Additional Comments to the President’s Commission on the United States Postal Service
Lockheed Martin Distribution Technologies
1801 State Route 17C
Owego, New York 13827-3998
The President’s Commission on the USPS has requested amplification of suggestions presented to the Commission at the recent public forum held in Austin Texas on March 18, 2003. This paper provides a brief review of recent initiatives undertaken by European Postal Systems to standardize the mail stream.
The primary objective of product standardization is to reduce the costs of processing mail. Standardization in a postal context can relate to a wide range of activities. Examples have been taken from three broad areas:
Once standardized approaches are introduced they can then be optimized and additional savings can be achieved.
Post Denmark is planning to harvest opportunities from its letter mail core product by moving to mail piece standardization. . Standardization of the mail piece is part of their strategy to extract as much value as possible from the core mail product through process savings gained by standardizing the physical mail piece. Post Denmark has introduced three standard letter product sizes to optimize the automated process:
The objective of this standardization exercise is to maximize the machineable mail content. Even with this standardization, mailers are still able to create an attractive and visually diverse mail stream.
Netherlands-based Sandd B.V. is a private company establishing itself as a credible competitor to the incumbent postal operator (PTT Post). In order to compete effectively Sandd B.V. has developed a clear market and product focus, part of which is a service level above the market standard and a delivery network designed for controlled growth and the optimization of variable costs. As a new entrant product, price and process standardization has been a strong driver from the outset, as follows:
Addressed direct mail and magazines
Database printed address
Delivery twice a week (Tuesday and Friday)
Low price, high value
This approach allows Sandd B.V. to operate an effective niche business based on a limited number of standardized products with the ability to sort mail effectively by keeping as much of the content in the automated mail stream as possible, while also assuring that the address content optimizes the automated mail sortation process.
Standard Postal Markings (Indicia)
Deutsche Post World Net (DPWN) launched the StampIT online postage product in 2001 and building on this development has decided to standardize indicia types across as many mail streams as possible (product harmonization strategy). As part of the standardization process the number of indicia types is being reduced to six. Supporting this decision is a processing target to increase the proportion of bar coded mail pieces in the mail stream. DPWN is also considering launching the FrankIT product allowing 2D bar coding across the majority of its business mail stream.
The advantages of standardization of indicia types includes:
This unified technology approach also reduces the cost of revenue protection. Full automatic protection of most mail pieces is possible since items remain in the automated mail stream.
Post Italiane has included standardization as part of its technology upgrade program. Hybrid letter mail from several customer sources has been standardized to enable the optimum mail format allowing as much of the mail stream as possible to be automated. This approach is complimented by the application of a 2D barcode on a large portion of the mail stream to facilitate more effective sortation. A standardized call center approach with 640 operational positions has also been implemented to minimize variability and maximize customer value.
Post Denmark has introduced a simplification of its discount structure for business mailers, based on mail piece size, weight and its ability to deliver the mail quickly (i.e. ‘clean’ mail that can be effectively sorted within the automated mail stream). Finland Post is also considering re-structuring its pricing approach to take account of the ease of sorting primarily business customer’s mail. A discount structure will be constructed to offer substantial reductions to those business mailers formatting mail that is machine-readable. Belgium Post has recently implemented a tariff restructure. The new tariff structure created additional value from its existing core letter market and consisted of:
Belgium Post found that customers were willing to pay more for a service that added more value such as the difference between a standard delivery service and a priority delivery service. This pricing re-structure has led to greater revenues than forecast and a higher level of sales than expected. The short-term downside from the tariff restructure was primarily a reduced quality of service. This has now been addressed and provides a good example of extracting more value from the existing core letter business through a standardized pricing approach.