Friday, February 15, 2013

Affordable Postage A Key To Printing Industry's Future, Quadracci Says

U.S. printing prices have failed to keep pace with inflation during the past 25 years, the CEO of the country’s second largest printing company told a Senate panel this week.

“During that same time period, the price of postage has continued to increase and as a result the single largest expense of printing is now the postage associated with delivering the final product,” Joel Quadracci, Chairman, President & CEO of Quad/Graphics Inc., testified Wednesday during a Senate hearing on the “Crisis Facing the U.S. Postal Service.”

“Over the last 25 years, through technological advances and process changes resulting in productivity gains of more than 4% annually, the printing industry has been able to actually reduce the price for printing (adjusted for inflation),” Quadracci said. “The Postal Service should address its problems by achieving the same cost control success,” but instead it is saddled with “extreme excess costs.”

“If the Postal Service can manage its costs and maintain an affordable pricing structure, its business can remain sustainable and ours, in turn along with it.”

“There are three main components to printing a magazine, catalog, retail insert or direct mail piece: the cost of the physical printing of the item, paper and postage. It may be tempting to address the Postal Service’s financial situation by simply raising postage rates to “cover the costs,” but I cannot stress enough how damaging postal rate increases are to our industry,” he told the panel.

“There is a direct negative correlation between rate increases and volume. Our customers demand predictability and affordability and if prices
suddenly increase more than expected they react by reducing their volume to cover the extra postage or move away from print altogether.”

“We are encouraged with the direction we have seen the USPS take over the last year-and-a-half,” Quadracci said, but a number of legislative changes are needed so that the Postal Service can manage its costs more effectively.

Quadracci noted the “tremendous capital expenditure” Quad and other publication printers have made in co-mailing and other “work sharing” activities that save the Postal Service money and earn mailers greater postal discounts. If not for those efforts “to help clients manage their postal costs through work sharing, mail volumes would have been reduced to an even greater extent over the last decade.”

Quadracci did not take a stand on the current hot postal issue – Saturday delivery – but noted the importance of USPS continuing to accept shipments and to process mail on Saturdays.

11 comments:

jeffrey simmons said...

What a crock. Excluding last mile delivery, standard mail is the least profitable part of what the postal service does. Even first class rates are mitigated with the massive discounts for presorting and 'work sharing', a process which is often performed incorrectly at the printer and can be performed for a quarter of the discount rate by the postal service itself.

USPS 'extreme excess costs' are being driven by the passage of PAEA in 2006. Using inflation as a measure is unfair as fuel prices have far outpaced it in 25 years. Productivity at the processing facilities has also been negatively impacted by management's insistence that this mail be worked regardless of whether it meets USPS machinability standards or not.

How much has the printing industry grown in the last 25 years? The USPS has cut over 40% staffing and seen annual productivity increases averaging near double digits since 2000. While happy to support a $1trillion+/year mailing industry that creates over 10 million jobs in the United States, the USPS wasn’t founded to be a profit mill for industrial printers/bulk mailers. I’m sorry Mr. Quadracci is too busy lining his pockets to understand that. A simple ‘thank you’ would’ve been nice, though…

Anonymous said...

Spoken like a true postal worker

Casino Marketers Weblog said...

Notwithstanding the simplicity of Joel Quadracci's statements and ultimate point, still the debate must be brought. It is entirely reasonable for an industry leader to underscore the downward spiral effect of postage cost increased to meet the budget within a parallel condition of declining volumes. I would say he is duty bound to do so, and he should speak louder!

So where is the crock? Direct Mail producers and the USPS survival are inextricably tied to each other like the automobile engine operation is to gasoline, the only difference, customers who purchase gasoline at the pump have no choice, whereas customers who pay for postage-paper-print direct mail may select alternate means of communication. That choice provides a natural business balance to increasing prices, and so Direct Mail Providers are in the middle, squeezed from both sides.

Who cares why costs are where they are? What we should all care about is bringing prices into alignment to stimulate volume increase which will contribute to all budgets, postage, paper, and print. We are all in this together.

Matthew Scott

Anonymous said...

The USPS: A bloated, financially insolvent enterprise manned by surly staff -kept afloat by a govt mandated monopoly.

Anonymous said...

I couldn't agree more Anonymous. Horrific waste, rules that even most of the postal workers cannot understand, customer service that would have caused a real business to go under years ago... Take away bulk mail and they would die a quick death. Jeffery simmons needs to figure out what side his bread is buttered on and learn to work outside a bureaucracy.

Anonymous said...

Perhaps, the USPS should look into the possibility for large printing companies and large letter shops to take over some of the work for the USPS. I think it is possible our industry is more efficient and more cost effective than the US Post Office is at the present time?

Print volumes and direct mail is shrinking at a fast rate. End users will either back off their volumes or abandon print and mail altogether if postage continues to increase. As Mr. Quadracci already pointed out, there is a direct relationship between print and mail volumes to the cost of postage. As a result, the US Post Office should think twice before increasing postal rates. They could very well put more printers out of business and find themselves in the unemployment lines.

@dryMAILman said...

Standard mail is the least profitable part of what the postal service does because of the major political contributions and shady dealings of notoriously inept and corrupt government contractors Northrop Grumman and Lockheed Martin. Contrary to what the USPS, APWU, NALC, James C. Miller III, Patrick R. Donahoe, et al. will tell you, flat mail from bulk mailers like Circuit City is easy "to sort process and deliver." Workshare discounts? Really? The USPS, the APWU, the NALC, the Postal Board of Governors, the Postal Regulators, the USPS OIG, the Oversight Dems, the Oversight Republicans, WE all should pay bulk mailers, like Circuit City, for messing up their presorted mail. Northrop Grumman's "Operation Deepwater" helped sink the Coast Gaurd thanks to lack of congressional oversight, now Northrop is helping to sink the mailing industry, thanks to lack of congressional oversight. Flat mail is still underwater, still sinking.

In other news: Postmaster General Patrick R. Donahoe is a liar.

Dave S. said...

Just like every other company has done...the USPS needs to streamline and run efficiently. Like Mr. Quadracci said the print industry has done its part in keep costs associated with printing the material that is being mailed but the USPS has not shown that movement at all.

At this point the USPS should be looking to at someone like UPS who has done a great job in dealing with Unions and running efficiently and making money. Just my 2 cents anyways...

Anonymous said...

this is an oversimplified snapshot of the symptoms, not the disease but....walk into a Post Office and "mail" a package then walk into a UPS Store and "ship" a package and compare the experiences. Ship vs mail may be a mere semantic difference but the attitude of an enterprise vs a bureaucracy is palpable. I admit this is an oversimplification but sometimes the disease is diagnosed by a tremor. Let's face it the USPS has become a retirement and healthcare program that delivers mail as a fund raising mechanism.

Anonymous said...

Everyone likes to boast about the great job UPS is doing...approx, $5.00 to send a letter. Yeah, let UPS take over the mailing market.

Anonymous said...

The long term health and improved efficiency of the USPS is essential not only to the employees and contractors of the postal service, but to the many industries tied to the hip of the daily service supplied by the USPS. Jeff Simmons is correct that a thank you is deserved, but a thank you for your past efforts. Now things MUST change and change drastically and quickly if the USPS is to continue as a cost-effective means of postal delivery. As with many industries, the resistance to change has been signficant and there is blame on many fronts - mismanagement, union resistance, entitlement mentality, government blundering, foot dragging, etc...

Cost control is essential - examples such as Saturday deliveries, closure of small post offices, sell-offs of USPS owned property/equipment, changes in entitlement programs (for hourly AND salaried groups), and less governmental oversight are but a few of the ideas that will hurt in the short run but are needed for the long term.

As anyone in the print industry (and those who deliver it) should know, we are no longer just competing with other printers/paper makers/ink suppliers/delivery companies. We are competing against other media sources and as such the NEED for cost control, efficiency, and speed have taken a step change in the past decade. Direct mail, catalogs, and magazines will never have the timeliness and low cost of the internet/TV/radio BUT they have other attributes which must be pushed while keeping the associated costs and inefficiencies of printing and delivery to a MINIMUM. We (the print industry) cannot afford to see prices rise to deliver our products - period. We can live with loss of Saturday delivery, we can live with some losses in rural timeliness, we can live with modifying large printers into being their own mail routers (i.e. Pub Printing, Quad Sussex, RRD locations, etc...).

Time for all of us to come to this difficult realization or we will be like so many industries that did not change to meet the challenges of a changing technological movement with the appropriate speed and effectiveness.