BEFORE THE
POSTAL RATE COMMISSION
WASHINGTON, D.C. 20268-0001
POSTAL RATE AND FEE CHANGES. 2000
Docket
No. R2000-1
DIRECT TESTIMONY OF JOSEPH E. SCHICK
ON BEHALF OF THE ASSOCIATION FOR POSTAL COMMERCE
AND
MAIL ADVERTISING SERVICE ASSOCIATION
Communications
regarding this document
should be served on
Ian D. Volner
N. Frank Wiggins
Venable. Baetjer, Howard & Civiletti, LLP
1201 New York Avenue, N.W.
Suite 1000
Washington, DC 20005-3917
Dated:
May 22.2000
TESTIMONY
Purpose and Autobiographical
My name is Joseph
8
Association
9
(“Postcom,
OF JOSEPH
Sketch
I submit this testimony
E. Schick.
for Postal Commerce
fl &“).
E. SCHICK
and the Mail Advertising
In separate testimony
of its economic
on behalf of the
Service Association
consultant,
Postcom,
10
et al. has shown why drop entry discounts
--
should reflect 100% of the measured
11
cost savings
from this worksharing
12
purpose of my testimony
13
the cost savings
14
transportation
Postal Service operational
15
strengthening
the incentives for drop entry serves to encourage
16
on pallets.
the Postal Service
realizes
associated
with drop entry
serves
objectives.
18
Pewaukee,
Wisconsin.
19
companies
in the United States for magazines,
20
other direct mail marketing materials.
21
Postal Affairs and have been employed
22
the current
23
numerous
24
testified
25
entry.
Chairman
The
is to show why, as a practical matter, full recognition
to advance
In particular,
I am Director of Postal Affairs at Quad/Graphics,
17
activity.
Quad
is one of the largest
of MTAC;
non-
I show that
mail to be placed
Inc. headquartered
printing
catalogs,
in
and distribution
books, parcels
and
I have more than 15 years of experience
in my present position since 1990.
I have served
technical advisory committees
before this Commission
other
of
and continue
in
I am
to serve
on
and informal industry working groups.
in Docket R97-1 on
matters
related to drop
I
1
STRONG
DROP ENTRY INCENTIVES
PROMOTE
PALLETIZATION
OF MAIL
2
The depth of the discounts offered by the Postal Service for the drop entry
3
4
of mail influences
more than the decision whether
5
enter their mail at a destination
6
and mail service provider,
-I
counts.
8
rate structures
9
however,
entry facility.
for mailers to
From the standpoint
it is the total cost of the job (including
of the mailer
postage)
that
Several of the postal related costs, such as sortation, are reflected in the
of both the Standard (A) and Periodical rate schedules.
one component
the current
11
(sacks, gaylords or pallets) - for transportation
rate schedules
-- the cost of placing
At each step of the mail preparation
presorted
mail in containers
to the Postal Service facility.
process,
mailers and mail service
13
providers
14
influenced
15
mailing and the benefit that the mailer will receive in terms of reduced postage.
16
The choice of type of containerization
17
and often is not, the same for an entire mailing job.
18
mailer to split the run of a catalog into geographic
parts.
19
entered;
and transportation
20
made independently
21
have choices
There is,
of the total cost of a mailing job that is not reflected in
10
12
it is worthwhile
and, at each step, the choice taken
by the trade-off
between
the cost of preparing
and of transportation
others are not. Nor are containerization
is very strongly
and presenting
a
does not have to be,
It is not uncommon
for a
Some parts are drop
decisions
of one another.
The basic calculus of cost against the benefit of discounted
rates applies,
22
and is applied, regardless
23
driven by the amount of the postal cost savings that will be realized
of the size of the mailing.
2
In each case, the decision is
by drop
1
entering
2
example,
3
enter all of its mail at a single BMC or SCF close to the point of printing even
4
though only a portion of the mailing will qualify for the drop entry discount.
5
other cases, the mailer may decide that it is necessary to split the mailing entirely
6
and to use plant-load
I
using private sector transportation
8
which drop entry makes economic sense in terms of the total cost of the job. At a
9
deeper level of discount,
10
a portion
of the mailing at a particular
at a particular
drop entry discount
entry point.
For
level, a mailer may decide to drop
In yet
Postal Service trucks for some portion of the mailing job,
only for that location
This disaggregation
or those locations
at
the mailer may decide that it is cost effective to enter
mail at 2, 3 or more separate destination
11
destination
entry points.
of mailing job by point of entry carries with it a distinct
12
difference
13
this lies in the cost difference
14
drop entered
15
possible.
16
thereby
keeping the transportation
17
feasible
level.
18
reducing
19
entered
20
discount,
21
mailer has already
22
undiscounted
23
getting the mail onto the Postal Service trucks (in a plant load operation)
in the kinds of containers
that are used for transport.
The reason for
associated
with the type of containerization.
For
mail, it is almost imperative
to use pallets to the maximum
extent
Pallets permit most efficient
use of the cubic capacity
of the truck
cost -- paid for by the mailer -- at the lowest
Also, pallets can be loaded onto (and off) trucks very quickly,
stop time and demurrage
charges.
However, for mail that is not drop
and for mixed loads where only a portion of the load will qualify for the
the decision
as to the choice of container
paid for Postal Service-provided
is very different:
transportation
Since the
through
the
rate, the mailer’s only incentive is to find the least costly means of
3
or to the
1
closest postal facility.
The fact is that the palletization
2
sophisticated
3
circumstances,
4
types of mail) gaylords.
equipment
therefore,
(forklifts,
palletizers
of mail requires costly and
and the like) and
more costly than the use of either sacks (or for certain
It is also important to consider the depth of dropship entry.
5
6
of the
mail
preparation
7
containerization.
8
postal requirements
9
As indicated,
is in many
process
affect
the depth
of entry
Two elements
-- presort
These are separate elements, but are tied together
and
because of
and mail volume.
in a normal mailing operation,
10
containerized
11
a mailing
12
(Destination
13
carrier route mail can claim that level of dropship
14
mailing, there were no 5-digit, 3-digit or SCF level pallets, the mail would not be
15
entered at a SCF. It could only be entered at either a BMC (Standard
16
ADC (Periodicals),
17
was in sacks, we would not dropship regardless of sack level because of material
18
handling and added transportation
19
and set up for distribution
each mailing job is presorted,
has no carrier
Delivery
However,
based on its own merits.
route presort,
Unit) discounts.
if palletized.
it will not be eligible
If, for instance,
for any DDU
That would be due to the fact that only
discount.
If, in that same
(A) mail) or
If, in that same mailing, all or most of the mail
costs associated with sacks.
if we were presented
with greater
20
and/or 5-digit presort and 5-digit palletization,
21
in behavior related to mail preparation
22
Expansion
23
classes would prompt co-mailing,
of the presort discounts
incentives
for carrier route
there would definitely be a change
in the printing and consolidation
and harmonization
co-palletization
4
of those discounts
industry.
across
and, as a result, deeper drop
1
entry.
2
incentives
3
Standard (A) mail have been proposed in this case.
4
Although
we are hopeful that the Postal Service will restructure
in the future,
Moreover,
no significant
the landscape
changes
of dropshipping
in the presort
has changed
its presort
structure
for
since the drop
5
entry discount structure was initiated for Standard (A) mail in 1991. At that time,
6
dropshipping
7
the SCF was located.
8
that facility was off-loaded there.
9
that has moved in the SCFs for dropship entry into the Postal Service, numerous
at a SCF meant going to one designated
Any mail that we had on a trailer that qualified for entry at
Since that time, because of the volume of mail
10
postal annexes have appeared.
11
or more different buildings located miles apart.
12
required
13
SCF dropship discount.
14
same trailers to maximize our transportation
15
costs, we actually end up losing those efficiencies
16
to off-load different
This relationship
In some cities, a SCF may be represented
facilities for the same
Because we are combining those classes of mail on the
between
efficiencies
and to help control our
at destination.
presort and containerization
landscape
18
for drop entry deep into the postal system.
19
drop entry differentials
20
with drop entry be reflected in the discount.
of drop entry makes it especially
Experience
by 5
In many instances, we are being
classes of mail at different
17
21
building in the city where
be preserved
and the changed
important to maximize the incentives
To do this, it is imperative
that the
and that the full cost savings associated
with the drop entry discounts
in Standard
(A) shows that the
22
deeper the discount the more volume that is drop entered.
23
the more mail that is drop entered, the more mail that will be placed on pallets.
5
It is also the case that
1
As there are many of us in the mailing industry that believe that container-based
2
discounts
3
recognized
4
incentive to drop entry also promotes palletization.
deserve
renewed
consideration,
that drop entry discounts
at the very least,
promote
palletization
it should
be
and that a strong
5
Palletization
6
Benefits the Postal Service
7
8
9
The Postal Service has openly acknowledged
cost benefits when mail is presented
that it realizes cost and non-
to it on pallets.
Although,
under the plant
10
verified drop ship system, the mailer actually
bears the cost of offloading
the
11
truck at the destination
12
of the mail handling process: the quicker the truck gets in and out, the sooner the
13
unloading
14
administration
of the drop entry process.
15
cross-docking
operations
16
are much less time-consuming
17
presented
18
the destination
19
whether the sortation is manual or automated,
20
moved to the location in the plant at which it is to be sorted than other any form
21
of containerization.
22
developed
pallets that are stackable
23
the postal
facility
entry point, the Postal Service benefits even at this step
bay will be available for another entry, simplifying the Postal Service’s
on pallets.
Also, it has long been recognized
-- which are performed
that
by Postal Service personnel
and more accurate
--
when the mail has been
Further, when the mail is to be further worked or sorted at
entry point, mail on pallets can be more conveniently
Further,
at which
working
pallet of mail can be more readily
with industry,
the Postal
and can be conveniently
they have been off loaded
6
staged,
Service
transported
has
from
to the mail service
providers
plants.
Last, but by no means least, the use of pallets significantly
reduces the risk of, and incidents of, injury to Postal Service employees.
All of these considerations,
handing
and processing
benefits
to the Postal Service
of course, translate
at less cost to the Postal Service.
are incorporated
Some of them may be unquantifiable.
reflect
Service
100% of the cost savings
is able to measure
operational
into more efficient
in order
7
it plainly makes sense to
with drop entry that the Postal
to promote
objectives.
Not all of these
into the drop entry discount.
Nonetheless,
associated
mail
realization
of these
other