Making Sense of Postal Logistics

Nov 01, 2005 10:30 PM  By

Postal logistics” is one of those pieces of jargon that people toss around a lot but can’t necessarily define. Generally speaking, it’s a matter of picking and choosing from among the myriad transportation and delivery options to arrive at the distribution method that best suits your needs.

If you think that getting your catalogs delivered is simply a matter of dropping them off at the nearest U.S. Postal Service facility, you’re not taking advantage of the postal workshare programs that are the foundation of postal logistics — and that means you could be spending far more money than necessary to get your books into the mailboxes of customers and prospects.

Marc McCrery, manager of operational requirements and integration for the U.S. Postal Service, says that catalogers should consider three main discount opportunities when it comes to shipping catalogs: 1) presorting; 2) automation, which requires the application of a barcode; and 3) destination entry — where you want your catalogs to enter the mail stream. By and large, the deeper into the mail stream you deposit your catalogs, the cheaper your postage rates. The USPS gives you discounts in exchange for your sharing some of the work in getting the catalogs closer to their ultimate destinations. But because such work sharing requires you to hire additional service providers to help with sorting and drop-shipping, you need to weigh the additional expenses against the postal discounts to determine how much money you’ll actually save.

Postage savings gained by drop-shipping
into bulk mail center (BMC) into destination sectional center facility (DSCF) into destination delivery unit (DDU)
flats under
0.2063 lbs.
$0.021 per piece $0.026 per piece $0.032 per piece
flats over
0.2063 lbs.
$0.10 per pound $0.125 per pound $0.157 per pound

PRESORTING

If you mail catalogs via Standard Mail, you’re already doing some presorting; it’s a basic requirement of Standard Mail. Presorting is grouping your mail by three- or five-digit zip code designations. There are also zip + four discounts for those using standard mail. A standard mail presort can save you about 30%, depending on the level of sorting and whether you barcode.

The printer typically handles presorting, though catalogers can buy software to do it themselves. Joe Macdonough, a senior product specialist for Rochester, NY-based BCC Software, estimates that you can lease presorting software for standard flats weighing less than 1 lb. for just under $1,000 annually. For flats weighing more than 1 lb., the price more than triples.

“In general terms, if you are a catalog company with a circulation somewhere around 10 million, you can get the presorting software you need in a price range of $1,000-$5,000,” Macdonough says.

AUTOMATION

When you presort your mail, you can save more by handling basic automation — in other words, by including a barcode. On a three-digit zip presort, you can save 12%. If you automate on a 3/5 zip presort, you can save 24%. Barcode costs are usually included in your overall pricing from your printer or your logistics company if you work with one.

DESTINATION ENTRY

There are several points at which your catalogs can enter the postal system. The easiest but most expensive option is to simply have your printer deliver all your catalogs to its nearest post office. From there the USPS will handle the entire distribution process. This is known as origin entry; only about 10%-15% of Standard Mail catalogs are handled this way, according to Lee Spratt, vice president of channel sales for Weston, FL-based delivery services provider DHL Smart & GlobalMail. These are typically smaller mailings or segments of larger mailings. For example, a mailer in Florida may not have sufficient volume within the Pacific Northwest to justify sending a truck to drop-ship its catalogs to the bulk mail center (BMC) in Seattle.

Any other mailing option involves some degree of drop-shipping, also known as zone-skipping. “A sizable mailing of over 2,000 lbs. needs to drop-shipped,” the Postal Service’s McCrery says flatly.

You — or rather, your drop-shipper/postal consolidator/postal logistics services provider — can have the catalogs drop-shipped from the printer to any or all of the 29 BMCs, 485 destination sectional center facilities (DSCFs, also known as “plants” or city/metro area facilities), and more than 38,000 destination delivery units (DDUs, or local neighborhood post offices). Each facility is a separate stop along the mail stream.

“Most catalogers end up gravitating to the plant level,” says the USPS’s McCrery. “If you drop to the plant networks throughout the U.S., each one of your recipients can receive your catalog within three or four days.” Sending the catalogs to the appropriate BMCs could add as many as four days for delivery. Conversely, shipping catalogs directly to the DDUs — the final stop before the recipients’ mailboxes — can shave another day off your total delivery time, though the travel time required to hit the post offices could end up canceling out the amount of time saved within the mail stream.

Charley Howard, vice president of postal affairs for San Antonio, TX-based database services provider Harte-Hanks, prefers to zone-skip as far as possible into the mail stream. “We send about 80% of our clients’ books directly to the DDU,” he says. For Howard it’s a matter of saving time rather than money: “Bound printed matter such as catalogs is not typically a priority [for the USPS], but since it tends to eat up a lot of space in the local delivery unit, they’re usually pretty anxious to get it out of there.”

You have to make sure that the costs involved in transporting catalogs down to the DDU level don’t exceed the savings. Howard recommends transporting only large shipments — about 2,500 lbs. — all the way to the DDU; for instance, it wouldn’t make sense to send a half-full truck to a given DDU. “If you don’t have a lot of tonnage in a given shipment, sending directly to the DDU is really a waste,” he says.

Gary LaBarre, distribution manager for Maple Grove, MN-based printer Banta Catalog Group, suggests keeping a simple formula in mind when determining the postal point of entry for catalog: Destination entry discounts minus freight costs equals net saving.

For instance, if you drop-ship into a DSCF, you’ll pay less postage than if you drop-ship into a BMC (see “Postage savings gained by drop-shipping” on the bottom of page 21). But because transporting catalogs to the more numerous, more remote SCFs will increase your freight costs, your overall savings will be diminished.

“Freight charges are based on the amount of mail going to a specific SCF,” LaBarre continues. “If you can get 85% SCF penetration on a 2 million-piece mailing, you’ll need to go by way of remote locations that have higher freight rates. It’s all volume related. It’s a balance between postal discounts and freight charges, with your ultimate goal being maximum net savings. And the more catalog volume you can generate, the better rates you are likely to get from carriers.”

“The whole dynamic depends on company size,” adds Spratt of DHL Smart & GlobalMail. “Large catalogers may work with three to five different drop-shippers, and smaller companies usually work with just one.” Working with multiple drop-shippers allows you more freedom of choice, Spratt says, to experiment with sending your shipments to different stops along the mail stream to determine the most economical shipping combination.

Many in the industry use the terms “drop-shipper” and “consolidator” interchangeably. In fact, says Dan Scapin, president of logistics and distribution for Chicago-based printing and delivery services provider R.R. Donnelley, “there’s a slight difference between some drop-shippers and consolidators. Drop-shippers don’t normally mail different catalog titles together. They tend to mail only one title at a time. Additionally, consolidators measure USPS performance and generally provide your marketing team with more-specific information, such as precisely when your shipments are due to arrive at a given destination.”

A very rought estimate for drop-shipping costs is $6 for every 100 lbs. of material — in this case, catalogs — with a minimum of about 400 lbs. per load for most drop-ship companies, according to Richard Oye, vice president of solution development, R.R. Donnelly. The drop-shipping cost would be adjusted based on travel distance, however.

BEYOND SAVING POSTAGE

The benefits of building the right postal workshare program go well beyond saving money on postage, Scapin adds. “Eighty percent of respondents place an order on the day a given book arrives at their home,” he says. “A savvy cataloger will arrange to have a book or mail piece arrive the day he thinks sales will be at their peak. Catalogers used to always look to save money. Now they look for the best response.”

Not only do your postage costs potentially decrease the deeper into the mail stream you drop-ship, but your ability to pinpoint in-home delivery dates also increases, since you’re leaving fewer variables in the hands of the USPS. As a result, this could allow you to better schedule the delivery of inventory. “Because of drop-shipping, a cataloger can save on more than just postage. It can also save on operation and inventory costs,” Scapin says.

Glossary

Automation discount: Postage discount to mailers who barcode their mailpieces and meet addressing, readability, and other requirements for processing on automated equipment.

Bound Printed Matter (BPM): Catalogs, magazines, and other bound printed materials.

Bulk mail: Standard or third class mail.

Bulk mail center (BMC): One of 29 postal processing facilities that distribute third class mail.

Bulk Parcel Return Service (BPRS): USPS service that enables high-volume mailers to have undeliverable-as-addressed Standard Mail machinable parcels returned to them.

Carrier route: All the addresses that a postal carrier delivers to.

Carrier route presort mail: Mail sorted by carrier route to qualify for postal discounts.

CASS: Coding Accuracy Support System, a USPS service that checks the accuracy of zip codes, zip+4 codes, delivery point codes, and carrier route codes.

Delivery sequenced mail: Mail that is arranged by a mailer in delivery order for a particular carrier route.

Destination bulk mail center (DBMC) rate: A discounted postal rate received when a mailing is delivered by the mailer to the appropriate BMC.

Destination delivery unit (DDU): The final postal facility at which a mailpiece arrives prior to being delivered to the addressee; local post offices are DDUs.

Destination delivery unit (DDU) rate: A discounted postal rate for third class mail and periodicals that are delivered by the mailer to the appropriate DDU.

Destination sectional center facility (DSCF) rate: A discounted postal rate for standard mail, Parcel Post, and Bound Printed Matter that is delivered by the mailer to the sectional center.

DSF: Delivery Sequence File, mail that the cataloger arranges in delivery order for a particular carrier route. Mailers can use DSF to identify questionable addresses.

Flats: Mail that exceeds the Postal Service’s dimensions for letters (11-1/2″ long, 6-1/8″ high, 1/4″ thick) but does not exceed the maximum dimension for the mail processing category (15″ long, 12″ high, 3/4″ thick); dimensions for automation rate flats vary.

Sectional center facility (SCF): One of more than 450 postal sorting facilities (also known as destination sectional center facilities) where mail goes after it’s been sorted at a bulk mail center and before heading on to the destination delivery unit.

Standard mail: Commercial and nonprofit mail that weighs less than 16 ounces a piece; subclasses are Regular Standard Mail, Nonprofit Standard Mail, Enhanced Carrier Route Standard Mail, and Nonprofit Enhanced Carrier Route Standard Mail.

Zone skipping: Using a third-party delivery service to take catalogs or other packages from the printer or fulfillment center to the post offices nearest the recipients’ homes, bypassing several intermediary stages that are part of the typical end-to-end U.S. Postal Service delivery process.