Mailing & Fulfillment — Looming Changes for Mailers

BABY BOOMERS may remember the poster (also used in IBM ads) that preached "plan ahead," but illustrated the result of doing the opposite. As 2008 moves along, looking at the changes ahead facing the mailing industry, the advice again may be to "plan ahead," but do better than shown in the poster.

Mailers can expect several significant events over the next year, stretching into early 2009:

o A rate case, or "price adjustment" as they're now called, this month;

o Implementation of tighter "Move Update" standards in November;

o Phase-out of more postage meter models by the end of 2008; and

o Implementation of the Intelligent Mail Barcode (IMB) in May 2009.

In addition, the Postal Service will conclude rulemakings about service performance measurement and address location on flats, and Congress and the Postal Regulatory Commission (PRC) will be considering reports about the postal monopoly, accounting rules for postal products, USPS "advantages" compared to competitors and other topics.

The Postal Service's interest in another rate increase has been known since last year, and observers' anticipation was satisfied in February with the agency's notice of a May 12 rate increase for all of its market-dominant products. (A second announcement in mid-March revealed new rates for competitive products, also effective May 12.)

True to its word, the USPS gave mailers 90 days notice of the major rate hike--twice what the law requires. But the value of 90 days notice isn't the same now as it was in the past. Although the 1970 law (replaced in December 2006 by "postal reform") prescribed a protracted ratesetting process, and although the final form of a case filed under that law wasn't known until the PRC issued its recommended decision, the duration of the process at least allowed for thought about, and general planning to comply with, the rules that would eventually implement the case's results.

However, the new rate-setting process for market-dominant products leaves mailers with just the 90-day notice assured by the Postal Service. As a result, the effective pre-implementation period has gone from more than a year to just three months, and the opportunity for mailers and their suppliers to prepare has been compressed accordingly.

Fortunately, the recent filing includes few changes in rate structure or classification, so the 90-day period might be adequate. Had the case been more complex (as future cases may be), software companies and their customers might have been apoplectic if their first look at what will be implemented came only 90 days in advance.

Nonetheless, some plans can be made based solely on the signals the Postal Service continues to send. "Efficient" mail still enjoys a rate advantage, so mailers may want to continue working with clients whose mailpiece design is less than ideal. Compliance with the physical standards for automation is important, but so are those for barcoding and address quality.

Similarly, strategies to aggregate more volume into a single mailing improve the chances for finer pre-sort, wider use of destination entry, and for better rates accordingly.

Even though "Move Update" standards have applied to discount First Class Mail for more than a decade, the continuing volume and cost to the Postal Service associated with undeliverable-as-addressed (UAA) mail would suggest those rules weren't effective. So, last year, the Postal Service conducted a long-awaited rulemaking to tighten and expand those standards, shortening the update period from 185 to 95 days before the date of mailing and extending the rule's effect to Standard Mail.

The final standards will take effect next November 23 but, at this point, no professional mailer or list manager should be surprised by the content or purpose of the standards, or struggling to be ready to comply. However, that UAA volume remains as high as it is indicates that more than a few list owners may need to take action.

Mailing companies also need to recognize the potential risk if they present mailings produced from outdated lists. As its name indicates, Postal Service Form 6014, Certificate of Move Update Compliance attests to the mail owner's responsibility for compliance with the Move Update rules and, in turn, can indemnify a mailing house for any related deficiencies.

Therefore, professional mailers may want to inform clients that they will need to submit Form 6014 with any mailings for which the mailing company itself did not do the address update work.

Phase four of the Postal Service's transition to more secure postage meters concludes at the end of 2008. At that time, "security enhanced" letterpress meters will be de-certified and no longer valid for use.

The USPS has been de-certifying postage meters since the 1990s, removing from service those that were the most susceptible to tampering and postage theft. The phase-out began with mechanical meters, then those electronic meters that were reset manually, followed by the ongoing transition from letterpress to digitally printing meters.

"Unenhanced" letterpress meters (those without an automatic shut-off capability) were removed from use by December 31, 2006; "enhanced" letterpress meters (those with an automatic shut-off capability) are the ones that must be out of use by the end of 2008.

The biggest single event--or set of events--will be those surrounding the May 2009 implementation of the Intelligent Mail Barcode. In addition to eventually replacing the current Postnet format with the IMB on letters and flats, the Postal Service proposes that the transition include adoption of IMB-based container and pallet labels, heightened emphasis on electronic submission of postage statements and documentation, and electronic scheduling of mail entry.

Although many months remain before the implementation date, mailers are (or should be) attentive to what the IMB transition and related activities entail. More than simply a font change, the IMB affects production equipment, software, mailpiece design, container label stock, and the methods by which postage is paid and documented.

However, mailers, and especially the producers of mailing software, have been anxious over the Postal Service's timeline and delays in the publication of complete standards for IMB preparation and related topics. Similarly, the mailing industry has expressed concern that the Postal Service's PostalOne system will be overwhelmed if mailers quickly adopt the IMB and electronic document submission in significant numbers.

In turn, such speculation fuels industry worries about increased postage costs when rates or discounts are linked to the use (or non-use) of the full range of features being proposed by the agency. Access to such rates would be frustrated, of course, if circumstances make it difficult for mailers to meet the corresponding requirements.

Fortunately, the Postal Service has been exceptionally aware of mailing industry concerns and responsive to what it's heard. After the agency issued an advance notice of its IMB requirements last January, it held customer meetings nationwide and urged mailers to submit comments on what was proposed.

By the end of the 60-day comment period, the USPS reportedly received about 2,500 comments--and they had an impact. On February 29, the Postmaster General announced that the original January 2009 target for IMB implementation was being pushed back to May 2009, that the current barcode would still be valid to earn discounts through May 2010, and that the agency would soon address other concerns raised in the comments. The Postal Service was expected to issue its next proposal for finalization and publication before the National Postal Forum in late May.

Flats automation will be enhanced beginning later this year when the USPS begins deploying its fleet of flats sequencing systems. In the first phase, more than 100 of the mammoth machines will be installed in processing plants to prepare mail in walk-sequence for those carrier routes with the highest volumes of flat-size mail.

Meanwhile, the agency will soon conclude its rulemaking about address placement on flats. That initiative, designed to enhance carrier efficiency and not related to FSS equipment needs, will require changes in mailpiece design and in the addressing and production of flats. Although the final rule has not yet been issued, mailers and their clients need to recognize the agency's strong interest in standardizing address location on flats and use the proposed rule (published last October 10) as a guide to what the final rule may contain.

Separately, the USPS will be concluding the rulemaking about the methods it will employ to monitor its performance against the service standards published last December. The PRC also sought comments on those methods, as it has on a variety of other proposals and topics, including the Postal Service's universal service obligation, the mailbox monopoly, and the agency's advantages and disadvantages as compared to private sector carriers.

As those broader issues are discussed in the future--perhaps leading to further actions by the Postal Service, PRC or even Congress--the mailing industry and its clients need to be engaged and attentive to their eventual implications at the practical level. PI

About the Author
Leo Raymond is director of postal affairs for the Mailing & Fulfillment Service Association. He joined MFSA in March 2003 upon retiring from a 35-year career with the U.S. Postal Service. To contact him, e-mail lraymond@mfsanet.org. This article is an update to what Raymond wrote for the February 22 issue of "Postal Points," MFSA's postal newsletter for its members.