Volume IV, No. 4 Fall 1997 Newsletter

Priority Mail Processing Centers Begin Service, But No Current Savings

Discovery during the pending omnibus Postal rate case before the Postal Rate Commission has revealed some interesting information regarding the Priority Mail Processing Centers ("PMPCs"). The following PMPCs are now operational:

Miami, FL Jacksonville, FL Orlando, FL

Newark, NJ Hartford, CT (located in Springfield, MA)

The following PMPCs are scheduled to become operational next year: Rochester, NY on January 3; New York Metro (on Long Island) on January 10; Pittsburgh, PA on January 17; Boston, MA (in Nashua, NH) on January 24; and Philadelphia, PA (to be located in New Jersey) on January 31. These ten PMPCs constitute Phase I.

The network will handle identified Priority Mail that originates and/or destinates in the Northeast and New England (parts of West Virginia, all of Pennsylvania, all of Delaware and all states to the north of those) and parts of the Southeast (southeastern Georgia, the southernmost tip of South Carolina, and Florida except for the western panhandle).

Service Standards

The PMPC contract directs the contractor, Emery Worldwide Air Freight (and its parent group, CNF Transportation ("CNF")), to deliver 96.5 percent of identified Priority Mail that is within the service area and subject to a two-day service standard within two days. However, the two-day 96.5 percent service standard does not measure the time from when the customer mails a piece to when it is delivered, but, rather, from when the Postal Service tenders Priority Mail to CNF to when CNF delivers it back to the Postal Service at designated delivery points.

CNF will sort Priority Mail sent to an address within the Phase I service area by 5-digit ZIP Code. Within the Northeast, it will be transported by truck to designated delivery points by the second day after it enters the mailstream. CNF will deliver Priority Mail sent to an address outside the Phase I service area to designated Area Distribution Centers (ADCs) if sent by truck or to designated Airport Mail Center/Air Mail Facility (AMCs) if sent by air one day after it enters the mailstream. The Postal Service will tender Priority Mail originating outside the Phase I service area to CNF at an AMC one day after it enters the mailstream. Priority Mail originating inside the Phase I service area will be tendered at USPS plants and transported by CNF to the PMPCs the same day it enters the mailstream.

Because AMCs within the Phase I service area will no longer distribute Priority Mail, entry of plant loads at AMCs apparently will not be permitted. Instead, large volume customers will be required to have their plant-loaded Priority Mail entered directly at a PMPC. Postal Service witnesses were cross-examined as to how preventing Priority Mail users from accessing AMCs will improve service. The witnesses were unable to explain how Priority Mail service performance will improve when Priority Mail users are required to transport their Priority Mail to distant PMPCs instead of nearby AMCs. Nevertheless, they steadfastly maintained that the PMPC contract will improve Priority Mail service performance. Some Postal sources say that exceptions to this rule against AMC entry may be made where necessary.

Cost Increases

The PMPC contract was supposed to improve service and restrain costs. For example, an April 1997 Postal Service press release proclaimed that PMPCs reflected a "bold business decision designed to improve service and control prices." (USPS Press Release No. 36, April 24, 1997.) However, discovery during the rate case has revealed that the PMPC contract results in large increases in the mail processing and transportation costs attributed to Priority Mail (costs relied upon by the Postal Service to calculate and justify the proposed Priority Mail rate increases).

Specifically, Priority Mail air transportation costs increased by $18 million due to the PMPCs, and ground transportation costs increased by $100 million, according to the Postal Service's proposal. These increases occur despite the fact that the contract only affects a fraction of Priority Mail volume (approximately 30 percent of Priority Mail volume is scheduled to be handled by PMPCs before the middle of 1998).

The estimated cost of the PMPCs during fiscal year 1997 was $36.4 million, even though only four of the 10 Priority Mail Processing Centers had begun operating - and those four only for a period of between three and 30 days. The estimated 1998 PMPC costs are over $265 million, offset by an estimated $127 million in savings from contract air transportation costs and clerk/mailhandler wages.

Priority Mail Marketshare Continues to Drop

Notwithstanding the Postal Service's reports of double-digit increases in Priority Mail volume compared with 1996, the Postal Service admitted during the current rate case that Priority Mail's marketshare has dropped dramatically over the past decade.

In 1988, Priority Mail's share of the two-day market was 76.9 percent by volume. By 1990, the marketshare was down slightly, to 76 percent; in 1993 the marketshare had dropped to 72 percent. According to a Postal Service witness, Priority Mail's marketshare is currently under 65 percent.

The Postal Service witness blamed Priority Mail's declining market share on its lack of certain service features which are considered important by expedited service customers, including guaranteed delivery, track-and-trace with delivery confirmation, flexible payment, volume discounts, and reliable pickup services. Neither Priority Mail's unreliable performance nor price were identified as a reason for the drop in marketshare.

Postal Service Implements External Priority Mail Service Performance Measurement

According to a Postal witness, the Postal Service implemented external measurement of Priority Mail service performance on September 13, 1997, the beginning of Postal Quarter I, FY 1998. This measurement of service performance measures the time it takes to deliver a Priority Mailpiece to the addressee. The witness added that the Postal Service has no plan to publicly disclose the results of this service performance measurement system.

Postal Explorer: Extensive Postal Information on CD-ROM

Last September, at the National Postal Forum, the Postal Service announced the creation of a new interactive CD-ROM - "Postal Explorer" - that will contain the Domestic Mail Manual, the International Mail Manual, Quick Service Guides, Publication 25 (Designing Letter Mail), Publication 63 (Designing Flat Mail), Publication 353 (Designing Reply Mail), Publication 417 (Nonprofit Standa rd Mail Eligibility), Notice 123 (Ratefold), Postal Zone Charts, Customer Support Rulings, Postage Statements, and domestic and international rate calculators. According to a Postal Service press release, Postal Explorer:

	permits searches by word or phrase of individual publications or throughout the CD;
	identifies, calculates, and prints domestic and international postal rates;
	provides Internet access;
	has multimedia capability; and
	permits mailers to enter data online to automatically prepare postage statements.

The introductory rate for Postal Explorer will be only $20. A January 1998 release can be obtained by calling (800) 238-3150.

1998 Calendar

APMU Meetings (tentative) March Las Vegas, Nevada
June Washington, D.C.
September Washington, D.C.
December Washington, D.C.

National Postal Forum March 8-11 Las Vegas, Nevada
August 30-September 2 Washington, D.C.

MailCom 1998 April 27-May 1 Atlantic City, New Jersey
October 28-30 Anaheim, California

MTAC Meetings March 24-26 Washington, D.C.
June 9-11 Washington, D.C.
September 15-17 Washington, D.C.
December 8-10 Washington, D.C.

Postal Board of Governors January 5-6 Washington, D.C.
February 2-3 Ft. Lauderdale, Florida
March 2-3 Washington, D.C.
April 6-7 Washington, D.C.
May 4-5 Charlotte, North Carolina
June 1-2 Washington, D.C.
June 29-30 Washington, D.C.
August 3-4 Harrisburg, Pennsylvania
August 31-September 1 Washington, D.C.
October 5-6 Honolulu, Hawaii
November 2-3 Washington, D.C.
December 7-8 Washington, D.C.

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)