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For months, the industry has buzzed with news about the impending postage rate restructure. Many organizations have opted for a wait-and-see approach. After all, the United States Postal Service (USPS) has not officially approved the new regulations. That step comes later this spring, 30 days before planned implementation in May 2007.
At this point, one drastic change companies can count on is the shift to shape-based postage. The USPS relies on postage to cover operational costs, and the current pricing system simply does not work. Certain types of mail cost more to process because they require human handling. Parcels and many flats fall into this category. Yet the USPS now charges the same amount—87 cents—to mail a three-ounce letter that zips through an automated processing machine as it does to mail a three-ounce flat or parcel that a person sorts by hand.
To put the current rate structure in perspective, consider the following inequity: The USPS pays an average of $55 per 1,000 letters for an employee to sort and process mail. A machine, on the other hand, can read addresses, look up zip codes, add bar codes, and sort letters by destination for roughly $4.20 per thousand.
Spotlight on Financial Services
With its massive output of monthly statements, the financial services industry will be hard hit by revamped pricing. Following are suggestions to help increase mailing efficiency.
Fold documents to cut costs. Banks, investment firms, and insurance companies often mail account statements and policy documents unfolded, using 9x12" envelopes. Under the new rate system, companies that mail envelopes of this size weighing less than three-and-a-half ounces—roughly 20 sheets of paper—will see an average postage increase of 20 percent.
Offset this increase by folding letter-size documents in half and mailing them in 6x9½" envelopes, which classify as letters. For example, an investment report that weighs two ounces now costs $0.63 to mail, flat or folded. In May, the postage rate for the flat document jumps to $0.82, a 30-percent increase, while the letter rate actually decreases to $0.62. This 20-cent cost difference adds up when mailing hundreds of thousands of pieces.
Say good-bye to padded mailers. Downsizing parcels to flats yields similar savings. Many financial companies, for instance, send clients affinity mailers, like calendars and appointment books. These items typically ship in padded mailers and small boxes. To mail as a flat, a package cannot exceed ¾". The padding built into protective mailers adds 3/8" to the thickness, leaving little room for content. Consequently, most packages that use these mailers qualify as parcels.
A six-ounce parcel costs $1.59, increasing to $2 under the proposed system. By using expanding envelopes that ship as flats, the new postage rate drops to $1.62, saving $0.38 per piece.
- Think outside the box. Banks, specifically, can use the above strategy to reduce postage when mailing personal checkbooks to customers. Based on new rules regarding flexibility, all boxes ship as parcels once the restructure goes into effect. Flexibility guidelines require flats 10" or shorter to bend at least 1" without damage. Flats longer than 10" must flex at least 2" without damage. At an average weight of 10 ounces, the familiar boxes now used to ship checkbooks cost $2.55 to mail. The new pricing system bumps the postage up to $2.80. As an alternative, fulfillment companies can package checkbooks in an expanding envelope. Reconfiguring the package as a machine-friendly flat lowers the postage to $2.42, yielding savings of 13.6 percent.
No one knows for certain the bottom-line effect the upcoming rate restructure will have on mail-dependent businesses. However, opportunities abound for working with the new system and identifying creative, cost-effective packaging solutions.
Bob Makofsky is general manager for Conformer Expansion Products. For information, visit www.conformerinc.com.
author: By Bob Makofsky