The FSS Slows, and the Red Ink Flows

Postal officials still have no fixes for a money-losing billion-dollar boondoggle, except to jack up postage rates for catalogs and magazines. 

Source: USPS reports. The Leakage metric was introduced in FY2017.

For the third year in a row, productivity of the U.S. Postal Service's Flats Sequencing System declined in 2018 – with no end in sight to the money-losing machines’ troubles.

Hourly throughputs declined 5% during Fiscal Year 2018 and are 14% below where they were five years ago, the USPS reported recently in its Annual Compliance Report. Leakage – the proportion of mail that was supposed to be run on FSS machines but wasn’t – rose from 20.1% to 21.9%.

And barely half of FSS mail – 54.2%, down slightly from last year – ended up being sorted in delivery sequence as intended. The only good news is that “Mail Pieces at Risk” -- catalogs or magazines that got jammed in the machines or needed other special handling -- dropped from 5.8% of FSS mail to 4.6%.

The Postal Service has touted various efforts to fix the agency’s flats-handling processes, but the compliance report says it “is still unable to provide an estimate of the financial impacts of these operational initiatives” because of flaws in its data-management systems. One such flaw, an Inspector General’s report revealed recently, is that FSS facilities are apparently doing nothing to track, understand, or correct the causes of leakage.

The Postal Regulatory Commission asked the USPS on Friday to explain why this year’s Annual Compliance Report makes no mention of Lean Mail Processing, which postal officials touted last year as “an initiative to make processing USPS Marketing (AKA Standard) Mail Flats and Periodicals mail more efficient.” (Puh-leeze! Lean Management is so 2017.)

Cost coverage worsens
The FSS’s failures contributed to greater unprofitability for the two main types of mail handled by the FSS machines – non-carrier-route Marketing Mail (“Marketing Flats”) and Periodicals. Rather than fixing the causes of the red ink – by scrapping the FSS machines, for example – postal officials have pressed for abolition of the inflation-based price cap on flats mail.

USPS’s costs per Marketing Flat mail piece rose an astounding 13.4%, causing cost coverage to decline from 74.0% to 68.6%. Postal officials blamed lower economies of scale, as increased co-mailing by printers shifted flat mail from Marketing Flats (17.5% volume decline) to such lower-cost categories as High-Density Flats (up 20.0%).

The cost per Periodicals piece increased only 1.3%, while revenue per piece declined by the same amount – perhaps also because of more co-mailing. The result is that the Postal Service’s highly questionable costing methodology showed that Periodicals covered only 67.54% of their costs, down from 69.33%.

Related articles:

• Failed Sequencing System: No Wonder USPS Still Hasn't Fixed the FSS 
• Boondoggle: The FSS Goes from Bad to Worse 
• Why the Flats Sequencing System Should Be Scrapped