FEWER SACKS A GOOD THING: USPS encourages mailers to use pallets

“Put your publications on pallets and save money.” That’s the message the Postal Service is sending to publishers.

In a new filing with the Postal Rate Commission, the Postal Service is offering mailers pricing incentives to switch to Periodicals pallets and stop using costly mail sacks. Pallets are more cost-efficient because they hold more volume than sacks and are easier to transport.

The current experiment focuses on smaller-circulation publications of average weight and considerable advertising content. The filing proposes an expansion that would provide incentives for heavier publications with high editorial content, specifically publications weighing more than 9 ounces with less than 15 percent advertising content.

AFCS LEARNS TO READ: Upgrade allows cancelers to sort mail

For years now, the Advanced Facer Canceler System (AFCS) has been the backbone of letter processing, allowing mail to be postmarked and properly oriented for automation processing.

Now, thanks to funding approved by the Postal Service Board of Governors, the 1,086 AFCSs in operation will receive an optical character reader (OCR) computer “upgrade,” allowing them to scan and sort letter mail in addition to their regular duties.

The enhancements provide technology to replace 646 multi-line optical character readers (MLOCRs) with 395 new machines. Placing OCR technology into AFCSs allows them to bypass the MLOCR operation so letter mail can be sorted sooner.

The upgrades will be added to existing cancellation equipment and to some new OCR/barcode sorters with expanded sort capability. Reduced handlings and significant savings are expected in 2006 and 2007 when fully deployed.

In the past five years, investing in letter automation technology has helped the Postal Service avoid $3.9 billion in processing and delivery costs. We’re reducing costs and improving service — two key objectives of the Transformation Plan.

POSTAL REFORM – Postal Leaders Testify at Joint Hearing

The Postal Service’s 34-year business model is based on the outdated assumption that rising First-Class Mail volume will fund an ever-expanding delivery network, said Postal Board of Governors Chairman David Fineman and Postmaster General Jack Potter.

“We must face the simple fact that our business model — established by the 1970 Postal Reorganization Act — is no longer valid,” Fineman told the gathered congressional leaders. “The time is now to provide the Board of Governors and postal management with new tools to meet the new business environment it faces.”

Postal reform is fraught with challenges, said Potter, “but the rewards for the people of our nation can’t be understated. If we are successful in our efforts, we will preserve the right of every American to affordable, universal mail service.”

He added, “That is what we provide today. That is what we want to be able to provide for many years to come.”

“Mail volume has declined in each of the last three years, dropping more than 5 billion pieces from its peak in 2000,” said the PMG. During the same three-year period, the number of addresses the Postal Service served increased by 5.4 million.

“In 2003, for the first time since the Postal Service was reorganized 34 years ago, First-Class volume was less than 50 percent of total mail volume,” said Fineman. Total mail volume was 202 billion — only 99 billion pieces were First-Class Mail. Why the loss of volume? The Internet, e-mail, faxes, and electronic bill-paying were the stuff of science fiction in 1970.

While Standard Mail volume has risen, it doesn’t contribute as much to the Postal Service’s bottom line. “It takes about three new pieces of Standard Mail to make up for the loss of one piece of First-Class Mail,” said Fineman. The decline in First-Class Mail volume took away $642 million in revenue contribution last year, he added.

Potter and Fineman thanked Congress and the Administration for passing legislation that prevented the Postal Service from overfunding CSRS. The law helped USPS reduce its outstanding debt by more than one third — from $11.1 billion to $7.3 billion — in fiscal year 2003. It will provide more debt relief this year.

“This same legislation, however, creates new financial obligations that increase costs,” said Potter. The law forces the Postal Service to pick up the $27 billion tab for military retirement benefits earned by Postal Service employees when they were in military service. For every other federal agency, this cost is borne by the Treasury. “Military retirement costs have no connection to the operation of the Postal Service or the services it provides,” said Potter.

And, in 2006, any savings realized by CSRS will be placed in an escrow fund controlled by Congress — not by the Postal Service. “The escrow account will be funded by postal ratepayers through higher postage rates,” said Potter. CSRS legislation needs to be amended, he said, so military retirement costs are returned to the Treasury and the escrow requirement is eliminated.