Reclassification Would Save Mailers Money

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The U.S. Postal Service is proceeding with a product redesign effort so it can reduce costs for itself and its customers.


Postal officials hope a new classification system will increase volume and revenue and meet competition from private carriers and e-commerce. The agency is expected to report a $2 billion deficit this fiscal year, which ends Sept. 7. Reclassification, which was last done in 1996, will not affect plans for another rate increase. Insiders expect that to be filed as early as October.


Though it is unclear how the USPS will change classifications, Don O'Hara, executive director of product redesign in the pricing and product design department, said officials want "to do simple things that take costs out of the combined mailer and postal service operations."


For example, the USPS has been updating its equipment that processes flats -- which includes catalogs and periodicals -- allowing both mailers and the USPS to control operating costs more efficiently. Catalogers can take advantage of these preparation procedures today, "but to really get full advantage of these procedural changes, you have to have rates to go along with the preparation, and that does take a reclassification case."


Another idea is to reduce the number of mail streams. Mail currently can be processed mechanically, manually or through automation. Postal officials want mail to flow through the system with as few processes as possible.


Another possibility involves setting rates and preparation requirements to reflect customers' capabilities and the USPS' costs. For example, a moderate mailer may allow the postal service to do more of the mail preparation work, so it may not give that customer as many options. However, a sophisticated mailer that does more of the preparation may get even deeper discounts than it does now.


The USPS, which would like to implement the reclassification system by summer 2004, is currently seeking comments from customers about the redesign efforts. Ideas originally were due by Sept. 1, but O'Hara extended the deadline earlier this month.


"We want to make sure that mailers have enough time to offer their ideas and proposals to us," he said. "There is no hard and fast cutoff date."


The original timetable called for the development phase to go until September and the refining of proposals to run till March. The new timetable combines both steps and anticipates a concrete proposal by March.


The USPS then will prepare a filing to the Postal Rate Commission, probably from October 2002 to February 2003. The plan then will be submitted to the PRC and hearings to be held from March to December 2003. This way, the new rate classifications would be implemented in May 2004.


Reclassification is a separate issue than postal reform. Anything that Congress does to update the way the postal service does business will have no effect on reclassification.


Mailers can send O'Hara ideas by e-mail at dohara1@email.usps.com.


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