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Achieving Discounts -- New Numbers, Same Advice

May 2009 By Leo Raymond
IN THE wake of postal reform, the U.S. Postal Service (USPS) started a new practice last year: annual rate increases. Last May, this May, and potentially every May in the foreseeable future, prices will change for most forms of mail and USPS services—usually upward.

Each such “price adjustment” (as a rate case is now known) is linked to a calculated increase in the Consumer Price Index (CPI) for the previous 12 months compared to the CPI for a similar period a year earlier. This figure caps the average rate increase for a class of mail (e.g., First-Class Mail), but changes within a class—such as the rate cells in a rate category—can be greater.

Most mail volume nowadays is “workshared” mail, i.e., mail that has been prepared by the sender to obviate the need for some degree of USPS processing. In exchange for taking specific preparation steps, mailers earn a reduction in the postage they pay; that reduction is generally, but not perfectly, aligned with the postal processing costs that are avoided.

Commercial mailers and their clients pay very close attention to how workshare rates—including the prices in particular rate cells—are changed in a “price adjustment,” and they devote considerable energy to strategizing how to continue earning the lowest possible rates. But, even though worksharing has been around in some form since the late 1970s, its basic principles, and the fundamental strategies for mailers who want to optimize their discounts, have changed very little.

Worksharing comes in three forms: presort, automation and destination entry. Each has a set of rates—or discounts, if you’re the glass-is-half-full type—with associated requirements. By design, each obligates the mail preparer to perform additional work that avoids USPS work and thus, in principle, justifies the discount.

Tried and True

Presort dates back to 1976. Simply put, presort discounts are based on the postal processing costs avoided when the mailer arranges mail in groups, for example by ZIP Code or carrier route. Originally, presorted mail was bundled and sacked, but this has been largely phased out in favor of loose mail in sleeved trays. But, though the details may change, the basic idea of grouping mail remains the same.

In this year’s rate changes, mail owners and preparers again can see that, over the years, presort has become a fundamental part of commercial mail production and really no longer is an option. In fact, all commercial rate mail (including all Periodical and Standard Mail) must be presorted, even to qualify for those rates.

 

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