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Volume I, No. 3 September 1994 Newsletter

Priority Mail is Big Business

Priority Mail has grown to become a truly major product line for the Postal Service. Data for fiscal year 1993 show that Priority Mail revenues, at $2.3 billion, exceeded the revenues from the following classes (i) all categories of second-class mail (publications), (ii) all categories of fourth-class mail (parcels), and (iii) Express Mail (see column 1 below). Here are the numbers (in millions):

                                Attributable    to Institutional
                    Revenues    Cost            Costs

    Priority Mail   $2,300      $1,166          $1,134

    Second-class    1,740       1,614           126

    Fourth-class    1,183       1,229           -46

    Express Mail    627         482             145

Priority Mail was far more significant in terms of contribution to Postal Service institutional (overhead) costs, or "operating profit." In 1993 Priority Mail earned an operating profit of $1,134 million, which was fivefold greater than the combined operating profit of $225 million from all second-class, fourth-class and Express Mail combined (see column 3 above). With financial results like these, Priority Mail deserves better delivery performance.

Improved Procedure for Ordering Priority Mail Supplies

Had trouble receiving timely delivery of an adequate supply of materials for Priority Mail or Express Mail? Not to worry. Relief is here. At a recent APMU meeting, Tony Gallo, Assistant Product Manager for Priority Mail, announced that the Postal Service has entered into a contract with DDD Corporation to provide Priority Mail users with red, white and blue envelopes, boxes, stickers, address labels and other disposable Priority Mail supplies (sorry, no yellow sacks). Priority Mail users can phone their orders to customer service at 1-800-222-1811, or FAX them to 1-800-270-6233. The Postal Service is also distributing a self-mailing order form to major users. DDD, with a centrally located warehouse in Indianapolis, will provide a much more orderly fulfillment service. Orders will normally ship within 24 hours of receipt. Standing orders and larger orders (pallets or truckloads) will be shipped via surface transit. Small orders and emergency orders will ship via Priority Mail.

Coming: Optional Track and Trace Service for Priority Mail

A track and trace service for Priority Mail has now finished beta site testing, according to Bob Michelson, Product Manager for Priority Mail. Track and trace will be accomplished by affixing a special peel-off barcode label on Priority Mail pieces. Every piece of Priority Mail with a track and trace barcode will be read into the computer system at the point of acceptance, upon arrival at the delivery unit, and finally when the carrier delivers it to the customer. Yet to be determined is whether track and trace will be offered as a standard service, or as an optional service for an additional fee. Should the Postal Service decide to make track and trace optional, it will need to seek the approval of the Postal Rate Commission. That process could add an extra year to the implementation schedule. The Postal Service hopes to have this optional track and trace option available to Priority Mail customers perhaps in 1995; otherwise, in 1996.

Priority Mail Re-engineering Task Force Hears Mailer Problems, Desires

A Postal Service task force on re-engineering Priority Mail has been working to help beef up Priority Mail delivery performance and improve quality of service in other ways. In a frank two- way session with task force personnel, members of APMU offered a number of ideas for consideration. Among the suggestions were:

The ability to submit Priority Mail on a manifest and use indicia instead of meter strips.
Allowing Priority Mail users who manifest to use centralized payment procedures ("CPP").
Hundredweight pricing for multiple packages addressed to the same destination in a mailing; that is, multiple packages going to the same address would receive the rate applicable to a single package (a common practice among Postal Service competitors).
Better protection against the elements (one mailer said that all Priority Mail packages leave the plant "dry," but some are "wet" by the time they are delivered).

If you have any complaints or suggestions about ways to improve Priority Mail, let us know and we'll pass them on the Postal Service task force. Now is the time don't delay.

Priority Mail Dropship Feasibility Test

The Postal Service has conducted feasibility tests for a new Priority Mail Dropship service, to be marketed as PostalShip. Some shippers already use Priority Mail to drop ship to destinating SCFs, but this is not a service heretofore actively promoted by the Postal Service.

Reclassification for Priority Mail?

When Postmaster-General Marvin Runyon listed the classes of mail which would face reclassification in a recent interview in M.A.I.L. magazine, he failed to mention Priority Mail. When Chief Operating Officer and Senior Vice President Bill Henderson was subsequently cross-examined at the Postal Rate Commission by APMU Legal Counsel on September 21, 1994, Mr. Henderson said that these decisions were up to the Board of Governors, and it was too early to say whether Priority Mail will be involved. Priority Mailer users will consequently have to wait a bit longer to know what, if anything, is to be proposed for them.

The Postal Service's Ad Hoc Committee on Reclassification, composed of over sixty of the nation's largest mailers, has not met since early summer. At the September MTAC meeting, however, senior postal officials stated that filing of a major reclassification case at the Postal Rate Commission as early as December is a real possibility. It is already being referred to "the mother of all classification cases" by some knowledgeable observers.

Reclassification is seen by many as another attempt by Postmaster-General Runyon to remake the Postal Service into a consumer-friendly firm, to "grow the business," and to be ready to take on the challenges of the twenty-first century. It is being looked at by many as a panacea that will solve many of the Postal Service's problems.

Has reclassification been oversold? Heads of many established mailer groups have left meetings with the Postal Service convinced that their members will be among the winners, and therefore their future lies in reclassification. Some have actually been convinced that everyone will be a winner in reclassification, since efficient and economical to handle mail will be encouraged by the new structure. This optimistic view has led those groups to be relatively inactive in the current rate case, simply hoping that the 10.3 percent across-the-board proposal will be rubber-stamped by the Postal Rate Commission.

A handful of the nation's largest mailers are seen as having a disproportionate voice inside the Postal Service in designing the reclassification case. If it is designed solely to achieve the lowest rates possible for some of the biggest mailers, however, the reality of reclassification may be somewhat less high-sounding than the initial objective.

Reclassification will likely result in big winners and big losers. To accommodate lower rates for large mailers, there could be more losers than winners. Many who now think they will be among the winners may have a rude awakening when the Postal Service's case is finally revealed. When the trusting examine the results, members of these associations may well ask, with one voice, WHAT HAPPENED? All this misplaced optimism reminds us of the basic difference between an optimist and a pessimist the pessimist has better information!

The Rate Case: Into the Home Stretch

With the hearings on rebuttal testimony scheduled to end on September 29, and Initial Briefs due on October 4, Postal Rate Commission Docket No. R94-1 has moved into its final phase. Hopes by some for a settlement based on the Postal Service's 10.3 percent proposal vanished long ago, and many issues have been hotly litigated. Some Intervenors skipped the opportunity to file direct testimony, hoping for a settlement, felt the need to file rebuttal testimony. In fact, this may be the first Commission docket in which intervenors' rebuttal testimony was more voluminous than direct testimony. Priority Mailers hope for some reduction in the Postal Service's proposed coverage factor of 209 percent -- the highest proposed for any class or subclass.

The only reclassification proposal by any party was made by the Office of the Consumer Advocate to rezone the currently unzoned two to five pound weight increments. This proposal had almost no explanation or justification. In the unlikely event that this proposal were adopted, it would become impossible to drop a two pound piece of Priority Mail into a collection box, as that is not permitted for zoned mail.

Priority Mailers to Meet September 28

Priority Mailers attending the National Postal Forum are cordially invited and encouraged to attend the next meeting of the Association of Priority Mail Users, Inc. on Wednesday, September 28, 1994, from 2:30 to 4:00 p.m., in Washington, D.C. The APMU meeting is being held in the Congressional Room of the Omni Shoreham Hotel across the street from the Washington Sheraton Hotel.

The Association of Priority Mail Users, Inc. is a nonprofit organization of Priority Mail users and suppliers to Priority Mail Users which seeks to ensure that proper business and financial decisions are made by the United States Postal Service to promote and protect the cost efficiency and quality of service of Priority Mail. For information on APMU programs and membership information, please call 703-356-6913.

Association of Priority Mail Users, Inc. 8180 Greensboro Drive, Suite 1070 McLean, Virginia 22102-3823 (703) 356-6913 (phone) (703) 356-5085 (fax)


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