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USPS Proceeds on New Flats Sorting Technology

The U.S. Postal Service took another step toward complete automation of the mail-sorting process with the Board of Governors' approval yesterday of a new technology that will be fully deployed by 2008.

The Flats Sequencing System will allow the sequencing of larger mail pieces in delivery point order. Flat mail, which includes large envelopes, catalogs, magazines and newspapers, is one of the most labor-intensive mail categories to process because of variations in size, thickness and address label placement. Allowing the sequencing of larger mail pieces in delivery point order will reduce the time carriers need to prepare mail for delivery.

In April, a prototype FSS — half the size of the production machine — will be installed in Indianapolis. Once field tests are completed in June, a full-size preproduction machine will be built and tested through June 2007. Full deployment of FSS equipment will begin in spring 2008.

Also at the meeting, Postmaster General John E. Potter said First-Class mail overnight service dropped a point to 95 percent for the first time since fall 2003. Also, second-day performance fell two points to 88 percent and three-day performance was down three points to 83 percent.

Potter has directed Deputy Postmaster General Patrick R. Donahoe to lead an effort to improve service for the rest of the year. Donahoe said the scores reflect the difficulties following hurricanes Katrina and Rita.

Meanwhile, USPS revenue for its fiscal first quarter dropped 1.4 percent while expenses rose 4 percent, chief financial officer Richard J. Strasser Jr. said. The decline was expected because more mail was delivered just before the 2004 elections, he said, as well as more activity in marketing financial services and credit cards.

Revenue was $18.52 billion in the first quarter of FY2006 while expenses were $17.79 billion. The USPS generated net income of $728 million, before escrow allocation, down from $1.682 billion in the year-ago period. After the escrow allocation, the agency lost $22 million in net income.

The postal Civil Service Retirement System Funding Reform Act of 2003 requires the USPS, as of fiscal year 2006 (which began Oct. 1), to hold in escrow an amount equal to the difference between the CSRS retirement costs before and after the implementation of the law. The federal Office of Personnel Management calculates this amount, and based on the latest estimate the USPS is allocating $250 million monthly.

Total volume for the quarter was 55.9 billion pieces, down 1.5 percent over the year-ago period. Strasser said the continuing decline in First-Class volume (down 3.8 percent) resulted in $415 million less revenue. Priority Mail volume rose 4.1 percent, Express Mail increased 5.7 percent, Package Services climbed 3.8 percent and Standard Mail rose 0.5 percent. Periodicals fell 1.8 percent. Strasser said the first-quarter figures also showed a 0.7 percent drop in total factor productivity.

The board also approved funding to develop and test a Remote Encoding System program, which will replace the Image Processing Subsystem and merge remote encoding operations used to process and forward mail.

Melissa Campanelli covers postal news, CRM and database marketing for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters

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