🇺🇸United States

Failed Dynamic Route Optimization Leading to Excess Transportation Costs

1 verified sources

Definition

USPS implemented a Dynamic Route Optimization (DRO) initiative to shift Highway Contract Routes from fixed-price static routes to rate-per-mile dynamic routes, aiming to reduce mileage and costs. However, at most sites, dynamic manifests were not followed; routes remained static or required excessive manual adjustments, resulting in inaccurate mileage payments to contractors and unachieved savings. Implementation lagged far behind targets, with only 34 of 195 planned sites converted by FY 2018, and even those underperformed.

Key Findings

  • Financial Impact: $48.47 million wasted on nationwide rollout with minimal benefits
  • Frequency: Ongoing since FY 2016
  • Root Cause: Inadequate software integration, manual overrides for local needs, and failure to achieve true dynamic routing despite contracts

Why This Matters

This pain point represents a significant opportunity for B2B solutions targeting Postal Services.

Affected Stakeholders

Route planners, Transportation managers, Contract administrators, Highway Contract Route suppliers

Deep Analysis (Premium)

Financial Impact

$5M–$10M per year in excess transportation and labor cost attributable to misaligned manifests and shadow IT: overpayments to contractors due to inaccurate RPM-based mileage, additional manual reconciliation FTEs, and downstream costs from misaligned tracking and performance data that conceal or delay route-rightsizing.

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Current Workarounds

Site teams and IT admins export or print DRO manifests, then manually reconcile and adjust routes, miles, and trip IDs in spreadsheets and emails to match what drivers actually run; they then key or upload corrected data back into legacy transportation, accounting, and tracking systems.

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Methodology & Sources

Data collected via OSINT from regulatory filings, industry audits, and verified case studies.

Evidence Sources:

Related Business Risks

Suboptimal Route Execution Causing Idle Resources and Delivery Inefficiencies

Over 10% excess miles driven industry-wide, mirroring competitor savings potential

Shortpaid Mail and Uncollected Postage in Metering

$Unknown systemic annual loss (TRP program targets multi-million deterrence)

Postage Meter Fraud and Revenue Diversion Schemes

$Multi-source annual losses (revenue protection recovers millions)

Audit Failures in Postage Revenue Assurance

$Systemic shortpay recovery costs annually

Excessive Vehicle Maintenance Costs from Aging Postal Fleet

USPS vehicle maintenance costs grew from about $1.1B in FY 2009 to roughly $1.3B in FY 2011 and have continued to escalate as the LLV fleet ages, representing hundreds of millions of dollars per year in avoidable or above‑benchmark spend attributable to deferred replacement and reactive repairs.[4][6][7]

Vehicle Downtime and Route Disruptions from Inadequate Preventive Maintenance

USPS fleet‑wide downtime and associated workarounds (overtime, rented/borrowed vehicles, emergency repairs) contribute to extra costs that OIG benchmarking indicates could be reduced by tens of millions annually through best‑practice preventive maintenance and replacement strategies.[4][6][7]

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