DOCKET SECTION
BEFORE THE
POSTAL RATE COMMISSION
WASHINGTON, DC 20268-0001
POSTAL RATE AND FEE CHANGES, 1997
)
Ri-rr!l;,r !)
fffl I/
II I@ ;;/ PjJ
iDocket No. R97-1
ERRATA TO DIRECT TESTIMONY OF DR. JOHN HALDI (VPKW-T-l)
ON BEHALF OF VAL-PAK DIRECT MARKETING SYSTEMS, INC.,
VAL-PAR DEALERS’ ASSOCIATION, INC., AND
CAROL WRIGHT PROMOTIONS, INC.
(February 11,1998)
The attached errata reflect changes associated to the responses to MOAANPICW-Tl-l-l l,
and also contain certain other minor changes, Most corrections deal with changes necessitated by a
miscopying ofECR High-Density and Saturation DDU-entry volumes in table A-6 at p. A-13.
Respectfully submitted,
John S. Mile;
Alan Woll
Jack F. Callender
WILLIAMJ.OLSON,P.C.
8 180 Greensboro Drive, Suite 1070
McLean, Virginia 22102-3823
(703) 356-5070
Counsel for Val-pak Direct Marketing Systems, Inc.,
Val-pak Dealers’ Association, Inc., and
Carol Wright Promotions, Inc.
I hereby certify that I have this day served by hand delivery or mail the foregoing
document upon all participants of record in this proceeding in accordance with Section 12 of the
Rules of Practice.
February 11, 1998
13
1
effect of weight
2
with respect to determining
on cost has not been treated
The current
3
Revised 2/l 1198
rate schedule for Standard
rate cells.’
different
5
and (ii) point of entry into the postal network.
6
appropriately,
7
variable
8
shown in Table 1. The unit costs range from
9
letter entered
11
unit costs for Standard
at the delivery
Shipping
A ECR letters,
costs.
Differences
condition,
of,
Test Year volume-
including
contingency,
are
cents for a Saturation
letter
BMC.
in the unit costs, as shown in Table 1,
reflect the Postal Service’s costs incurred
13
units.8
14
variable
15
instead
Thus, when developing
by (i) presort
cents for a Basic presort
unit, to
of the Destinating
consists of 16
Each rate cell is thought
My estimated
12
by mail not entered
at delivery
costs from the bottom up, those volume-
costs that are incurred
be handled
A ECR letters
The rate cells are distinguished
as a separate product.
entered upstream
consideration
the unit cost of letters.6
4
10
as an important
and transported
for mail which is not dropshipped,
and must
by the Postal Service, are presumed
here
G
Even within the letters category, weight may cause costs to vary.
Since weight is not part of the rate design for letters, however, its effect is subsumed
within the average per-piece cost. The effect of weight must be, and is, taken into
account in the development of bottom up costs for nonletters.
7
8
USPS-T-36, p. 31.
Cost incurrence for postal transportation and dock handling expense is
computed on a per-pound basis, consistent with the cost avoidance developed in LRH-111, and is based on estimated actual weight of the mail in each rate cell; i.e., cost,
incurrence is not estimat,ed at the breakpoint weight of 3.3 ounces. See Appendix A
for more details.
14
1
to be equal to the costs avoided
2
facilities.
3
the two sides of the same coin.
4
Stated succinctly,
Sortation
costs.
by mail that is dropshipped
cost incurrence
Differences
to destinating
and cost avoidance
are treated
as
in the unit costs in Table 1 also reflect
5
the Postal Service’s presort
6
costs avoided by presortation
I
volume-variable
8
equivalent
level of sortation.
9
are treated
as two sides of the same coin.
cost differentials.
likewise
In my bottom up approach,
have been presumed
to equal the
costs which the Postal Service must incur to achieve an
10
Conformity
11
process, when multiplied
12
slightly
with
13
costs for ECR letters.’
14
uniform
amount
15
detailed
explanation
16
in Table 1 is contained
percent)
9
Revised 2/l l/98
Here too, cost incurrence
CRA costs.
and cost avoidance
Unit costs derived by this bottom up
by the volume in each respective
less than the estimate
Accordingly,
category,
are
of total CRA volume-variable
unit costs are adjusted
upward
by a
cents per piece) to conform with the CRA total.
regarding
development
in Appendix
of the volume-variable
A
unit costs
A.
See Appendix A for the details concerning development of CRA costs
for ECR letters and nonletters.
15
Revised 2/11/98
Table 1
Volume-Variable Unit Cost for
Standard A ECR Letters, With Contingency
(test year, cents per piece)
6
No Destination
7
Entry
8
Basic
9
Automation
- Entry at Destinating
BMC
$yJjj
-
SCF
DDU
BYgj
ma
m
10
High-Density
11
Saturation
~
m
. ,.
gg
m,
12
13
14
15
Source:
Appendix
Development
of Bottom
16
Nonletters
17
weigh up to 16 ounces.
18
than letters.
19
Nonletters
20
per-piece
10
structure.
A, Table A-l 3
below
up Costs for ECR Nonletters
the breakpoint.
Standard
With respect to weight
Rates for ECR nonletters
can
they are less homogeneous
vary with weight
that weigh less than the breakpoint
A ECR nonletters
of the mailpiece.
(3.3 ounces) now pay a flat
rate, the same as letters. I0 All costs for each rate cell below the
The proposed parcel surcharge is not part of the current rate
17
1
TO illustrate
the methodology
2
variable
3
presented
below.
4
assumed,
and in Case II, moderately
5
As explained
6
cost relationship,
7
included
8
either a credible
theory or reliable
9
between
and cost.
unit costs for Standard
A ECR nonletters,
two different
high weight-related
low weight-related
both assumptions
to deal with the reality
weight
with
costs are assumed.13
empirical
CRA costs.
12
This serves as a control to prevent
13
and vice versa.14
has been adjusted
15
delivery
16
The effect of this assumption
17
below the 3.3 ounce breakpoint
to advance
evidence on the relationship
In both cases, the unit cost for all ECR
to equal estimated
weight-related
the weight-
‘l’he two cases are
of the Postal Service’s failure
nonletters
Case I: High
are arbitrary.
cases are
costs are
below, in the absence of solid evidence concerning
11
14
used here to develop bottom up volume-
In Case I, moderately
Conformity
10
Revised 2/11/98
shifting
costs.
CRA costs for nonletters.
of costs from letters
to nonletters,
In Case I, mail processing
and
costs equal to 2.33 cents per piece are assumed to be weight-related.
13
is to shift costs from lighter-weight
to heavier-weight
Some city carrier street time costs ma
NAAAJSPS-T36-17, redirected to the Postal Service
nonletters
nonletters
above the
elated: see
26
1
2
ECR Letters
The following
discussion
makes use of the bottom up cost figures
3
computed
for the 16 rate cells for Standard
4
preceding
Section III of this testimony.
5
Revised 2/l l/98
Margins.
The implicit
margins
A ECR Mail, as presented
for the rates proposed
in the
by the Postal
6
Service for each ECR letter rate cell are shown at Table 4, Part A. For all
7
ECR letters,
.31 Margins
8
9
10
the average margin,
or contribution
range from a low of
to other costs, is ,&ig cents
cents to a high of 9:&l cents
per piece.
Mark-Ups.
The implicit
percentage
mark-ups
for Standard
11
letter mail are shown in Table 4, Part B. For all ECR letters,
12
mark-up
13
on Saturation
14
on ECR letter mail span a wide range, from gg to
15
mark-ups
16
average.
31
Because the highest
is 144 percent
mail -
which has the lowest unit cost -
on the different
rate categories
A ECR
the average
margin
the implicit
percent.
are seen to vary widely
is imposed
mark-ups
The implicit
around
the
The Postal Service did not calculate unit contribution at this level of
detail. Response of witness Moeller to NAAFUSPS-T36-35 (Tr. 612795).
27
Revised 2/l l/93
Table 4
Margins and Mark-Ups Implicit in Postal Service Proposed
Rates for ECR Letters
A. Margins
(cents per piece)
t
6
7
No Destination
Entry
8
Basic
9
Automation
10
High-Density
11
Saturation
12
13
- Entry at Destinating
DBMC
DSCF
DDU
B. Mark-Ups
(percent)
No Destination
Entry
14
15
- Entry at Destinating DBMC
DSCF
DDU
16
Basic
17
Automation
3.iQ
18
High-Density
im
19
Saturation
~-1”6’
Sources:
Proposed rates from USPS-T-36, p. 31
Unit Costs from ECR letters, Table 1.
m
20
21
22
ad
Revised 2/l l/98
48
1
Table 6
2
3
4
VP-ON Proposed
Enhanced Carrier Route Rates
(in dollars)
No Destination
Entry
___--
5
6
10
11
12
Letter5
Basic
Automation
High-Density
Saturation
13
14
15
16
Nonletters (piece-rated)
Basic
High-Density
Saturation
0.167
0.150
0.138
17
Nonletters (pound-rated)
Per Piece:
Basic
High-Density
Saturation
0.058
0.041
0.029
i
9
18
19
20
21
22
23
24
25
Per Pound:
Basic
High-Density
Saturation
0.530
0.530
0.530
BMC
SCF
--___
DDU
0.152
0.135
0.123
0.149
0.132
0.120
0.144
0.127
0.115
0.458
0.458
0.458
0.442
0.442
0.442
0.420
0.420
0.420
Revised 2/l l/98
51
1
Table 7
2
3
Margins and Mark-ups From
VP-CW Proposed ECR Letter Rates
4
5
A. MARGINS
(cents)
6
7
8
9
10
11
No Destination
Entry
Automation
Basic
High-Density
Saturation
12
9.4
fgJ
g?J
DDU
8.0
B. MARK-UPS
No Destination
Entry
13
14
15
16
17
18
9.3
- Entry at Destinating
DBMC
DSCF
Automation
Basic
High-Density
Saturation
138%
- Entry at Destinating
DBMC
DSCF
DDU
124%
115%
159%
125%
115%
168%
ggt&
164%
Revised 2/l l/98
incurred
(Table A-S). Dividing
gives unit shipping
Unit
total costs (Table A-S) by TYAR volumes
(Table A-6)
costs (Table A-10).
Costs for ECR Letters
Tables
A-11 and A-12:
Unadjusted
TYAR
(Table A-l),
Total
plus shipping
(Table A-11).
Multiplying
gives an unadjusted
Unadjusted
Cost.
8,712,800,000
Table
Cost and
and delivery
in unadjusted
costs
total unit costs
unit costs (Table A-11) by TYAR volum~es (Table A-6)
$491,006,000
this $27,822,000
Adjusted
TYAR
Subtracting
Unit
this from the CRA
(Table A-2) results
difference
(Table A-6), gives a per-piece
A-13:
Unit
The sum of mail processing
total cost of $463,184,000.
Dividing
Total
costs (Table A-10) results
After Rates Total Cost for Letters,
of $27,822,000.
TYAR
by total TYAR letter volume of
adjustment
Costs.
in a difference
of 0.3193 cents.
Adding
the per-piece
adjustment
of 0.3193 cents (Table A-12) to unadjusted
unit costs (Table A-111) gives the
adjusted
Rate ECR Letters
Unit
Piece
unit co&s for Standard
A Regular
shown in Table A-13.
Costs for ECR Nonletters
Tables
A-14 and A-20:
(Table
A-14) and 0.5825 Cents
processing
and delivery
TYAR
Unit
Cost Less 2.33 Cents
Per Piece
costs (Table A-l, columns
A-4
(Table
A-20).
1 and 2) together
Per
Unit
mail
with unit
Table
A-6
Revised
Standard
211 l/98
A ECR Mail
1998 TYAR Volume
(pieces)
No Dest.
Entry
_____
LETTERS
Automation
Basic
High-Density
Sajurejion
682,281,OOO
835.299,OOO
1
374,796,OOO
BMC
SCF
856,221,OOO
1,035,288,000
38.040.000
211.268,000
479,035.OOO
1,205.217.000
2,029,472,000
248.831,OOO~~
DDU
__.__
42,125,OOO
97,96: ,000
470.851,000
Total
_____
2,059,662,000
3,173.765.000
392,986,OOO
3,086,387,000
___- ------- _____________.___
--_
_____-_
----- _______
.-- __________..__..
r1,932,453.0001
Subtotal
NONLETTERS
Piece-Rated
Basic
High-D
Saturation
Subtotal
Subtotal
Subtotal,
3,962,555,000~676,97!i,ooo~
115,536.000
564,897,OOO 1,724,261,000
3.493,243,000
29,049.000
42,541,OOO
465.253,OOO
213,81:!,000
281,107,OOO
285.819,OOO 2,229,350,000
3,097,680,000
_______
------- ________________
..___.__ ____ -- ______....- ________-.....---875.053,OOO
Pound-Rated
Basic
High-D
Saturation
2,140,817,000
VOLUME
Source:
Witness
5,897.937.000
750,655.OOO
5.893,965,000
12,542.557,000
2,052,621.000
6,187,846,000
251,474,150
5.768,949
50,048.411
_..._________----
1.087,339.934
4,074,572
5,661,585
__._._______ --
3,367,276.976
56,6713,939
147.773,845
245.80!5,634
388,837,658
1.820,086.346
___- ---- _____.._- ______...-...----
4,762.768,000
403,423,OOO
2,264,634.000
307,291,511
1,097.076.092
3,903,888.479
7.430,825,000
2,122.56:3,919
19,973.382,000
NONLETTERS
TOTAL
3.427,037.000
8,712,800.000
28.686,182,000
Moeller,
USPS-T-36,
WP 1. page 20.
A-13
Table A.7
Revised 2/l 1196
Standard A ECR Mail
1996 TYAR Weight
(pounds)
No Dest.
Entry
LETTERS [I]
Automation
Basic
High-Density
Saturation
31,629,641
38,723,352
SCF
___-
69,796.722
84,393,759
27,807,896
69.962,630
DDU
-____
1.278,297
2,972,659
-1
,~:K:!Z
1z~:~::~
--____________
--_ _...._---------_ - . . . . ..------------- .------_ ----- ---) 92.155.964) 169.808,052)
260.320.430)
34,384,6911
Subtotal
NONLETTERS
Piece-Rated
Basic
High-Density
Saturation
BMC
__...
Total
____.
130,512.556
196,052.400
l2igEj
--.--.------___
1 556,669,1371
[I]
58,715,245
3,012,890
23.709.842
231,948.053
4,757,511
20,539,334
451,194,240
59,224,059
255,661,977
12,355,023
22,444.096
433,686,352
Subtotal
05,437.977
257,244.898
766,080,275
466,485,471
Pound-Rated [Z]
Basic
High-Density
Saturation
79,660,806
1.949.739
14333.445
344.738,349
1,367,604
1,651,620
1.067,567,737
49.733.368
115,032.091
18,005,106
82.722,289
536.466844
Subtotal
96,443,990
347,757.573
1,232.333,196
639,214.241
Total Nonletters
181.661.967
605,002,471
1,998,413,471
1.107,699.712
TOTAL WEIGHT1
274,037,9311
774.610.5241 2.256.733.901~1,142,064,403~
754,212,560
89.438.556
733,597,506
_____
-.-.- _______.__
1,577,246.622
1,509,972,000
135,773.000
670.004,OOO
__.. _________
-.-_.
2,315.749.000
3,892,997,622
14.449.666.7591
[I] Test Year After Rates Volumes (Table A-6) multiplied by Base Year Weight/Piece.
Table A-5.
[Z] Pound-rated
pieces:
Moeller, WP 1, page 20.
A-14
Table
A-9
Revised
Standard
2/l l/98
A ECR Mail
Total Shipping Costs Incurred
on Account of Non-Destination
Entry, TYAR
LEnERS
Automation
Basic
No Dest.
Entry
---__
BMC
_____
4,361,727
5,339,950
3,315,344
4.008,704
SCF
___..
761,989
1.917.108
_________.____ _____
------ ____ _---- _________
Subtotall12.708,3081
NONLETTERS
Piece-Rated
Basic
High-D
Saturation
Subtotal
Subtotal
TOTAL
6,371,281
8,096,832
11,017,533
12,363,572
415,478
225,982
1.622,851
3,269,587
975,618
7,005,620
_--- ______.__
-. _______
-_.--___ ___--______.___
11,781,897
Pound-Rated
Basic
High-D
Saturation
4.750,538
12,219,133
20.992,042
8.439,061
11,265,762
fzzq
_-- __________-__
p7ziF3q
31,477,937
2,264.310
11,250,825
________....-___
44,993.072
56.613,663
1,696.618
5.276,080
13,299.626
63,586,361
16,518,485
33,768,250
COST
Test Year Afler Rates pounds,
[2] Shipping
Total
_____
10.985,225
16,375,072
29,253,366
268,869
64,961
1.362.788
2.045,532
78,452
3.152,096
_________
-- ____ _____
-- ______________....---__
Sources:
[I]
DDU
--___
Costs per pound,
Table A-7,
Table A-8 ( total column).
A-16
Table A-12
Standard
A ECR Letters
Revised
Unadjusted
NAR
2/l l/98
Total Cost
cmJx
No Dest.
Entry
_____
Automation
Basic
High-Density
Saturation
43,566
58,390
l$
TARGET:
52,515
69,760
1,741
7,356
F
Subtotal
CRA AFTER
SCF
_____
BMC
_____
$
131,372
26,200
78.460
$
166.663
Per Piece Adjustment
= Difference/total
Volume
(cents)
Sources:
[l]
NAR
[2] NAR
Volume
(pieces),
Total Unadjusted
Table A-6.
Unit Costs, Table A-l 1
A-19
126,789
212,632
17,323
106,240
2,42’1
6,222
l$l
Rates Total Cost for Letters (Table A-2, Column 3)
Difference
TOTAL
-__-.
DDU
_____
$
463,184
$
491,006
I$
27,622
0.3193J
1
Table
A-13
Revised
Standard
Adjusted
A ECR Letters
NAR Total Unit Cost
(cents per piece)
A: WITHOUT
No Dest.
Entry
_....
CONTINGENCY
BMC
____
SCF
_..--
DDU
_____
Automation
Basic
High-Density
Saturation
B: WITH
No Dest.
Entry
_....
Automation
Basic
High-Density
Saturation
6.7718
7.3827
5.3293
4.2876
CONTINGENCY
BMC
____.
6.5172
7.1281
4.9463
3.8391
SCF
_____
6.2867
6.8977
4.7363
3.7505
6.1261
6.7370
4.4038
3.5678
Sources:
[l]
TYAR
Unadjusted
[2] Per-piece
Total Unit Costs, Table
adjustment,
Table
A-20
A-12.
DDU
-____
A-l 1
2/i l/98
Table
B-l
Revised
Standard
Analysis
Proposed Rates [I]
Automation
Basic
High-Density
Saturation
of Postal Service Proposed
for ECR Letters
(cents)
Rates
No Dest.
Entry
_____
BMC
____.
SCF
DDU
16.4
15.7
14.3
13.4
14.9
14.2
12.8
11.9
14.6
13.9
12.5
11.6
14.1
13.4
12.0
11.1
9.63
8.32
8.97
9.11
8.38
7.07
7.85
8.06
8.31
7.00
7.76
7.84
142%
113%
168%
213%
129%
99%
159%
210%
132%
102%
164%
209%
IEstimated
Costs [2]
Automation
Basic
High-Density
Saturation
Estimated Margin
Automation
Basic
High-Density
Saturation
[3]
Estimated Mark-up
Automation
Basic
High-Density
Saturation
[4]
Sources:
[I]
USPS-T-36,
p. 31.
[2] Appendix
A, Table
[3] Proposed
rate
[4] Margin/estimated
2/l l/98
A ECR Mail
A-13.
-estimated
cost.
cost.
B-3
Revised 2/11/98
In part D, rates developed for BMC dropship
were rounded.
Shipping
costs of 1.5 cents were added to develop rates in the No Destination
column.
Rate di,fferentials
of 0.3 and 0.5 cents, respectively,
to develop the SCF and DDU rates.
Table
C-3:
Standard
Proposed
Rates.
reproduces
TYAR Volumes
initial
adjusted
revenues
of VP-CW
from Table A-6. These volumes, multiplied
as shown in part F. Subtracting
(Table C-12) results
in a difference
or 0.15 cents per piece. Adjusting
between
projected
target revenues
from the initial
shown in part G.
rates (Table C-
is shown in part H. The presort
from the Basic Rate is shown as the differential
slight decrease of $7,060,260,
proposed rates TYAR revenues
or 0.6 percent,
gives us the
as shown in part J. This is a
from the Postal Service’s
of $1,210,277,000.
c-3
discount
in part I.
the final rates in part G by the TYAR volumes
revenues of $1,203,216,740,
by the
ini~tial rates by this
proposed rates and the current
l, part D), stated as a percentage,
TYAR projected
rates.
of Table C-2. Part E
in the proposed rates for letters
The difference
Multiplying
adjusted
rates (Table C-2, part D) result in TYAR initial
$1,210,277,000
results
were subtracted
Developmcent
This table is a continuation
rates of $13,451,727,
amount
A ECR Letters
of $1,223,728,727,
for letters,
These are the initial
Entry
Revised 2/11/98
VP-CW
Proposed
Rates
Tables C-4 through
for ECR Nonletters
C-12 support
development
of VP-Cw’s
proposed
rates for ECR, nonletters.
Tables
Weight.
C-4 and C-5:
Standard
TYAR volumes and weight
A ECR Mail
are directly
TYAR
Volume
and
from Table,s A-6 and A-7,
respectively.
Table
C-6:
Standard
A ECR Mail
Postal
Table
C-7:
Standard
A ECR Nonletters
Service
Proposed
Rates.
Proposed
Rates
TYAR
gives the nonletter
Projected
TYAR projected
Revenues
revenues,
Postal
and Margins.
(for pound-rated
($1,678,365,324),
subtracting
Table
Contingency.
pieces).
The margin
shown at the bottom
TYAR total projected
C-S:
Standard
Table C-7
derived by multiplying
Postal Service’s proposed rates (Table C-6) by the volumes
weight
Service
the
(Table C-4) and
or expected contribution
of Table C-7, is obtained
by
costs (Table C-9).
A ECR Nonletters
TYAR
Unit
The unit costs shown in Table C-8 are directly
Costs with
from Appendix
A, Table A- 18 (B).
Table
C-Q:
Standard
A ECR Nonletters
TYAR
Total
Multiplying
the unit TYAR costs (Table C-8) by TYAR volumes
and weights
(Table C-5) gives TYAR total projected
c-4
costs.
Cost.
(Table C-4)
Revised 2/l l/98
Table
C-10:
Standard
A ECR Nonletters
VP-CW
Proposed
Table
C-11:
Standard
A ECR Nonletters
VP-CW
Proposed
Rates.
TYAR
Projected
proposed
Revenues
and Margin.
Multiplying
the VP-CW
rates (Table C-10) by the volumes (Table C-4) and weights
5) gives TYAR projected
9) leaves the margin,
revenues.
Deducting
or expected contribution
$1,682,409,408,
which is $4,044,084
$1,678,365,324
developed from projections
Rates
(Table C-
the total TYAR costs (Table Cto institution.al
costs, of
more than the contribution
of
of the Postal Service’s proposed
rates.
Table
Comparing
C-12:
Standard
the contributions
A ECR Mail
projected
TYAR
Projectted
Revenue.
by USPS and VP-CW proposed
shows that the rates proposed by VP-CW provide
a combined
essentially
than the margin
equal but slightly
less (by $3,016,176)
margin
rates
that is
from rates
proposed by the Postal Service,
USPS
Proposed
Rates
LETTER
MARGIN
NONLETTER
MARGIN
TOTAL
MARGIN
$ 1,210,277,000
1.678.365.324
$ 2,888,642,324
c-5
VP-cw
Proposed
Rates
Difference
$ 1,203,216,740
1.682.409.4OEi
$ 2,885,626,148
1
$ 4;,“;;;4;;
/
Table C-l
NAR
Revised
Standard A ECR Letters
Total Unit Costs and Current Rates
(cents per piece)
A: UNIT COSTS WITHOUT
No Dest.
Entry
_.__.
CONTINGENCY
BMC
..-_
Automation
Basic
High-0
Saturation
c:
SCF
. ..__
DDU
-_-
6.7718
7.3827
5.3293
4.2676
6.5172
7.1261
4.9463
3.8391
6.2667
6.8977
4.7363
3.7585
6.1261
6.7370
4.4636
3.5676
COST DIFFERENTIALS
Appendix
Hl
Entry
_-_.
BMC
..___
SCF
DDU
0.61
_.
0.61
0.61
0.61
-
2.05
3.10
2.16
3.29
2.16
3.14
2.25
3.17
RATES
IZ]
Entry
BMC
SCF
DDU
14.6
15.0
14.2
13.3
13.3
13.7
12.9
12.0
12.6
13.2
12.4
11.5
12.3
12.7
11.9
11.0
sources:
[l]
[I,
BMC
_-
D: CURRENT
Automation
Basic
High-D
Saturation
DDU
..__
No Dest.
Entry
--.-
PRESORT
Automation
Basic
High-D
Saturation
[I]
SCF
___._
6: UNIT COSTS WITH CONTINGENCY
2/1’1/98
A, Table A-13
[Z] Docket No. MC95-1, Opinion and
Recommended
Decision.
C-6
Table C-2
Revised
211 l/98
Standard A ECR Letters
Test Year Initial Target Rates
(cents per piece)
A: WITH CONSTANT
Margin =
No Dest.
Entry
Automation
Basic
High-D
Saturation
AMOUNT
8.199
ADDED
BMC
SCF
14.9708
15.5817
13.5283
12.4866
B: WITH CONSTANT
Coverage =
No Dest.
Entry
PERCENT
2.4405
APPLIED
BMC
SCF
C: 90% FIXED; 10% CONSTANT
No Dest.
Entry
_....
Automation
Basic
High-D
Saturation
DDU
PERCENT
BMC
--
DDU
_-
SCF
__-
15.1263
15.8253
13.4761
12.2843
D: ADJUSTED
Automation
Basic
High-D
Saturation
DDU
1
TO REFLECT
DEST. ENTRY
NO Dest~
Entry
____.
BMC
SCF
DDU
16.3
17.0
14.5
13.3
14.8
15.5
13.0
11.8
14.5
15.2
12.7
11.5
14.0
14.7
12.2
II.07
1
c-7
1
1
Table C-3
Revised
Standard A ECR Le”ers
Development of VP-CW Proposed
E: (TYAR Volume.
NO Dest.
Entry
__.__
LETTERS
Automation
Basic
682,281.OOO
835.299.000
_--__-.-.-~1,932,453,0001
Subtotal
[
PieceJ)
DDU
_...
856.221.000
479.035.000
1.035,288.000
1.205,217,000
38,040.000
248,831.OOO
211,268.OOO 2,029,472,000
_--_ -_----2,140.817,000
Total
--._.
42,125,OOO
97,961,OOO
2.059.662.000
3.173.765.000
__ --
3,962.555,000-
F: INITIAL
LETTERS
Automation
Basic
High,-D
Saturation
Rates
SCF
BMC
2/l 1198
__.___
---_..
8.712.800,000
REVENUES
111.211,803
142.000,830
5,811,1651
49,847,8681
126,720,708
160,469,MO
4,945,200
24.929.6241
69,460,075
183,192,984
31,601,5371
233,389,2801
5,897.500
14,400.267
8,056.636
51,793.610
313.290,086
500.063,721
50.414,538
359.960,382
308,871,6661
317,065,1721
517,643,8761
80,148.013]
1 1,223,728,727~
Target Revenues
Difference
from letters (Table C-12)
1
1,210,277,000
13.451,727]
Per piece difference
H: PERCENTCHANGEFROMCURRENTRATES
Automation
Basic
High..D
Saturation
10.3%
12%
1%
-2%
9.8%
12%
- 1%
-4%
I: PRESORT
Automation
Basic
High..D
Saturation
Subtotal
12.2%
14%
1%
-3%
DIFFERENTIAL
0.7
0.7
0.7
_.
0.7
2.5
3.8
2.5
3.8
2.5
3.8
2.5
3.8
J: INITIAL
LETTERS
Automation
Basic
High..D
Saturation
11.7%
14%
1%
-3%
109,847.241
140,330,232
5,731 ,011
48,723,480
1 304,631,9641
REVENUES
125,008.266
158,399.064
4.669.120
24,295,820
68.502.005
180.782.550
31,103,875
227.300,864
5,813.250
14.204.345
7.924,560
50.381,057/
312,572,2701
507.689,2941
78,323.2121
C-8
I 1,203,216,740~
Table C-4
Revised
2/l 1198
Standard A ECR Mail
WAR Volume
(pieces)
NO Dest.
Entry
_-..
LETTERS
Automation
Basic
682.261.000
635,299.OOO
1 1,932,453.0001
Subtotal
NONLETTERS
Piece-Rated
Basic
High-D
Saturation
Subtotal
Pound-Rated
Basic
High-D
Saturation
Subtotal
Subtotal,
BMC
SCF
__._.
2,059,662,000
3.173.765,000
392.986,OOO
3.086,387,000
2,140,817,000
8,712,800,000
3.962,555,000~676.975,00tjl
564.897,OOO 1,724,261,000
3,493,243,000
115,536,000
29,049.000
42,541.OOO
465.253.000
213,812,OOO
281,107.000
285,819.OOO 2,229,350,000
3,097.689,000
_________.
- . . . .._ ._............ -..-.-__...... - .___.........--.
875.053.000
2,052,621.000
6.187,846,000
3,427.037.000
251.474.150
5;768;949
50.048,411
_._...._........_
307,29,,510
Total
856.221.000
479.035000
42.125.000
1,035;288;000
1,205;217;000
97,961,000
38,040,OOO
248.831.000-?&&~
211,268,000
2,029,472.000
470,851,000
1.067.339.934
4.074;572
5,661,585
._.__.......... -.
1.097.076.092
3.367.276.976
56.676,93!3
147,773,845
245805,634
388,837,658
1,820,086.346
--.-__... -__ ___._.....--3.903.888,479
2.122.568.91!3
5.897,937,000
750,655.OOO
5,893.965.000
12,542.557,000
4,762,768.000
403,423,ooo
2.264.634,OOO
7,430,825.000
19.973,382,000
NONLETTERS
28,686,182,000
TOTAL VOLUME
source:
[l] Appendix
DDU
..__.
A, Table A-6.
c-9
Revised 2/l l/98
As explained
relationships.
above, the Postal Service faces multiple
Minimal
presort
mail that is not dropshipped
upstream
in the postal network
will likely
handlings
than will, say, saturation
SCF or DU. Thus, a “global”
weight-cost
relationship
is fatally
entered
into the postal network
are entered
upstream,
at identical
and heavier-weight
IOCS tallies
postal network.
critical
or at a
THE
points.
relationship
for mail
If lighter-weight
pieces
pieces are drops~hipped, any study
heavily
cannot record where mail is entered
Hence, a study based on IOCS tallies
so.
into the
cann.ot control for this
element.
Witness
control
bulk
flawed from the outset.
that does not control for this factor will be biased, perhaps
Unfortunately,
upstream
study that seeks to estimate
The Postal Service should study the weight-cost
entered
and is entered
incur far more weight-related
mail, whether
destination
weight-cost
Moeller
for variations
has observed that a properly-designed
“in the amount
haul of non-dropshipped
variations
of drop shipping,
study must
presortation,
average
mail, and other factors, all of whic:h could cause
in the unit cost by weight
increment.“6
LR-H-182
did not control
for any of these factors.
weight-cost relationship.
6
Response of the Postal Service to NAAILTSPS-T36-22 (Tr. 15/7714).
D-8