Mailing & Fulfillment Special Report — Rate Case Realities

IT’S ALL ABOUT EFFICIENCY. The Postal Service has always been a labor-intensive operation; about three-fourths of its costs are for labor (salaries and benefits). And, although it has spent billions on automation in recent years, that proportion has hardly changed. But that may be deceiving: inflation has driven up the cost of labor even as the number of employees has decreased steadily, despite equally steady growth in total mail volume. Nonetheless, aware of the impact of rising postage costs on mail volume, the Postal Service persists in looking for ways to become more efficient, an objective that unavoidably has to mean reducing labor costs.

In this case, the agency has finally taken the step of recognizing that different mail shapes have different processing costs, enable different levels of processing efficiency and so deserve to be charged different postage rates. This is best illustrated in retail First-Class mail—the stamped mail sent by average citizens.

Where 39 cents (at the “old” rates) covered the first ounce of a letter, flat or parcel, there are separate “new rates,” with flats being higher than letters, and parcels being higher than both. These separate pricing schedules are simply reflections of the corresponding differences in processing costs. And this shape-based approach to pricing is ubiquitous in the current postal rate case.

Elsewhere, familiar pricing patterns are changing, as well. Presort, the sequencing of mail by the preparer, is being repriced, as are the discounts for affixing a barcode and for entering mail downstream closer to where it’s addressed. Changes, large and small, are being advanced for these long-standing areas of worksharing, but all are related to the same idea: driving customer behavior to prepare mail in a way that enables greater USPS efficiency.

GETTING IT THERE THE FIRST TIME. Another part of postal efficiency that may escape the view of folks who deal with mail production is postal mail processing and delivery. Today, given the level of automation present in USPS facilities, it’s likely that a letter collected from a mailbox will not be touched by human hands again until it’s delivered to the recipient. In between, people not only don’t handle it, they don’t read the address to sort it, either.

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