DOCKET SECTION
BEFORE THE
POSTAL RATE COMMISSION
WASHINGTON, DC. 20268-9001
POSTAL R&TE AND FEE CHANGES, 1997
Docket No. R97-1
.f’
SUPPLEMENTAL TESTIMONY
OF
SHARON DANIEL
ON BEHALF OF
UNITED STATES POSTAL SERVICE
AUTOBlOG~PHlCAL
SKETCH ,_.,_.,..,.._.__.,_.............,....................................................
I.
PURPOSE
II.
METHODOLOGY/ANALYSIS
III.
AND SCOPE OF TESTIMONY
...........................................................
2
in IJSPS LR-H-112 .....................................................
2
Analysispresented
B.
New Data and Data Limitations ..................................................................
LIST OF EXHIBITS
Exhibit USPS43A:
Exhibit USPS43B:
Exhibit USPS43C:
1
...............................................................................
A.
RESULTS
i
.......................................................................................................
Nonstandard Surcharge Costs as Presented in USPS LR-H-112
Development of First-Class Mail Processing Costs
Updated Nonstandard Surcharge Costs
2
.3
Direct Testimony
1
2
of
3
Sharon Daniel
AUTOBIOGRAPHICAL
4
5
My name is Sharon Daniel.
SKETCH
I have worked in the office of Product Cost Studies
6
at Postal Service Headquarters
as an Economist and an Operations
7
since 1995. Prior to joining the Postal Service, I was a consultant
8
Waterhouse
9
Waterhouse,
and worked in the Center for Postal Consulting.
I supported
Research
with Price
While at Price
many of the Postal Service witnesses
in Docket No. MC951.
10
After joining the Postal Service, I provided testimony in Docket No. MC%-2
11
Standard
(A) Nonprofit letter mail processing
12
testimony
(USPS-T-29)
13
letters and Standard (B) parcels.
14
costs.
I am also presenting
in this docket on the mail processing
I have spent considerable
Analyst
on
direct
cost of Standard
time observing mail processing
in Processing
Centers (PBDCs), Bulk Mail Centers (BMCs) and carrier stations.
(A)
and
15
Distribution
16
also consulted extensively with postal headquarters
and field operations
17
personnel
I earned a Bachelor of Science
18
Degree in Mathematics
19
the College of William and Mary in 1991 and 7 992, respectively.
on various operational
and cost matters.
and a Master of Science Degree in Operations
I have
and cost
Research from
1
2
I.
BACKGROUND/SUMMARY
The purpose of this supplemental
3
additional
mail processing
4
It relies heavily on the analysis presented
5
1997); however, it includes a discussion
6
ounce pieces.
testimony is to present the updated analysis of
costs associated
with nonstandard
in USPS LR-H-112
First-Class
Mail pieces.
(as revised on August 18,
of the limited cost data for exclusively
one
7
8
9
The additional
cost of nonstandard
pieces was first analyzed
1 and the most recent update was described
in Docket No. R78-
in Docket No. R90-1, USPS-LR-F-160.
10
My analysis improves upon that older version by using new data where available’
11
expanding
the analysis to include presorted
and
pieces as well.
12
13
Nonstandard
First-Class
Mail is defined in the Domestic Mail Manual (DMM) -
14
Section Cl 00 as any piece weighing
15
following
one ounce or less and violating any of the
size limits:
16
17
a. Length exceeds 11 -l/2 inches, or
18
b. Height exceeds 6-118 inches, or
19
c. Thickness
20
d. Aspect ratio (length divided by height) is less than 1.3 or more than 2.5
exceeds l/4 of an inch, or
21
22
These limits define the criteria which make a mail piece nonmachinable
23
letter sorting equipment.
on automated
24
’ New data regarding the percent shares of nonstandard
witness Fmnk in response to NDMSNSPST32-29
letters, flats, and parcels were pmvided by
(September 9.1997).
presented in Exhibit C.
1
The analysis using these data is
1
II.
METHODOLOGYIANALYSIS
Analysis Presented
in USPS LR-H-l!2
2
A.
3
The same basic methodology
and formula was followed here as in previous
4
dockets.
However, we now have Test Year unit cost by shape information
5
from Library Reference
6
nonstandard
7
assumed to be nonstandard.
8
average of the cost differences
9
costs, The formula develops cost differences
H-196 and have used it. Exhibit USPS43A
formula and its inputs.
available
describes
the
Manual letters and all flats and parcels are
The basic goal of the formula is to get a weighted
between the nonstandard
pieces and average letter
between manual letters and the average
10
letter, between all flats and the average letter, and between all parcels and the average
11
letter. The formula used the percent of letters, flats, and parcels which were
12
nonstandard
13
dated July 13, 1972. The calculations,
14
piece, are now done both for single piece First-Class
15
Mail.
that was used in R78-1.
The data underlying
this analysis is from a report
which were previously
only done for single
Mail and presorted
First-Class
16
17
Exhibit USPS-436
calculates
18
letters using the methodology
19
(USPS-T-25).
the cost of single piece and presort nonmachinable
and inputs employed by Postal Service witness Hatfield
20
21
0.
New Data and Data Limitations
22
23
In response to NDMSIUSPS-T32-29
(September
9, 1997) the Postal Service
24
provided data which reflect a more recent estimate of the percent of letters, flats, and
25
parcels which are nonstandard.
26
USPS43C.
An analysis using these data is presented
in Exhibit
27
28
One limitation of the analysis presented
29
cost differences
30
methodology
of just one-ounce
presented
nonstandard
in Exhibit USPS43B
here is our inability to determine
pieces.
the
The mail flow model
can only be used to determine the cost of
2
1
an average weight letter.
2
increments.
3
cost of a one-ounce
4
H-196, it is not possible to determine the cost of processing
5
nonstandard
6
shape for First-Class
7
USPS LR-H-106
8
determined.
Inputs are not available to determine
costs by specific ounce
Whereas it might be possible to estimate the average mail processing
letter, flat, or parcel using the methodology
piece.
However,
the mail processing
presented
a one-ounce
in USPS LRletter-shaped
costs by ounce increment and
Mail has not been conducted
using the methodology
presented
in
and the reliability of those individual estimates has not been
9
It is important to point out that the Commission
10
11
Nonstandard
12
the analysis in this docket is based.
13
Commission
14
15
16
17
18
19
20
21
22
23
24
Surcharge
Library Reference
presented
was satisfied with the
in Docket No. R90-1 upon which
In its Opinion and Recommended
Decision, the
noted,
It is satisfying to observe that in this case the Service has provided solid
information on the comparative costs of standard and nonstandard First-Class
pieces. We note also that, while the finding of 11 cents additional cost
adequately anticipates the automated processing environment expected in the
test year, the lo- cent surcharge balances the goals of recovering the
corresponding cost while not reflecting the over-optimistic view of cost savings
from post-test-year ABC sequencing.. We find that the lo-cent surcharge will
also continue to encourage use of standardized mail pieces, consistent with the
Service’s automation and related productivity goals.
PRC Op. R90-I, Vol. 1 at V-15 [5035]
25
26
27
III.
RESULTS
Exhibit USPS43A
shows the updated unit volume variable cost difference for
28
nonstandard
pieces to be 15 cents for single piece and 11 cents for presort as
29
presented
in USPS LR-H-112.
30
presented
in response
31
variable cost difference for nonstandard
32
cents for presort.
33
include carrier costs associated
34
difference
Exhibit USPS43C,
to NDMSAJSPS-T32-29,
This cost difference
using the new volume mix
shows the updated unit volume
pieces to be 22 cents for single piece and 15
is limited to mail processing
with nonstandard
pieces.
since Docket No. R90-1 can be explained
3
costs and does not
The increase in the cost
in a variety of ways. As letter mail
1
is handled in increasingly
2
costs relative to pieces handled in other ways become increasingly
3
coverage
4
proportion
of letter mail handled in highly automated
5
continued
increase in the use of delivery point sequencing
6
costs will contribute
7
nonstandard
8
NDMSIUSPS-T32-29
9
pieces.
10
11
(proportion
fast and efficient automated
of sites with automation
to an ever widening
piece costs.
operations,
equipment)
difference
its mail processing
lower. Also, as
and technology
operations
increases.
improve, the
With the
(DPS), lower carrier in-office
between the average letter and
Reflecting the shape mix d-range from the response to
also tends to increase the cost differential
of nonstandard
shaped
Exhibii USPS-43A
Page 1 of 1
NONSTANDARD
SURCHARGE
COSTS PRESENTED
IN USPS LR-H-112
A. INPUTS
AMRAGE
MAIL PROCESSING
Sinnle Piece
Letters =
Flats =
Parcels =
s 0.1174
S 0.3243
s 0.7406
presort
Letien =
Flats =
Parcels =
s O.Q460
S 0.2067
s 0.2196
PERCENT OF NONSTANDARD
Letlen =
Flats =
Parcels =
UNIT COSTS (Library Reference H-106)
PIECES BY SHAPE
56%
39%
3%
MANUAL LETTER MAIL PROCESSING
Single Pc. =
Presorl
=
@O&et No. R9O1, LR-F-160)
COSTS
(Exhibit B)
5 0.2054
f 0.1144
8. RESULTS
Formula: (Manual Letters - Avg. Letters) l proporlion of letters + (Flats - Avg. Letters)
flats + (Parcels - AVQ. Lenem) l proportion of parcels.
Single Pice
s
0.1495
PrsDOrt
s
0.1079
.--.
l
propottion
of
Exhibit USPS43B
Page 1 of 10
Development
of First-Class
Mail Pr&cssinO
FlrstClus
Nonautomation
Presort Nonklachlnablo
Per Piece Cost Summary by Operation
Outgoing Primary
Manual
Mschsnized
MLOCR
RBCS
LMLM
BCSOSS
MPBCS
Outgoing Secondary
Manual
Mechanized
MPBCS
ADCIAADC Distribution
Manual
Mechanized
MLOCR
RBCS
LMLM
BCS-OSS
MPBCS
SCF Operations
Manual
Mechantzed
MLOCR
RBCS
LMLM
BCSOSS
MPBCS
Incoming Primary
Manual
Mechanized
MLOCR
RBCS
LMLM
BCS-OSS
MPBCS
PI
m
TPF
Piems
per Hour
Unit Costs
Mall
PI
WaQe
Rate
I41
cents
per Piece
Is]’
Piggyback
Fw&ar
VI
Premium Pay
Adjust&
l-4
Cents
psr Piece
102
0
0
0
0
0
0
862
1,413
7,350
616
4.965
11.864
7,467
$25.45
$25.45
525.45
514.82
$25.45
525.45
$25.45
3.6437
1.6006
0.3462
1.6293
0.5104
0.2123
0.3406
1.3720
2.2400
2.0950
1.4500
1.4500
1.7190
1.7190
0.0423
0.0196
0.0036
0.0201
0.0056
0.0023
0.0037
5.3156
4.0536
0.7291
2.6725
0.7457
0.3673
0.5695
16
0
0
691
1.440
7,467
$25.45
525.45
$25.45
3.6623
1.7670
0.3406
1.3720
2.2400
1.7190
0.0405
0.0194
0.0037
5.0927
3 9775
0.5695
161
0
0
0
0
0
0
759
1,271
7,350
616
4,965
11,964
7,467
$25.45
525.45
$25.45
$14.92
$25.45
$25 45
$25.45
3.3524
2.0020
0.3462
1.6293
0.5104
0.2123
0.3406
1.3720
2.2400
2.0850
1.4500
1.4500
1.7190
1.7190
0.0369
0.0220
0.0036
0.0201
0.0056
0.0023
0.0037
4.6364
4.5064
0.7291
2.6726
0.7457
0.3673
0.5695
99
0
0
0
0
0
0
696
1,351
7,350
616
4,965
11,964
7,467
525.45
$25.45
$25.45
514.92
$25.45
525.45
$25.45
2.6396
1.6634
0.3462
1.6293
0.5104
0.2123
0.3406
1.3720
2.2400
2.0950
1.4500
1.4500
1.7190
1.7190
0.0312
0.0207
0.0036
0.0201
0.0056
0.0023
0.0037
3.9275
4.2366
0.7291
2.6726
0.7457
0.3673
0.5695
4.821
0
0
0
0
0
0
562
1.271
7,350
616
4.865
11.804
7.467
525.45
t25.45
$25.45
$14.82
$25.45
$25.45
525.45
4.5276
2.0020
0.3462
1.6293
0.5104
0.2123
0.3406
1.3720
2.2400
2.0950
1.4500
1.4500
1.7180
1.7190
0.0496
0.0220
0.0036
0.0201
0.0056
0.0023
0.0037
6.2616
4.5064
0.7291
2.6726
0.7457
0.3673
0.5695
PI
WeiQhted
Exhibit USPS-43B
Pagc2of10
Development
of First-Class
Mail Processing
FIrstClass
Nonautomation
Pruort
Non-M&zhlnable
Per Piece Cost Summary by Operation (Continued)
Incoming Secondary
ManuaVNon-Auto Sites
ManuallAuto Sines
Mechanized
MPBCS
DBCS First-Pass
DBCS Second-Pass
CSBCS First-Pass
CSBCS Second-Pass
CSBCS Third-Pass
Q&r
Accept.Nerification
Unit Costs
Mail
Ill
VI
PI
TPF
Piis
per Hour
Wage
Rate
141
cants
per Piece
1.143
646
1,151
6,633
6,393
6.393
17,124
17,124
17,124
$25.45
$25.45
$25.45
$25.45
S25.45
$25.45
$25.45
$25.45
$25.45
2.2261
3.9369
2.2107
0.3636
0.3032
0.3032
0.1466
0.1466
0.1466
939
Q.C61
0
0
0
0
0
0
0
PI
Pipgyback
Factor
1.3720
1.3720
2.2400
1.7190
2.4340
2.4340
1 .Q460
1.9460
1.9460
PI
m
Premium Pav
Adjustmen;
Cents
per Piece
0.0245
0.O433
0.0243
0.0042
0.0033
0.0033
0.0016
0.0016
0.0016
3.0767
5.4474
4.9763
0.6636
0.7412
0.7412
0.2911
0.2811
0.2911
4.9357
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0699
0.0699
1.4865
2.9929
0.7366
0.0000
0.2664
0.7366
10,wo
181
Weighted
COSt
0.2692
sorti0 P. 0. Boxes:
DPS and SS
Non-DPS or SS
Bundle Sorting
0
690
10,000
% DPS
0.00% y
2,341
1,171
525.45
$25.45
1.0666
2.1735
1.3660
1.3660
0.0120
0.0239
IMODEL c0s.T
lProportio”al
Adj
9.5655
1.1566
1
1
. t . __
_____.
.. .
rl-l t- 4
i :
:.g
:.+,/ -.----.---
I
..__.
Exhibit USPS-438
Page 6 of 10
Davelopment
of First-Class
Mail Processing
Unit Costs
FlrstCIas8
Nonwtomation
Single Place Non-Mnhin&Ie
Per Pie
Cost Summary by Operation
Outgoing Primary
Manual
Mechanized
MLOCR
RBCS
LMLM
Bcs-oss
MPBCS
Mall
I4
m
Cents Piggyback
IV
IA
PI
TPF
Pieces
par Hour
Wage
Rate
per Piece
161
m
cents
PI
FaCtOr
Premium Pay
Adjurtmeni
ps Piece
cost
Weighted
10,000
0
0
0
0
0
0
662
1,413
7,350
616
4,905
11.984
7,467
$25.45
t25.45
$25.45
$14.92
$25.45
$25.45
525.45
3.6437
1.6008
0.3462
1.6293
0.5104
0.2123
0.3408
1.3720
2.2400
2.0950
1.4500
1.4500
1.7190
1.7190
0.0423
0.0198
0.0036
0.0201
0.0056
0.0023
0.0037
5.3156
4.0536
0.7291
2.6726
0.7457
0.3673
0.5895
5.3156
0.0000
0.0000
o.oooo
0.0000
0~0000
0.0000
Outgoing Secondary
Manual
Mechanized
MPBCS
1,546
0
0
691
1.440
7,467
$25.45
525.45
525.45
3.6623
1.7670
0.3408
1.3720
2.2400
1.7190
0.0405
0.0194
0.0037
5.0927
3.9775
0.5895
0.7064
0.0000
0.0000
ADC/AADC Distribution
Manual
Mechanized
MLOCR
RBCS
LMLM
BCS-oss
MPBCS
4,205
0
0
0
0
0
0
759
1.271
7,350
616
4.985
11,984
7,467
125.45
525.45
$25.45
514.92
525.45
525.45
525.45
3.3524
2.0020
0.3462
1.8293
0.5104
0.2123
0.3406
1.3720
2.2400
2.0950
1.4500
1.4500
1.7190
1.7190
0.0369
0.0220
0.0036
0.0201
0.0056
0.0023
0.0037
4.6364
4.5064
0.7291
2.6726
0.7457
0.3673
0 5895
1.9666
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
SCF Operations
Ma”Ud
Mechanized
MLOCR
RBCS
LMLM
BCS-OSS
MPBCS
3,612
0
0
0
0
0
0
896
1,351
7,350
616
4,985
11,964
7,467
525.45
525.45
$25.45
514.92
525.45
$25~45
$25.45
2.8398
1.8834
0.3462
1.6293
0.5104
0.2123
0.3408
1,372O
2.2400
2.0950
1.4500
1.4500
1.7190
1.7190
0.0312
0.0207
0.0036
0.0201
0.0056
0.0023
0.0037
3.9275
4.2395
0.7291
2.6726
0.7457
0.3673
0.5695
1.4973
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
Incoming Primary
MEl”U2.l
Mechanized
MLOCR
RBCS
LMLM
Bcs-oss
MPBCS
2,622
0
0
0
0
0
0
662
1.271
7.350
616
4,985
11.984
7,467
$25.45
525.45
$25.45
$14.92
525.45
$25.45
$25.45
4.5276
2.0020
0.3482
1.6293
0.5104
0.2123
0.3408
1.3720
2.2400
2.0950
1.4500
1.4500
1.7190
1.7180
0.0496
0.0220
0.0036
0.0201
0.0056
0.0023,
0.0037
6.2616
4.5054
0.7291
2.6726
0.7457
0.3673
0.5695
1.7671
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
Exhibit USPS-439
Page70flO
Development
of First-Class
Mail Processing
Unit Costs
FltiClur
Nonautomation
Single PIem Non-Machinable
Per Piece Cost Summary by Operation (Continued)
111
TPF:
Incoming Secondary
ManuabNon-Auto
Sides
MsnusVAuto SRes
Mechanbed
MPBCS
DBCS First-Pass
DBCS Second-Pass
CSBCS First-Pass
CSBCS Second-Pass
CSBCS Third-Pars
m
Pisces
per Hour
930
9,070
0
0
0
0
0
0
0
Mail Prep/Cancellation
serf to P. 0. Boxes:
DPS and SS
Non-DPS or SS
10,000
% DPS
0.00% y
0
690
1,143
646
1,151
6,633
6,393
8.393
17.124
17,124
17,124
2,341
1.171
Mall
PI
wage
R.&e
I41
cents
per Piece
m
Piggyback
Fllct0r
Is)
Premium Par
Adjustment’
l-4
cents
per Piece
181
Weiohted
-
$25.45
$25.45
$25.45
$25.45
$25~45
$25.45
$25.45
$25.45
$25.45
2.2261
3.9389
2.2107
0.3636
0.3032
0.3032
0.1466
0.1466
0.1466
1.3720
1.3720
2.2400
1.7190
2.4340
2.4340
1.9480
1.9460
1.9460
0.0245
0.0433
0.0243
0.0042
0.0033
0.0033
0.0016
0.0016
0.0016
5.4474
4.9763
0.6636
0.7412
0.7412
0.2911
0.2911
0.2911
0.2663
4.9406
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.5698
0.5698
1.4965
2.9929
0.0000
0.2664
$25.45
$25.45
1.0666
2.1735
1.3660
1.3660
0.0120
0.0239
cost
1/
-
---
.. .. . ... .
.r.................
1.
--
-.
-.
Exhibit USPS43C
Page 1 of 1
NONSTANDARD
SURCHARGE
COSTS USING NEW VOLUME
SHARES
A. INPUTS
AVERAGE
MAIL PROCESSING
Sinnle Piece
Letten =
Flats =
Parcels =
s 0.1174
L 0.3243
s 0.7408
presort
Letten =
Flats =
Parcels =
S 0.0460
S 0.2087
s 0.2198
VOLUME 8 PERCENT
Letters =
Flat6 =
Parcels =
Total =
OF NONSTANDARD
Single Piece
Vol (Mills)
Percent
62.7
19.3%
238.0
73.1%
24.9
7.6%
325.6
100.0%
MANUAL LElTER
Single PC. =
Presort
=
UNIT COSTS (Library Reference H-106)
PIECES BY SHAPE
Presort
Vol (Mills)
Percent
9.1
18.3%
77.4%
38.4
2.1
4.2%
49.6
100.0%
MAIL PROCESSING
COSTS
(Response to NIDMSNSPS-T32-29
Carder Route
Vol (Mills)
Percent
1.8
22.5%
6.0
75.0%
0.2
2.5%
8.0
100.0%
(Exhibii
Total
Vol (Mills)
73.6
:282.4
27.2
383.2
Percent
19.2%
73.7%
7.1%
100.0%
B)
S 0.2054
$ 0.1144
B. RESULTS
Formula: (Manual Letten -Avg. Letten) l proportion of letters + (Flats - Avg. Letten) ” proportion of
flats + (Parcels - Avg. Letters) l proportion of parcels.
Single Piece
s
0.2159
Pmsort
0.1459
s