FSS Postage Rates Will Raise Issues for Cataloguers, Publications, Printers, and USPS

Because of a provision in the recently announced postal rates, mailers and printers have four months to overhaul the way they prepare catalogs, magazines, and other flat mail.

The coming changes raise a variety of uncertainties for flats mailers, printers, and the U.S. Postal Service itself. And they will make it difficult for many mailers to project how much the new rates will cost them.

The higher rates slated to take effect January 26 will require something that until now has been optional -- and little used: Flat mail going to ZIP codes served by the Flats Sequencing System will undergo FSS preparation. That means the way the mail is sequenced, bundled, and placed on pallets will be completely different from the current methods, which will still be used for non-FSS areas – as explained in FSS Postage Pricing Will Affect Magazines, Catalogs, and Printers.

“FSS machines are a critical element in the Postal Service’s strategic operations plan,” USPS’s recent rate filing says. Currently, however, the efficiency gains that FSS machines produce are limited by the fact that most flats destinating within the ZIP Codes served by FSS machines have not been prepared to maximize FSS efficiency.”

The end of this article has an excerpt from the filing that provides an overview of why USPS is requiring FSS preparation, how the preparation of flat mail will change, and how postage rates for flats mail are being restructured. But first, here are seven questions that I have about these changes. I welcome your feedback on these, either by commenting on this blog or via email at dead.tree.edition@gmail.com.

1. How does a mailer calculate how much its postage will increase? If the exigent portion of the increase is not overturned, the increase will average 5.9% but actually be higher for some mailers and lower for others. The usual method is to take a typical mailing, plug in the new rates, and see how much that changes the bottom line. But mailers now face a whole new rate structure for a portion of their mail, with most having no clue regarding such things as how many mail pieces they will have on DFSS Scheme Pallets.
2. What is the Postal Service’s Plan B? Feeding traditional carrier-route and 5-digit bundles into an FSS machine is not ideal, but it works. The reverse, however, is not true: Mail that has undergone FSS preparation cannot easily be sorted if something goes wrong with an FSS operation, such as machine down time or too much volume.
3. How will co-mail incentives be affected? Postal officials have said they don’t want FSS rates to reduce the incentives to co-mail, which creates a win-win by lowering mailers’ postage while preparing mail in a more efficient manner for the Postal Service. But it will take analyses of many different mailing across multiple classes to determine whether that goal has been achieved. And even if it has, the characteristics of optimal co-mail pools (such as the number of mail pieces) may turn out to be quite different with FSS preparation.
4. Will some co-mail deals between printers and mailers need to be reinterpreted or renegotiated? Co-mail deals often involve a comparison of actual postage costs to baseline postage (the theoretical postage if there were no co-mail or dropshipping), with some sort of guaranteed savings or sharing of savings. But I’m already getting inquiries from some mailers indicating it’s not clear how their current contract language should be interpreted in light of the FSS rates.
5. Will FSS preparation enable printing plants to run more efficiently? Creating fewer, larger bundles will reduce the amount of packaging materials needed and in theory should enable bindery lines to run faster. But are there hidden costs as well?
6. To what extent will FSS preparation reduce mailers’ bindery costs? The way printers charge for creating mail bundles varies from printer to printer and customer to customer. In some cases, customers are charged per bundle – which should mean their bundling costs will decline significantly. In many, if not most, cases, bundling is charged on a per-thousand-copies basis, but will mailers with such deals push for per-bundle charges in the future?
7. Will all printers be able to create mailings with two very different sets of rules, one for FSS zones and one for non-FSS zones? The change should be little trouble for printing plants that specialize in publications, but will it present problems for more general commercial-printing plants that only occasionally handle flats mailings?

Here's what the Postal Service has to say about the new rate structures:

FSS machines are a critical element in the Postal Service’s strategic operations plan. FSS machines reduce the end-to-end processing costs of flat-sized mailpieces by automating their sequencing into delivery order and avoiding labor-intensive manual sortation by carriers. The Postal Service has installed FSS machines in mail processing plants that process high volumes of flat-sized mailpieces.

Currently, however, the efficiency gains that FSS machines produce are limited by the fact that most flats destinating within the ZIP Codes served by FSS machines have not been prepared to maximize FSS efficiency. For example, for mail destinating in FSS zones, carrier route preparation is of no value because it yields excessive bundles that increase bundle handling costs. In contrast, the containerization of FSS mail on FSS scheme pallets enables such mail to completely bypass bundle sortation operations and be fed directly into the FSS operations. The preparation of FSS Facility pallets also improves service by allowing the Postal Service to quickly identify FSS mail so that it can undergo necessary bundle sortation and be made available for FSS processing without delay.

Accordingly, the Postal Service is taking three steps. First, we plan to require the previously optional FSS preparation for all flat-shaped mail pieces destinating in FSS zones. Second, in this filing we are proposing FSS pricing for presorted flat-shaped pieces in Standard Mail, Outside County Periodicals, and Bound Printed Matter Flats that destinate in FSS zones. The proposed FSS prices are designed to minimize changes in postage for flats mailers. Third, in this filing we are also proposing to introduce discounts for mail on FSS scheme pallets that is entered at the location of the destinating FSS machine (DFSS).

Related articles:

• Why the Exigent Postal Rate Increase Will Backfire 
• USPS Admits FSS Is Losing Money  
• So Far, FSS Is A Step Backward, USPS Data Indicate 
• FSS Machines Running Far Slower Than Planned