USPS's response to a question from the Postal Regulatory Commission showed that FSS has pushed up the costs of mail processing far more than it has decreased delivery costs.
USPS invested more than $1 billion in the huge FSS machines to automate the labor-intensive process of handling catalogs, magazines, and other flat mail, but so far the results have been mixed at best. Meanwhile, the agency continues to seek special rate increases on some types of flat mail, such as Periodicals, on which it claims to be losing money.
The cost of delivering Carrier-Route-sorted Standard-class mail rose 2.32 cents per piece, from 16.54 cents to 18.87 per piece, in just two years almost solely because of a 48% increase in mail-processing costs, USPS told the PRC.
"An examination of mail processing costs by cost pool shows that the bulk of this rise is due to FSS sorting. Specifically, FY 2012 FSS sorting cost per piece for Carrier Route is 1.84 cents while the amount for FY 2010 is likely fairly small [because few FSS machines were operating then]," USPS wrote.
"Delivery costs (both city and rural carrier) have declined by 0.06 cents
[from 10.98 to 10.92 cents] per piece." the agency added. "Included in this overall change in delivery cost per piece is a decline of 0.49 cents per piece for cost segment 6 in-office city carrier labor costs between FY 2010 and FY 2012, despite a 5.9 percent rise in city carrier cost per workhour. This likely reflects the benefits of FSS sorting."
Not rocket science
In contrast to carrier-route pieces, the mail processing cost of non-carrier-route Standard flat pieces has risen only 6% in the past two years, according to USPS data. The reason for the contrast is not rocket science.
For ZIP codes not served by FSS, carrier-route bundles are nearly ideal and therefore result in the lowest rates, except for saturation mailings. Such bundles move through the postal system without being opened until they reach the letter carrier who will actually deliver them. Bundles containing pieces for multiple carrier routes or ZIP codes require additional handling and are therefore more expensive for the Postal Service.
But for ZIP codes served by FSS machines, carrier-route bundles are of little benefit to USPS. Like other bundles, they have to be opened and fed into a machine. In fact, the ideal bundle for FSS is supposedly four to six inches thick, many times larger than the typical Standard or Periodicals carrier-route bundle.
The big benefit of FSS is at the delivery units. When the process is working, a carrier receives all flat mail in delivery sequence, which cuts down on the time they spend preparing the mail.
USPS has not broken out mail-processing costs for Periodicals in the same way as for Standard. But the two mail classes' pieces and carrier-route bundles are so similar that the mail-processing costs for Periodicals carrier-route copies most likely have seen a dramatic increase as well.
And with carrier-route Standard and Periodicals pieces probably representing more than half of all FSS mail, it seems unlikely that FSS is saving enough on delivery costs to counter the system's impact on mail processing.
- FSS Is Increasing USPS's Costs, Expert Says: "There must have been far too many manhours spent on a system that was supposed to be highly automated," an industry expert wrote a year ago.
- FSS Machines Running Far Slower Than Planned
- 8 Reasons USPS Productivity Is Declining: The Employees Speak Out