Interdependent Transportation and Production Activity at the United States Postal Service

Transportation decisions and production decisions can usually be made separately. Under certain conditions, however, there are important interactions between transportation and production. An example of a combined production and routeing environment exists in the United States Postal Service (USPS). The daily movement and sorting of first class letter mail requires balancing transportation and mail sorting production costs, while considering the time dependent accumulation of mail during the day. The focus of this paper is on the practical application of a combined production/routeing model to a specific USPS division and the use of insights from this model to re-design the operation. A mixed integer linear program using candidate route integer variables is solved to near optimality. Specific routes and production schedules detailed by the model indicate that the division could save up to 5% of their combined production and routeing costs, amounting to $298 000 per year. More importantly, the model provides insight on potential heuristics to choose routes under these circumstances.