BEFORE THE
POSTAL RATE COMMISSION
RECEIVEL)
JIJN22 1203
PM ‘00
kL,_l,/:ir,ll
POSTAL
RATE AND FEE CHANGES,
2000
DOCKET
i
NO. R2000-1
ANSWERS OF UNITED PARCEL SERVICE
WITNESS KEVIN NEELS TO UNITED STATES
POSTAL SERVICE INTERROGATORIES
(USPS/UPS-Tl-18
through 31)
(June 22,200O)
Pursuant to the Commission’s
Rules of Practice, United Parcel Service
files and serves the answers of UPS witness Kevin Neels to the following
of the United States Postal Service:
USPS/UPS-Tl-18
interrogatories
through 31.
Respectfully
-A-
hereby
submitted,
f.’ ~/~~,/
Joh’n E. McKeever
William J. Pinamont
Phillip E. Wilson, Jr.
Attorneys for United Parcel Service
Piper Marbury Rudnick &Wolfe LLP
3400 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103-2762
(215) 656-3310
(215) 656-3301 (FAX)
and
1200 Nineteenth Street, NW
Washington, DC 20036-2430
(202) 861-3900
Of Counsel.
ANSWER OF UNITED PARCEL SERVICE WITNESS NEELS
TO INTERROGATORY
OF THE UNITED STATES POSTAL SERVICE
USPS/UPS-Tl-18.
Please refer to your biography
aviation sector has been a particular
have performed
any cost, demand,
which you have used revenue
revenue
ton-miles,
at lines 5-6, where you state, “The
focus of my work...”
or other economic
passenger
Please indicate whether
analysis of the aviation
miles (or kilometers),
or other similar measures,
to characterize
available
of the analysis you performed
(the approximate
points in the first several pages of Appendix
Response
to USPS/UPS-T1
the output of airline(s).
measures
a brief
level of detail of the bullet
A to your testimony will suffice).
-18.
I interpret the word “similar” in the interrogatory
involving
sector in
seat miles,
so, for each such study, indicate the output measure you used, and provide
description
the product of a quantity and a distance.
in my work, and can therefore
to include other measures
I have not used such output
identify no such studies.
-2-
you
If
ANSWER OF UNITED PARCEL SERVICE WITNESS NEELS
TO INTERROGATORY
OF THE UNITED STATES POSTAL SERVICE
USPS/UPS-Tl-19.
Please refer to pages 4-5 of your testimony,
UPS-T-l,
indicate (at page 4 line 21 et seq.) that “[t]o some extent, adjustments
accommodate
growth in volume,
options may be limited.”
although
footnote 4 (on page 5) you indicate that
the adjustments
you have in mind include “a supervisor
off, authoriz[ing]
extra overtime,
unproductive
downtime,
workers
or alter[ing] work practices...to
opinion, do these “adjustments”
ask[ing] workers to defer time
more closely to minimize
increase productivity.”
In your
typically occur within a time frame of one calendar
or less?
Response
can be made to
over a very short time frame the available
In the accompanying
monitor[ing]
where you
to USPS/UPS-Tl-19.
Yes.
-3-
year
ANSWER OF UNITED PARCEL SERVICE WITNESS NEELS
TO INTERROGATORY
OF THE UNITED STATES POSTAL SERVICE
USPS/UPS-Tl-20.
Please refer to your testimony
seems highly unlikely that the operations
and mechanized/automated
affected
operations
of these parallel processing
for shape-based
by the way in which mail is allocated
imply that a variable
(or variables)
capturing
should be included in appropriately
Response
any negative
to USPS/UPS-T1
The interrogatory
demand
cost or labor demand
it (or them) to be irrelevant?
with the quoted statement.
cost or labor
for each of the parallel processing
could potentially
if the models were fully and appropriately
in calculating
one. The allocation
made by the Postal Service,
activities.
My
specified,
and if such variables
The latter qualification
and is thus endogenous
to the mail processing
decisions change with shifts in volume,
to USPS/UPS-Tl-13(c).
-4-
is an
parallel sorting activities is a decision
effects of volume growth would have to be factored
See my response
capture the effects of such
volume variability.
of mail between
To the extent that such allocation
variability.
of mail or mail handlings
assumes that this is the thrust of the question.
were treated appropriately
important
the allocation
Does your statement
seems to imply a situation in which separate
Inclusion of such variables
interactions
activities [manual
-20.
models are being estimated
response
between them.”
test demonstrates
response
You state, “It
mail streams] would not be
specified mail processing
models, at least unless a specification
Please reconcile
at page 22, lines l-2.
into the calculation
operation.
such indirect
of volume
ANSWER OF UNITED PARCEL SERVICE WITNESS NEELS
TO INTERROGATORY
OF THE UNITED STATES POSTAL SERVICE
Inclusion of cross-activity
labor demand
capturing
allocation
variables
models is not the only or even necessarily
the interaction
effects cited in my testimony.
combine all of the processing
processing
other approaches
capacity available.
cost or
way of
One might also, for example,
variables
mailstream
measures
into a
of the amount of
With more time and study, I am sure that
could be developed.
Hence, I do not believe that the solution offered
the only one that is workable,
Bozzo (inclusion
the most appropriate
activities for a specific shapes-based
single model, and include among the explanatory
automated
in a set of activity-specific
or that the specific version
of a manual ratio variable)
is correct.
-5-
in the text of the interrogatory
of that solution used by Dr.
is
ANSWER OF UNITED PARCEL SERVICE WITNESS NEELS
TO INTERROGATORY
OF THE UNITED STATES POSTAL SERVICE
USPS/UPS-Tl-21.
Please refer to your testimony,
UPS-T-l,
at page 21, lines 3-14
Does your use of the term “largely” in line 3 of the cited testimony
Bozzo accounts for potential
Explain fully any negative
Response
interrelationships
answer.
to USPS/UPS-Tl-21.
Yes.
-6-
of operations,
indicate that Dr.
at least in some way?
ANSWER OF UNITED PARCEL SERVICE WITNESS NEELS
TO INTERROGATORY
OF THE UNITED STATES POSTAL SERVICE
USPS/UPS-T1
-22. Please refer to your testimony,
You illustrate the interactions
unit operations.
15/6251-6255,
between
UPS-T-l,
MODS activities with a description
Please refer also to Dr. Bozzo’s response
and to the accompanying
a. Please confirm that opening
library reference
unit operations
groups for which econometric
at page 21, lines 15-18.
of opening
to MPA/USPS-T15-1,
Tr.
USPS-LR-I-178.
are not among the ten MODS operation
results are presented
in USPS-T-15.
If you do not
confirm, please explain.
b. Please confirm that the MODS sorting operation
operations”
to which your example
c. Is it your understanding
that the opening
response to MPA/USPS-T15-1
ODIS destinating
workhours?
Response
volumes
refers.
groups are ihe “downstream
If you do not confirm, please explain.
unit models presented
treat MODS volumes
mail volumes,
by Dr. Bozzo in
in downstream
operations
among other things, as factors “driving”
and
opening
unit
If not, please explain.
to USPS/UPS-Tl-22.
(a)
Confirmed.
(b)
Confirmed.
(c)
It is my understanding
as factors “driving”
opening
that Dr. Bozzo treats TPHlF and destinating
unit workhours.
-7-
mail
ANSWER OF UNITED PARCEL SERVICE WITNESS NEELS
TO INTERROGATORY
OF THE UNITED STATES POSTAL SERVICE
USPS/UPS-Tl-23.
Please refer to your testimony,
Do you contend that it is impossible
labor hours in the variability
to incorporate
estimates,
if desired?
UPS-T-l,
at page 23, lines 15-19.
the measured
If you claim that it is impossible
so, please explain fully and support your answer with appropriate
economic
Response
and/or econometric
effect of capital on
references
to do
to the
literature.
to USPS/UPS-Tl-23.
No. iiowever,
an appropriate
measure of variability
must account for more than
just the effects of volume on labor hours, holding capital constant.
the effects that volume growth has on capital expenditures,
on labor hours through
its influence
on capital.
,
-8-
It must also factor in
as well as its indirect effects
ANSWER OF UNITED PARCEL SERVICE WITNESS NEELS
TO INTERROGATORY
OF THE UNITED STATES POSTAL SERVICE
USPS/UPS-Tl-24.
Please refer to your testimony,
Please describe the procedures
you employed
UPS-T-l,
at page 2.5, lines l-2.
in the “inspection”
you claim to have
performed.
Response
to USPS/UPS-Tl-24.
The first phase of this inspection
reg9398,xls.
provided
involved
in USPS-LR-I-107,
manual review of the data contained
to assess the frequency
instances of zero TPHlF and/or zero labor hours were reported.
instances
as one or more successive
In other words, I excluded
end of the observation
with which isolated
I defined these isolated
quarters of zero or negative
activity and a site that are both preceded
and followed
in
values for a MODS
by reporting
of non-zero values.
periods of zero TPH/F and hours for a site at the beginning
period, since such periods could have corresponded
or
respectively
to the period before the activity was installed at the site, or the period after it had been
shut down.
I found many such instances.
The second phase of this inspection
scan the data set and provide
reporting.
The computer
involved
the development
of software to
a full and accurate count of the number of such gaps in
program
and is included in my workpapers.
developed
for this purpose is named GAPS.PRG,
Results of this analysis are reported
in Table 5 on
page 27 of my testimony.
Although
it is possible that some of the gaps identified
zeros (i.e., legitimate
periods when no mail was processed),
too long to be explained
entirely by periods of idleness.
-9-
in this way represent
they are too numerous
Moreover,
frequent
true
and
ANSWER OF UNITED PARCEL SERVICE WITNESS NEELS
TO INTERROGATORY
OF THE UNITED STATES POSTAL SERVICE
inconsistencies
between the TPH/F data and the labor hour data demonstrate
existence of numerous
reporting
the
errors.
The table below shows the number of instances in which a MODS activity at a
site reports either positive TPHlF and zero labor hours, or vice versa.
plausible operational
reporting
explanation
for such a pattern.
It can be explained
There is no
only by
errors.
MODS
Pieces
Hours
Hours C=O Hours >O O-40 Hours
c=o
c=o
Group
Pieces >=O Pieces =0 Pieces -co
BCS
259
I 246
2
15
3
‘OCR
656
608
6
52
30
FSM
1872
1839
4
37 28
LSM
2137
1767
!i
374
78Fi
Manual Flats
171
-l’6’
2
Manunl L~etters
187
II%3
2
I14
I
4
Marnual Parcels
/ 1147
I 852
.-1
231
5%
187
Priclritv
1 1605
1 981
1
58
I
659
I
110
8
119
SPBS
1 5288
1 5094 1
202
Notes and Sources:
1. Data are from reg9398.xls
provided in USPS-LR-I-107.
2. Following USPS-T-15, pieces for manual operations equal total piece
handlings (TPH). Pieces for automated operations equal total pieces fed (TPF),
except for observations where TPFcTPH.
1-v
..--.
--_.-.-
I
.-.
I
---
;
I
/
-lO-
I
ANSWER OF UNITED PARCEL SERVICE WITNESS NEELS
TO INTERROGATORY
OF THE UNITED STATES POSTAL SERVICE
USPS/UPS-T1
Please provide
Response
-25. Please refer to your testimony,
a detailed citation to support the explanation
to USPS/UPS-T1
See USPS-T-15,
statement
UPS-T-l,
at page 28, lines 6-9.
you attribute to Dr. Bozzo.
-25.
page 127, lines 5-7. I misspoke when I included SPBS. The
by Dr. Bozzo refers only to manual parcel and Priority.
-ll-
ANSWER OF UNITED PARCEL SERVICE WITNESS NEELS
TO INTERROGATORY
OF THE UNITED STATES POSTAL SERVICE
USPS/UPS-Tl-26.
Please explain your understanding
TPF for SPBS operations
are measured.
and TPF for SPBS operations
Response
the recording
Data System Handbook
pieces for parcels, the Management
M-32 (Docket No. R97-1, USPS-LR-H-147)
actual count of parcels or by standard
first handling
conversion
states in
pieces are determined
by an
rates of the number of pieces per
(sack or hamper).”
In section 411, “Recording
Procedures,”
that same document
to “Use console or meter readings of mechanical
available.”
that TPH
from machine counts?
of first handling
section 212.14 that “in parcel operations,
container
is it your understanding
to USPS/UPS-Tl-26.
In discussing
Operating
are obtained
Specifically,
of the method by which TPH and
It also directs personnel
to “Record
readings of parcel sorting machines,
Total Piece Handlings,”
processing
directs personnel
equipment
where
parcel volume by container
or other counters.”
count, meter
In section 412.4, “Recording
the manual states that “For machine operations
.
the MOD
System records the actual total piece handling from meter readings or printouts
rather
than from projections.”
I infer from the statements
quoted from sections 411 and 412.4 of the MODS
manual that at least some parcel sorting machines
when counter data is available.
are equipped
it is used to determine
-12-
TPH.
with counters,
and that
ANSWER OF UNITED PARCEL SERVICE WITNESS NEELS
TO INTERROGATORY
OF THE UNITED STATES POSTAL SERVICE
USPS/UPS-Tl-27.
Standard
Is it your understanding
A are commonly
that bundles of fiat-shape
handled in SPBS operations?
basis for your understanding.
Response
to USPS/UPS-Tl-27.
Yes.
-13-
Periodicals
If not, please describe
and
the
ANSWER OF UNITED PARCEL SERVICE WITNESS NEELS
TO INTERROGATORY
OF THE UNITED STATES POSTAL SERVICE
USPS/UPS-Tl-28.
Standard
Is it your understanding
A are commonly
handled
that bundles of flat-shape
Periodicals
and
in manual parcel and/or Priority Mail operations?
If
so, please describe the basis for your understanding.
Response
to USPS/UPS-T1
-28.
Postal Service witness Kingsley states that “When pallets and sacks contain
bundles made up to finer sortation levels than the container,
This is accomplished
in a manuai or mechanized
operation.”
a bundle sort is required.
USPS-T-10
at 19-20.
She
does not identify where manual sottation takes place. I do not know for certain where
such sortation takes place.
-14-
ANSWER OF UNITED PARCEL SERVICE WITNESS NEELS
TO INTERROGATORY
OF THE UNITED STATES POSTAL SERVICE
USPS/UPS-Tl-29.
Please refer to your testimony,
UPS-T-l,
at page 29, lines 16-18.
a. Is the “trend over time in weight per piece” to which you refer, specifically,
over time in weight per piece at the sourcebype
b. To be “capable of distorting
code /eve/?
Dr. Bozzo’s volume-variability
that the effect of the “false trend” not be captured
regression
Response
models?
If not, please explain.
estimates,”
by trend variables
is it necessary
included in the
Please explain your answer fully.
to USPS/UPS-Tl-29.
(a)
specified
a trend
I was referring
and applied.
Handbook
I understand
based on the Management
M-32 (Docket No. R97-1, USPS-LR-H-147,
the source/type
(b)
to the level at which national conversion
factors are
Operating
Data System
$j 413) that they are specified
at
code level.
Yes. Dr. Bozzo does include trend variables
in his model, and if all sites
shared the same trends in weight per piece, the effects of those trends would probably
be captured
by Dr. Bozzo’s trend variables.
However,
if each site had its own unique
trend in weight per piece, their effects would be captured
nor by his site-specific
fixed effects.
-15
neither by his trend variables
ANSWER OF UNITED PARCEL SERVICE WITNESS NEELS
TO INTERROGATORY
OF THE UNITED STATES POSTAL SERVICE
USPS/UPS-T1
-30. Please refer to your testimony,
UPS-T-l,
at page 29, line 22, to
page 30, line 1. Please confirm that your statement would still be correct if it read,
“...the fixed effects, the random effects, the pooled and the between
be inconsistent.”
between
Response
If you do not confirm, please provide
estimator is consistent when site-specific
estimators
a mathematical
measurement
will all
proof that the
errors are present.
to USPS/UPS-Tl-30.
Confirmed
error involving
in the case of fixed site-specific
site-specific
trends in measurement
IID (i.e., identically and independently
case, the averaging
distributed)
measurement
error.
tend to reduce the variance
of the measurement
-16-
Not confirmed
measurement
across time periods that the between
error, or measurement
error.
in the case of
In this latter
model is based upon would
error, with a resulting loss in bias.
ANSWER OF UNITED PARCEL SERVICE WITNESS NEELS
TO INTERROGATORY
OF THE UNITED STATES POSTAL SERVICE
USPS/UPS-T1
31.
and footnote
Please refer to your testimony,
UPS-T-l,
at page 32, lines 16-21,
31.
a. Please confirm that your reference
specifically,
to the paragraph
in footnote
31 to page 55 of USPS-T-l
5 is,
ending at page 55, line 8. If you do not confirm, please
explain.
b. If you confirm in response
to part (a), please further confirm that the paragraph
cite begins at page 54, line 15, of USPS-T-15.
c. If you confirm in response
“The Postal Service’s
absolute and relative amount of handlings
changes in Postal Service operations,
levels and proportions
mailer behavior,
to USPS/UPS-Tl-31.
(a)
Confirmed.
(b)
Confirmed.
(c)
Confirmed.
-17-
recognize that the
or other factors.
The annual
key shares permit the assumed
to vary over time.”
explain.
Response
methods
you
per piece may vary over time, due to
updates of the cost pool totals and distribution
handling
If you do not confirm, please explain.
to part (a), please further confirm that the paragraph
cite begins with the sentences,
you
If you do not confirm, please
DECLARATION
I, Kevin Neels, hereby declare under penalty of perjury that the
foregoing
answers
are true and correct to the best of my knowledge,
and belief.
Dated:
June 22.2000
information,
CERTIFICATE
OF SERVICE
I hereby certify that I have this date served the foregoing
mail, postage prepaid, in accordance
document
with Section 12 of the Commission’s
by first class
Rules of
Practice.
w
‘.
zdzL/
Jot’6 E. McKeever
Attorney for United Parcel Service
Dated: June 22,200O
~Philadelphia, Pa.
63967