Washington–The U.S. Postal Service attempted to make its presence felt strongly during the July 16 Industry/USPS Flats Summit in Washington, cosponsored by the Association For Postal Commerce, the Direct Marketing Association, the Magazine Publishers of America, the Printing Industries of America, the Mail Fulfillment and Service Association, the IDEAlliance, and the Saturation Mailers Coalition, by better promoting its corporate flats (including most catalogs) strategy than it has since first unveiling the project two months ago.
In his presentation on July 16, USPS senior vice president, operations, John Rapp laid out two possible options that have been circulated over the past year with mailers—both still in the R&D stage—that he believes could cut costs and reduce rates for the delivery of flats. The first option, Delivery Point Packaging (DPP) uses automation to sort both letters and flats into delivery order and then bundle the mail into one package for each delivery stop. Although the technology is not available yet, Rapp said that the USPS expects to have a DPP machine simulation available within the next two years.
DPP is a one-pass system designed to sequence flats and letters together by machine quicker than the current process, which requires several pass-throughs. “DPP would automate manual carrier sorting and eliminate the fingering time,” Rapp said. On the other hand, he noted that it would likely take longer for the USPS to develop than the agency’s second option.
DPP would change postal rates for flats, because the rate structure would be altered to an 11-digit barcode from the current nine-digit code. Rapp couldn’t estimate how much rates could be reduced, but noted that they would “recognize the worksharing” involved between mailers and the USPS. If successful in its development, the USPS would hope to deploy DPP in 2007.
The agency could, however, deploy its second option–the Flats Sequencing System (FSS)—a year earlier. But the FSS isn’t as desirable an option, Rapp says. With the FSS, which is designed to sequence flat mail using two passes through the machinery as it currently does for letters. As with DPP, the rate structure would change due to a shift to more 11-digit barcoded mail volume recognizing worksharing among mailers. On the other hand, FSS would not decrease postal clerk office time as much as DPP would, thus rates presumably wouldn’t be as attractive to mailers and savings less impactful to the USPS.
“We’re pretty sure we can do FSS,” Rapp said, “but DPP looks like a bigger payback for all of us. We have not selected an option yet, because both are still in the R&D process.” The USPS hopes mailers will have a say in the process, and Rapp encourages mailers to e-mail the agency at FlatStrategyFeedback@usps.gov.
“We’re not trying to standardize and force all flats to be a standard size and shape,” Rapp said. “That’s not our intent. We realize the value of differentiation in mail, and are not trying to design a machine that would only handle one size, but to enlarge shapes and sizes to handle. It’s our intent to automate all the mail in the postal stream, because we know it will save costs. Our primary concern is that flats stay affordable.”
DPP gives us a better payback with lower pricing,” Rapp said. “We want to design equipment that will fit all the pieces. Whatever we do, we hope it’ll be a collaborative effort with all” mailers.
DPP R&D will continue through next year, according to USPS vice president, engineering Tom Day. In 2005-06, the USPS will run in-plant evaluations and competitive tests, then in 2007 it would like to award a contract and deploy the equipment.
As for FSS, Day said during his presentation that R&D will run through this year, in-plant tests, evaluations and a competitive test will take place by 2005, and the USPS will award a contract and begin deployment in 2006. (Deployment of either system may take even longer than that. In explaining how manufacturer Lockheed Martin Distribution Technologies, which is one of several vendors vying for a contract for either DPP or FSS equipment, will develop machines for DPP and FSS, Lee Spadine, Lockheed’s manager, mail automation systems, said in his presentation that deployment of a DPP machine won’t take place until 2008.)
Day said he has no idea how much the USPS will invest in either program once either program is deployed, but said a $1 billion-plus expense “wouldn’t surprise me.”
As for which system will prevail, if the DPP doesn’t work, “we’d like to have something developed in FSS and cut at least some of the costs and handling in flats,” USPS executive vice president/chief operating officer Patrick Donahoe said. “These two aren’t being looked at in separate silos; we’re evaluating a number of these processes. Even though our capital costs are probably at a long-term low, we don’t want long-term depreciation costs, because that won’t be in the best industry interests.”