Volume II, No. 3 December 1995 Newsletter

Priority Mail Redesign Project Approved by Governors

Last November, the Board of Governors of the Postal Service approved the pilot redesign project for Priority Mail. The plan establishes dedicated mail processing facilities and a dedicated ground transportation network for Priority Mail. The pilot project is scheduled to begin ramping up during April/May 1996, and the ramp-up phase should conclude around September/October 1996. The initial pilot project will cover 10 extended metropolitan areas, 3 in Florida and 7 in the Northeast, as follows:

        Florida             Northeast   
        Central Florida     Boston
        Jacksonville        Hartford
        Miami               New York
                            Northern New Jersey
                            Philadelphia    
                            Pittsburgh
                            Rochester

The Postal Service's fundamental goal is to provide mailers a highly consistent two-day delivery service. The redesign project for Priority Mail is the first time the Postal Service has undertaken to operate dedicated facilities for a single class of mail since the BMC network was constructed in the 60s. (The BMCs were originally intended for fourth class mail only.) In addition, the dedicated ground transportation is planned to operate as an integrated, optimized network. In concept, this is different from existing Postal Service ground transportation, which consists of a large number of contracts with independent operators. In theory, a single optimized network will guarantee better service while controlling cost. Whether the Postal Service will subcontract the entire network to a single operator, or attempt either to coordinate or operate the network itself, has not yet been determined.

Before the Governors met, APMU sent a letter to the Board recognizing that Priority Mail service needs improvement and commending the redesign project generally, while raising several concerns. Specific concerns raised include: (i) the threat that processing of Priority Mail through dedicated facilities will eliminate all overnight service; (ii) the potential for cost increases arising from dedicated ground transportation service; (iii) the potential for increased cost arising from idle personnel in dedicated facilities; (iv) the threat that plant-loaded Priority Mail shipments will be diverted from direct entry at airport facilities and instead be channeled through the new, dedicated Priority Mail facilities, thereby introducing unnecessary dispatch delays; and (v) the need to have track and trace capabilities with the flexibility to be sited where Priority Mail is plant-loaded.

David Shinnebarger New Product Manager for Priority Mail

Loren Smith, the Postal Service's Senior Vice President/Chief Marketing Officer, appears to be fond of change. "New Faces for 1996" would aptly describe what's now playing at the Expedited Services Group. Here's the new line-up.

David Shinnebarger has been designated the new Product Manager for Priority Mail, filling the vacancy created when Bob Michelson moved over to International Mail. Dave will also be responsible for Express Mail and parcels. Dave comes from the new products group in marketing, and reports to John Wargo. Dave's telephone number is (202) 268-2272.

Tony Gallo, long-time Assistant Product Manager and former Acting Product Manager for Priority Mail, well-known to APMU members, will follow Bob Michelson to International Mail. Tony will assume his new position in January. At press time, the new Assistant Product Manager for Priority Mail had not been identified, but an announcement is expected soon.

Tom Philson, another familiar face, is also leaving the Expedited Services Group and moving to International Mail.

Last of a dying breed? Dave Shinnebarger may be the last living specimen of a vanishing postal species. The Product Manager positions for First, second, and third class mail have all been abolished. Remaining in the Expedited Services Group, at least for the time being, are Jeff Burger, Jamie McHenry, and Mel Schneider.

Track and Trace Plans

The Postal Service is conducting a research and development project on track and trace for Priority Mail and ground parcels. Briefly, the track and trace project, although independent of the Priority Mail redesign effort, is on a roughly parallel timetable, and some of the initial track and trace equipment is planned to be installed in the new, dedicated Priority Mail facilities. The proposal for a Phase I test effort will be presented to the Board of Governors for review and approval in February. Phase I is expected to last about one year, to be followed by a nationwide roll-out. During the initial testing period, confirmation will be available for packages entered at key areas along the eastern Seaboard and destinating in Florida. The Postal Service will be looking for Priority Mail users to participate in the tracking tests.

Outlook for Next Rate Case

As a result of the rate increase in January, the Postal Service concluded the 1995 fiscal year (ending September 30) with a widely-publicized surplus of $1.8 billion. The entire surplus reportedly will be used to reduce the Postal Service's negative equity, and will not be available to defray operating deficits or prolong the existing rates.

The Postal Service foresees a surplus of $500-$700 million for fiscal year 1996. Thus, last year's $1.8 billion surplus is diminishing at an annual rate of $1.1 to $1.3 billion. Extrapolating this diminution to fiscal years 1997 and 1998, the Postal Service would be looking at deficits of $600 and $1,800 million, respectively, unless another rate increase is imposed. Since it takes approximately one year to process a request for higher rates, the Postal Service will probably need to file for an increase sometime between August 1996 and March 1997. The good news is that the rates currently in effect appear likely to hold for 2.5 to 3 years, which is somewhat longer than expected when the last rate case was filed.

Collective Bargaining Agreements

The Postal Service's contracts with the letter carriers (NALC), clerks and mailhandlers (APWU) and rural carriers were arrived at in August, October, and November, respectively. The contracts with NALC and APWU expire in 1998 (3 years), and the contract with rural carriers expires in 1999 (4 years). Under the new agreements, the unions retained their semi-annual COLA, plus wage increases of approximately 2 percent.

APMU Meeting at National Postal Forum

The Association of Priority Mail Users will host an industry session at the next National Postal Forum, scheduled for late April 1996 in Anaheim, California. The APMU leadership is putting together a plan for an interesting and fun presentation. Also being planned for Anaheim is a luncheon meeting for members and any persons interested in learning more about our association.

1996 APMU Activities

Participating in MTAC: APMU representatives will attend quarterly MTAC meetings Ä March, June,
September, December, and work to increase visibility of Priority Mail.

Serving as Postal Service Advisory Body: APMU communicates with Priority Mail Product Manager
and others regularly to exchange new ideas and to provide input.

Supporting Improved Service: APMU has offered to participate in the Postal Service Redesign
Project, Phase I.

Conducting Quarterly Association Meetings: APMU meetings in 1996 are tentatively scheduled for
March, June, September, and December.

Facilitating Information Exchange Among Members: APMU members share experience with each
other at meetings and informally.

Receiving News on New Postal Developments: APMU is an unparalleled source of information of
Postal Service developments for Priority Mail.

Publishing Newsletter: APMU News is a quarterly source of information about Priority Mail.

Providing Access to Legal and Economic Information About Priority Mail: legal information is
provided by William J. Olson, Esquire, and economic by John Haldi, Ph.D.

National Postal Forums: APMU coordinates a luncheon meeting between industry and Postal officials,
and assists with presentations.

Serving as Spokesman to the Media: APMU responds to inquiries and requests for comments.

Providing Input and Monitoring Postal Reclassification: For example, APMU has recommended study
of the creation of an under 2-pound rate.

Facilitating Experimental Postal Service Initiatives: APMU participates in testing new services.

Educational Activities: APMU will conduct sessions at the Anaheim National Postal Forum.

Postal Rate Commission: APMU intervenes in and litigates rate and classification cases, as needed.

1996 Calendar of Events

APMU Meetings	March 12 Washington, D.C. June 11 Washington, D.C. September Washington, D.C. (to be scheduled) December Washington, D.C. (to be scheduled)
National Postal Forum	April 21-24 Anaheim, California August 25-28 Washington, D.C.
MailCom 1995	March 3-7 Atlantic City, New Jersey
MTAC Meetings	March 12-14 Washington, D.C. June 11-13 Washington, D.C. September Washington, D.C. (to be scheduled) December Washington, D.C. (to be scheduled)

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)