Strategic Redesign of Urban Mail and Parcel Networks at La Poste

We discuss our development of a decision model that allows La Poste, the French national postal operator, to assess the cost benefits of merging the urban mail and parcel delivery networks, which were run previously as separate entities. Our model, based on a mixed-integer linear program, derives the optimal network structure, including direct delivery, indirect delivery, or a hybrid structure, and provides an approximation of its routing cost. This approach allows us to model realistic large-scale problems. Based on data from the French city of Nantes, we find that merging the mail and parcel delivery networks yields cost benefits of approximately three percent, an amount that proves to be robust under various scenarios we tested. These findings corroborated La Poste management’s expectations of potential cost savings and led to management’s decision to create a new organizational structure in which local managers are responsible for the urban delivery of domestic mail and parcel.