Postal Service Eyes January Rate Hikes

The U.S. Postal Service is planning to raise virtually all rates a bit in January, apparently including a one-cent hike of the Forever Stamp, to 50 cents. And it’s also hoping it will soon get the power to implement larger rate hikes.

The USPS will raise rates for both market-dominant mail (such as First Class and Marketing Mail) and competitive mail (such as Priority Mail) on Jan. 21, 2018, postal officials told mailing-industry representatives this week.

The average rate increases for market-dominant classes are limited by an inflation-based cap, currently close to 2%. A postal official indicated that rates would rise from 1% to 3% for most market-dominant products, according to attendees at a meeting of the Mailers Technical Advisory Committee.

Postal officials didn’t spell out what any of the new rates would be. But a statement that the increase for letter mail would be about 2% almost certainly means that the price of the popular Forever Stamp for First Class letters will rise from 49 cents to 50 cents (a 2.04% hike).

The new rates for flat Marketing Mail and Periodicals would provide greater incentives to create efficient mailings, which is good news for catalogs and magazines that are co-mailed, as well as for printers that provide co-mail services. But it means higher-than-average rates for small publishers that don’t take advantage of such mail-consolidation programs.

The USPS is most likely to file the new rates with the Postal Regulatory Commission in October. As long as the PRC determines that the USPS proposal meets certain standards, such as not violating the price caps, the new rates will take effect without modification.

Next month, the PRC is slated to announce the results of its 10th anniversary review of the law that created the price cap. If it determines that the law’s system for regulating market-dominant rates is not meeting the law’s objectives, the PRC can modify or replace the system.

Postal officials argue that, because the system fails to meet the objective “to assure adequate revenues . . . to maintain financial stability,” the PRC should loosen or eliminate the price cap. But a significant PRC overhaul of the rate-making rules would probably lead to legal challenges that could delay implementation of any changes.

Related articles:

• Why the Rate Cap Isn't Killing the Postal Service 
• Hell Will Freeze Over on April 10 
• Is the Postal Service Really Broke?

Good Money After Bad? Mailers Try to Block FSS Expansion

An FSS machine: savior or white elephant?

Where the U.S. Postal Service sees an opportunity to expand the Flats Sequencing System to more ZIP codes, mailers see a backdoor rate increase.

Postal officials recently told mailing-industry representatives that declining volumes and some equipment upgrades are creating excess capacity for the FSS. At a meeting of the Mailers Technical Advisory Committee (MTAC), they proposed having the football-field-sized machines process the mail for additional ZIP codes.

See ya in court!
Irate mailers and printers responded by threatening to shift more business to alternate delivery -- private services that bypass the USPS. And they pointed out that the change would in essence be a rate increase for catalogs, publications, and other flat mail. In other words, a legal challenge is possible. (See FSS -- A Four Letter Word for some great insights and additional developments regarding FSS expansion.)

Publication printers are perturbed that they already have to absorb extra costs from handling and shipping FSS mail, without their customers getting any benefit. What’s especially galling is that, no thanks to postal officials, the printers’ expansion of co-mailing is the one recent investment that has brought about significant savings for both flats mailers and the USPS.

Mail that's been sorted by an FSS machine

The catalog and magazine industries are still smarting from a string of broken promises about FSS. They’re in no mood to support an alleged “efficiency” change that appears to be more about saving face than saving money.

Postal officials, including two previous postmaster generals, repeatedly promised mailers that FSS mail would cost no more than traditional carrier-route mail. That made sense: FSS was supposed to save the Postal Service lots of money by automating the labor-intensive process of sorting flat mail into walk sequence.

But it hasn’t worked out that way. On a recent (post-April 10) Standard Class postage statement I examined, FSS-sorted catalogs cost at least 7% more than the equivalent carrier-route pieces.

Today's vocab word: "obfuscatory"
The USPS has given coyly obfuscatory answers to recent questions about its FSS costs, telling the Postal Regulatory Commission a few weeks ago that it had not calculated the return on its $1.4 billion FSS investment. But clearly the system hasn’t worked as planned, and the high FSS postage rates bolster widespread suspicions that the system is still a money loser.

Why then, mailers ask, should the Postal Service throw good money after bad by shifting mail that is mostly in carrier-route bundles to FSS processing? It looks like a lose-lose for both mailers and the Postal Service, except for providing the face-saving illusion that the FSS is working.

Postal officials explain that the FSS would run more efficiently if it didn't have so much excess volume. They told MTAC that the labor-saving high-speed flats feeders they are installing will boost the machines’ throughput by 15% to 20%.

Related articles:

• Standard Mail Flats: Ending the Controversy Without Fixing the Problem: I realize now that I may have this exactly backwards. It's quite possible that the USPS loses even more money on FSS mail than on traditional Standard flats. 
• USPS Needs a Plan B for Flat Mail, Coalition Says: The one-size-fits-all FSS strategy isn't working, mailers' groups pointed out two years ago.
• Flats Sequencing Forecast: Cloudy With a Chance of Bravado: What looked like bravado six years ago is looking more like BS today.

 

USPS Backing Down on Saturday Mail Delivery

Postal officials are ready to raise the white flag in their six-year battle to end Saturday delivery of letters and flat mail.

Postal-reform legislation with broad-based support is gradually taking shape in Congress, Deputy Postmaster General Ron Stroman told last week's meeting of the Mailers Technical Advisory Council (MTAC), according to PostCom Bulletin.

"In response to question as to what the USPS has compromised on in the legislative discussions with its stakeholders, Stroman said that 5-day delivery was one of the things the USPS dropped and that other things that used to be on its list are no longer there," said the bulletin, which is only available to members of the multi-industry Association for Postal Commerce (PostCom).

Congress members made it clear that getting approval for five-day delivery was "a politically difficult hurdle to overcome," the Bulletin quoted Stroman as saying. Postal officials dropped their Saturday plan in hopes of getting what they really need from Congress -- reform of so-called "prefunding" of retiree health benefits and of postal pensions.

In March 2010, the U.S. Postal Service released its Action Plan for the Future that called for ending Saturday deliveries, along with several other changes intended to prevent the agency from going bankrupt. Dropping Saturday deliveries would add $2 billion annually to the USPS's bottom line, postal officials claimed, though critics charged it was underestimating potential revenue losses.

Responding to concerns about delivery delays for critical items like mail-order pharmaceuticals, postal officials relented and said package delivery would continue on Saturdays. But Congress still didn't bite and continued to include a six-day delivery requirement in its annual budget.

The boom in e-commerce-related mail, including Sunday delivery of Amazon packages, has made curtailment of Saturday delivery an even harder sell. 

Related articles:

• Donahoe Signals Change of Heart on Weekend Deliveries 
• 5 Myths of Saturday Mail Delivery
• It's Time for Postal Unions and Mailers To 'KISS' on USPS Reform

Postal Service Plans To Sell Magazine Subscriptions

The U.S. Postal Service, at the urging of publishers, is planning to sell magazine subscriptions on its web site and to promote them at post offices.

“The USPS is moving forward on a plan to offer magazine subscriptions for sale on usps.com,” says Idealliance’s summary of the recent Mailers’ Technical Advisory Committee (MTAC), a joint USPS-mailers groups. “Also, the USPS and mailers are developing a plan to have posters in retail sites with QR codes and other ways of linking to magazine subscriptions.”

When the idea originally surfaced at an MTAC meeting early this year, it included selling subscriptions in post office lobbies, as stores including Best Buy do at checkout. But setting up such a program for hundreds or even thousands of publications might not be worth the effort. It will be easier to test the QR-code posters in select locations.

Employee Buyouts Surpass USPS Projection

At least 23,000 APWU-represented employees have signed up for incentives to leave the U.S. Postal Service, according to Postmaster General Patrick Donahoe.

Donahoe provided that number at a "State of the Postal Service" presentation last week to leaders of the Mailers' Technical Advisory Committee (MTAC), according to notes released yesterday by Idealliance, a trade organization of publishers and their suppliers. Postal officials had predicted that 15,000 to 20,000 of the approximately 115,000 eligible employees would take the buyout, which includes $15,000 and for many the chance to take early retirement.

Full-time employees had until yesterday to accept the buyout or to change their minds if they had already signed up. Part-timers' deadline is Jan. 4.

Donahoe also told the MTAC leaders that USPS is urging the lame-duck session of Congress to take action on postal reform and not start over in 2013, according to the Idealliance summary. The key issues are removing the burden of prefunding retiree health benefits and allowing five-day delivery, he said.

Related articles:

• USPS Underestimates How Many Employees Will Take the Money and Run, Poll Says
• Congress Is Fixin' To Fix the Postal Service  
• USPS Planning Retirement Incentives To Help Downsizing, Donahoe Testifies

FSS Machines Running Far Slower Than Planned

Flats Sequencing System machines continue to run much slower than their target speeds and aren't getting any faster. But they also aren't breaking down as often as they were last year, according to a Postal Service presentation.

From October through mid-February, the average number of pieces sequenced hourly ranged from 7,000 to 10,000 per week, well below the target of nearly 12,000. Throughputs so far this year have stabilized in the range of 8,000 to 9,000 per hour with a slightly downward trend, according to a presentation Megan J. Brennan, USPS's Chief Operation Officer, made at a recent Mailers Technical Advisory Committee (MTAC) meeting.

But the "Mean Time Between Failure", a measure of how frequently the machines break down that was at about 10 for most of August and September, has been consistently above 13 recently. And the time it took to get a machine back online dropped by about one-third in a six-month period.

Greece Is the Word for USPS, Donahoe Says

The U.S. Postal Service’s financial situation is starting to “look like Greece,” the Postmaster General told mailers last week, because of resistance to changing the agency's obviously unsustainable cost structure.

If Congress doesn’t allow USPS to change, Postmaster General Pat Donahoe told the Mailers Technical Advisory Committee (MTAC), by 2016 it will have $60 billion in annual revenue but $90 billion worth of debt.

Donahoe was updating the mailers on his plan to reduce the agency’s cost structure through such measures as eliminating Saturday delivery, closing many post offices and distribution centers, slower deliveries, and ending the accounting games surrounding retiree health benefits and pensions.

“We have to act on this now. Putting a couple of pieces together and holding your breath is not the solution. We will be in an untenable position in 5 to 6 years,” one account of the meeting quoted Donahoe as saying.

“It is hard to get the message across. Everyone can’t have their cake and eat it too. When you look at our outlook and do nothing, we look like Greece,” he said, referring to the country that faces default on its debt and massive upheaval after years of obviously unsustainable budget deficits.

USPS Will Not Seek Exigent Rate Increase

The U.S. Postal Service will not seek an "exigent" (higher-than-inflation) rate increase this year, Postmaster General Pat Donahoe told the Mailers Technical Advisory Committee today.

USPS asked the Postal Regulatory Commission last month for special permission to raise most postal rates by more than 4%, in addition to the usual rate increases that are capped by changes in the Consumer Price Index.That proposal came in a court-ordered reconsideration of the financially strapped Postal Service's request for rate hikes to help it overcome the effects of the recession.

But Donahoe told the mailers group today that USPS would pursue that case only to get the PRC to clarify its position on when such exigent rate increases are allowed.

It will, however, implement CPI-capped rate increases in January, he said. Based on current inflation numbers, those increases will probably be a bit above 2%.

D. Eadward Tree Unmasked!

A postal executive stunned the Mailers Technical Advisory Committee (MTAC) today by announcing that D. Eadward Tree, pseudonymous chief arborist of Dead Tree Edition, is actually a high-ranking Postal Service official.

Rosa Fulton, Executive Director of Flats Sequencing, said that the Flats Sequencing Map published on this blog last month had only been shown to a few high-ranking USPS officials. She announced, therefore, that D. Eadward Tree must be none other than Patrick R. Donahoe, the #2 man at the U.S. Postal Service. Donahoe reportedly laughed but issued no denials.

Ms. Fulton's "revelation" also drew chuckles from those who had read this blog's criticisms of several Postal Service programs, such as the rechristening of the Intelligent Mail barcode as the FUBAR code.

Confession: That super-secret FSS map was part of a presentation to a meeting of mailers in March that was then posted on a USPS web site.

I've been called many things before -- DeadTree, Mr. Tree, Tree Dude, His Pseudonym-ness, an executive at several prominent publishing companies, that anonymous blogger with the aggravating name, an irritating #&*%#$ -- but never Pat Donahoe.

Here are a couple of clues: Yes, I have a day job, but my salary is less than Mr. Donahoe's.

Monkeying Around with Postal Pallets

Where have all the pallets gone, U.S. Postal Service officials sometimes wonder.

The Postal Service spends millions of dollars annually replenishing the supply of pallets, tubs, mailbags, and the like because so many get diverted to other uses each year. Pat Donahoe, USPS's COO, explained to the Mailers Technical Advisory Committee (MTAC) recently that, sometimes, getting the pallets back is no easy matter.

He displayed the following photo from a major U.S. zoo to prove his point.


Do you suppose there's an Intelligent Mail barcode on these orangutans?

Watch out! It's the IMb Express!

If you’re one of those sick people who like to rubberneck at accidents, keep an eye on the U.S. Postal Service’s Intelligent Mail Barcode initiative. It’s a train wreck waiting to happen.

Industry contacts report continuing frustration getting problems resolved and questions answered regarding IMb, one of USPS’s major strategic efforts. Mailers are having trouble getting postal officials even to discuss the challenges that might derail the program and are questioning whether IMb, already delayed twice, will be ready for implementation next year as scheduled.

USPS last month pushed off implementation of IMb once again to a three-phase process -- as Dead Tree Edition predicted -- that is to begin in May. Some chastised me for improperly abbreviating the name, which USPS refers to as IMb. That seems DUMb to me, but so be it.

Representatives of mailers, printers, and mailing-industry vendors in such organizations as Idealliance and the Association for Postal Commerce (PostCom) are nearly unanimous in their frustration with the Postal Service’s lack of communication and planning regarding IMb.

“How can we implement IMb when we customers are uncovering things at the eleventh hour? When the switch is flipped will it work?” reads one of a litany of concerns recorded at a recent Idealliance meeting. “There is a lack of direction,” reads another. “We seem to take one step forward and two back."

Some in the mailing industry who must communicate IMb requirements to their own organizations now find themselves in hot water: Their bosses can’t believe the Postal Service’s decisions, planning, and communication regarding IMb could possibly be so bad.

Since the Idealliance meeting, yet another communication breakdown has emerged: Postal officials have decided that mailers must presort addresses before assigning an IMb. That will force mail vendors to undo much of the work they have already done on IMb because they were planning to assign bar codes before presort. Perhaps the Postal Service's IMb folks have been attending the William Burrus School of Customer Relations. (See “When business is down, kick the customers.”)

Intelligent Mail Barcodes are a printing issue as well as a postal issue because there have been questions regarding how well USPS equipment can read IMbs produced by printers’ current inkjet machines. Despite their complaints about implementation, mailers are generally supportive of the IMb concept, which should enable the Postal Service to track mail as it moves through the system, spot problems, and optimize its processes.

A source reports that when he asked an industry expert to explain what was going on with the program, the expert replied that “IMb is too complex for mere mortals to understand.”

To get a taste for the complexity, check out the slide below from an IMB DPP that had MTAC LOL because the TWTDSTR. Translation: At a recent Mailers Technical Advisory Committee meeting, industry representatives laughed at a postal official's Death by PowerPoint presentation because of this slide in which the type was too darn small to read.

Not that anyone could have understood the slide even if the type had been larger.

Postal Service eyes mega-millions from FSS

The first phase of the Flats Sequencing System (FSS) will save the U.S. Postal Service hundreds of millions of dollars annually and result in thousands of job eliminations, a recent Postal Service presentation indicates.

Based on the presentation, Dead Tree Edition estimates the Postal Service is targeting delivery savings of more than 5 cents for every catalog, magazine, newspaper, and other flat handled by FSS. Most of the savings would come from eliminating roughly 6,000 letter-carrier and other employee positions as all 100 Phase I FSS machines go into operation during the next two years. By automating the sequencing of flats rather than having letter carriers do it by hand, FSS is supposed to enable a letter carrier to handle more deliveries.

Still under wraps is how the machines will affect costs and employment levels at processing and distribution centers, where flats are sorted for the delivery units. But postal officials have said that FSS will result in consolidation of some P&DCs.

In just the two ZIP codes served by the Reston Annex in Virginia, the move to FSS resulted in nine employee positions being eliminated, seven delivery vehicles being reallocated to other locations, and 960 square feet of space becoming available. Those results are typical of what to expect from FSS, Jordan Small, USPS's Vice President, Delivery Operations, told the Mailers Technical Advisory Commitee (MTAC) recently. (A summary of the FSS-related changes at the Reston Annex is on the last slide of Small's "FY 2009 Cost Containment Strategies" presentation.)

Reston Annex, serving ZIP codes 20191 and 20194, is one of seven "sort schemes" being handled by USPS's first fully operational FSS machine in Dulles, Virginia. If the Reston Annex results are indeed typical, its results would be replicated about 700 times (7 sort schemes multiplied by 100 machines) in Phase I of FSS.

With letter carriers typically making about $50,000 in annual salary, not to mention benefits, Dead Tree Edition conservatively estimates USPS's Reston Annex savings as $600,000 annually. Replicated 700 times, that would be $420 million. Each FSS machine is to operate six days per week with a capacity of 280,500 flats per day, suggesting that Phase I will eventually sequence about 8 billion flats annually.

The Postal Service may never reveal exactly how many positions it eliminates as a result of FSS because it is undertaking other strategies to reduce the number of letter carriers as well. The number of city delivery carriers declined by more than 10,000 (almost 5%) in the fiscal year that ended on Sept. 30, and the Postal Service is targeting another 9,200 positions in the current fiscal year.

FSS is best suited to areas with high densities of residential and commercial deliveries where the Postal Service has buildings large enough to house the enormous FSS machines. It's not clear how many additional phases FSS will have, especially in light of declining volumes of flat mail. Just a few days ago, in fact, the Postal Service revealed that it is reconsidering the idea of sequencing letters and flat mail together, an approach that was abandoned as too costly a few years ago.

Another IMB Delay?

Postal officials are hinting of another delay in implementing the Intelligent Mail Barcode, just three months after insisting the key initiative was on schedule.

Information-technology issues are causing the latest delay to the ill-fated IMB program, resulting in a three-phase implementation, a source told Dead Tree Edition. A full-service option with rate incentives was supposed to be introduced in May 2009, with IMB becoming mandatory in May 2010.

The U.S. Postal Service decided early this year to delay implementation because of unresolved customer concerns. The IMB will provide a unique identification to each piece and container of mail, enabling the Postal Service (and mailers) to track the flow of mail and to optimize mail handling.

Mailers and their vendors, especially printers, have been complaining for years that their input has been ignored by postal officials who were developing the IMB program. For example, there have been battles over whether the specifications for the barcode itself could be met by the printers' inkjet equipment. MTAC meetings relating to IMB have reportedly become increasingly contentious in recent months, and many issues needed for implementation have yet to be resolved.

Mailers who have tried to prepare for IMB by requesting a mailer identification, as suggested by USPS, have been told they must first have a meeting with a postal employee. Questioning whether USPS could hold meetings with the thousands of affected mailers in time, the mailing community had wondered whether the May 2009 date was realistic. But USPS announced in August that the program was still on schedule.

When business is down, kick the customers

The head of a major postal union offered a novel solution for what ails the U.S. Postal Service this week: Stop communicating so much with your customers.

"You must evict the Mailers Technical Advisory Committee (MTAC) from postal headquarters," William Burrus, president of the American Postal Workers Union, said in an open letter to Postmaster General Jack Potter. He wrote the letter because "the current USPS business plan is not working and cannot be expected to work in the future" and to warn against cost cuts as a response to declining revenue.

"It is unhealthy to have individuals whose allegiances are to their private-sector employers located inside postal headquarters," Burrus went on. "There is no similar arrangement elsewhere in our society, where by sheer proximity a major customer has unlimited access to the nerve center of a company. Do you believe that UPS or FedEx would permit a customer to set up shop inside its headquarters? Can you imagine providing the APWU with offices at postal headquarters? Evicting MTAC will change the psychology of the relationship, and shift them from partners to valued customers."

Burrus is correct that mailers have an unusual level of access to Postal Service management -- unusually bad.

Production managers at magazines and catalogs talk frequently with various people at their paper suppliers and printers. We sit down with them frequently to work out mutual problems and to explore opportunities. We have frequently toured their facilities, met with company presidents, and occasionally even gone into the homes of executives.

But with the Postal Service, a larger supplier for most of us than any printer or paper company, we get a once-in-a-blue-moon visit from a national account rep who knows little about our business and has limited ability to get anything done. We have to rely on industry associations and especially on MTAC to work out existing problems with the Postal Service and to prevent new ones.

I have had disagreements with people on MTAC, but I can't imagine how bad things would be for customers and the Postal Service without this kind of group working on a variety of technical issues. Even as an outsider, I can see that such major Postal Service initiatives as Intelligent Mail Barcode and the Flats Sequencing System would be doomed if not for the work of MTAC.

Here is a link to more information about MTAC. Do you see anything nefarious there? The meeting minutes are especially informative because you can link on PowerPoint presentations that were made at the MTAC meetings.