"We have to make sure that costs are taken out so the rates stay about the same."
Jim O’Brien, VP, Distribution & Postal Affairs Time, Inc.

The passage of the postal reform bill is a gratifying step in the right direction. However, the U.S. Postal Service is continuing its efforts to drive down costs through a number of initiatives and as it does so, publishers must remain vigilant to make sure that as the USPS eliminates costs, publishers’ priorities aren’t eliminated along with them.

One initiative, and one that has immediate concerns that need to be addressed, has to do with the shape of mail and how magazines in particular will be affected. Called Flat Sequence Sortation (FSS), it eliminates the manual sortation of flat mail;a category that accounts for about 25 percent of the mail and includes magazines and catalogs;by the carrier by automating the process. Already in place for letter-sized sortation, flat sortation machines are expected to cost in the tens of millions of dollars. Immediate concerns for publishers are three: Loss of carrier route discounts, label placement and scheduling.

Labels Problematic
Label placement has been getting a lot of attention, although most observers are not yet panicked. Current positioning of the address label is limited to two spots;top and center on the front cover or top and center on the back cover. According to Rita Cohen, senior vice president, legislative and regulatory policy at the Magazine Publishers of America, keeping the standard bottom-right position may work, but the label will have to be placed upside-down. "A lot of my members did not think this was a wonderful [solution]," says Cohen. Yet the postal service is signaling that the machines can be adjusted which leaves the possibility of an appropriate solution. But Jim O’Brien, vice president, distribution and postal affairs at Time Inc., is skeptical. "They have a prototype being installed in Indianapolis right now, so it feels like the horse is a little out of the barn."

Sorting It Out
A mail carrier standing in front of a stack of large cubby holes stuffing each one with mail is sorting according to the sequence they walk their route. "But that takes a lot of time," says David Straus, American Business Media’s postal counsel. "The average carrier spends two to three hours a day in the office casing the mail. His route is sized accordingly so that he has two to three hours to case the mail and then five to six hours on the street to deliver it."

The postal service intends to reduce the time carriers spend casing the mail even further by automating flats as it has done with letter size. Since the postal service is adding about two million delivery points per year, it will either have to add more carriers or allow them to visit more delivery points in a day. "If they have to add carriers to those routes at the same ratio of stops to carriers that they have now, the cost is going to get out of hand," says Straus.

Cohen cites figures from the USPS that manual casing costs 7.7 cents per piece and that FSS is expected to drop that cost to 3.4 cents per piece. With 50 billion flats out there, though some are "saturation" or "high density" promotional mailings that don’t get cased, that’s a significant cost savings, with a bonus of the ability to potentially absorb more delivery points with minimal carrier additions.

"The bottom line here is for better or worse I think we have to be supportive of this technology because periodicals costs are once again out of control," says O’Brien. "Hopefully this will allow them to reduce the carrier sorting time in the office and drive the costs out of our system." In other words, what’s good for the postal service’s bottom line is good for magazine publishers, to a point.

"The concerns are a few," says O’Brien. The introduction of the FSS machines will likely make carrier route bundle discounts obsolete. O’Brien adds that the postal service has hinted that publishers may be defaulted to the five-digit rate as the next best available discount rate. "The carrier route rate is 17.2 cents per piece," says O’Brien. "The five-digit rate for that same piece would be 23.8 cents. It’s substantial for people to lose that. We have to make sure that costs are taken out so the rates stay about the same."

The FSS machines may save money but time is another game altogether. "It’s a two-pass operation," says O’Brien, "they have to run our products through the machine twice." The first pass scans the addresses and the second pass sorts the magazines by the carrier’s walk sequence. The double scan may mean that magazines will have to be entered into the system earlier, putting pressure on already-tight schedules. "If they miss those cut-offs, their subscribers will end up getting delivered a day later," says O’Brien.

These issues are not foregone conclusions, however. Straus, Cohen and O’Brien all point out that they’re keeping close tabs on the progress the postal system has been making with FSS.
related stories: http://www.lunewsviews.com/automation.htm | http://www.qg.com/whatsnew/postal_news/postal_081003.asp |

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