The U.S. Postal Service's stepped-up efforts to consolidate its mail-processing facilities is good news for printers that handle dropshipped mail, according to a printing executive.
"There is a definite need to rightsize. Therefore we are in complete support of the USPS efforts in this area," wrote Joe Schick, Director of Postal Affairs at Quad/Graphics, in a company publication that was released Thursday. Quad is the country's #2 printer and a major shipper of catalogs, direct mail, and magazines to postal facilities.
"Total mail volume is expected to be about 170 billion pieces in 2011 while the current postal processing network has the capacity to support more than 300 billion pieces."
More than 40 processing and distribution centers are the subject of Area Mail Processing studies to decide whether some or all of their work should be moved to nearby P&DCs. In a recent one-week period, seven new AMPs studies were announced, as described in Postal Service 'AMPs' Up Facility Consolidations.
"It is an opportunity to reduce Postal Service costs while at the same time provide efficiencies to our distribution and drop-ship process," Schick wrote. "As facilities are consolidated and mail is processed in fewer facilities, we're able to build loads that have fewer stops, which should help us manage our transportation costs and make it easier for our drivers to get in and out of postal facilities."
"Unfortunately, local communities and Congress are making this difficult for the Postal Service. It's one example where the USPS is trying to do the right thing, but politics gets in the way."
Showing posts with label dropshipping. Show all posts
Showing posts with label dropshipping. Show all posts
Friday, February 4, 2011
Saturday, May 8, 2010
The Unofficial Guide to Flats Sequencing
This guide was originally published in January 2009 but has been significantly updated since then. For the latest on the successes and failures of the Flats Sequencing System so far, please see USPS Speeds Up FSS Start-Ups, FSS Throughputs 9% Below Plan, USPS Official Says, and USPS Consolidation Plan Means Moving or Closing Some FSS Machines.
Is the Flats Sequencing System going to revolutionize the Postal Service’s handling of catalogs and magazines or is it destined for failure? Good question.
The evidence is mixed, partly because USPS has been forthcoming about some aspects of FSS but secretive about others.
Mailers report little trouble with the few FSS machines that are operating so far. And some are impressed by postal officials' efforts, after some initial hiccups, to work with industry on creating an efficient, “lowest combined cost” approach to the handling of catalogs, magazine, and other flat mail.
But postal officials were also caught off guard by the rapid decline in flat mail, which has forced them to rework the locations and schedules for Phase I (the first 100 machines) of the FSS program. And Northrop Grumman, which is building the machines, reportedly reassigned all of the engineers who had been working on FSS after the machines failed two USPS acceptance tests.
USPS has a split personality when it comes to talking about the Flats Sequencing System. It has provided lots of information about the new technology but not answered some basic questions that have been kicking around for a couple of years.
It has created an FSS Web site bringing together various documents related to FSS and a neat video (above) showing the FSS in action. But it put the video on YouTube without referencing the video on its own Web sites. And it has had trouble keeping the list of FSS locations up to date.
To clear up the mysteries and confusion, Dead Tree Edition here offers answers to frequently asked questions about FSS:
Q: What is the purpose of FSS? A: The most straightforward answer comes from a report issued by USPS' Office of Inspector General (OIG) report, rather than the PR or marketing folks: “The mail processed by the FSS will arrive at the delivery unit in walk-sequence order, ready for delivery by the carrier with no additional mail movement or manual sorting required. Savings should result when delivery units can eliminate the requirement for mail carriers to manually case flat mail. A small reduction in clerks’ work hours at delivery units should also result, since employees would no longer need to move FSS-processed mail to the carrier casing areas.” The best description from the Postal Service itself comes from an obscure cost study: “The Flats Sequencing System (FSS) machine sorts flat mail into Delivery Point Sequence (DPS) for carrier delivery. This program eliminates the last significant manual sortation currently performed by carriers before leaving the office. Since FSS machines will be deployed in processing plants, the FSS program will shift processing activities from delivery units to processing plants.”
Q: Where will the machines go, and what ZIP codes will be affected? A: Here are links to the official list of the 47 Phase I, IA, and IB locations for the 100 machines and the list of 2,328 affected ZIP codes. Declining Volumes Lead to FSS Expansion explains the Phase IA expansion of August 2009, which added 10 facilities and about 1000 ZIP codes to the Phase I plan; Phase IB added five more in May 2010.
Q: How much will the machines save the Postal Service? A: The Postal Service isn’t saying, but the OIG report says “FSS is expected to generate operational savings of between $593 million and $677 million annually.” That’s consistent with Dead Tree Edition’s conservative estimate that the Postal Service envisioned delivery savings of at least $420 million (at least 5 cents per flat) from Phase I, but the calculations are actually quite different. Dead Tree Edition considered only delivery costs, while the OIG report presumably looked at all factors – impact on sorting costs, equipment maintenance, real estate, and depreciation as well as delivery costs.
Q: Will the savings be shared with the customers in the form of lower postal rates? A: Don’t count on it. Facing a $2.8 billion loss in the last fiscal year and declining mail volumes, USPS no doubt will use the money to improve its financial situation rather than to decrease average prices. Postal officials have said informally that dropshipped flats handled via FSS will cost mailers less than if they had been dropshipped in traditional carrier-route bundles. But that is likely to mean higher-than-normal rate increases for non-FSS flats, so that the average rate increases for each class will be close to the rate cap, which is determined by changes in the Consumer Price Index. Publishing Executive's article "Pushing the Envelope" has an extensive discussion of FSS from a customer perspective.
Q: You mean we will have two sets of rates for flats, one for FSS and one for non-FSS areas? A: Probably. Postal officials are still working with the mailing industry to determine the best way to package FSS flats, but it’s clear that at some point mailers will no longer be creating carrier-route bundles for areas served by FSS and that the rules for bundling and containerization will change. Trying to avoid the kind of delays and miscommunication that have plagued the Intelligent Mail Barcode (IMb) program, both postal officials and mailers are reportedly trying to work out all issues before the new rules and rate structure are announced. Some of the work revolves around optimal bundle sizes and how best to strap or band pallets. In the meantime, mailers are packaging mail in the traditional way (for example, carrier-route bundles and SCF pallets), which is not optimal for the FSS machines that are already running.
Q: How will FSS flats be packaged? A: It looks as if mailers will create larger bundles for FSS facilities than for non-FSS facilities. The bundles may cover an entire FSS scheme (typically, two to four ZIP codes that are processed on the equipment at the same time). Ideally, mailers will create scheme pallets, but that will be extremely rare except for huge mailstreams (those containing more than 3 million pounds) unless the minimum weight for pallets is reduced. Probably the next step down will be machine pallets, which will contain copies for all of the schemes (typically about seven) that will be worked on the same FSS machine. The next step down after that may be FSS pallets, containing copies going to all of the FSS machines in a facility. There may be some mixing of FSS and non-FSS copies on the same pallets. The use of tubs instead of sacks is being investigated for flats that mailers cannot palletize.
Q: Why did mailers have to change the way they address their flat mail? A: For FSS to be optimal, letter carriers will need to be able to determine quickly which flats get delivered to the next address. Because the catalogs and publications will be upright in a tub with all of the spines facing right, the best way to do that is to have all of the addresses right-side up in the upper right portion of the cover that faces the carrier. As a result, most magazines are now placing addresses up-side down in the lower left quadrant of the front cover, while most catalogs are addressing right-side up in the upper right portion of the back cover. The new addressing rules, which apply to flats going to non-FSS areas as well, took effect on March 29, 2009.
Q: What about newspapers? The official answer is that newspapers going to FSS zones will be processed on the FSS “to the extent possible”. But there is some skepticism in the mailing community about how the machines will handle some newspaper formats. It’s also not clear to what extent in-county Periodicals and other locally focused publications will be encouraged or forced to enter their mail at FSS facilities rather than at their local post offices.
Q: What about saturation mail? Postal officials say that saturation mail will bypass FSS but that high-density mail will be processed on the machines.
Q: How much do the machines cost? USPS has a contract to pay Northrop Grumman Corporation $874.6 million for the 100 systems in Phase 1, but the OIG refers to Phase I as a $1.4-billion investment. Most machines will go into existing buildings, but there are a few new buildings, plus some modifications to existing buildings.
Q: Did the Postal Service make a good investment? A: Investing $1.4 billion to save between $593 million and $677 million annually would certainly be a good investment; the investment would pay for itself in barely two years. See Can the Flats Sequencing System Be Fixed? for more information about a couple of potential problems in achieving those savings. FSS Throughputs 9% Below Plan, USPS Official Says explains how the drop in flats volume has hurt the machines' productivity.
Q: How much of the country will be included in Phase I/1A? A: It looks as if the latest plan will involve roughly 25% to 30% of the flats the Postal Service handles. The percentage should be higher for mail going mostly to affluent urban and suburban dwellers. By the way, postal officials are already planning Phase II and considering whether to pursue new technology that would sequence letter and flat mail together.
Q: How will firm bundles be handled? A: Postal officials say there will still be Periodicals-class firm bundles but indicate that firm bundles containing only a few copies in FSS zones may no longer make economic sense for mailers.
Q: How will FSS affect the timeliness of delivery? A: The critical entry time for next-day delivery will be noon for sacked Standard flats, 4 p.m. for palletized Standard mail, and determined on a facility-by-facility basis for Periodicals and First Class. In theory, FSS will make the day of delivery more predictable. For example, letter carriers sometimes forgo manual casing on days when they have heavy volumes, delaying delivery of flats. But “News” Periodicals (daily and weekly publications) may see some deliveries delayed by a day. They may need to enter mail by mid-afternoon at an FSS facility to get next-day delivery, while entering in the late afternoon or early evening at a non-FSS Sectional Center Facility (SCF) typically gets them next-day delivery.
Q: How will FSS affect dropshipping? A: It has already led to consolidation of dropship facilities and will probably lead to more, which is good for mailers. Unfortunately for mailers, the FSS-related consolidations will tend to affect dropship facilities in densely populated areas, rather than those in such hard-to-reach locations as El Paso, TX and Clarksburg, WV. The good news is that the FSS dropship locations will be identical for Periodicals and Standard classes; that is not always true for dropshipping of non-FSS flats.
Please submit additional questions, as well as suggestions and other FSS information, to Dead.Tree.Edition@gmail.com.
Wednesday, September 30, 2009
USPS Steps Up Mail-Processing Consolidation
The U.S. Postal Service has announced the possible closing or downsizing of 15 processing and distribution centers in the past two weeks, part of a newly aggressive effort to rationalize its mail-processing network.
While proposed post-office closings get most of the media attention, 32 of the much larger processing and distribution centers are the subject of Area Mail Processing studies (AMPS) that could result in some or all of their work going to other P&DCs. USPS has approved at least partial consolidation of 11 other P&DCs this quarter, as shown by its AMPS Web site. The site links to reports detailing the proposed and recently approved consolidations.
Those reports suggest the proposed consolidations would together yield well over $100 million in annual savings and result in elimination of more than 1,000 positions. Declining mail volume and increased automation have left the Postal Service with far more mail-processing capacity and locations than it needs.
In many cases, the consolidations help mailers by eliminating some of the 400 or so P&DCs to which they must transport mail to receive Sectional Center Facility (SCF) dropship discounts. But in other cases, the consolidations affect only the processing of outgoing mail (such as mail pieces postmarked for delivery to other regions) and leave the handling of dropshipped mail intact.
The consolidations typically move work to larger P&DCs that are 20 to 80 miles away. Temporary employees lose their jobs, while career employees must often make the longer commute to the larger P&DC to remain employed by the Postal Service.
Concerned about their towns losing jobs and their postmark, local officials often join postal unions in opposing AMPS consolidations. But USPS’ Office of Inspector General just released a report defending one of those challenged consolidations, a shift of outgoing mail processing from Canton, Ohio to Akron. Counter to claims from opponents of consolidation, the study found that service improved and that USPS expenses were reduced by more than $2.2 million annually.
Here is USPS's current list of P&DCs being considered for consolidation:
While proposed post-office closings get most of the media attention, 32 of the much larger processing and distribution centers are the subject of Area Mail Processing studies (AMPS) that could result in some or all of their work going to other P&DCs. USPS has approved at least partial consolidation of 11 other P&DCs this quarter, as shown by its AMPS Web site. The site links to reports detailing the proposed and recently approved consolidations.
Those reports suggest the proposed consolidations would together yield well over $100 million in annual savings and result in elimination of more than 1,000 positions. Declining mail volume and increased automation have left the Postal Service with far more mail-processing capacity and locations than it needs.
In many cases, the consolidations help mailers by eliminating some of the 400 or so P&DCs to which they must transport mail to receive Sectional Center Facility (SCF) dropship discounts. But in other cases, the consolidations affect only the processing of outgoing mail (such as mail pieces postmarked for delivery to other regions) and leave the handling of dropshipped mail intact.
The consolidations typically move work to larger P&DCs that are 20 to 80 miles away. Temporary employees lose their jobs, while career employees must often make the longer commute to the larger P&DC to remain employed by the Postal Service.
Concerned about their towns losing jobs and their postmark, local officials often join postal unions in opposing AMPS consolidations. But USPS’ Office of Inspector General just released a report defending one of those challenged consolidations, a shift of outgoing mail processing from Canton, Ohio to Akron. Counter to claims from opponents of consolidation, the study found that service improved and that USPS expenses were reduced by more than $2.2 million annually.
Here is USPS's current list of P&DCs being considered for consolidation:
- Binghamton, NY (partial consolidation approved, according to local press reports).
- Bloomington, IN
- Bowling Green, KY
- Bristol, VA
- Cape Cod (Wareham), MA
- Charlottesville, VA
- Dallas, TX
- Dulles, VA
- Frederick, MD
- Green Bay, WI
- Hickory, NC
- Industry, CA
- Kalamazoo, MI
- Kilmer (Edison), NJ
- Kinston, NC
- Lima, OH
- London, KY
- Marysville, CA
- North Reading, MA
- Mojave, CA
- Newark, NJ
- New Castle, PA
- North Bay (Petaluma), CA
- Oxnard, CA
- Palatine, IL
- Rocky Mount, NC
- Saginaw, MI
- Salinas, CA
- Southeastern, PA
- Stockton, CA
- West Jersey (Whippany), NJ
- Wheeling, WV
Sunday, November 23, 2008
Is Quebecor back from the dead?
Is Quebecor World ready for a "return to greatness," as Printing Impressions suggests in the glowing cover story of its latest issue?
At first blush, it's hard to see an exciting future for a company that has already lost $1 billion this year after going Chapter 11. After all, the giant printing company acknowledged in a financial filing recently that it faced "challenging market conditions, resulting in price erosion and decreased volume in most of the Company's markets."
But dig a little deeper and you will find some signs of strength. Most of the $1 billion loss was a writedown of the albatross that almost brought QW to ruin, the European division that it sold in June. QW World has not used much of its debtor-in-possession financing since filing for Chapter 11 in January and experienced positive cash flow, though barely, in the third quarter.
An apparent blessing of the Chapter 11 filing, at least so far, is that counterparties canceled all currency-hedging contracts with QW, which has Canadian plants that produce items for the U.S. market. The U.S. dollar has gained more than 20% on the Canadian dollar since then.
Another blessing came from the U.S. Postal Service last year when it overhauled rates for Periodicals and Standard flats mail in ways that enhanced the incentives for co-mailing. Only R.R. Donnelley and Quad/Graphics are in the same league as Quebecor when it comes to large co-mail and dropship pools for mailed flats, and in this case size does matter.
Of the three, Quebecor's efforts have been more focused on the small mailers (with circulation of, say, less than 100,000) that have flocked to co-mailing in the past year or so and that gain such huge postal savings when participating in QW's large co-mail pools.
I was at an industry function recently where several executives talked of there being only three printers -- QW, RRD, and Quad. Certainly there are others, some of them sizeable companies with stronger credit histories than QW. But without rotogravure presses (rumored to be more profitable than offset), huge co-mail pools, and extensive dropship networks, it's hard to see how they can compete with the Big Three for most medium- and large-circulation publications.
Printing Impressions quotes company executives as saying the new QW is more streamlined and has fewer silos, doing innovative things like using available magazine press capacity (which no doubt there is a lot of these days) "to meet peak four-color educational textbook demand." And QW has definitely been more aggressive in recent months about reaching out to customers and potential customers -- for example, sponsoring and participating in webinars held by Folio: and Multichannel Merchant.
The big question is whether QW is now strong enough to ride out the turbulence of a severe recession and lean enough to thrive as many customers permanently reduce or even eliminate their demand for printing.
At first blush, it's hard to see an exciting future for a company that has already lost $1 billion this year after going Chapter 11. After all, the giant printing company acknowledged in a financial filing recently that it faced "challenging market conditions, resulting in price erosion and decreased volume in most of the Company's markets."
But dig a little deeper and you will find some signs of strength. Most of the $1 billion loss was a writedown of the albatross that almost brought QW to ruin, the European division that it sold in June. QW World has not used much of its debtor-in-possession financing since filing for Chapter 11 in January and experienced positive cash flow, though barely, in the third quarter.
An apparent blessing of the Chapter 11 filing, at least so far, is that counterparties canceled all currency-hedging contracts with QW, which has Canadian plants that produce items for the U.S. market. The U.S. dollar has gained more than 20% on the Canadian dollar since then.
Another blessing came from the U.S. Postal Service last year when it overhauled rates for Periodicals and Standard flats mail in ways that enhanced the incentives for co-mailing. Only R.R. Donnelley and Quad/Graphics are in the same league as Quebecor when it comes to large co-mail and dropship pools for mailed flats, and in this case size does matter.
Of the three, Quebecor's efforts have been more focused on the small mailers (with circulation of, say, less than 100,000) that have flocked to co-mailing in the past year or so and that gain such huge postal savings when participating in QW's large co-mail pools.
I was at an industry function recently where several executives talked of there being only three printers -- QW, RRD, and Quad. Certainly there are others, some of them sizeable companies with stronger credit histories than QW. But without rotogravure presses (rumored to be more profitable than offset), huge co-mail pools, and extensive dropship networks, it's hard to see how they can compete with the Big Three for most medium- and large-circulation publications.
Printing Impressions quotes company executives as saying the new QW is more streamlined and has fewer silos, doing innovative things like using available magazine press capacity (which no doubt there is a lot of these days) "to meet peak four-color educational textbook demand." And QW has definitely been more aggressive in recent months about reaching out to customers and potential customers -- for example, sponsoring and participating in webinars held by Folio: and Multichannel Merchant.
The big question is whether QW is now strong enough to ride out the turbulence of a severe recession and lean enough to thrive as many customers permanently reduce or even eliminate their demand for printing.
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