DOCKET SECTION
BEFORE THE
POSTAL RATE COMMISSION
WASHINGTON, D.C. 20266-0001
POSTAL RATE AND FEE CHANGES, 1997
ERRATA TO TESTIMONY
I
!
RECEW
ocl
6
4 ssPM’97
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ur 1t’E
Docket No. R97-1
AND EXHIBITS OF WITNESS
CRUM
The United States Postal Service hereby files errata to the testimony
of witness
Crum.
Revised pages incorporated
with each change shown in the attached table.
to USPS-T-29
these minor changes
The changes
and exhibits
are provided,
result frrom the errata
filed on October 1, 1997.
Respectfully
submitted,
UNITED STATES POSTAL SERVICE
By its attorneys:
Daniel J. Foucheaux, Jr.
Chief Counsel, Ratemaking
Scott L. Reiter
475 L’Enfant Plaza West, S.W.
Washington, D.C. 20269-l 137
(202) 268-2999; Fax -5402
October 6, 1997
Detailed Crosswalk for Errata Filed 1016197
4
4
4
5
5
6
6
6
7
7
7
7
7
7
6
6
9
Exhibit
Exhibit
Exhibit
Exhibit
Exhibit
Exhibit
Exhibit
Exhibit
Exhibit
Exhibit
Exhibit
Exhibit
Exhibit
Exhibit
Exhibit
Exhibit
Exhibit
Exhibit
Exhibit
Exhibit
Exhibit
Exhibit
D
D
D
D
D
D
D
D
E
E
E
E
F
F
F
F
F
F
F
F
G
J
6
11
16
24
25
1
5
17
16
19
20
22
23
26
4
25
4
OSCF Id
OBMC
DBMC un
DBMC st
Total
OBMC
DBMC un
Total
Total math
Total nmo
Total bmc
Total obmc
dump pal
dump otr
dump owe
Tend cl
Sackhie
M Savings
NM Wld
Total
we 3
dump gylrd
10.8 to 10.7
10.6 to 10.7
57.7 lo 57.6
27.3 to 27.5
.6 to .7
.261 to ,202
31.3 to 31.4
31.3 to 31.4
29.2 to 29.4
44.7 to 45.2
,364 to .3666
16.5 to 16.6
16.5 to 16.6
45.7 to 46.0
45.7 to 46.0
,140 to ,139 &
14.0 to 13.9 8
,049 to ,050 &
,107 to ,164 B
,024 to ,025 &
,097 10 ,098 &
.266 to ,267 B
,246 to .249 8
,110 to .lll 8
,636 to ,638 8
,110 to .106
.089 to ,091
,108 to -107
,577 lo ,576
,046 10 .049
.046 to ,047
.106 to ,110
,055 to ,056 &
,165 to ,169 8
.273 to ,275
.172 to ,171
,292 to .294
.B to .7
.043 to .044
These errata are based on the changes to USPS-T-29
,123 to ,125
12.3 to 12.5
,030 to ,031
,146 to ,143
0 to ,001
,136 to ,137 8 ,110 to ,106
,140 to .139
,064 to ,065
,016 to ,017 B ,069 to ,091
,123 to ,125
.040 to .041
,049 to ,050
filed 10/l/97.
Revised
1 O/6197
1
(at least 4 feet high).
Pieces are segregated
2
into the parcel sorting machine or the manual handling process respectively.
3
D shows the BMC presort related savings including those beginning
4
BMC where qualifying pieces are entered.
5
BMC volume proportion
6
presort-related
of machinable
by container type for efticiency of entry
Exhibit
at the origin
Weighting the average costs by the Inter-
and nonmachinable
pieces gives total BMC
savings of 10.7 cents per piece (see Exhibit E).
7
8
C.
Summary
9
10
In Exhibit E, BMC presort related savings of 10.7 cents per piece are combined with
11
the DBMC-related
12
piece for acceptance
13
which apply to OBMC mail as well as DBMC mail. On the basis of lny cost analysis,
14
then, I conclude that origin BMC dropship by the mailer with mandatory
BMC presort
15
saves 57.6 cents per piece, at FY 1998 test year cost levels, compared
to non-
16
OBMC inter-BMC parcels.
acceptance
and mail processing
cost savings (9.2 cents per
and 37.7 cents per piece for mail processing
(see Section II))
17
18
IV.
DESTINATION
A.
Introduction
SCF PARCEL
POST COST SAVINGS
19
20
21
22
I studied the potential cost savings for parcel post pieces dropshipped
23
destination
24
BMC, they avoid all the associated
25
incurred there. These pieces would also avoid the transportation
26
to the destination
27
from the applicable
28
bulk at the destination
SCF. Witness Hatfield (USPS-T-16)
29
transportation-related
savings associated
sectional center facility (DSCF).
to the
When parcels bypass the destination
handling and sorting costs that would be
leg from the BMC
SCF. My testimony describes the mail processing
costs saved
costs for DBMC parcel post if mailers deposit their parcels in
describes the
with DSCF dropship.
Revised
1016197
1
Because the primary task of the destination
2
digit ZIP Code areas, the proposed
3
mandatory
4
5-digits.
5
an average of 10 pieces per 5digit
area and nonmachinables
6
(General
with an average of 25 pieces per 5digit
7
the presori requirement
8
back to the BMC for sorting and the benefits of the DSCF dropship would be more
9
than eliminated.
presort requirement.
BMC is to sort machinab’le
destination
parcels to 5-
SCF dropship discount
includes a
My analysis assumes pieces must be presorted
I also assume machinable
Purpose Mail Containers)
to
parcels are offered by the mailer in sacks with
are offered in GPMCs
area.
If
were removed, pieces would generally have to be shipped
10
11
B.
Mail Processing
Savings
12
13
Parcel post that is dropshipped
14
handlings
15
DBMC pieces.
16
be limited to mailings with at least 50 pieces.
17
BMC mail processing
18
destination
19
related costs for parcel post moving in the Postal Service mailstrearn
20
digit dropshipped
21
which could qualify for the discount.
at the destination
by the mailer to the destination
SCF avoids any
BMC in addition to all the other savings associated
To be consistent
with the DBMC requirements,
with
DSCF parcels must
Exhibit F describes the destination
costs avoided by parcel post that is dropshipped
SCF. Exhibit G compares the downstream
DSCF sacks (for machinables)
to the
SCF and delivery unitversus the 5-
and GPMCs (for nonmachinables)
22
23
Exhibit F shows the total average mail processing
costs avoided at BMCs by DSCF-
24
deposited
25
nonmachinable
26
cents per nonmachinable
27
delivery units. Those Exhibit G results are contingent
28
will not be allowed at those SCFs that are bypassed
29
volume that gets direct transportation
parcel post to be 27.5 cents per machinable
piece.
piece and 54.4 cents per
Exhibit G shows .7 cents per machinable
piece as the additional
savings at SCFs and
on the assumption
5
that DSCF
by the 12.3 percent of parcel
from the BMC to the delivery unit.
30
-
downstream
piece and 19.8
Revised
1 OK397
1
Adding the Exhibit F and Exhibit G results gives savings of S.282 an,d $.742
2
respectively
3
proportion
4
respectively
5
31.4 cents per piece, compared
6
levels. This result is sensitive to the volume assumptions
7
For example, lowering the average per sack quantity to five would drop machinable
8
savings to 22.4 cents while lowering the average per GPMC quantityy to 15 would
9
lower nonmachinable
10
cents.
11
conversion
for machinables
and nonmachinables.
of DBMC machinable
Weighting
and nonmachinable
mail processing
savings of
DBMC mail, at FY 1998 test year cost
per 5digit
savings to 54.1 cents for a total weighted
This simple calculation
sack or GPMC.
average of 24.6
could be made in Exhibit G by changing
factors and multiplying
by the
pieces (.93 and .07
- see Exhibit F) gives my total estimated
to non-DSCF
them together
the
through for each of the operations.
12
13
C.
Summary
14
15
On the basis of my cost analysis,
I estimate that DSCF dropshippecl
16
machinables
17
Postal Service an average of 31.4 cents per piece at FY 1998 test year cost levels,
18
compared
in 5-digit sacks and nonmachinables
to non-DSCF
in 5digit
parcel post with
GPMCs. will save the
DBMC mail.
19
20
v.
DESTINATION
DELIVERY
A.
INTRODUCTION
UNIT PARCEL
POST COST SAVINGS
21
22
23
24
I studied the potential cost savings for parcel post deposited
25
destination
26
delivery unit, they avoid both the destination
27
analysis will estimate the mail processing
28
facilities.
29
savings associated
delivery unit (DDU).
Witness
When parcels are deposited
Hatfield (USPS-T-16)
by the mailer at the
at the destination
BMC and the destination
costs avoided by bypassing
describes
with DDU dropship
30
6
SCF. My
these
the transportation-related
Revised
1 O/6/97
1
B.
MAIL PROCESSING
SAVINGS
2
3
Parcel post that is dropshipped
4
all handlings
5
other savings associated
6
processing
7
the assumptions
8
least the same total minimum volume per mailing as DBMC (currently
9
Qualifying
10
by the mailer to the destination
at both the destination
BMC and destination
with DBMC parcels.
cost savings relative to non-DDU
delivery unit avoids
SCF in addition to all the
My analysis will estimate these mail
DBMC parcels.
To be compatible
of the DBMC analysis, the pieces must be delivered
mailings would be limited to Postal Service designated
avoid costly rehandling
with
in bulk with at
50 pieces).
delivery units to
and rerouting that might eliminate the savings.
11
12
Exhibit F describes
the destination
BMC mail processing
costs avoided by DDU
13
entered parcel post. Weighting
14
and nonmachinable
15
information
16
to estimate the additional
savings at SCFs through unloading
17
DDU-deposited
Page 3 of Appendix V, USPS-T-29
18
downstream
postal network costs to be 14.4 cents per piece (. 1097-1.034) for
19
machinable
parcels while page 4 shows the nonmachinable
20
per piece (.3688+.0828).
21
machinable
22
gives the average modeled postal costs at downstream
23
piece.
24
per piece is also my estimate of savings.
25
processing
costs at BMCs gives the total DDU deposited
26
processing
savings of 46.0 cents per piece.
the savings by the DBMC volume of machinable
pieces gives a total savings of 29.4 cents per piece.
from the parcel post models presented
parcels
Weighting
and nonmachinable
I use
by witness Daniel (USPS-T-29)
at delivery units of
shows ,the total
costs to be 45.2 cents
these by the DBMC volume share of
pieces (.930 and .070 respectively
- see Exhibit F)
facilities of ‘16.6 cents per
Since these are the modeled facility costs that DDU mail avoids, 16.6 cents
Adding this to the avoided mail
parcel post mail
Revised
IQ16197
1
C.
SUMMARY
2
3
On the basis of my cost analysis,
4
save the Postal Service an average of 46.0 cents per piece at FY 1998 test year
5
cost levels, compared
I estimate that DDUdropshipped
to non-DDU
parcel post will
DBMC mail.
6
7
VI.
BMC PRESORT
A.
INTRODUCTION
PARCEL
POST COST SAVINGS
8
9
10
11
The Postal Service is proposing
12
presorted
13
origin BMC and can be moved through the facility in bulk and routed to its
14
destination
to the destination
a discount for bulk entered Inter-BMC
parcel post
BMC. BMC presort parcel post avoids sorting at the
BMC.
15
16
B.
MAIL PROCESSING
SAVINGS
17
18
To qualify for the BMC Presort discount as proposed,
19
parcels at any designated
20
pieces will be deposited
21
boxes oflen referred to as ‘gaylords”
22
deposited
23
network mail processing
24
show the savings for the presorted
25
Presort savings to be $.139 and nonmachinable
on sufficiently
facility.
mailers can deposit their
My analysis does assume that machinable
in sufficiently
(at least 75 percent) full largs cardboard
and that nonmachinable
full pallets (at least 4 feet high).
costs to the costs of qualifying
pieces.
pieces will be
I compare the postal
BMC Presort parcels to
Exhibit D shows machinable
BMC
BMC Presort savings to be $.125
Revised
1016197
1
C.
SUMMARY
2
3
Based on my analysis and assuming the specifications
4
Presort saves 13.9 cents for machinable
5
pieces at FY 1998 test year cost levels.
described
above, BMC
pieces and 12.5 cents for nlonmachinable
6
7
VII.
BOUND
PRINTED
A.
BACKGROUND
MATTER CARRIER
ROUTE PRESORT
C:OST SAVINGS
8
9
10
11
In Docket No. R84-1 the Postal Service proposed
12
Matter presorted
13
by witness Madison (USPS-T-16).
14
carrier route discount
15
The current discount is 6.3 cents per piece.
to individual
a discount for bulk Bound Printed
carrier routes and box sections based on an analysis
increased
Though no new cost studies were completed,
the
in both Docket No. R90-1 and Docket No. R94-1.
16
17
B.
MAIL PROCESSING
SAVINGS
18
19
My analysis uses a similar format and much of the basic data from witness
20
Madison’s
21
the postal service volume variability assumptions,
22
based on operational
23
analysis and shows the estimated
24
Matter to be $.067.
study.
I have updated the wage rates and piggyback factors, adjusted for
and revised the methodology
changes which have occurred.
Exhibit H describes
savings for carrier route presorted
the
Bound Printed
25
26
C.
SUMMARY
27
28
Based on my analysis,
I estimate that the mail processing
29
presorted
30
1998 test year cost levels.
Bound Printed Matter as compared
savings omfcarrier route
to Basic Bulk BPM are 6.7 cents at FY
9
. .--
--
Revised
1016197
Revised
10197
Exhibit D
Page 1 of 1
BMC PRESORT
PARCEL
MACHINABLE
SAVINGS
PARCEL POST
Nonpresorted
Costloiece (1)
Operation
POST COST
BMC Presorted
CosvDiece
(21
Difference
{Savinasl
Origin SCF Load
$
0.050
$ 0.019
$
0.031
Origin
Origin
Origin
DBMC
DBMC
%
$
a
$
0.027
0.184
0.022
0.025
$
a
%
S
d
5
$
0.003
0.143
s
0.406
$ 0.267
BMC Unload
BMC
BMC Load
Unload
Sort
Total
NONMACHINABLE
Nonpresorled
CoNpiece
Operation
0.024
0.041
0.022
0.024
0.137
$ 0.001
sJQ&c&J
s
BMC Savings
= $ ,108
0.139
PARCEL POST
BMC Presorted
Cost/piece
Difference
{Savinosl
Origin SCF Load
$
0.109
a
0.075
$
Origin
Origin
Origin
DBMC
$ 0.068
$ 0.249
$ 0.101
a 0.111
$
$
$
a
0.094
0.164
0.086
0.094
$ (0.026)
$ 0.085
$ 0.015 BMC Savings
$ 0.017 = $.091
$
a 0.513
BMC Unload
BMC
BMC Load
Unload
Total
1. USPS-T-29,
2. Exhibit J.
Appendix
V, page 3.
0.638
$
0.034
0.125
Revised
1 O/6/97
Exhibit E
Page 1 of 1
COSTS AVOIDED BY DEPOSITING INTER-BMC PARCELS AT THE
ORIGIN BMC WITH PRESORT TO THE DESTINATION BMC
DBMC Savings
I. Mail Processing
(see Section IIC of Testimony)
s
0.377
II. Acceptance
(see Section IIB of Testimony)
a
0.092
$
0.106
(1)
$ 0.091
(1)
a
(2)
BMC Related Savinas
A. Total Machinable
Savings
B. Total Nonmachinable
Savings
III. Total BMC Presort Relatecl Savings
Total OBMC Mail Processing
Savings
(I + II + Ill)
0.107
S 0.576
1. Exhibit D
2. Machinable and nonmachinable savings weighted by Inter-BMC volume proportions
.106’.913 [.913=60,462.052/66.257,961]
+ .069’.067 [.067=5,795,914/66.257.961]
(L,R-H-135)
Revised
1 O/6/97
mibh F
Page 1 of 2
DESTINATION
BMC MAIL PROCESSING
PARCEL POST DEPOSITED AT DESTINATION
A.
MACHINABLE
PARCEL POST (Costs for Nonqualifying Mail)
Prob. of
Handlinqfl)
ODeratiOn
Unload
Unload
Unload
Unload
Unload
COSTS AVOIDED BY
SCFs OR DELIVERY UNITS
Bedload
Pallet
OTR
Gaylord
OWC
l-v 1998
cost par
Handlinaf2)
.
0.049
0.033
0.019
0.024
0.044
0.047
0.000
0.000
0.001
0.000
0.003
0.006
0.026
0.002
0.049
0.047
0.043
0.110
0.000
0.000
0.001
0.000
Label Cost
Primary Sort
Secondary Sort
Tend CL
Sack and Tie
1 .ooo
1 .ooo
0.630
0.733
0.267
0.005
0.056
0.036
0.056
0.189
0.005
0.058
0.030
0.041
0.050
Load OTRs - loose
Load OTRs w/sacks
LoadOWC
Bedload Sacks
0.603
0.029
0.130
0.236
0.037
0.031
0.067
0.029
0.022
0.001
0.011
0.007
Dump
Dump
Dump
Dump
0.962
0.003
0.009
0.026
0.002
Pallet
OTR
Gaylord
OWC
5
=cosh(3)
Savings
B.
NONMACHINABLE
9 0.275
PARCEL POST (Cosk for Nonqualifying Mail)
Operation
Prob. of
Handlina(l)
*
cost par
Handlinp(2)
Unload Bedload
Unload NMOs on Pallet
Unload NMOs in OTR
0.986
0.008
0.007
0.168
0.111
0.047
0.185
0.001
0.000
SW-t
1.000
0249
0.249
Bedload from IHC
Load NMOs in OTR
Load NMOs on Pallet
Load NMOs in OWC
0.129
0.536
0.310
0.025
0.171
0.094
0.101
0.222
0.022
0.051
0.031
0.006
$ 0.544
Totil
Mail Processing
Savings at BMCs
s
-.
0.294 (4)
Revised
1016197
Exhibit F
Page 2 of 2
1. Probability that an average piece till receive a particular handling. (Library Reference H-l 31
and USPS-T-29)
2. Estimated test year attributable costs of complete handling for particular piece. (USPS-T-29,
Appends: V, pages 3 6 4.)
3. Avoided costs of the average piece. (2‘3)
4. Machinable and nonmachinable savings weighted by DBMC volume proportions
.275’.930 (.930=69,624,307/96,361,277]
+ .544’.070 [.070=6,756,973/96,381,277] (LIR-H-135)
Revised
1 O/6/97
Exhibit G
Page 3 of 3
III.
POSTAL NETWORK
COSTS MINUS CANDIDATE
Machinable parcel pod: $.159 - a.152 = $.007
Nonmachinable
parcel post $.498 - %.300 = S.198
MAIL COSTS
= .7 cents
= 19.8 cents
Revised
1016/97
Exhibit J
Page 1 of 2
BMC PRESORTED PARCEL POST COST PER PIECE
Machinable
BMC Presort
#ofhand.
m
(2)
Origin SCF
Load Gaylord
Origin BMC
Unload Gaylord
Crsdk Gaylord
Load Gaylord
Destination
BMC
Unload Gaylord
Dump Gaylord
D. Primary (Key)
Label
Secondary (scan)
1.
2.
3.
4.
5.
Cost Summary
(3)
cow. fact.
(4)
PB fact
(5)
$DWOD.
1 .oooo
23.9
104.5
1.64
0.019
0.019
1 .oooo
1 .oooo
1 .oooo
21.9
12.6
23.9
104.5
104.5
104.5
2.13
2.13
2.13
0.024
0.041
0.022
0.024
0.041
0.022
1 .oooo
1 .oooo
1 .oooo
1 .oooo
0.6300
21.9
11.7
695.6
104.5
104.5
1.0
2.13
2.13
2.03
1433.3
1.0
2.03
0.024
0.044
0.056
0.005
0.036
0.024
0.044
0.056
0.005
0.030
Test Year 1996 Wage Rate (LR-H-146) =
$ 25.445
Productivity.
USPS-T-29, Appendix V, page 15.
Conversion Factor. USPS-T-29, Appendix V, page 15.
Piggyback Factor. USPS-T-29, Appendix V. page 16.
Wage rate * piggyback factor I (producitivity * conversion factor).
CERTIFICATE
OF SERVICE
I hereby certify that I have this day served the foregoing
participants
of record in this proceeding
in accordance
upon all
with section 12 of the Rules of
Practice.
Scott L. Reiter
475 L’Enfant Plaza West, SW,
Washington, D.C. 20260-l 137
October 6, 1997
doclJment