BEFORE THE POSTAL RATE COMMISSION WASHINGTON, D.C. 20268-0001 l--J cj~> ;n SC-i r) w ~I c? -~I :n TJ n _, 5 : c g POSTAL RATE AND FEE CHANGES, 1997 DOCKET NIO. R97-1 FLORIDA GIFT FRUIT SHIPPERS ASSOCIATION NOTICE OF ERRATA TO DIRECT TESTIMONY OF LEONARD FGFSA-T-1 The testimony of Leonard Merewitz, FGFSA-T-1, contains many errors which require correction. A detailed attached Errata summary. Since there are so many pages requiring revision, the entire testimony, Exhibits, has been prepared to reflect the Errata and including listing of the changes MEREWITZ are rset forth in the is attached hereto Maxwell W. Wells, Jr., Post Office Box 3628 Orlando, Florida 32802 Attorney for Florida Gift Fruit Shippers Association FLORIDA GIFT FRUIT SHIPPERS ASSOCIATION ERRATA TO DIRECT TESTIMONY OF LEONARD MEREWITZ, FGFSA-T-1 Page Line 2 10 price-Waterhouse 3 9 In purchased transportation - change to - of InterBMC: and IntraBMC purchased transportation 3 10 “We include all modes Delete entirely. 3 12 Inter B - change to - InterBMC 4 5 to CFM of capacity - change to - to cubic foot miles(CFM) capacity 5 1 Exhibit LAM-5 - change to Exhibit LAM-6 5 11 5 12 Last incomplete sentence, correct to read as follows: When those pieces are converted to pounds, the dec:rease goes to 12.8% as shown in the final column of the first panel. Standard (B)(p.2) - change to read - Standard (B) 6 14 Parameter. 6 12 quantity (1 + r) - change to - quantity (1 + b) 6 16 change “less” to “greater” 6 17 change 13.1 to 16.0 6 18 change 13.7 to 10.8 7 4 change 1990 to 1991 7 7 10.4% of this increase 8 8 proceeding. - change to - Price Waterhouse InterBMC higheay transportation.” - change to read - parameter b. - change to - 13.1% of this R77-1 - change to - proceeding, R77-1 of 9 3 econometrician” tools - change to - econometrician’s tools 9 6 H-82,84 - change to H-82 and H-84 9 9 6 17 use it despite - change to - use these data despite response - change to - responds 10 5 volume increases real - change to - volume increases 10 fn5 change to read: Really the “rate relevant” run of about three years. 11 3 24 cents - change to - 31.5 cents 11 21 ever now - change to - every now 11 21 case - change to - cases 13 12 after LaLonde, 14 5 discussed 14 14 after transportation, 14 15 on outbound and inbound - change to - on both outbound inbound trips 100% real insert: (see below, p. 22) - change to - discuss add: starting at p. 21. 15 delete reference to 9b 15 change to: In-bound SCF 15 change to: In-bound other 15 change to: out-bound SCF 15 change to: Out-bound other and 9-10 change to: Outbound and inbound runs are compared in LAM-9a. -_ __. -15 Parcel Post is 33.9% of the CFM in quarter 1 for inbound runs but is only 23.9% for outbound runs. 15 13 characteristic of minimum variance”. - change to read characteristics of minimum variance. When asked if mail to be mail to be - change 18 25 Panzar was asked if mail to be to - When Prof. 18 28 house. Did - change to - house, did 19 1 mean - change to means 21 22 17 18 in all of them 5. - delete the 5. delete the and This 23 9 LAM-l - change to - LAM-l 1 23 16 indices - change to - indications 24 1 1.112-changeto-1.08 24 2 (y96812) - change to - LAM-13 (See, Lib Ref FGFSA-H-2) 24 2 delete: (also see LAM-4a, p. 1 of 6) 24 5 insert “of” between make and a. change “the following” to “these contradictory” 24 18 outbound 25 10 because of the finding DBMC mail on - change to because (among other things) of finding DBMC parcel post on leg - change to - inbound leg estimates of PP cubic feet - change to - estimates 12 25 between parcel post and Standard A cubic feet. 26 16 delete - “try to” 26 19 change “topology” to “typology” - 2 places 27 4 caste - change to - cast 27 15 delete the “for” in available for Change first sentence 27 22 bound samples more frequently? of the relation to read: Why did PW and PS collect in- 28 6 are - change to - or 28 7 delete “or’ 28 11 that sample - change to - that the sample 29 7 BOUND Variables).our - change to BOUND Variable). Our 29 8 lAM-4a. Complete LAM-3 inbound and outbound. 4b 5 - change to - LAM-3 revision - original erroneously included Revision correctly reflects only outbound. combined LAM-4b Revision to clarify and correct source references Lam-13 New, as correction to testimony (page 24) reference to (y96812) CERTIFICATE OF SERVICE I hereby certify that I have this day served the foregoing document all parties of record in this proceeding on this date in accordance 12 of the Rules of Practice and Procedure. Dated : January 26, 1998 upon with Section FGFSA-T-1 BEFORE THE POSTAL RATE COMMISSION WASHINGTON, D.C. 20268-0001 POSTAL RATE AND FEE CHANGES, 1997 FLORIDA GIFT FRUIT SHIPPERS DOCKET NO. R97-1 ASSOCIATION TESTIMONY OF LEONARD MEREWITZ (Revised per errata) In Behalf Of FLORIDA GIFT FRUIT SHIPPERS ASSOCIATION Maxwell W. Wells, jr. Maxwell W. Wells, Jr., PA. P. 0. Box 3628 Orlando, FL 32802 January 26, 1998 I. Qualifications My name is Leonard Merewitz. 1 am a Principal in LAMA Consulting and have testified before this commission four times before: in R80-1, and R84-1, on behalf of USPS and direct and rebuttaltestimonyfor the National Association of Presort Mailers in MC951. In this testimony the Florida Gift Fruit ShippersAssociation askedme to do studieson purchasedtransportation and its distribution over classesand subclassesof mail. My education in economicswas at Harvard College where I received a Bachelor of Arts 8 degree magna cum laude in 1964 and at University of California at Berkeley where I receivedthe 9 Ph.D. in 1969 I beganteachingasan Acting AssistantProfessorat the sameUlniversityin 1968 and 10 remained as assistantprofessor at what is now the Haas School of Business Administration at 11 Berkeley. I taught quantitative methods and transportation there until 1975 ,whenI moved to the 12 Motor Vehicle Manufacturers Association of the US (Now American Automobile Manufacturers 13 Association) in Detroit. There I did researchon autos and trucks and their regulation. In 1976, I 14 moved to becomeDirector of Transportation Studies at J. W. Wilson Associatesin Washington. 1 15 joined the federal governmentin 1977 as a Senior Economist at the National Transportation Policy 16 Study Commission, a temporary agencycomposedof Congressmen,Senatorsand membersof the 17 public who hired a staff to do studiesand write a Report 18 In 1979the Postal Servicehired me as SpecialAssistantto the Senior .4ssistantPostmaster 19 General-Finance I remainedat the PS as a memberof Postal CareerExecutive Servicefrom 1979 20 until 1986. At that time I joined the PRC as Special Assistantto Commission Crutcher and Staff 21 Assistant. In late 1993,I left the US government’semploy and I startedLAMA Consulting in 1995. 22 Between 1994and 1996 I had af5liationswith JackFaucett Associates,Symbiotic Technologiesand 1 1 Whitfield RussellAssociatesand participated in a trucking privatization project in Ukraine in 1994. 2 I havepublishedthree books and about 17 articles in referreedjournals or books including two in a 3 series on postal matters edited by Professors Crew and Kleindorfer and published by Kluwer 4 AcademicPublishersin 1993and 1997. I havebeena memberof the TransportationResearchForum 5 since1970. In additionto postaltestimony,I haveenteredexpertwitness testimsonybefore the South 6 Dakota, North Dakota, andMontanaPublic Utility Commissionsand the Superior Court of Alameda 7 County, California. I am a member of Phi Beta Kappa, the Transportation ResearchForum, the 8 American Economics Association and the National EconomistsClub. 9 The purposeof my testimony is to review the work of Bradley USPS T- 13 on attribution of 10 purchased highway transportation costs. I then review the TRACS system of Price Waterhouse 11 sponsored by witness Nieto USPS T-16. I evaluate methods of allocating attributable costs and 12 suggestone of my own. I then review someof the specialeconomicsrelating to transportation. These 13 principles help us articulate criteria for judging cost allocation methods. From the errors of theory 14 and data we find in TRACS. We tind that we are unable to derive a distribution key for highway 15 purchasedtransportation.In course of making thesepoints we voice someopinions on the methods 16 of TRACS, unfortunately many negative.. II. What PurchasedTransportation Do We Study? The Florida Gift Fruit ShippersAssociation asked me to study purchasedtransportation over the period 1988 to 1996, concentrating on highway transportation and the TRACS system. A. 6 The PS purchasedsome $3,730 million worth of transportation in FY~19%. Air, rail and water accountedfor $1,538million. Highway in total was almostexactlyhalf the purchasedtransport budgetat $1,540million. Ofthis $1540million, IntraBMC was about $260 and InterBMC was about $230 million. Source:comorehensive Sta-I C&rations p.20 (1996). We have provided an Exhibit on recent history of Inter and Intra BMC purchasedtransportation. 10 That is Exhib LAM-I. 11 Sinceparcelpost is nonpreferential mail, and part of Standard(B) it uses(when Inter BMC and in 12 certainother circumstances)the nonpreferentialtransportationsystemwhich usesthe BMC’s as hubs. 13 It is collectedfrom AssociateOf&es ( AO’s) to the extent it is enteredthere anclthen shippedto the 14 rest ofthe countryby InterBMC transportation. From there it is distributed to SCF’s and AO’s 1s in their distribution area. 16 17 18 B. Bradley’s regession analysis. 3 1 Professor Bradley describesan elaboratemodel. Much in it is correct and much is clever. 2 A “scrub”is a logical term for dataediting. Unfortunately the theoretical basisof the model is weak 3 He would not disagree that measurementwithout theory is a poor methodology. His main 4 independentvariable appearsto be output but in the final analysiswhat he has measuredis capacity 5 and not volume. There is a close fit of cost to cubic foot-miles CPM of capacity. There is no 6 showingof a closefn to volumevariations,a necessarycondition to infer “varia,bility” or attribution. 7 Attributable costs are those costs demonstrablyrelated to volume. seeLib. Ref. H-I. 8 Prof Bradley hasfoistedon this Commissiona very cleverlittle trick. He correlatescontainer 9 capacityrequiredandcontainercost. That is a theoretical relationship. His good tits are deceptive. 10 That is like a correlationbetweenplant size and expectedoutput. Industrial cost analysisfocuseson 11 cost per actual unit of eventuated output. Actual output is a random variable and as such is 12 stochastic.High costsmay eventuatehorn badplanning. In Bradley’s model bad planning can never 13 show. He neverdiscussesactualoutput, discussinginsteadceiling output whether he mentions it up- 14 front or not. The history of capacity utilization as recounted in my Exhibit LAM-10 shows that 15 capacityis a poor measureof true output or throughput. Effective managementin transportation is 16 not achieved by simply contracting for capacity. Developing good load factors is the key to that 17 businessasit is in the airlinebusinesswhich is well-known to consumers. Entrepreneursgo to great 18 lengths to favorably affect their load factors. 4 1 Exhibit LAM-6 through LAM-8 show the impact of drop-ship rules new in 1991 and rates 2 in third-classand Standard(A) on the traffic in the two accountsof purchasedtransportation which 3 we study. Basically, the conclusion is that traffic is down while expenditureson transportation are 4 up. Traffic is down becausemailers, especially Standard(A) mailers are taking advantageof work 5 sharing opportunities and doing more of their own transportation. 6 The top panelof LAM-6 is a summaryshowing a 12.8 percent drop in Standard(A) traffic 7 between1991and 1996 and a 24% increasein Standard(B) traffic. Since Standard(A) is a bigger 8 classin volume -- 13% of the larger group is greater than 24% of Standard(B). 9 Panel2 concernsStandard(A) and showsthat mail subjectto nationwideentry or BMC entry’ 10 was 41.9 billion in 1991and is only 33.1 biion in 1996 The changein workload measuredby pieces 11 in a -21 percent. When those piecesare convertedto pounds the decreasegoes to 12.8 percent as 12 shown in the final column of the first panel 13 Panel3 @. 2 ) concernsStandard(B). Here we havelargelynatural growth taking place with 14 one exception. There hasbeen considerablework sharingproceedingapacein the rate category of 15 Destination-BMC parcel post, This phenomenonsubstitutesfor Inter BMC transportation but not 16 for Intra BMC. Destination BMC parcels still require transportation to their destination SCF’s and 17 AO’s. Our solution is to claim one half the savedpounds as a workload saving sincethese two ‘This mail is ‘mail not drop-shippedbeyond [i.e. deeperinto the systemthan] the BMC.” 5 1 accounts(in&a BMC andinter BMC) are roughly equal in magnitude. Line 8 shows the full savings 2 and line 9 accountsfor half the savings. The result when both Standard(A) and Standard(B) are 3 brought together is a 2.7 percent decreasein traffic. 4 We may now compare this small decreasein traffic to an apparent healthy increase in 5 transportation expendituresand explore the meaning of those changes. First we must obtain an 6 estimateof real increasein the useof transportationservices. Expenditures alone will not tell the full 7 story becausethey include the results of price change,usually increases.When we have taken out 8 those price increases,we will have the real increasein transportation servicespurchased. 9 From LAM-7 andLAM-8 we may infer that price changein the over-the-roadtrucking sector 10 was no greaterthan 2.5 per centper year (in fact the current estimateis 2.25 per cent per year) over 11 the period 1991to 19%. The exhibitsshow the price index for trucking nonlocal between June 1992 12 and November 1997. Exhibit LAM-8 performs a regressionanalysison the model 13 InY= A+ b* t 14 Where In is natural logarithm and t is time in months. Time differentiation shows that the rate of 15 growth is the parameterb. The b we estimateis a monthly rate of growth. The cluantity (l+b) raised 16 to the power 12 gives the annualrate of growth which is here estimatedto be :2.25per cent. Since 17 I do not have the complete seriesI need for my analysisI have to say that price growth was no 18 greaterthan 2.5 per cent per year Thereforein the period of our comparisonprice increasewas 16.0 6 1 per centwhile contractexpendituresincreased26.8 per cent. The result was a 10.8 per cent increase 2 in real purchasedhighway transportation services. One can say this was real in the senseof cubic 3 foot-miles abstractingfrom price level change. 4 5 Thus, between1991and 1996volume in the nonpreferential highway transportation system 6 declinedfrom 7181 million poundsto 6989 or by some 3% mainly becauseof drop shipping. 7 PleaseseeLAM-6. During the sameperiod, purchasedhighway transportation increased27 8 % Not more than 13.1% of this increasewas price increase becausethe price index, 9 “Trucking excludinglocal” showsa 2.25 per cent averagerate of growth in truck rental costs 10 over that period). So, during this period there was a 16% real increasein the purchaseof 11 highway transportation servicesby the postal service.To summarize,we have a 16 % real 12 increasein the faceof a 3 % decreasein volume demandingtransportation.’ What should we 2Eventhough this is the non-pref transportation system,designedfor third-class and fourth-class (with the preferential designedfor first-classand second-class)periodicals are seenin the traffic. One might object that traffic was increasedover the period from the second-classor periodicals direction. But, the YQ!UQ&by which I meancube and not pieces(of periodicals has not changedover this time period). In millions of cubic feet, it was 242 in 1991 and only 240 in 1996. Zoning Zoning has existed in periodicals for a long time and this is analogousto dropship discounts. There is a premium for delivering mail and depositing it into the systemcloser to the destination, There is simply lesstragic on those trucks and yet the amount of purchased transportation servicesis up about 15.8% in real terms. Volume (whether cube or pieces) alone does not drive the amount of purchasedtransportation input. 7 1 makeof this? It certainly seemsthat the volume growth and spendinggrowth are inversely 2 correlated.As one goes down the other goesup. We do not seriouslyconcludethis but the 3 simplisticd 4 13 testimonyis surely brought into question. It also appearsthat transportation is related to 5 servicestandardneedsaswell as to volumes. Schedulesare madeto meNetservicestandards. 6 Trucks are consistentlybetween5O?hand 300/oempty Volume alone does not drive capacity; 7 the need to meet schedulesand serve volume drives capacity. Dr. Bradley has not taken 8 into account service standardsat all in any of his analysis:what has been called Service 9 Related Costs in an earlier PRC proceeding,R77-1 increasein purchasedtransportationas volume increasesof Bradley’s T- 10 Mr. Bradley hastold us that actual volume would be preferableto capacity. 11 As he wrote in an article in 1988: 12 13 14 15 16 17 18 19 In purchasedtransportation, the “output” is the transportation of mail and the appropriate variableshouldinclude both distanceand weight (or cube). In purchasedair transportation, payment is madeon the basisof actual shipments,so data is availablefor the actual poundmilesof mail transportation. In purchasedhighway and rail transportation, however, data is not availableon the actuallevel of volume, becausecontracts are specifiedand paymentsare madeon the basisof capacity Therefore,a proxy for actualvolume is required and the proxy that was used was cubic foot-miles of capacity.’ The TRACS sampling processactually yields volume data for proper 20 Capacity is just a proxy 21 econometricanalysisto find the impact of additionalpieceson purchasedtransportation costs without ‘Michael D. Bradley and Alan Robinson, Determirring ihe Mur@?1 Cost ofParchased TransportuN’orr,-1 of the Transportation ResearchForum, p. I72 8 1 the dubiousinterventionofthe relationshipbetween capacity and volume. The relationship between 2 capacity and volume may not be that simple. 3 Bradleyvery neatlyandvery intenselystudiedthe wrong subject He has done an engineering cost analysiswith the econometrician’stools. We need an economic or econometric cost analysis with real world data. He ought to be very pleasedto know that the data now exist to do his analysis. Bradley had availableto him through TRACS real actualizedvolume from actual truck runs with live 7 mail. Theseare availablein L.R. H-82 and 84. He failedto usethesedata despitethe fact that he said 8 in his own writings that real volumes were preferableto a proxy for volume. LEnfortunatelyBradley 9 must be rejected as a well-executed, poorly conceivedproject He has made precise estimatesof 10 parameterswhich unfortunately have little relevanceto regulation. Mr. Bradlley has told us that 11 actual volume would be preferable to capacity. Capacity is just a proxy 12 sampling process actually yields volume data’ for proper investigation and.to find the impact 13 of additional pieces on purchased transportation cost without the dubious interconnection of 14 the relationship between capacity and volume. The relationship between calpacity and volwne 15 may not be simple. The TRACS 16 This analysis flies in the face of the obvious facts. One of the most successful work 17 sharing programs is in transportation. Mailers are availing themselves of it in droves. So 18 effective volume (for transportation purposes) is going down. PS responds by purchasing 19 more transportation. Six years is a long time. This is long enough to make adjustments in the 20 transportation system. Several of the major changes of drop shipping should have had their %cluding weight and mailcode or subclass 9 1 impact by now. 2 As shown in LAM-9b the average use of capacity on Intra BMC is 56.7% and 3 declining. On Inter BMC (longer-haul) it is 69%. Spending on these two accounts has 4 increased 49% in the last six years. Real spending has increased and capacity utilization is 5 going down. After all the t-statistics and R-squared are discussed what is the policy 6 prescription of Bradley’s analysis? It is that in the long run’ as volume increases 100% real 7 purchased transportation will increase 97%. Well, transportation needs hawe gone down and 8 transportation expenditures have increased, nevertheless. 9 10 Bradley would have us believe that he studied cost drivers and1that TRACS will 11 provide the missing link to relate transportation cost to volume. He blelieves that he has 12 studied the change in cost with respect to the change in capacity and the TRACS will provide 13 the answer on change in capacity with respect to change in volume. He is wrong. TRACS 14 has nothing to do with capacity or changes over time. TRACS looks at one point in time to 15 &.&&J& 16 Bradley surely knows that misspecitication is one of the most serious problem in 17 econometrics. Not getting correct variables in an analysis. Unfortunately he has fallen in to 18 a classic trap in social science. Wisely, he divides the problem he must solve into several 19 parts. Unfortunately he cannot or does not know how to study the important or difftcult part, costs. Bradley’s analysis, therefore, fails because of the missing link. Professor ’ Really the “rate-relevant” run of about three years 10 1 while he can flex his methodological muscles on the part that is less important, almost trivial. 2 Transportation is pervasive throughout our economy. It is provided by h&seholds and by 3 producers both owner operators and firms. The nature of its costs are very well known. The 4 government uses standard costs on income tax returns 3 1.5 cents per mile is the allowable S cost on transportation. That is an averagewhich can be used nation wide without much error, 6 Similarly, the cost of operating trucks is well known. If Bradley could study the change in 7 transportation cost with respect to his cost driver that would be fine if it were supplemented 8 with good relationship between changing capacity and change in volume. No one has done 9 proper econometric specification of this second relationship. Surely it must consider factors 10 other than volumes so that the net effect of volume can be seen with more preferential mail 11 on in theses accounts service standard is surely influenced. With persistent over capacity the 12 relationship of capacity to changes in volume is variable. With all due respect, professor 13 Bradley is somewhat like the inebriate who has lost his keys. He can’t see in the dark (where 13 they probably lie). So he looks under the street lamp where the light is good with such over 1s capacity and with the powth of preferential and nonpreferential transportation runs. Factors 16 other than volume must be in the transportation cost equation. III. TRACS 17 18 A. Description 19 Although TRACS, a measurementsystemdesignedby Price-Waterhouse(PW), for 20 the USPS, has been in use in rate casessince R 90-l it has never been tested or examined or 21 evaluatedon the record. Information about it has come from the PS at a slow pace: a few library 11 1 referencesevery now and then in mail classificationcasesand a few now and then in a rate case. It 2 is a measurementsystemto measureutilization of transportation resourcesfor air, rail, highway, and 3 water. It is not a statistical system,but it doesinvolve samplingand has statistical properties which 4 can be measured. PW designedforms to be filled out in a CODES environment with hand-held 5 equipmentby PW and postal technicians. 6 In addition to statistical accuracy,issuesof not slowing down the mail were in the minds of 7 the designersof TFLACS. In the highway sampling system,a truck is never stopped on the road for 8 sampling. Instead,samplingis doneonly when mail is unloadedfrom trucks. At that time, mail waits 9 to be processedso there is time for sampling without unduly slowing the mail. Nevertheless,the 10 estimateshavestatisticalpropertieswhetheror not they were designedasa statistical system. Despite 11 the heavinessof traffic on the outbound movement, 70% of sampling was done on inbound 12 movements,and only 30% on the outbound.’ The inbound movementis sampledmore heavily for 13 the convenienceofthe postal service. This is certainly not a sampling schemedesignedto minimize 14 the varianceof estimatorsand witness Nieto saysas much (seeTr. 7/3434 ). 15 B. Expansion 16 Ms. Nieto usesthe word “expansion”to meansseveralthings. The TRACS systemin seeking 17 to be able to find costs of each leg of the trip expandsvolume off-loaded marrytimes. It expands 18 what is in items or containersto the size of the container. That spaceis expandedto the size of the 19 vehicleandlater the off-loadedmaterialis expandedfor the emptinessof the vehicle on previous legs 20 of its journey. One might almost say that TRACS’ designerswere obsessedwith expanding. 21 I wish to separatethesebecausesomeI acceptin my analysisand someI cannot accept. 6 Theseare detainedwith respectto the BMC for all intra BMC and inter BMC’s. 12 1 **Some of the methods used by P-W and describedby witness Nieto are haphazardmethods. 2 Discussion surrounding the variable PERCONT were loosely described and applied by 3 statisticaltechnicians.Sometechniciansrecorded pieces,others weight or percentagesofthe 4 truck or of the container or item. Nieto attempts to paper over theseproblemsby saying it 5 will all come out in the wash (FGFSAIUSPS, T 2-49). 6 2. I 8 TO expandfrom a “sampling” to a universeor population I accept as standardsamplingand extrapolation to a population. 3. To expandfor empty space.I cannotaccept.This is to chargethe “items” ,for only that traffic 9 presentlyin the items It is alsoto chargethe vehicle-trip for only those items presently in the 10 vehicle. The key problemwith this approachis the concentration on the leg of the trip as the 11 proper unit of cost analysisof the trip segmentfrom point A to point B and not the round trip 12 from A to B andback to A. ProfessorsBowersox, Smykay and LaLonde (seebelow, p. 22) 13 record the acceptedanalysisunit as the round trip in the freight transportation literature. 14 I am informedthat the PS never stacksfreight higher than 6 feet. UPS, on the other hand uses 15 a “double bottom” so that spacecan be used up to the fill 10 feet of the trailer. It is ludicrous to 16 expandto the 111cubicfoot capacityof the truck when trucks are very rarely if ever used abovethe 17 six foot high point. 18 MS Nieto frequently proteststhat nom are calculatedin her analysis(Tr. 713433). leg at a time. This is technically true becauseshedoes no costing &r 19 Shesaysshedoesnot&one 20 s, but it is the simplest of stepsfrom a distribution key to a list of costs. The main contribution of 21 TRACS to purchased transportation cost finding is the development of a distribution key. 22 Nevertheless, how a sample is treated is very important in developing a distribution key. If 13 1 proportionsof mail codesor subclassesare derived from a calculation, then the calculation in a very 2 real senseis determiningthe Distribution Key which will then be applied to the attributable amounts. 3 4 Expandingfor empty spaceis very akin to blamingthe victim. The carpool ,resultswe discuss 5 in the next section work out much more equitable with more reasonwhen the unit over which the 6 spreadingof costs is done is larger than the leg. Sometrafftc happensto be on sparseruns. These 7 are often incoming and therefore in a peak-load analysiswould be chargeda lower unit cost, We 8 explore that possibility but are not advocatingthat. PleaseseeLAM-3 9 Postal Servicemethodfor the &. Becausethere is sparsetraffic on the leg, they pay high unit costs. 10 That is the key problem:costingthe leg. One may advocatecosting the round trip or costing general 11 transportation in a multi causationframework which we call “jointly determined”. In our car pool 12 example, the one driver is on some analysisaskedto pay for the full cost of the drive home from 13 school. Sincethe other riders needthe car at home in the morning, I do not believethat is fair. The 14 trip to andfrom is a unit. Pleaseseeour discussionof the specialeconomicsof transportation starting 15 at p.21, There is no point in expandingto the size of the truck. Let us chargeeach CFM on both 16 outboundand inboundthe sameunit cost Chargeeachstudentin the carp001for trips he takes. The 17 studentstake threeman-tripsin the morning and only one man trip to return the vehicle becausethe 18 other studentshave different schedulesand get home on their own Let us assumethat the cost of 19 a round trip is $8.00.Then Table A applies.Expansionis neededwhen the purpose is to find the cost 20 of the legper se.When costsand CFM are aggregatedandthen a quotient is formed, the aggregation 21 servesthe timction of the expansion:applyingthe sampledproportionsto the whole. The crucial item 22 is the unit of aggregation. 14 They are chargedin the 1 There are decided differencesbetween the classcomposition of the traffic on in-bound and 2 out-bound trips to and from the BMC. SeeLAM 9a analysisof this can be facilitated by observing 3 facility categories(FACCAT’s) where tests are taken. These come in the following five types : 4 Inbound SCF 5 Inbound other BMC Outbound SCF Outbound other 9 10 Outbound and inbound runs are shown in LAM-9a. Parcel Post is 33.9% of the CFM in quarter 1 for inbound runs but is only 23.9% for outbound runs. 11 TFUCS was executed more with the convenienceof PS in mind and less with statistical 12 accuracy in mind. Ms. Nieto said several times that her estimates did not partake of desirable 13 statistical characteristicof minimum variance”. 14 15 C. Examples 16 Most regulatoryproblemsinvolvingjoint or commoncostscanbe boiled down to the question 17 of how to split the costs of a group lunch. Four people go out to lunch. Do they split the bill four 18 ways or do they split the bar bill separately? 19 A simpleexamplemay show the issuesin a more familiar context Here is ;anexamplewhich 20 showsthat expansionto the size of the truck is wrong, that calculating costs for e;achleg of a trip is 15 1 erroneous.’ Let us envisiona carpool.Three studentscarp001to a school. Ail three users,the driver 2 and two riders, use the carp001in the morning, In the afternoon, sinceclassschedulesdiffer, only 3 the driver returnshomein the carpool. They rotate usingeach other’s cars but the samestudentwith 4 the late classestakesthe car back to the bedroomcommunity eachnight. The question is how should 5 the $8.00round-trip cost of the carp001($4.00 on each leg) be apportioned among the three users. 6 In SchemeA, asshownin Table A below, every man-trip costs $2.00, sincethere are a total of four I man-trips eachday. The drive in the morning generates$6.00 and the drive home generates$2.00 8 in revenue. SchemeB chargesthe driver morewhen he is alone coming home. This ensuresthat the 9 round trip is the unit of analysis,and no effort is spenttrying to allocate the cost of eachleg. 10 Table A 11 J&ual Cost Per Person Per Man-Trip First Pricing Scheme 12 13 Student Uses 14 Total Number ChargePer Student Of Man-trips Man-trip Charges 15 16 A Mom & Afternoon 2 $2.00 $4.00 17 B Morning 1 $2.00 $2.00 18 C Morning 1 $2.00 $2.00 19 20 $8.00 Total: 21 22 23 ‘The way eachleg is costed individually is through “expansion.” Proportions are measuredand then the entire car cost is attributed to traffic only on that leg. 16 1 First Pricing Scheme Table B 2 3 Student Afternoon Mom Total 4 5 A $2.00 $2.00 $4.00 6 B $2.00 $0.00 $2.00 I C $2.00 $0.00 $2.00 8 - Total 9 $6.00 $2.00 $8.00 10 11 12 In SchemeB, the riders apportion the cost of eachleg in proportion to how many people 13 are on eachleg. In the morning, the three userspay $1.33 each so that the revenuegeneratedon 14 the drive is $4.00. In the afternoon, with only one person aboard, the chargeis.WOO for that 15 person, This rest&s in Student A’s ( the driver) paying $5.33 and the other two paying $1.33 16 each. SchemeB generates$4.00 revenuefor eachleg but the cost of a man-trip varies. 17 18 Table C t and Char= 19 Per Lsg Second Pricing Scheme by Trips 20 21 22 Leg Rides 23 cost Cost/Student Of Leg Per Ride 24 25 Morning 3 $4.00 $1.33 26 Afternoon 1 $4.00 $4.00 17 1 2 Total: $8.00 3 4 5 Table D Second Pricing Scheme by Students 6 7 Student Morning Afternoon Total for Student $4.00 $5.33 8 9 A $1.33 10 B $1.33 $1.33 11 C $1.33 $1.33 12 13 - Total: $4.00 $4.00 $8.00 14 15 16 Another exampleis from postal circumstances.In carrier street time analysis,carrier 17 accessis the time taken away from the route to accessthe house and load the mail receptacleand 18 return to the route. Apart from load time, the time ‘Up the garden path” (or access)to the house 19 and “back down the path” (deaccess)to the route is attributed to the single classcausing a stop. 20 In a PW-Nieto world, the time used in making the accesswould be attributable to the subclass 21 causingit (which was being carried), but the time causedby the deaccesswould be attributable to 22 the classesremaining in the pouch, -the. 23 accessand the trip should be attributable to the samecausenot to the mail which happensto be in 24 the leg while the deaccesstakes place. This shows that it is treacherousand misleadingto allocate 25 costsleg by leg. When askedif mail to be delivered causes the trip from the route to the 26 house, did that same mail cause the trip back to the route? His answer in FGSAKJSPS T The deaccessis necessitatedby the 18 1 1l-3 was, yes. This means that mail present on a segment is not coincident with the cause 2 of that segment’s costs. 3 Our two approaches(so far)* may be characterizedas follows: Our choice is to cost the 4 leg or to cost the joint product: the round trip. If we cost the b someriders will pay $1.33 per 5 ride and others will pay $4.00 Why is the first or method A abovepreferable? When there is 6 uneventraffic not at the option of the traveler or shipperthere will be wide swings in cost per 7 trip, if we cost eachleg. It is not that one user is getting a better product and therefore they 8 should pay more. There is nothing more desirableabout the servicebeing offered to incoming 9 trips at BMC’s than that offered outgoing trips. 10 11 12 13 There are really three casesdiscernablein allocating costs of truck transportation: lea on its om- allocate cost of eachleg by dividing costs of leg by traffic on that leg only. 14 15 Round trip- add up the costs of line haul and back haul. Divide total by traffic (person- 16 trips or CFM). 17 18 Joint determination- this approachrecognizesthat servicestandardshave a role in 19 determining costs as well as mail volume. A scheduleof trips preventslong delay times, 20 The costs of transportation are partitioned through accountingtechniquesinto a small ’ We shall find that there really are three cases 19 1 number of sectorsbasedon size of vehiclesand approximatelength of haul (e.g., Intra B, 2 Inter B, Inter SCF, Intra SCF). Within such groups where costs can be expectedto be 3 homogeneoustotal costs are divided by total CFM, a measureof transportation demand. 4 It is important to realize that all approachesbut one aggregateCFM and costs and 5 6 make a grand quotient within a control group (either the round trip or the accounting sector). 7 Only the &&g on its own method keepsthe quotient within the leg exclusively. 20 1 IV. ReceivedEconomic Theory Pertinent to Transportation and Its Applicatilon 2 A. Theory 3 There are some salientfacts about transportation which should guide its analysis. 4 1. It is createdin bulk. If somepotential servicesare not used,those are gone for ever. This 5 is why it is efftcient to have a high load factor. This is also why international tanker (ship) 6 rates fluctuate by a factor of 10 to 1 and more. 7 2. It is often scheduledfor servicequality rather than for efficiency. There is a fixed schedule 8 of trips whether passengersor freight eventuates. The scheduleis staggeredso that 9 demandwill be “sufficient.” There is usually one trip per day at a minimum between two 10 cities. Commuter railroads run severaltrains in the middle of the day (nlbeit with fewer 11 cars) so that maximum waiting time will be reduced. 12 3. tried to purchasea one-way airline ticket. 13 14 Entrepreneursprefer to sell units of round trips. This is evident to anyonewho has ever 4. Line haul and back haul arejoint products. This is as near to fixed output proportions as 15 we ever come in economics.The miles from New York to Washington are exactly equal 16 to the miles from Washington to New York. As Marshall (seebelow)tells us that the cost 17 of anything used for severalpurposeshasto be defrayedby its fruits in all of them. In the 18 PS the rules for transportation do not allow mixing mail with other freight. Therefore we 19 cannot haul furniture if not enough mail materializesin order to minimize cost. 20 To elaborateon number 4 above,we might discussthe following. In the production of 21 transportation services,it is very difficult to produce a line haul without producing a back haul to 22 go along with it. Therefore, the contract costs of purchasedtransportation would be-. 21 1 The useful unit of analysisis the line haul and back haul together. They are a .unit becausewe 2 cannot havethe one without the other. This resemblesin essentialways the classicaljoint product 3 of economics:the wool and mutton and the wheat and straw discussedby Alfred Marshall, 4 Princiules of EconomiG (p. 321-323, Eighth Edition, London: Macmillan, 1961). The truck needsto return to its origin to accomplishthe next line haul, Similarly, the car in our carpool example aboveneedsto get back to the bedroom community so that it is availableto take the group to school in the morning. The trip there and back is more t?uitfUy seenas a unit in 8 transportation. 9 Microeconomic theory usually focuseson the pricing problem: What can the enterpriseget 10 for the “by product” which is desiredin addition to the prime product By contrast, our problem I1 is one of cost analysis,but it is always maintainedthat the joint production of-two outputs must be 12 seenas a unit. Prof. Panzar,in referring to “the ‘segments’ or ‘legs’ of a route ..,” saysthat he 13 “[does] not seehow their costs could be analyzedseparatelyfrom those of the route as a whole.” 14 (PanzarFGFSA T-l I-l(b)). 15 That the round trip is a logical unit of analysisin transportation is demonstratedin several 16 ways: 17 . The authority Bowersox, Smykay and Lalonde @IS&L), F!hys&l DistribU 18 m: 19 analysisand logistics. We provide a quotation from this book which discussesthe rational 20 analysisof line-haul cost. 21 22 0 (New York: Macmillan, 1968 rev. ed.) is a practical book on transportation The difficulty, experiencedby many, of purchasingone-way airline tickets is a layman’s introduction to this truth acknowledgedby transportation professional;s.Entrepreneurs 22 1 want to cover their return trips when they undertake a line haul. If you are not convinced, try to take a taxi trip which takes the driver out of his normal area. . The difficulty in renting a car and returning it to a place other than the origin. There is almost always an extra charge for doing so. BS&L in their standardtext on logistics have a chapter on transportation cost analysis. It 5 6 is entitled, “Transportation Costing.” For truck transportation cost what BS&L call line-haul 7 cost? are usually analyzedwith the round trip as a unit. “becausea truck usually goes from an 8 origin to a destination and back, line-haul costs are generatedin both directions.“ Round 9 w is a heading in the following table, 7-2. (p. 169). SeeLAM-l 1, p. 5 of 5. 10 11 12 13 14 15 B. HOW MUCH USE CAN WE MARE OF TRACS DATA VS. TRACS AXALYSIS We would like very much to design a distribution key for TRACS which eliminatesthe 16 inequity of chargingtraffic on light segmentshigh rates. Presentindications are that the data 17 forthcoming from TRACS is not reliable. Is there enough quality control? Eydtibit LAM 4b 18 shows alternate estimatesof cubic feet by two approaches. 19 Exhibit LAM-4b combinestwo Library References,one on Standard(A) and one on Standard(B) 20 mail. The Exhibit is in terms of thousandsof cubic feet. In the Intra BMC movementthesefigures 21 from Lib. Ref H-l 11 and 135indicate the ratio of cubic feet between parcel post and standardA as 9 To be distinguishedfrom terminal and administration cost for example 23 1 4.25 to 1 in favor of standardA. But if we rely on TRACS we find a ratio of CF equal to 1.08 LAM- 2 13. (SeeLib. Ref. FGFSA-H-2). This is quite a discrepancy:one estimateis 3.8,times the other. 3 We are despondentabout TRACS. The ability to estimateCF and CFM is necessaryand the effort 4 is laudable.But what are we to make of a systemwhich makesthesecontradictory findings. 5 See LAM 4b. There are further problems with the TRACS data. The mail code KK signifies bulk 6 small parcels,a category which never existed. Somehow TRACS techniciansfound 225,000 cubic 7 feet in postalquarter 1 of 1996and 739,000cubicfeet in the secondquarter of thi.smail code. Please 8 see LAM 4a for Quarters 1 and 2 There are different patterns to in-bound and out-bound 9 movements.In one observation,standardA was 33.1% of in-bound movementswhereaslooking at 10 out-bound movements where bound equals 2, standard A was 37.2% and this is not the most 11 dramaticof comparisons.In-bound and out-bound movementshavevery different composition. In 12 a situation such as this one we cannot be indifferent as to which type of trips fall in to the random 13 sample becausecertain types of movementsserve some classesmore than others and if those are 14 monitored too much cost will be allocated to these classes. 15 We showed above that charging by the leg and making an “equitable” distribution therein 16 penalizesclassesof mail on lightly-traveled routes just as the driver in the carp001is penalizedfor 17 beingthe only one on the inboundleg. It is more equitable and efficient to chargeevery volume unit 18 (CPM) andthereforeimplicitly “cost out”” the round trip as a unit. With regard to witnessesin this 19 caseNieto clearly statesthat shecostsout purchasedtransportationleg by leg [Tr , l/3434]. Bradley 20 by contrast, clearly saysthat to study the problem leg by leg is improper FGFSAAJSPS Tl3-251. ” By “cost out” we mean“find of the costs of.” 24 I Panzarsaysthe samething. 2 This distributionkey would be more in line with economictheory We could go further with 3 economictheory in the direction of linear or mathematicalprogramming, Such analysiswould lead 4 us to calculate costs at the maximum-load point as Meyer, Kain and Wohl (Cambridge: Harvard 5 UniversityPress,1965)havedonein their classicstudy of urban transportation.” In our application 6 herethis would suggestcalculating costs when the trucks are at their fullest (certainly on outbound 7 trips). This peak-loadapproachlooks at outbound runs only and divides costs asthe proportions of 8 mail classespresenton those trips. This distribution key is shown in Exhibit LOAM-3. 9 Unfortunatelythe TRACS datacollectedarenot reliablebecause( among other things) of the finding 10 DBMC mail on incomingruns: a logical contradiction. Further TRACS data collection problems are 11 shown in LAM 4b. Lib Refs H-l 11 and H-135 are inconsistentin their estimatesof the relation 12 between Parcel Post and StandardA cubic feet. 13 14 15 In the Opinjon andRecommendedDecisions of severalrecent cases,th’ePRC has found that 16 the identity and integrity of the preferential and nonpreferential transportation systemswhich once 17 existed separatelyis now a thing of the past. (R 87-l) 18 We see first class loading in candidateDistribution Key’s of 14%; 1l-17% in the fourth 19 quarterof the baseyearbetween10 and 18% for fust classincludingpriority. Some 10 % of the cubic 20 foot milesare periodicals. The decline of the distinction betweenpreferential and nonpreferentialin “See p, 186 for their decision to chargethe construction cost of rapid transit largely to the traffic at the peak. 25 1 the transportation systembegan when non-red tag mailers in secondclass insi.stedthat the 2 service charge “red tag”‘* mailers for the better servicethey received. Postmaster-generalbolger 3 decree that all secondclasswill be preferential, There was a long tradition that 4 distributed through BMC’s. magazines postal were 5 Thereis more andmore preferentialmail on thesehistorically nonpreferential transportation 6 routes.Thereforedecisionsbeginto be madeconsideringservicequality and the needto meet service 7 standards.New transportation contracts are enteredinto becauseof these considerationsand not 8 exclusivelybecauseof volume, That transportation cost could vary 97% with v’olumeor even 90 or 9 95% seemsmore and more unlikely. 10 TRACS is preoccupiedwith proportions to the exclusion of basic piece data. If one parcel 11 were in a containeror item, all the spacewould be allocatedto Parcel Post. If three parcelswere in 12 the container all the spacewould be allocated to Parcel Post as well. 13 Mr. Hatfield’s analysishas problems. He suggeststreating DBMC differently from Intra 14 BMC. Theseparcelsmove with eachother on the sametruck at the sametime. why should 15 their cost analysisbe different?Many other classesof mail aretransportedfor the convenience 16 of the carrier.To make decisionsas to whether a particular segmentwas part of the net pay 17 load in the directionthat the piecestraveling or whether for the convenienceof carrier would 18 subject 19 one typology as Inter BMC, Intra BMC, DBMC and Intra SCF. In an other typology, he 20 distinguisheslocal, intermediate and long distancetransportation. rate making to much more detail than it presently has.Mr. Hatfield divided cost in I2 Red tag meanssecondclassitems which receivedpreferential servicebecausethey were publishedweekly or more frequently. 26 1 2 The files related to TRACS highway transportation analysisare divided in to the following 3 groups: DESIGN, EDIT and EXPAND. In the Design group, samplesare defined. In the EDIT 4 group, data are scrubbedand mistakesare found and cast off. In the EXPAND group, articles are 5 weightedfor cubicfeet and to convertfrom poundsto cubic feet andthey are expandedto fill the size 6 of hemsand containersandultimatelythe size of the truck. We have concentratetdon analysison the 7 EXPAND group of analysisespeciallyhwy-1 through hwy-12. The results avail:ablein LAM-4b are 8 from an exercisewhich follows the TRACS methodology except for three items: 9 An error in PERCONT 10 11 Expansion to the size of the truck is eliminated 12 13 FACCAT weighting is alternately used and not used. 14 Distribution key can be observedfor cubic foot miles and cost using the Nieto methodology These 15 are available in the intra BMC account for both in-bound, out-bound and the union of the two 16 categorieswhich we call “.” or “dot.“. 17 There is no question that there is a bias in data collection for TRACS: 18 TRACS is not a minimum variance sample. 19 20 TRACS takes 70% of its sampleon inbound movements. 21 22 Why did PW andPS collect in-boundsamplesmore frequently?It was easierto sit at the BMC where 27 1 a lot of shipmentscomein andcollect muchdatawith little travel and in short amount of time. AO’s 2 and DU’s have less dock activity per hour. We haveshownin the in-boundand out-boundanalysisthat parcel post is heavily represented in in-bound trips. This has an easy explanation. PS has a large market sharein the householdto householdandhouseholdto businessparcelpost market PS’s comparativeadvantageis its retail infra 6 structureor setof officesall over the land, well establishedand convenientto households.That mail 7 is presenton in-bound movementsto BMC’s and AO’s. Business to householdpackagesare more 8 likely to be drop shipped at BMC’s.” Such traffic would not arrive on postal purchased 9 transportation.The weighting of FACCAT is meant to counteract this known bias. The only way to 10 be sure there was a random sample of possible trips is to know the NASS schedule. That is 11 consideredproprietary by the PS. I believethat there is a strong likelihood that the sampleremains 12 biasedin favor of a samplingof m-bound unloadings and the mail classeswhich are presenton those 13 inbound runs. 14 I3FGFSA’s packagesdo this largely for quality becauseof the limited shelf life of the product and desirefor freshness. 28 We used data provided in LR’s H-82 (TRACS Highway Sample Design Programs and Documentation) and H-84 TRACS Data Files in Machine Readable Format. We did two types of analysis. We studied the pure data collected by PW and PS. We also did several runs of the SAS program with modifications. We analyzed implicit cost distributions over mail codes on inbound, outbound (using the BOUND Variables). Our distribution were made in CF, cubic foot miles and costs as shown in Exhibits LAM-3 and LAM-9 29 LAM-1 Historical Data on lntra and Inter BMC Purchased Transportation Cost Year 04 85 lntra BMC 144.5 166.1 Inter BMC 134.4 154.6 278.9 320.7 89 90 91 92 93 ~94 95 96 163.7 161.3 185.3 181.6 232.3 240.1 257.4 257.1 188.2 173.7 209.2 214.5 201.4 214.5 223.7 243 351.9 335 394.5 396.1 433.7 462.6 481.1 500.1 Source: National Consolidated Trial Balance 1990-96. 1985 C:\WINDOW...ttyGFS\hist\intra.erpp,wb3 Total LAM-la Growth of Purchased Transportation I lntra BMC plus Inter BMC Highway 500 480 460 l 440 420 400 380 ' 360 1340 89 I _. ‘. ,,” ,I ,I ” 90 91 92 93 Year 94 95 96 LAM-2& Purchased Transportation FY1996 by Quarter Accounts and Attribution (1) (2) (5) (4) lnlra Acct No. Amt (a) (5) Inter Accl No. Amt (a) 1996Ql 53127 53128 53129 53136 44415 7456 1368 4941 58180 53131 53132 53133 40714 1517 2174 199602 53127 53128 53129 53136 45052 10322 1543 6085 63002 53131 53132 53133 46894 3856 2861 55611 1996Q3 53127 53128 53129 53136 44960 6374 1316 5046 57696 53131 53132 53133 51010 1438 2706 1996Q4 53127 53128 53129 53136 61708 6690 1609 7900 78107 53131 53132 53133 74011 1865 2893 70769 Sources: a: USPS T-5,WorkpaperB-14. c: Cal 5 = co14 " COI 3 col9=co18*col7 Worksheet 14.0.1. p.2 Cost Accounts Within PurchasedTransportation Which We Study IntraBMC Exceptional Service Emergency Service Leased Trailers 53127 53128 53 129 53136 InterBMC Exceptional Service Emergency Service 53131 53132 53133 TRACS Replication ACCOUNT=53127 for Outbound Runs BOUND=2 Pa196 Distribution Keys Using USPS Estimates (Weighted) for 7 Mail Types Intraa-BMC Percent MAILCODE CuFt 1St Class 67,605,983 2nd Cl Periw tntemational PRI STD A STD B Otk CFM 11.74 79,581,x25 1 ,w,652 13.62 0.32 3a,Q77,752 183,416,476 6.77 31.66 M,978,922 STDS-P CUR 139.m.m3 11.29 24.20 Percent CFM 3,408,194.649 8.31 cost wJ7,lW !‘ercent Cost 8.12 5,880,015,621 107.759,975 1 77Z521.718 14.34 0.26 4.32 2.m9.m 14,934,072,720 36.34 5,651.659 5.156.461.73a Q.767.979.345 12.57 23.66 2,548,389 29.55 12.87 7.085.654 35.66 23,601 597,wl 10.15 0.12 3.52 PC)296 Distribution Keys Using USPS Estimates (Weighted) for 7 Mail Types kltra-BMC Percent MAILCODE 1 St Class CuFt 109.323376 2nd Cl Per& International PRI STD A 72,164,443 2,122,343 45277,681 14QmJ.4m 16.14 II.98 0.33 7.51 24.74 Percent CFM cost 7,753,681.536 5,114,375,73a 14.76 9.73 3351.566 2,516,920 119,261,967 2,433,266,372 0.23 4.63 53,081 1,123,673 25.75 15.74 5.317.618 2,968,94s 29.16 5,167.644 80,616,7!x 13.36 13,526,516,646 8.268.680.322 144.013,876 23.80 15.320,410,116 STD E Otht STDS-P CFM CuFt 16.33 12.27 0.26 5.48 259r 14.47 2528 Pa393 Distribution Keys Using USPS Estimates (Weighted) for 7 Mail Types Intra-BMC Percent CuFt MAILCODE CuFt tst Class 2nd Ct P&x 107.263.534 78,616,643 14.95 10.98 lntemationat PRI 2,458.722 45,890.m 0.34 6.38 STD A STD B - Otht 234,890,210 61,?92,c67 32.70 11.33 STDS-P 167,276,X6 23.31 PWCent CFM CFM 9.185.761.362 10.68 3.736241 9,51o.t58.221 Q7,150,066 11.26 0.12 3,6a.525 53,221 3,64t ,769,626 J),lM,361.635 4.31 35.67 1.474.924 14.014.9X 6,716,142,3t5 23,170,039,508 10.32 27.44 3.469.6a4 9352,237 PWX Distribution Keys Using USPS Estimates (Weighted) for 7 Mail Types I”tra-BMC ACCOUNT=53127 SOUND=2 COSt 10.45 to.17 0.15 4.12 39.19 9.76 26.15 LAM-3 (rev 21 Jan 1998) Percent MAILCODE CuFt 1 St class 2nd Cl Perk 127,270,796 98.899.168 1.5X.147 International PRI 60,44&324 CuFt 17.90 13.91 Percent cost 14.15 4.263,058 4.211.322 106,262 Cdst 13,lQ r3.m 0.27 211,960,837 4,43414w43 23.791,036,768 6.22 33.36 1,674,7cu 9927,636 5.80 33.72 7,664,558,736 15.738,094,576 11.03 4,M)5,167 22.08 7929,794 12.33 24.54 STD A 169850,276 STD 6 Othf STDS-P ~,~.~ 1645x,m7 9.57 2316 SAS run y96all 10,087,503,793 9.141.881,525 CFM 12.63 0.33 8.50 26.68 Source: Percent CFM with data from L.R. H-84, Nov. 17. 1997. 0.33 LAM-4a Page WI96 of 6 I Bound = CF, CFM and Cost for Inbound, Outbound Movements and Union, percent LINE Mail Category CuFt CuFt CFM 3.192.077217 1 First Class Letters 44,954,516 5.73 2 First Class Presort 3 Single-PC Cards ~,~,~ 24‘wl 57.933 3.25 0.03 0.01 1,321.345,999 6 Priority m,711,074 36.877,313 9.M 4.70 4,526,166,536 2,475,685.3?5 7 Express 6 Pwiodicats 845.758 84.121.040 0.11 10.73 Q.334.149 1.19 49.013,LEE 189,860,723 6.25 21.67 226.207.966 29.11 14 NonPref Other 3.om,Jss 17,588,743 0.39 2.22 15 Total Std A 16 Small Parcels 248.641 .x4 225,193 31.71 0.03 17 Parcel post 16 Sound Printed Matte 2ZWX.427 28.52 4 Prest Postcards 5 Total First Class 9 Std A Single Piece IO Std A ECR 11 Std A Other 12 TotalRegStdA 13 NonPref ECR 19 Std B Special 56.151.666 42.358,527 7.16 5.4) 20 Std S Library 21 Penat?yuSPS 10,326,617 2,674,684 1.52 22 Free for Blind 23 International b68.955 6,62&O, 1 784.020.631 24 Total All Mail PQ193 Distribution Keys Usir UNLOADED Intra-BMC ACCOUNT=S3127 Mail 0.34 0.08 0.87 1m.m Various Mail Classes Percent 9,m,1m 2,642.921 CFM Percent cost 4.fis 1.502.868 1 .EQ 587,561 O.Dl cost 4.49 1.76 0.01 0.m 4,454 1,lTI 6.W 2.096.m 6.27 3.81 1,016,116 16,424 3.04 0.E 2.5EBw4 463.719 7.77 1.38 22.a 2,921 .wB 6,829,481 8.73 LX.42 220,634,661 3x6 0.32 10,214.243 61,758 1,794,3J7,223 23.161.833,629 2.62 33i9 681.198 6.495.409.462 32.745528 0.E 9.47 1,x6.278.299 4,771,943,5ca 1 .A17 6.M 15.388.469.739 21.166.881.546 13,68L,‘m 21 .P3,289,312 4,518,846,e4!3 4,367.076,708 1.002,374.601 0.02 30.75 6.S 6.37 1.416 264@%962 0.42 ‘an&= EEw89,631 O.C6 0.61 68.533.794.146 im.ca 10.977205 5Ke 11.472,201 2,484,ffil 1 ,m7,8m 0.m 3x4 0.24 2.04 32.82 0.02 34.33 7.43 5.39 541.395 Ill.679 1.62 0.33 56,112 0.17 0.61 288.= 334‘l6,283 1m.m (Weighted) SOUND=, LINE percent CuFt CuFt 1 First Class Letters 12.613,626 4.21 2 First Class Presort 3 Single-PC Cards 1,627,lu2 53.882 0.54 0.02 15,671 0.01 14.510.291 11.933,346 4.77 3.52 4 Prest Postcards 5 Total First Class 6 Priority 14).906 0.05 6 Periodicals Q Std A Single Piece IO Std AECR 7 Express lQ.176.340 5,768,829 10,417.531 6.31 1.90 3.43 11 Std A Other 12 TotalRegStdA 13 NonPref ECR 71,481,161 87.678.541 338,171 2351 28.84 0.11 14 NonPref Other 15 Total Std A 17 Parcel Post 16 Sound Printed Matte ‘5,EV=58 9+6-6S.271 2.26 31.21 101 .Z3,527 20.368.801 53.34 6.rn CFM 1,477&?3.344 129,172.485 percent CFM cost percent cost 4.dB 0.:&J 663,789 47,679 4.20 0.33 2,126 0.01 5.266.OlQ 1.145.611 0.m 1,612.607.668 4.50 714,119 4.52 1,142,375,085 w‘m.580 3.47 O.CQ 488.765 3,624 3.10 0.02 1.253,w7.566 686,297,7aJ 3.M 2.11 834,787 334.625 5.29 2.12 I ,453.806,270 7,mo,018,3s 9.160.122.308 4.41 21 .:I4 27.67 1,738.231 3.510.5m 5.533621 11.01 22.24 35.37 57939,726 0.17 24.831 0.16 6X,476,721 9.93l.188,757 12.6a2.773499 2.11 3316 58.4, 252.663 5.861.315 4.523651 1.60 37.13 31.22 4.fiz 7m4J9 1,521,211 .SS 0.m 525 0.m 4.88 LAM-4a Pagf?)_of 6 7 Express 6 Periodicals zn.174 M.827.561 9 Std A Single Piece 10 StdA ECR 11 Std A Other 12 Total Reg Std A 13 NonPref ECR 14 NonPre, Other 15 Total Std A 16 Small Parcels 17 Parcel post 16 Bound Printed Matte 19 Std B Special 20 Std B Library 21 Penalty-USPS 22 Free for Blind 23 International 24 Total All Mail 147.209.641 0.12 24,585,414,620 1.715.289.689 20.53 1.44 3.12 M.23 24.79 57.T74 9,7j 1,461 0.12 20.54 1.43 3,233,475 s,544,743 0.96 2.58 66954,175 78,829.393 19.95 3.725.515,143 24.162.975.476 2349 0.63 2Q.603.78D.314 627.5s1.m 5.08 29.20 6.672046,171 36,935,417,517 86.SlS.656 0.04 2587 71 .W3.970 28.880.348.631 11.826.607 14,77K,B33 3.52 4.40 3.628.093.210 24.18 3.194 1.M 5.19 1.136 z465835 3354,570 3.420.853 521,512 6.194984.150 1,266,348,510 1.02 0.16 1,156,567.115 223,807,520 0.!37 0.19 0.57 1 .J42.813.838 119,429,585,825 0.837 lCO.lr) 463.664 67,939 410,4x 0.19 0.87 47,26?,629 1m.m 2.119.143 17,D447Ell 97,923.31 I 146,242 1 ,sw= 335.612,762 PWQS Distribution Keys Usir UNLOADED Intra-BMC ACCOUNT=63127 0.09 19.32 Mail imm 0.53 5.13 3o:w O!X 675.246 1 ,$&I.426 9.503.071 3.10 M.10 11.642.743 244519 24.62 0.52 2.641 .m9 14.52Qi51 5.33 3072 28.256 11.378.750 0.06 24.05 1,421,319 3.01 5.21 495,330 1.W 0.98 (Weighted) BOUND=. Percent Percent percent 1 First Class Letters 75.Bn.597 9.53 6.674.018.57t 8154 2,683,681 6.35 2 First Class Presort 3 Single-PC Cards 31,688,725 247.078 4.01 0.03 2,772,098,24l 22.664,926 3!39 003 1.216.862 3.78 0.W 5,cK2.764 112,791.164 0.64 14.X 343.36l.ffi7 9.612.142,805 044 12.‘70 58.567334 7.40 0.27 5.942.772.876 7.99 0.W 4 Prest Postcards 5 Total First Class 6 Priority 7 Express 6 Periodicals 2.1m.te3 nP4m 15,6%,B56 9.77 62,858.m 6,211,774,4tX 1.96 1,191,882,451 10 Std A ECR 11 Std A Other 33321.362 132,923,463 4.21 16.60 3.340,428,772 11,816,521,573 152Q 12 TotalRegStdA 13 NonPref ECR lB1.883.679 2x9 0.41 16.346,832,785 587.574.914 2.83 2623 2,155.186,736 1B,942.584,446 9 Std A Single Piece 14 NonPref Other 3,23x53 22,37a,BQ2 15 Total Std A 16 Small Parcels 207.482.827 733.461 17 Parcel Post 22X344.175 42.554.332 28.10 5.33 23.806.063.318 3.75z685.135 44406.081 5.61 I .61 6.292.4XWZ3 1 s32.8a.345 107,431.m 18 Bound Printed Mstte 19 Std B Special 20 Std B Library 21 Penaiiy-USPS 22 Free for Blind 23 International 24 Total All Mail 0.09 12,754,207 l,leJ.Ea 4.145434 0.15 0.52 4,784.332 791.t58.519 0.60 ,m.m PO29i Distribution Keys Us0 UNLOADED Mail (Weighted) 24,524,m 529.321 .m ZQ.615.643 77.261.085.585 8.134 154 4.:32 8.958 157,763 4.067.275 2.315.839 ‘-,= 2,997.513 501.680 0.49 12.65 7.2u 0.15 9.32 1.56 5.53 21.16 0.51 1 .m.m 4.968.833 7.243.290 171.785 22.w 0.53 2.134 24!51 948.425 8.370,500 2.95 26.03 0.133 3x0 1,932 9.525137 0.01 4% 8.14 I .!% 0.14 1 .wQsm 2,167,651 618.328 52,746 O.‘E6 0.34 216,880 116.677 103!33 3zl51.665 15.46 29.63 5.13 6.74 1.92 0.16 0.67 0.37 lcmm LAM-4a Pa& of 6 19 Std S Special 20 Std B Library 25.704997 6,537,183 21 Penalty-USPS 22 Free for Blind 1.348.461 6x.71 e 23 International 24 Total All Mail 5.453.925 =-vJ‘Ei~ PC1196 Distribution Keys Vsir UNLOADED Intra-BMC ACCOUNT=53127 Mail 8.45 2.61 3,175,741,947 859,987,433 9.64 2.55 0.44 0.20 262.632.067 40.606,4?6 474,D45,261 32,938,116,276 0~60 0.12 95,261 57,058 0.60 0.36 1 .?I4 1M.M 251,261 15,7B7.672 1.58 103.03 I.79 1iX.M) 1,304,QQ7 476,373 6.27 3.02 (Weighted) BOUND=2 Percent LINE CuFt 1 First Class Letters 2 First Class Presort 3 Single-PC Cards 4 Prest Postcards 5 Total First Class 6 Priortty 7 Express 6 Pertcdicals 9 Btd A Single Piece 10 Std AECR 13 NonPref ECR 14 NmPref Other 15 Total Std A 16 Small Parcels 17 Parcel post 18 Bound Prtnted Matte 19 Std B Special 20 Std 6 Librav 21 Penany-USPS Percent CFM CFM 3Zl43,890 23.826.841 6.70 4.95 1 .?I 5.m5.674 1 .lQ2.4~.504 4.61 3.34 19om9 42,263 0.04 0.01 4,634.151 13Q7,tto 0.01 5ww~ 24,943,965 11.71 2.913,558,639 O.CKl 6.17 1 ,G%33,310.290 3.74 m‘w2 64,944xX) 3.564.320 J8,=.5Q Qtvxa.542 11 Std A Other 12 TotalRegStdA 5.20 O.f5 13.53 0.74 6.M 2i.a 24.434943 5.231.801.897 0.07 14.67 3c8.980.589 3,316.137.p8 0.87 9.3’1 6.558.451 ,a 2344 33.6’1 0.45 14x29,425 2,725.164 29.2s 0.57 11 ,ms,589,237 10.501.165 2.19 1.09B,m.m 13.247,64+672 lS3.755.794 225,193 3x0 0.E 122.216.9JJ 25.46 7.45 35761.867 16.653,629 3.47 I.325400 0.37 0.26 m233 0.01 1 .Jw‘w 22 Free for Blind 23 International 24 Total All Mail CuFt 1,3M.m6 479974,643 PQ196 Distribution Keys Usir UNLOADED Inter-BMC 0.29 1m.m Mail 165,045133 13,680.a 6.433.485.813 2,SS7,63S,SQ3 1,191.534,761 162.387.168 ~.~.~ 3,12l,S46 B‘w‘MJm 35,658.6E.B88 3.06 37.15 O.Db 23.85 6.41 3.34 0.45 0.06 0.01 0.24 ID300 Percent cost cost @am 4.75 539,871 2,JLB 3.06 0.01 652 0.m 1.31.931 527,351 7.83 2.99 12.800 0.07 1,764,c97 126,sQ4 9.99 0.73 l,lB2,817 3,316.916 6.70 16.79 4,mo,6.?7 26.22 0.32 E6Qza 428,335 5,115,6Sn 5,6a9 6,542.550 1.714,212 2.43 26.97 0.m 37.m 9.71 482.808 2.79 w-m 16,616 0.37 0.09 w52 16,674 17.558,612 0.01 0.11 100.03 (Weighted) ACCOUNT=53131 Percent LlNE 1 First Class Letters 2 First Class Presort 3 Single-PC Cards 4 Prest Postcards 5 Total First Class 6 Priority CuFt 27,D47,645 6,62Q,36Q 191,SfO 10,567 34079.500 15,661 .BJl CuFt Percent CFM CFM Percent cost cost 6.06 9.CO1.176.913 7% 3.570.273 7.55 2.03 0.06 2,148.7Q2.c63 63,112,4x 1 .m OS5 886.327 29,411 1.07 0.06 0.W.l 10.15 4.67 3,671,099 11.216.752,YX 4,101.m ,588 O.cO Q.:S 3.,43 1,451 4,467,462 1,752,463 0.00 9.49 3.71 LAM-4a Page Y of 6 PQ296 Distribution Keys Usit UNLOADED Mail (Weighted) Ifltra-BMC ACCOUNT=53127 BOUND=1 Percent LINE CuFt CuFt 1 First Class Letters 21.418.825 7.07 2 First Class Presoll 4.044913 119.7K6 1.34 0.04 3 Single-PC Cards 4 Prest Postcards 5 Total First Class 8 Priority 7 Express 6 Periodicals 9 6td A Single Piece 10 Std A ECR 11 Std A Other 12 Total Reg Std A 13 NonPref ECR 14 NonPref Other 15 Total Std A 17 Parcel Post 16 Bound Printed Matte 19 6td B Special 20 6td B Library 21 Penalty-USPS 22 Free for Blind 23 tntemational 24 Total All Mail 1,139 0.W Peront CFM 2.346385701 580.586.494 9,402,673 117.706 268,412 613,208 I.83 4.19 73.431.5m 20.4 24.25 5.893,058.643 7.011.782.526 337,576 14.371,915 0.13 4.75 m.m1 ..I62 29.12 PO296 Distribution Keys Usir UNLOADED Mail IW.W 7.33 9.07 I.33 1 .A4 847,334,557 471,%9,327 332.848366 l,se906 1.329.1Q2 0.04 8.08 1.48 0.29 0.96 0.m 0.M 5,171 890,470 2.35 868.985 2.974,900 3,754 49 5.a 4.527,463 61 ,T76,568 3.32 0.20 1.61 0.(x3 o.ai 1,723,457,313 7,127,539 10,060,132 612,462 5.67 235,166 Q.Ul O.D3 6.16 6.28 830,915 11.6’1 0.M 105,574 16.658.~2 16,972808 7.18 1.76 Percent cost Z,Q35502.573 8.45 7.61 33.14 4.23 cost 3,788,074.767 12.320,338 25584,562 23.845.816 im,352,6m 12,800,5a CFM 18,43V4il lB.C6 21.4) O.CC 1 .I 20,276,806 6,150,‘%3,171 3.4s 24.98 10.316,676.617 31.62 3.86 1,26&521,lW 2.898,124.636 1,193,873.134 64580.434 111,277.f&O 1w.421.m 32.62E.lZ3.685 2,637,209 18.22 3,518.e.m 7,159 24.02 0.35 437,529 3.40 27.45 4,023958 4.870.897 3325 6.81) 637.097 1 ,lQ8,336 4.35 6.16 3.60 0.20 466,271 32.745 3.16 0.22 0.34 0.423 54,452 0.37 0.50 im.al TJ.cQo 14,651,236 1m.m Weighted) Intra-BMC ACCOUNT=63127 BOUND=2 Percent Percent LINE 1 First Class Letters 2 First Class Presort 3 Single-PC Cards 4 Prest Postcards 5 Tota First Class 6 Priority 7 Express 8 Periodicals 9 Std A Single Piece 10 Std A ECR 11 Std A Other 12 TotalRegStdA 13 NonPref ECR 14 NonPref Other CuFt 54583.m CuFt 11.14 27.843.612 127,372 5.65 0.03 5,c61,525 87,2C6,582 i.m 17.86 54,921,716 7.15 1.944.819 5ww= 8,511,315 0.41 12.01 1.74 mm.899 71,146,6% 5.w 14.57 1c6.452,110 2.632.676 22.21 03 6,OX97S 1.64 CFM CFM cost cost 4,327,632,6m 2,191.501,746 9.69 4.91 1 B52.776 981,675 10.59 5.61 13.262.252 343.243.361 0.m 5.204 157,714 0.m 15.411 4.83 2.X17.588 968648 17.13 50,558,367 0.11 ‘we3 4,468,317.085 5‘ww@J‘l 2.889.039.445 lO.Qi 1.22 6.43 2,107,043 233.267 1.164.571 0.25 12.04 1.33 5.Q2346z731 9,537,050,270 13.27 20.91 2.332.821 3.750.458 6.65 13.33 21.32 379,141,075 1.075903.930 0.85 2.41 164,566 451,896 2.58 6.675.843.230 2.154.898.111 0.77 0.92 5.64 0.94 LAM-4a Page$f 6 15 Total Std A 16 Small Parcels 119.291,785 738,461 24.43 0.15 10.792.101.274 24.17 4.346Q41 24.84 24,524,7U3 0.05 17 Parcel Post 16 Bound Printed Matte 121.981.505 24.98 1,012,805 5.79 19 Std B Special 6.09 5.21 30.21 5.57 0.01 26.60 2am.m 25.432,273 13,4@9,330,m1 2.486.173.978 I.532 4,664,240 20 Std B Library 21 Penaily-USPS 2.894.075 64.196 0.55 3,394,335,787 332.987.211 7.m 0.75 Q-39.295 152.051 5.54 0.67 0.11 0.67 43051,099 418.c4L.470 0.10 0.94 20,Wl 182.428 0.11 0.93 6588 I7.500.429 0.26 1W.M 22 Free for Blind 23 international 3275468 1.809.432 24 Total All Mail 488,311,154 0.37 1M.W PQ2S6 Distribution Keys Usir UNLOADED Inter-BMC Mail im,793,853 44852,961 .BBl 0.23 1m.m (Weighted) ACCOUNT=53131 Percent LINE CuFt 1 First Class Letters 2 First Class Presort 3 Single-PC Cards 4 Prest Pcstcards CuFt 29.112,363 6.128.209 lC0.444 5.615 5 Total First Class 6 Priortty 35344.831 7 Express 33.589 68.277.77I 8 Periodicals 9 Std A Single Piece 3.050.772 Percent CFM 9.58 202 8.524.907.524 1.626.403.067 0.m 0.W II.63 i.m 0.01 ~,~.~ 1,172.677 10,183,?86.334 2247 26,072,946.343 1 .MB,~,~ 5,711,747 3,903,480,925 CFM cost 7.10 3,427.915 1.35 0.m 856.482 12.4x) 0.03 6.48 4.097.289 0.M 404,998 0.53 21 .i2 2,296 10,541,486 1DJ.889 1,x9.421 7.11 1.38 0.m 0.M 8.50 0.84 0.00 21 .ffi I.83 2.37 2.706,668.128 61342.067 20.19 26.626.057.316 22.18 10,715,016 2.26 2222 74.098.456 1,722.719 24.58 0.57 32,436,216,3iiS 654,066,B91 27.02 056 13K6.336 27.04 13 NonPref ECR 14 NonPref Other 15 Total Std A 15,szo,011 91,580.188 5.12 34307 6.146.244.238 224,cQn 0.07 2337 38,246.527,488 108.624.489 ZS.350.466.163 5.12 32.28 3.52 4,484,568.523 3.74 5.09 1.17 6.994.354.589 5.a 1 .:o 2.789849 0.16 0.33 85.675 158,434 1.11 524,361 10 Std AECR 11 Std A Other 12 Total Reg Std A 16 Small Parcels 17 Parcel Post 16 Bound Printed Matte 19 Std B Special 20 Std B Library 5.564.583 7.191.8C8 71.022.643 10,685,im 15.489.cu3 21 Pen&y-USPS 3.558.543 l.m8,142 22 Free for Blind 23 lntemational 527.748 3.c61.342 24 Total All Mail 3mm.B‘% PQ396 Disttibution Keys Usir UNLOADED Mail 0.41 0.17 r.m mm 1.6‘w=,438 219.205.531 396.526.521 1.332.2Ct2.089 120,w,568,580 2.EQ 2.25 471 Percen cost O.C8 2362 rcoca 2.55 263.685 2,508.133 0.55 5.x) 15,808,153 3279 0.09 44089 II.293922 1,796,712 663.244 48.212,431 2343 3.73 5.79 1.36 0.18 0.33 1.09 imm (Weighted) Intra-BMC ACCOUNT=53127 LINE BOUND=. CuFt Percent CuFt CFM CFM cost Percen cost LAM-4a Page 6 of 6 1 First Class Letters 2 First Class Presort 62.266.sBl 4w41,m 9.14 5.34 809.858 2Ew33 131 ,X3,612 6 Prtortty 7 Express 6 Periodicals 8.43 3,396,567 0.09 6,926532,219 3.891.105.157 B4.117.432 3.66 0.03 0.03 14.60 17,258,166 12.921.062.995 0.02 12.1’6 1,668.668 3%85 2,916 45532,364 B91.565 5.07 0.10 4,149,m,46a 67,694,576 3.91 96.633,971 16,898,391 10.74 1.88 11,452,600,410 33,016,m8 4.23 iB6.C9‘$148 243,m,576 x).93 27.01 4,995,~,988 24,162.677,233 13 NonPref ECR 2,623,664 14 NonPref Other 15 Total Std A 30.890.553 276,722,X6 0.31 3.43 16 Small Parcels 587,106 PI .535,a36 3 Single-PC Cards 4 Prest Postcards 5 Total First Class 9 Std A Single Piece 10 Std A ECR 11 Std A Olher 12 Total Reg Std A 17 Parcel Post 16 Bound Printed Matte 19 Std B Special 20 Std B Librav 21 Penalty-USPS 22 Free for Blind 23 lntemationat 24 Total All Mail 5VZB.761 45917,265 1o,e&,?a6 3,146,529 KQ.283 5.137,62.6 899,772,545 PC!386 Distribution Key% Usir UNLOADED Intra-BMC ACCOUNT=%127 Mail 2,D42.56&480 31,Ml ,X4.71 6 429711,674 33.75 0.07 3.243,885,367 34.674,681,777 75.D47.1m 25.73 28,7tO,403,Bi5 5.62 5.10 0.03 10.713 1 .a2 4.70 22.74 29.3’7 0.40 3.m 32.62 0.0’7 270.2 4.37 7.m 1.21 4.643,988,866 7.4BB.B33.423 Seeffi7.189 0.P3 0.35 0.09 4m.624.097 W,55o,lS5 0.33 0.05 0.57 410,034,146 0.33 103.03 ic6,250,3si ,149 im.al 7.79 3.83 0.08 5106,033 0.01 11.72 1.347,aw 45,310 3.76 0.10 4.113.671 9.44 1.99 86s.m zo88.754 10,977,si 13.831.413 191,241 1.322,MB 15,44$7Dt 30.706 12,m,D6z 1.932.868 2.475.771 4.79 25.19 31.97 0.44 3.03 35.44 0.07 27.58 4.44 5.68 0.97 421,581 187.998 0.43 a.464 127.016 0.05 0.29 43.579.203 im.m cO.St P-XCW COSI (Weighted) BOUND=1 LINE 1 First Class Letters 2 First Class Presort 3 Single-PC Cards 4 Prest Postcards 5 Total First Class 6 Priority 7 E&mss B Pertcdicals 9 Std A Single Piece 10 Std A ECR 11 Std A Other 12 Total Reg Std A 13 NonPref ECR 14 NonPref Other 15 Total Std A 16 Small Parcels 17 Parcel post 16 Bound Printed Matte CuFt Percent CuFt 31.609.961 14,312,7Dt 10.37 262,788 O.oB 0.B zJ5,J99 46.410,649 9,942.m 51 ,911 3zo15,115 6.464.928 5.3w588 58,448,= 71 ,m,572 615.938 12,033,765 8ww‘?s 558,958 62,729.012 11.242.427 4.m Percent CFM CFM 3,ams44,5J7 1,457,342,405 40,444511 11.2f~ 1.516.479 10.46 4.10 0.12 576.270 3.98 0.11 O.Lkl 16,472 1,917 15.22 3.26 5,413,567,432 1.316.253.185 15.65 3.79 2.111,158 533.561 0.02 3,979,cm 2,162 IO.50 2.12 4.D26.B3wm 4g3322.243 0.01 11.56 1.74 r9.w i53.D47,105 7.126.1c6.280 2336 0.20 6.372.474,623 78356,742 3.94 27.50 1 .I 77225.321 9,626,055,881 66,398,057 0.16 27.14 3.83 15.236.m 6,133.6!33.464 897,016,214 I.42 2.16 20.46 24.W 0.23 3.33 27.W 0.10 2343 2.68 1.456,901 249,667 285.775 3,2x,975 3,756.616 38,752 43.996 4.255385 26.613 4.086.676 32x33 0.01 14.57 3.72 0.02 10.05 1 .n 1.97 22.22 25.92 0.27 3.17 2936 0.19 28.20 2.53 LAM-4b (rev. 21 Jan. 1998) Estimates of Parcel Post and Standard Sources Parcel Post Panel A Mail Category A CF From Non-TRACS lntra BMC Cubic Feet (000) Parcel Post 22,497 a DBMC 70,468 b 92,965 Inter BMC Parcel Post 42,556 c Source: Lib. Ref. H-135, Standard Mail (B) Parcel Post Volume and Cubic Feet Data Distribution by Weight and Zone and BMUASF - GFY 1996, Attachment I. a. p. 32 b. p. 44 c. p. 38 Panel I3 Standard(A) Standard (A) Cubic Feet (000) Inter BMC lntra BMC 136,980 395,737 Source: Lib Ref. H-11 1 Dropship Savings in Periodicals and Standard Mail Appendix A, Table 4 and conversion factor .056583 = 1117,673 from TRAC!; program “hwy 1”. p. 171, Lib. Ref. H- 82. Panel C Summary Figures lntra BMC 92,965 b 395,737 d Inter BMC Parcel Post Standard(A) Sources: C:\myfiles\contrl 42,600 136,980 a Panel A. b Panel A .estwb3 a c c Panel B d PanelB LAM.6 p.Iof2 Standard (A) Standard (8) impact of Drop Shipping on Workload In lntm-BMC and Inter BMC Purchased Transportation 1996 1991 33056.2 41914.1 mail not ds beynd BMC e/ 4546.5 5214.6 lb St (A) 0.872 2442.6 6989.1 1.242 0.973 1966.6 7101.4 w. DBMC correction Standard A Mail 1996 1991 Dest. SCF Entry DDU Er&y Standard A 20.26 5.87 Standard 6619 SCF DE 1821 DDU DE 8440 59.3 26.13 59331.2 50354.1 Tot St. A Reg Total BR Regular -145 8440 Single Piece Dsd SCF or Dest DDI 41914.1 Dst SCF or Dest D -26130 not ds beynd BMC DDU 33056.2 41914.1 mail not ds beynd BMC el 0.7607 ratio -21.1% change in workload Notes: measured by pieces a. Bttg determinants IQ91 b. SCF DE = SCF Destination Enby c. Bitting determinank 1996 d. ds = drop-shipped e. “ds beyond BMC” means to SCF , A0 or DU. LAM4 P.ZOf2 Standard B Mail 1991 Mail 1 2 3 4 5 Pieces PP BPM Spatial Library Total 1996 Weight 129.9 363.2 144.9 40 670 Pieces 660.2 917.4 285.5 116.9 1980.0 ratio of workload 6 7 8 9 IO lbslpc PP DBMC PP (mills) lbs saved millions half of DBMC savings Standard (B) after DBMC adj Weight 212.8 516.1 189.8 30.1 948.8 1094.9 1231.3 319.4 51 2696.6 bef DBMC adjust 1.3619 5.1447 5.12 26.3 13.2 1966.8 5.2608 Q6.41 508.0 254.0 2442.6 0.9732 1.242 dropshii.incr.pmh2.w DBMC PP avoids inter BMC transp but it does not avoid intraBMC transp LAM-7 PricelndexofTruckTransportationExceptLocal Jun Jut Aw Sep OCI Nov Dee Annual Jan Feb Mar APr May Jun Jul Aw Sep OCt NOV Dee Annual Jan Feb Mar APr May Jun Jul Aw Sep OCt Nov Dee Annual Jan Feb Mar APr MW Jun Jul Aug Sw OCI NOV Dee Annual Jan Feb Mar 1992 1992 1992 1992 1992 1992 1992 1992 1993 1993 1993 1993 1993 1993 1993 1993 1993 1993 19Q3 1993 1993 1994 1994 1994 1994 1994 1994 1994 1994 1994 1994 1994 1994 1994 1995 1995 1995 1995 1995 1995 1995 1995 1995 1995 1995 1995 1995 1996 1996 1996 (a) 100.0 99.8 99.7 99.5 99.5 99.4 99.4 100.7 100.5 100.6 100.6 100.3 100.8 100.1 100.8 100.8 100.8 101.1 101.1 100.7 101.5 102.1 102.3 102.4 102.6 103.0 103.2 103.4 103.5 103.8 103.8 104.2 103.0 104.4 105.0 105.1 105.0 105.1 105.4 104.7 105.4 105.3 105.6 105.5 105.0 105.1 106.0 108.7 106.8 APr May Jun Jul Aug Sw OCt Nov Dee Annual Jan Feb Mar APr May Jun Jul Aw Sep OCI Now 1996 1996 1996 1996 1996 1996 1996 1996 1996 1998 1997 1997 1997 1997 1997 1997 1997 1997 lQ97 1997 IQ97 106.6 107.0 108.6 107.4 107.7 107.9 108.7 108.7 108.7 107.6 109.9 110.3 110.1 110.4 110.5 110.5 110.8 111.2 111.1 111.3 111.0 US Bureau ofLaborStatistics,tabstatlntemetsite,sertes PCU4213W LAM-8 Estimation month'f ‘r. Index Jun 1992 100.0 JUI 1992 99.8 1992 99.7 Aug 1992 99.5 sep OCt 1992 99.5 NO-/ 1992 99.4 Dee 1992 99.4 Jan 1993 100.7 Feb 1993 100.5 Mar 1993 100.6 1993 100.6 APr 1993 100.3 May Jun 1993 100.8 Jul 1993 100.1 1993 100.8 Aw 1993 100.8 Sep OCt 1993 100.8 Nov 1993 101.1 1993 101.1 Dee Jan 1994 101.5 Feb 1994 102.1 1994 102.3 Mar 1994 102.4 APr 1994 102.6 May 1994 103.0 Jun 1994 103.2 Jul 1994 103.4 Aug 1994 103.5 Sep act 1994 103.8 1994 103.8 Nov 1994 104.2 Dee 1995 104.4 Jan 1995 105.0 Feb 1995 105.1 Mar 1995 105.0 APr 1995 105.1 May 1995 105.4 JUfl JUI 1995 104.7 1995 105.4 Aug 1995 105.3 Sep OCt 1995 105.6 1995 105.5 Nov 1995 105.0 Dee 1996 106.0 Jan 1996 106.7 Feb 1996 106.8 Mar 1996 106.8 APr 1996 107.0 May 1996 108.6 Jun 1996 107.4 Jul of Annual nat. log. 4.60517 4.603168 4.602166 4.600156 4.800158 4.599152 4.599152 4.612146 4.610156 4.611152 4.611152 4.608166 4.613138 4.60617 4.613138 4.613138 4.613138 4.61611 4.61611 4.620059 4.625953 4.62791 4.628887 4.630838 4.634729 4.636669 4.638605 4.639572 4.642466 4.642466 4.646312 4.64823 4.65396 4.654912 4.65396 4.654912 4.657763 4.651099 4.657763 4.656813 4.659658 4.658711 4.65396 4.663439 4.670021 4.670958 4.670958 4.672829 4.687671 4.67656 Rate of Growth of Trucking Price index t 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Regression Output: Constant Std EnofY Est RSquared No. of Observations DegreesofFreedom 4.588696 0.005332 0.978215 66 64 X Coefficient(s) 0.001847 Std Err of Coef. 3.4E-05 tvalue monthly growth fact 53.60731 1.022389 moly rog rate ofgrowth 0.022389 2.238904 % peryea Aw Sw OCt Nov Dee Jan Feb Mar APr May Jun Jul Aug Sep OCt Nov 1996 1996 1996 1996 1996 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997 107.7 107.9 108.7 108.7 108.7 109.9 110.3 110.1 110.4 110.5 110.5 110.8 111.2 111.1 111.3 111.0 4.67935 4.681205 4.688592 4.688592 4.688592 4.699571 4.703204 4.701389 4.70411 4.705016 4.705016 4.707727 4.71133 4.710431 4.712229 4.70953 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 65 Totals for Account Mailcodes BOUND 1 53127, MAILCODE PIECES Percent A B c D E F H I J K L M N 0 P Q R s T " v w Y AA DD EE GG IiH II LL 7,619 1,6:16 15.16 3.21 0.61 459.91 69.60 0.91 0.07 0.42 0.45 1.51 0.33 342.28 305 33 213 49 175 62 1,766 629 1,382 29,112 527 5,140 445 243 375 57 102 09 11 252 12 1.0 8 1 1 7 ------50,270 Prqared FOJ LAMA 1 28 0.10 0.35 0.12 3.51 1.25 2.75 57.91 1.05 10.22 0.89 0.48 0.75 0.11 0.20 0.18 0.02 0.50 0.02 0.02 0.02 0.00 0.00 WT 15.94 627.32 83.19 162.97 percent 5.10 0.77 0.01 0.01 0.02 0.00 3.73 0.18 6.35 0.92 1.81 C"FT 32.98 4.33 0.07 0.03 0.11 0.02 ::7.07 2.25 35.76 6.90 9.22 0.06 w===E== 2.875.73 34.63 387.08 2,223.56 518.13 623.56 212.94 7.53 55.06 0.88 114.75 80.56 1.13 0.64 1.31 0.06 1.27 0.31 116.31 ========== 1.29 ------- 0.02 16.58 =====-==== 100.00 9,019.91 100.00 775.31 0.01 0.00 by Al Rosenthal iWX5) Consuliing 31.88 0.38 4.29 74 65 5.74 6.91 2.36 0.08 0.61 0.01 1.27 0.89 0.01 0.01 0.01 0.00 0.01 0.00 162.72 2.12 23.65 31~6.93 14.79 5,8.90 15.80 0.53 5.36 0.07 7.06 11.02 0.13 0.06 0.08 0.01 0.09 percent 4.25 0.64 0.01 0.00 0.01 0.00 3.49 0.29 4.61 0.89 1.19 20.99 0.27 3.05 40.88 4.43 7.60 2.04 0.07 0.69 0.01 0.91 1.42 0.02 0.01 0.01 0.00 0.01 0.00 2.14 ------100.00 RE%ED, Orioher 11. 1997 Page 2 Totals Account for Mailcodes 53127, BOUND 2 MAILCODE PIECES A B c D E F H I J K L M N 0 P. Q R s T " v Y AA BB DD EE FF HH II JJ KK 3,483 6,123 LL MM NN 1 5 175 41 166 44 1,335 309 3,864 16,010 403 3,170 190 174 104 25 20 2 1 6 5 4 2 1 1 8 3 2 ------- 1 117 20 2 36,477 Percent 3.55 16.79 0.00 0.01 0.48 0.11 0.46 0.12 5.47 0.85 10.59 43.89 1.10 8.63 0.52 0.48 0.29 0.07 0.05 0.01 0.00 0.02 0.01 0.01 0.01 0.00 0.00 0.02 0.01 0.01 0.00 0.32 0.05 0.01 100.00 Prepared by Al Rosenthal (Y9645) For LAM4 Consulting WT 300.27 241.83 0.06 0.05 1.45 0.31 293.38 35.50 515.81 40.13 283.34 2,104.70 33.50 207.83 860.13 Percent 4.70 3.78 0.00 0.00 0.02 0.00 4.53 0.56 8.07 0.63 4.54 32.32 0.52 3.25 0.06 1.94 3.81 0.27 25.34 11.81 3.13 596.00 5.75 0.13 ==E======2 L?zPI 7.76 3.28 0.69 0.47 0.46 0.00 0.09 0.04 0.02 0.00 0.03 0.06 0.00 0.41 0.18 0.05 9.32 0.09 0.00 ------- 6,392.64 100.00 496.13 209.38 44.31 30.31 29.19 0.19 5.75 2.38 1.31 C”FT 211.53 1.7.34 0.00 0.00 0.10 0.02 s:3.21 5.01 ::9.40 3.33 16.41 11.9.09 2.05 12.70 112.59 33.31 19.78 3.23 2.15 2.84 0.01 0.79 0.28 0.15 0.01 0.11 0.46 0.02 1.87 1.65 0.30 84.35 0.33 0.01 =====s==3= 525.09 REWED Percent 4.10 3.30 0.00 0.00 0.02 0.00 4.42 0.95 5.60 0.63 3.12 22.68 0.39 2.42 23.35 6.34 3.77 0.63 0.41 0.54 0.00 0.15 0.05 0.03 0.00 0.02 0.09 0.00 0.36 0.31 0.06 16.18 0.06 0.00 ------100.00 Orlaber 11. 1997 Page 3 Utilization of Truck Floor Space Year lntra BMC Inter BMC 1993 50.35 73.00 1994 57.62 70.00 1995 57.40 08.32 1996 53.67 64.62 Source: Response to FGFSANSPS J-2-12, Attachment 1 2 NOllVl30SSV Stl3ddlHS Ilr-klJ IdIE) VClltlOlz.4 40 S31&!01V90tlt131NI 01013lN SS3NlIM 33bW3S WlSOd JO 3SNOdS3tl RESPONSE OF POSTAL SERVICE WITNESS NIETO TO INTERROGATORIES OF FLORIDA GIFT FRUIT SHIPPERS ASSOCIATION b. Highway capacity utilization factors for FY96 can be seen in the table below: Highway Capacity Utilization Factors; Objection filed September 15, 1997. 15 RESPONSE OF POSTAL SERVICE WITNESS NIETO TO INTERROGATORIES OF FLORIDA GIFT FRUIT SHIPPERS ASSOCIATION Highway i. Capacily Utilization FY95 \ 14 Factors n 0 r r ;; A m < n 7 r r P % r 'Z =1 m u r 0 z u 0 z 0 % ,y,d g&,‘S S! Z-L 2,qeL “! p”e ‘(JA+J ()I); JO) ,o,XJ pE0, punod-MW)‘oi aq, ,2pu,, puno, “aq~ s! ,.SS ,ad ,SOJ ,neq-au!, aw~!ro,dde aq~ fz + c&or) oooco~ s! JOJXJ “! padd!qs s! s,s”5 qs”3 %a,,, din-pun”, ‘~X‘j “e 5! S!qL p”E ‘lo,XJ pea, sno!,e\ ‘0, I! ,e, moq aql ,e”sn “odn laysod-Jo-In” a,qe, ‘(l”L?q ,!“n 0, ,E,!L”!s ,neq-a”![ aql GO8 k[lWlS” p[X, )eq, ,! ,@!a~ Z,J”,, JO a,o~ Jo ,“noule ‘,al!e,, ~>“,I aq, Lq s,soa aq,e[ e aql aq 1s”~” ,eq, ISOJ aq 01 )! ,ap!s”os aql ale aq, JO a”o a,qel s,! pue md,no 0, S! pa~\,O\“! ‘u&m :iue pue aauewp 01 alq!ssod MO” s! 111 ‘,“N, Jo ,@“a[ %?,a.\&? u”,IS”OJ ,a.\oX, S! ,O,JBJ pEo, at,, J! >J”ElS!p 0, pa,J”,ls”“J aq “E!> a,eJs ).HJ e leq, p”e ‘as”els!p q1F.n ,‘a”![ >([ls!,lS ale ‘W[lN”,“J 23, Aq ~0; ‘,@,a& dq Sl,O!,&!D/, ,103 X,J IR,, “.N”,,S “2aq SW, J! ‘NJ s”ql ‘In2 %“!.C[d!,lnw ‘sa!,,~ o, “! pW!,a”a4 e ,a.\02 01 paZ’,eq~ ‘J”BJS”“3 ,ad lsoa ,“e,,-a”!, v Z-L auo e a,e,“~,e~ ISOJ ,“!o[ lsoa 01 aie.~ mldt”!s ,ayJ”d-Jo-lno “Xl L”o,J 0, s,aJa, aqn, ! A”e ,oJ s1SoS ,WX,-a”,( qloq aq~ ‘aK[q!un~ h!“!p,O ~S~IUOUOJ~ z!Seq aq, p”e,s,ap”n ,Kue ,OJ lsoJ ‘s”o!,X,!p “o!leso,,e spuadap s! “o!,e,ado h”lXJ dy-puno, E “1 “@O pado[a.\ap ale S,SOJ ,nq-a”!, ‘~“!,“““J3e X,1 pue ‘“o!,m!p pco[ pBo[ dy-pun”1 s,a.\e,, Kq pa”!um,ap aql “! ~‘01 ‘WXJ U! slua[q”,d s! S,olXJ OJ snoa^o~eue ‘SnqL ““!,~“!JS~p aq, pue zi”!p!.\!p J! Jo ht .uo!m,odsue,, a,dt”era aq, ‘,aqm Mx)‘oc 8”!,EJ”[[E ,“LX,-a”!, g asnmaa pea, ale spunod Jo ,,“W JO @“a[ aq, .iIlJW, a8Wa\E S! I,$,.\\ X,, JO J,Fq-2”O 1:‘; ,Kq *a,+” ‘;t’ot~ ,i~lX?U) SZ[ Aq a,!L” l‘ns,‘t1@yS S! JolXJ sa,!L” .i,a.\o~a, SC, Jo ,“W, ]SOJ a,,, 8 ,Od Transportation T~V3LE i-2’ ROL~SD-TRIP Costing 169 OL-T-OF.POCKET LI‘E-H.aL-L COSTS FOR \‘.%RIOUS (Based upon a cost of S.31499/rehicte mile) LO.iDS .A!erage Round-trip Load (pounds, Cost in Cents per CM mile IO.003 II,(xx) I ?.col l?.ooO l-1.030 15.coJ 16.Mx) I7.ow S.3133 .x-l 2625 ,243 230 .?I00 .1969 .I853 mml ?7.003 28.W 29.Km 30.003 3I.wo 32.xM 33.033 s.1212 .I167 .I125 .I086 .I050 ~1016 .a984 .ms 18,OZKl 19,ooo 20.030 2I.wJl 22.m 13.ow 21.oM) .I750 .I658 .I575 .I500 .I422 .I370 .I312 25.m .I?60 34,cnN 35.cm 36.030 37.030 ?SW :9.ccQ 4o.cm 41.ooo .0926 .swoo ,087s .0851 .0829 .0808 .0787 .0768 iwage -- - Round-trip Load Ipounds) Cost in Cents per CHI mile One-~a) CO% US the same 8~ round-trip costs when the load in each direction is the same. When Ihe loads in each direction are d#erent. the average of the outbound load plus Ihe inbound load mw be compu:ed 10 select the proper cost. For example. if the outbound load is 30,ooO pounds and rhe inbound load is tO,ooO, the average round.lrip load is ?O.oM)pounds The out-al-pocket line-haui cost per cwt. mile is S.IS7S. For W-mile acual haul, the out-of-pocket line-haul co11 is S.473,‘IW pounds (300 miles X S.li7i cuI. mile). 6 Pickup and Deliwry Costs. As with line-haul costs, pickup and delivery costs have senice units asswiared with time (drivers’ wages) and distance (fuel). These costs are first collected from the books of account. The amnwt of WI deliwred in :ha: specific pickup and delivery area is then collected from shipment records. Dividing the total pickup and deliwry costs by the total CM? gives a cost per cwt. This cost was determined to be 5.17,/w% It is now necessary to know only the number ofcw picked up and delivered in a specific shipment to calculate its share of pickup and delivery cost. For example, if the shipment weight is 260 cwt, the pickup and delivery costs are 534.20 (5.17 WI X 260 WI). In fact, Table 7-3, column 3, shows that the S.17~cwt for pickup and deliwry cost is based upon an average of 240 CX’I picked up and deliwed. L. ZJ s 0 T w m 0 w I m zz . 7 I/ IIOWN’I‘OWN I~IS1‘1<lI~Ul‘ION 2X7 LAM-l 3 TRACS Estimate of Cubic Feet Fiscal Year 1996 PQ196 Distribution Intra-BMC Keys Using USPS Estimates (Weighted) for 7 Mail Types ACCOUNT= BOUND= 53127 MAILCODE CuFt Percent CuFt 1st Class 2nd Cl Period International PRI STD A STD B Other STDB-P aa,27a,ala I 24.891547 11 ,133,460 67564,941 328,939,249 147,624,723 266,621,091 PO296 Distribution Irma-BMC Keys Using USPS Estimates (Weighted) a.37 11.84 1.06 6.40 31 .I8 13.99 27.17 328,939.249 266.621.091 for 7 Mail Types ACCOUNT= BOUND=. 53127 MAILCODE CuFt Percent CuFt 1st Class 2nd Cl Period International PRI STD A STD B - Other STDB-P 158,075,574 104,704,624 7,226,tl67 77,175,67Q 287,632,51a 145,066.120 296,053,459 PQ396 Distributiin Intra-BMC Keys Using USPS Estimates (Weighted) 14.66 9.72 0.67 7.16 26.68 13.46 27.65 267.632,516 288,053.459 for 7 Mail ACCOUNT= BOUND= 53127 MAILCODE 1st Class 2nd Cl Period International PRI STD A STD B - Other CuFt 200,165,973 127996943 a,497,872 61.323.674 380.539.334 150,069,556 Percent CuFt 16.22 10.37 0.69 4.87 30.84 12.16 380,539,334 Types LAM-i3 STDB-P 305,244,64a PQ496 Distribution Intra-BMC Keys Using USPS Estimates (Weighted) 24.74 305,244,848 for 7 Mail Types. ACCOUNT= BOUND=. 53127 MAILCODE 1st Class 2nd Cl Period International PRI STD A STD B - Other STDB-P Percent CuFt CuFt 17.73 11.47 0.37 5.96 25.62 12.89 25.96 228,145,303 147,604,149 4.714.949 76.709.871 329,741.850 165,936.636 334,141,5ao 329,741.850 334.141560 Four Quarters Standard(A) ratio Parcel Post Source: 1.326.a52,951 1.663976 1,224,060,97a Running of Postal Service SAS Model in Lib. Ref. H-62 and H-64, y96all CERTIFICATE OF SERVICE I hereby certify that I have this day served the foregoing document all parties of record in this proceeding on this date in accordance 12 of the Rules of Practice and Procedure. Dated : January 26, 1996. upon with Section
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