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Supplying Principles and Practices > USPS Supplying Practices Process Process Step 5: Measure and Manage Supply > Implement Investment Recovery Plan
Implement Investment Recovery Plan
An investment recovery plan outlines how to identify, reuse, sell, or dispose of
surplus and/or idle supplies. Investment recovery can generate significant
revenue and create cost savings, allowing the Postal Service to reduce waste
and increase revenue.
The investment recovery plan is first developed in the Develop Preliminary
Investment Recovery Plan topic of the Develop Sourcing Strategy task of
Process Step 2: Evaluate Sources and is finalized in the Finalize Investment
Recovery Plan topic of the Plan for Contract Management task of Process
Step 3: Select Suppliers.
Implementation of the plan will guide and outline the activities associated
with, and performed during, the Investment Recovery task of Process Step 6:
End of Life. Implementing the investment recovery plan is the act of
establishing as practice the previously planned activities associated with
measuring and managing supply. The Item Manager is responsible for
measuring and managing supply, the process essential to maintaining the
appropriate levels of inventory to fulfill customer demand (or lack thereof).
The Client is also responsible for implementing the inventory control plan, in
conjunction with the Item Manager.
By this stage of the process, a final removal decision has been made by the
Client regarding discontinued products, outdated products, inoperable
equipment, and excess inventory, in accordance with the finalized investment
recovery plan and the quadrant approach. The entire Purchase/SCM Team is
involved in investment recovery; the Item Manager and Client must consult
the Contracting Officer, Market Analyst, and Pricing Analyst for their insight,
input, and advice regarding storage space, hidden costs, external demand,
and the current value of surplus.
The essential components that ensure best value and facilitate investment
recovery pertain to actualizing the final removal decision. Investment
recovery is addressed by the following methods:
• Recycle - the "scrapping" of an asset that can no longer perform
its intended function, cannot or should not be repaired, and
cannot be sold as surplus
• Reallocate - the actual relocation and redeployment of a
material
• Resell - the financial transaction of selling a material on the
open market
• Remarket - the selling of a surplus material back to the Supplier
• Return - the nonfinancial transaction of providing surplus
material (e.g., delivery and industrial equipment) to the Supplier
for a credit
• Remanufacture - the use of components of a material, alone or
combined with others, to create a new material or product (e.g.,
mail transportation equipment and spare parts)
• Remove - the process of disposing of surplus material (e.g., old
office furniture)
• Donate - the donation of assets to another organization
Recycling surplus reduces the impact of Postal Service operations on the
environment. The Client decides which assets no longer perform their
intended function, cannot or should not be repaired, cannot be sold as
surplus, and therefore will be "scrapped." The Client then must consult the
Market Analyst and the Pricing Analyst regarding the value of the scrap
material collected, as determined by volume and geographical location of the
scrap (relative to the proximity of dealers and the ease and efficiency of the
collection process). The following five factors determine the degree of
success of a recycling (scrap) management program:
• Current market for the particular material
• Type of material (e.g., ferrous or nonferrous)
• Condition of the material (e.g., mixed, sorted, clean)
• Quantity of the material
• Involvement of a knowledgeable process manager
When it is decided that identified surplus will be recycled (scrapped), supplies
will be collected and relocated to a scrap dealer. The Client determines how
this surplus will be physically relocated to the dealer (e.g., send to, or require
removal by the new owner of the material).
Reallocating identified surplus is the actual relocation and redeployment of a
material. Reallocation puts the material to work as part of its lifespan and
avoids the cost of purchasing. Although a material may no longer fulfill the
purpose for which it was originally purchased, it still can fulfill other purposes
useful to the Postal Service. The Purchase/SCM Team will determine when
and where specific materials are fruitful to more than one project or use and
convey this information to the Item Manager and the Client. For reallocation
to become a successful reality, the Purchase/SCM Team must communicate
closely with any potentially concerned parties.
When it has been decided that identified surplus will be reallocated, supplies
will be redeployed and relocated to a new Client with an identified need for
the surplus. This puts the material to work as part of its lifespan, albeit for a
different Client. To implement the final decision to reallocate, there must be
the need and the space.
All eBuy users have the ability to enter excess items into the Excess Item
Catalog (EIC) located in the eBuy purchasing system. The purpose of EIC is
to promote the redistribution of excess assets and to defer the cost of buying
new equipment. EIC is a form of reallocation in which items no longer in use
by the Client are leveraged by a new Client and is, therefore, applicable to
investment recovery. However, EIC is not applicable to the investment
recovery plan (as developed in the Develop Preliminary Investment Recovery
Plan topic of the Develop Sourcing Strategy task of Process Step 2: Evaluate
Sources) because the items are catalogued and not immediately used (and
may never be used). Only items that are known to fulfill the future need of
another Client can be addressed by the investment recovery plan. Obsolete
items can be put on EIC by the Client, but there is always the risk that these
items will not be leveraged in the future. EIC is available through eBuy:
http://ebuy.usps/jsp/co/Login.jsp.
Reselling surplus materials is the financial transaction of selling a material on
the open market. Reselling generates revenue that improves short-term cash
flow. Potential revenue will be determined through market research. Reselling
is also appropriate for a forward auction, the traditional auction used when
organizations want to sell off excess inventory, machinery, or equipment that
is no longer in use to maximize revenue (which is discussed in the Auction
topic of the Develop Sourcing Strategy task of Process Step 2: Evaluate
Sources).
If the identified surplus will be resold, the Market Analyst must be consulted
to determine the value of a specific product. Data rights and intellectual
property issues may need to be considered in the resale of property such as
computer software. Additional information on data rights can be found in the
Clarify Data Rights and Intellectual Property Issues topic of the Develop
Sourcing Strategy task of Process Step 2: Evaluate Sources.
Suppliers frequently buy back used equipment to protect proprietary
technology and prevent competition from being able to sell identical material.
Potential revenue realized by remarketing will be compared with potential
revenue realized by reselling. After a price analysis has been conducted, the
results will be communicated to the Client, and a plan will be selected.
Effective remarketing usually requires an advanced agreement between the
Postal Service and Supplier. This agreement should be included in the
contract's terms and conditions.
The return of material should be addressed in the contract. When a return
takes place the supplier will give the Postal service a credit.
Except for locks, manufacturing is not a core competency of the Postal
Service, so remanufacture may be a rare solution for the disposal of surplus
and idle assets. Remanufacture would be appropriate when a "make"
decision has been made by the Purchase/SCM Team, a product will be
created internally, and these surplus or idle assets can be leveraged to
reduce the costs associated with the new product or service. The decision to
remanufacture will lead to the utilization of surplus to strategically make
in-house another product at the Postal Service, as outlined in the Conduct
Make vs. Buy Decision Analysis topic of the Decide on Make vs. Buy task of
Process Step 1: Identify Needs.
Disposal is often costly, but the costs of disposal in the long run can be
reduced or negated. Potential savings are determined by a total cost of
ownership (TCO) analysis, the analysis of the total cost incurred over the life
cycle of an item, encompassing development, purchase, use, maintenance,
support, and disposal. The decision to remove identified surplus is made if it
is determined to be more economical than other methods by the Pricing
Analyst. The Item Manager must consult the Contracting Officer when
removing items because Supplier involvement is sometimes required.
The Postal Service environmental policy, as stated in Handbook AS-550,
Recycling Guide, and Handbook AS-552, Pollution Prevention Guide, must
be incorporated into procedures governing material redistribution, recycling,
and disposal.
If the Postal Service has determined that goods have no residual value and if
their disposal is unlikely to produce any revenue, the Postal Service may
authorize the donation of the assets to another organization. Such donations
should be to nonprofit organizations, state agencies, or public bodies and not
to individuals. Organizations can include schools, charities, and volunteer
organizations. Donations must be approved by the Life Cycle Management
Team, and it must be confirmed by the Market Analyst that the assets have
no significant market value.
Conduct Market Research and Benchmarking Analysis topic, Decide on
Make vs. Buy task, Process Step 1: Identify Needs
Conduct Make vs. Buy Decision Analysis topic, Decide on Make vs. Buy task,
Process Step 1: Identify Needs
Develop Preliminary Investment Recovery Plan topic, Develop Sourcing
Strategy task, Process Step 2: Evaluate Sources
Consider Auctions topic, Develop Sourcing Strategy task, Process Step 2:
Evaluate Sources
Clarify Data Rights and Intellectual Property Issues topic, Develop Sourcing
Strategy task, Process Step 2: Evaluate Sources
Finalize Investment Recovery Plan topic, Plan for Contract Management
task, Process Step 3: Select Suppliers
Investment Recovery task, Process Step 6: End of Life
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