With mail volumes declining at a rate previously thought impossible, particularly with First-Class Mail, the U.S. Postal Service is rightsizing with an eye toward greater efficiency. Instead of a First-Class Mail delivery standard dictating the processing and transportation requirements of the USPS, it will be the resulting network that dictates delivery standards going forward, reports USPS management. Overnight delivery of FirstClass Mail soon will be history. Volume is falling off so much and so fast that the USPS can no longer afford to support the infrastructure to meet the level of performance.
The most often-asked question we receive from advertisers: “How will this affect my in-home dates for mail?” The answer underscores the need for mail tracking, now more than ever.
A planned USPS consolidation, down to 175 plants, roughly one-third the size of today’s U.S. Postal Service, will be a very big change and we really do not know exactly how the mailing industry — incorporating First Class, Standard, Periodicals, Parcels and Standardized Services — will be affected.
When we look at mail, the volumes driving this change come primarily from two mail classes: First-Class Mail and Standard Mail. First-Class Mail volumes are projected to fall 47% to 41 billion pieces by 2020. Each percent of First-Class Mail is $300 million in contribution, meaning a $14 billion loss in contribution from First-Class Mail. Standard Mail is projected to remain relatively static over the 10-year period.
The loss in First-Class Mail means that Standard Mail must pick up the loss or that the network must shrink to support the cost. It takes three pieces of Standard Mail to equal the contribution of one piece of First-Class Mail. If the USPS doesn’t want to lose Standard Mail through huge increases in postage rates, it must opt for consolidating its network. Period.
Currently, First-Class Mail drives the network requirements with operating windows in place to support overnight service. With the loss in First-Class Mail volumes, the First-Class Mail network must be redesigned to support the mail volume and mail mix of the future.
Therefore, the USPS is in the process of defining the most efficient mail processing network and infrastructure to match its current and projected workload. The USPS has indicated that service standards will be affected, mainly on First-Class Mail, which some commercial mailers rely on for time-sensitive messages. Other classes of mail such as Standard Mail will experience a less negative impact.
The biggest change with the largest potential for delivery impact of time-sensitive Standard Mail has to do with the linkage between the SCF (sectional center facility) and its DDUs (destination delivery units). With only 175 plants, each SCF will have nearly three times the number of delivery units to support and serve than currently in place. More to the point is the geography each SCF will cover — again, roughly three times the distance. This is where the risks lay.
Instead of DDUs within and up to 50 miles to 100 miles away, the DDUs served will be within and up to several hundreds of miles away. Does this mean that the equipment utilization will be staggered so that the furthest DDUs are processed and dispatched first and then the closest last? This would seem to make sense if better efficiency of vehicles is to be achieved. If this is the case, delivery performance impact will be minimal. If not, those of us whose drop-shipped mail enters the mail stream might need to stagger entry to the same facility with the furthest DDUs entered one day and the closer ones entered the next day. This is a concern that can be managed by your mail service provider.
The skinny? Depending on class of mail, its shape, the type of processing required and location, there will be new time-of-day strictures for facilities that survive and new, potentially longer routes to get advertising mail to these facilities. Recalibrating production, transportation and delivery to postal facilities will be necessary. Further, it will be absolutely necessary for mailers to track their mail through postal processing to ensure in-home dates and to troubleshoot while mail is in USPS’ hands.
In short, mail tracking is important now. While it’s alarming to see facilities close, it’s also something we can manage from the outside. We have to do so.
Charley Howard is VP of postal affairs and Chris Armstrong is VP of mail tracking services at Hart-Hanks.