Saturday, August 22, 2009

Declining Volumes Lead to FSS Expansion

To cope with declining volumes of catalogs and periodicals, the U.S. Postal Service is adding nearly 300 ZIP codes to the list of areas that will be served by the Flats Sequencing System.

The 100 machines in Phase I of the FSS program will be spread among 42 locations -- including new sites in Houston, Philadelphia, Charlotte, and the Twin Cities -- rather than the 32 in the original plan, USPS revealed Friday. The new plan will shift some flats-sorting work from postal facilities in Minneapolis; Queens, NY; Buffalo, NY; and Southeastern, PA (Philadelphia suburbs).

All 100 machines were originally scheduled to be deployed by late next year, but the program is running a few months behind that plan. USPS is in the process of revising the schedule.

The original Phase I plan, developed during a time of growth for catalogs, magazines, and other "flat mail", included about 1300 ZIP codes. But flat volume was down 11% last fiscal year and has declined 12% so far this year.

Concerned that there would be insufficient volume for some of the huge machines, postal officials now have 2,288 ZIP codes in the plan and are redeploying some machines from the original Phase I sites to the new locations. USPS has not revealed what proportion of flats mail will be served by the Phase I machines, but it appears to be close to 25%. (Update: Multichannel Merchant has an estimate of 25% to 30%.)

The changes announced Friday include shifting 19 of the Phase I machines to new locations, removing Aliso Viejo, CA from the list, and changing where the four Atlanta machines will go. Added to the list of facilities getting FSS machines are two each in the Philadelphia and Atlanta areas as well as ones in Charlotte; Linthicum, MD (Baltimore suburbs); Rochester, NY; Stamford, CT; Westchester, NY; San Francisco; North Houston, TX; and St. Paul, MN.

FSS is supposed to revolutionize the labor-intensive process of sorting and delivering flat mail, cutting millions of work hours (and hundreds of millions of dollars) for USPS and supposedly bringing the Periodicals class closer to break-even. As more machines are rolled out (five are in operation), mailers will eventually be faced with FSS-specific packaging regulations and rate structures.

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