Advances in Regulatory Economics series
Edited by Michael A. Crew and Paul R. Kleindorfer
Chapter 9: Optimization of the United States postal retail network by applying GIS and econometric tools
Declining mail volumes worldwide require posts to adapt retail networks to provide postal services more efficiently. This chapter develops an approach to postal retail optimization using both GIS (Geographic Information System) tools and econometric methods. With over 30,000 retail locations, United States Postal Service (USPS) operates the largest retail network in the United States. However, this retail network is not a direct result of systematic economic decisions by management. Rather, it is a ‘legacy’ network with most locations established before the 1970 USPS reformation. This legacy retail network may not optimally balance the needs of twenty-first century postal consumers and those of the postal operator for an efficient social result. Since 2007, consumer transactions at USPS retail outlets have declined 17.9 percent, from 2.5 billion to 2 billion. Similarly, revenue from retail outlets has decreased 21.4 percent over the same period, from $14 billion to $11 billion. As part of its comprehensive five-year business plan, USPS has outlined retail network cost reductions of $2 billion. Optimizing the retail network, maximizing retail revenue while minimizing operating costs, provides USPS the opportunity to achieve the goal outlined in its business plan.
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