posted on January 12, 2007 08:04:41 AM
Morning Folks.
I just received a notification that the USPS, in May 2007, is going to be changing the way they charge postage. Instead of weight-based rates, they will be using shape-based rates instead. This change is in addition to the rate increase that will be implemented at the same time. 1st Class Mail will be capped at 3.5 ounces, everything else will be charged per shape, not by weight.
Anyone else heard this? My local Post Office is offering seminars concerning this change for a $15 admission fee. If this proposal is implemented, I am simply dumbfounded. It will change everything about the way I currently do business.
Some of this information is included at www.pccwichita.com
posted on January 12, 2007 09:04:41 AM
From my archives:
October 10, 2006
Five steps to Shape-Based Postage Compliance
by Bob Makofsky
Don’t get too comfortable with the new postage rates. Citing rising fuel and health care costs, the U.S. Postal Service has filed to raise rates again in May 2007. The proposed rates follow a more complex pricing structure than the flat 5.4% increase implemented last January. For the first time, the rate structure will rely on shape, as well as weight.
A push for automation
The new system reflects the higher handling costs of flats and parcels. Today, a three-ounce letter, flat and parcel all cost $0.87 to mail first class. The shape-based rates will lower mailing costs for the same three-ounce letter to $0.82. However, postage rates for the three-ounce flat will increase to $1.02, and the rate for the three-ounce parcel will jump 61% to $1.40. Other classes of mail will see similar increases.
“The proposed pricing structure rewards companies for designing mail that is compatible with USPS mail automation systems,” says Marvin Makofsky, president of Conformer® Expansion Products. With its patented line of expanding envelopes, the Long Island-based company helps clients improve mail efficiency. “Organizations that rely heavily on mass mailings can realize huge savings through more efficient packaging.”
Small changes yield big savings
Many financial institutions, for example, now send statements and performance reports in 9” x 12” envelopes. Folding these documents in half and using a 6” x 9” envelope classify the piece as a letter instead of a flat. Under the new pricing structure, this change can reduce postage costs by up to $0.20 per piece, a 17% savings.
Companies that mail items like books and DVDs can reap even larger savings by converting parcels to flats. Many organizations currently ship such objects in padded mailers. These packages require hand processing by the post office, which classifies them as parcels. Using paperboard or plastic Conformer Expansion Envelopes provides added protection and still allows the post office to process these packages as flats. For firms that mail these items in quantity, such as media distributors and fulfillment companies, the savings add up quickly: $10,000 on a mailing of 50,000.
Literally thinking out of the box can yield enormous savings. For example, a national bank that mails personal checkbooks to 500,000 clients per month can cut annual postage costs by $2.3 million, simply by using Conformer Expansion Envelopes instead of traditional check boxes.
Reduce the rate hike in 5 steps
Careful planning now will help organizations limit the impact of the upcoming rate hike.
• Audit current postage use. Figure out how much the organization currently spends on postage. Count the number of pieces that go out each quarter and each year. What types of items does the company send (e.g., loose documents, bound booklets, CDs, etc.)? How much does each piece weigh? What kinds of packaging does the firm now use (e.g., letter-size envelopes, padded mailers, boxes, etc.)
• Calculate the effect of the proposed increase. Estimate the impact of the postage increase by applying the proposed 2007 rates (www.usps.com/ratecase) to the current mail volume.
• Identify opportunities to increase mailing efficiency. Fold documents in half, and mail them as letters instead of flats. Limit the use of padded mailers and thin boxes by switching to automation-friendly packaging when possible.
This process may not necessarily start in the mailroom. Redesigning letter-size brochures as 5½” x 8½” booklets, for instance, could more than pay for itself in postage savings. Work with departments that produce the items mailed to find creative packaging and mailing solutions.
• Create and publish packaging standards. After identifying cost-effective packaging methods, publish these standards throughout the organization. Explain the factors driving the changes, and make it easy for employees to comply with these best practices. Keep appropriate mailing supplies readily available since convenience often dictates behavior.
• Secure senior-level oversight. In many cases, the individuals with budget responsibility for postage have little or no influence over the actual pieces being sent. Consider the marketing materials in the above example. The department responsible for creating the brochure may balk at paying for a redesign—especially if another group receives credit for the postal cost savings. When performance reviews favor managers with budget surpluses, such concerns are well founded.
To avoid this potential conflict, senior leaders need to take an active role in ensuring administrative efficiency. Meet with all the managers involved in the mail process—from designing packages and collateral materials to shipping items. Approach the upcoming postage challenge as a united effort. In the end, the entire organization will win.
Bob Makofsky is General Manager for Conformer Expansion Products. For more information about the company and its award-winning, patented envelope designs, visit www.conformerinc.com.
CONTACT:
Bob Makofsky
Conformer Expansion Products, Inc.
516-504-6300 [email protected]
A New Dimension in Packaging
Jan 1, 2007 12:00 PM , By Mark Del Franco
The U.S. Postal Service's proposed rate changes and new guidelines from just about every other major parcel carrier mean that no matter what type of product you ship or which carrier you're using to deliver goods to your customers, you can expect to pay more to ship your parcels in 2007.
Let's start with the rate case that the USPS filed this past May and that at press time was expected to be implemented this coming May. To reap the full benefits of its investment in automation, the Postal Service is using discounts to encourage mailers to send pieces that fit within the parameters of its machinery. So whereas a mail piece's weight was the major factor in determining postage, going forward there will be more of an emphasis on shape and bulk as well.
For instance, currently a 2-oz. letter, flat, or parcel costs $0.63 to send. Under the proposed rate case, the cost of sending a 2-oz. letter will decrease by a penny, to $0.62. But postage for a 2-oz. flat will increase to $0.82, and postage for a 2-oz. parcel will nearly double to $1.20. If your parcel is 0.75 of an inch thick or less, you'll get charged the $0.82 rate for a flat, but if your package is thicker, you'll be charged as the $1.20 parcel rate.
“The USPS realizes that it costs less to ship a letter than it does a flat,” says Rich Elefante, director of marketing for Atlanta-based United Parcel Service's Mail Innovations division.
A WEIGHTY ISSUE
UPS, FedEx, and DHL are also taking size and shape into greater consideration now, with their new dimensional weight charges. UPS is implementing the charges this month; Memphis-based FedEx will put them into effect Feb. 5. And as of mid-December, Weston, FL-based DHL was planning to introduce dimensional weight classifications sometime in the first quarter of 2007.
The carriers are saying that they want better, more-precise ways to charge mailers for carrying their goods. So how much room your parcels take up in a carrier's truck or trailer will affect what you pay.
“The dimensional-weight-based charges are in response to lower-density packages, more expensive routes, and rapidly increasing fuel costs,” says Bill Armstrong, technical development manager for Elmwood Park, NJ-based Sealed Air Corp., a manufacturer of protective packaging.
“Each type of vehicle is restricted in the volume of the trailer and the maximum amount of weight it can carry,” Armstrong explains. “Consider that traditionally, the cost of shipping a package has been based primarily on the weight of the packaged item. If a load then ‘maxes out’ by weight, the carrier receives the most revenue possible for that shipment.”
Ideally, then, a carrier would want a trailer packed with boxes loaded with heavy machinery. If, on the other hand, the volume of the trailer is filled before maximum weight is achieved — if instead of machinery, the same boxes were filled with feathers — then the carrier would receive less revenue for that shipment, but its costs for transporting it would remain pretty much the same. In these cases of low-density packages, Armstrong says, “the carrier's profits are lessened.”
From the carriers' point of view, dimensional weight charges ensure that their customers pay their fair share of the total vehicle capacity that their packages will occupy, by requiring a premium for low-density packages. With this new rate calculation, UPS, FedEx, and DHL will measure any package that is 3 cubic feet (5,184 cubic inches) or larger by the dimensional weight rather than the traditional oversize calculation. And as part of its rate case, the Postal Service intends to add a dimensional weight classification for packages that exceed one cubic foot.
WHAT IT MEANS TO YOU
Most marketers don't yet have a handle on how their packaging needs will change. But change they will — perhaps dramatically, says Todd Benge, senior partner for Andover, MA-based parcel optimization provider BirdDog Solutions.
For example, Benge says, “if you run a pick-and-pack operation with only a few sizes of cartons, the dimensional weight charges that you incur will be much higher than the oversize charges that are currently in effect if your cartons are above 3 cubic feet and [weigh more than] 30 lbs.”
As a result, you may need to make available to your packers additional carton sizes to make sure parcels don't take up more space than they need to.
If you currently have just three sizes of boxes at your packing stations and often rely on dunnage to fill up extra space, you may be better off increasing the number of standard container sizes. You will need to analyze the number of orders that are shipped out in oversize cartons to determine if adding container sizes will pay off.
“How you select your packaging will have an immediate impact on the price you're paying,” Benge says. So marketers that tend to overpack to protect fragile materials might consider using smaller, tighter packages instead of absorbing the extra cost. “Because the dimensional weight is calculated at around 9 lbs. per cubic foot, many shippers that pack lighter boxes will need to use their packaging more effectively,” he says.
Wayne Teres, a Framingham, MA-based operations consultant, says marketers considering changing carton sizes should investigate variable depth, or multiscored, cartons when shipping. The beauty of the multiscored carton, he says, is that because the carton can expand into three sizes, mailers can essentially multiply their available carton sizes without needing more storage space.
The multiscored carton has multiple scores in the depth direction. You simply cut each side down to the desired depth with a standard box-cutting knife and fold in the resulting flap. The final carton, Teres says, has clean corners for a professional appearance and more closely conforms to the product in depth. They therefore reduce the need for void fill when shipping.
In the past it was very easy for catalogers to fill the carton with dunnage, Teres says. “You do that now, and it's going to cost you.”
A BRIGHT SPOT
The new calculations could be good news for some merchants. Benge says that the USPS's pending parcel rates and some dimensional charges will work in favor of shippers of heavier packages that are less than 3 cubic feet. For example, under the current system the Postal Service will bill a 70-lb. package measuring 81 in. × 7 in. × 7 in. an oversize 2 charge (the agency has three classifications for oversize parcels) of $41.10. With the dimensional weight charge, that same package will be billed based on its actual weight since it measures less that 3 cubic feet; postage would cost only $23.21.
But there's no question that the changes will make life more complicated, particularly since mailers are used to calculating the weight of packages rather than dimensions. The major carriers use laser technology to calculate the dimensions of each package; unless you can effectively measure the dimensions of each package to factor the billable weight, you are likely to see additional charges for these packages a week or two after the original invoice was paid.
CONSIDER THIS…
Any increase in parcel delivery has mailers scrambling for ways to offset the costs. But given the new parameters such as the dimensional weight charges, “unfortunately there's no magic bullet here,” says Rich Elefante, director of marketing for UPS Mail Innovations.
You could switch to a lower-cost packaging or void-fill material, but you must consider how that will affect the parcel's protective powers, especially if you ship easily damaged goods. “If you save $2 million on packaging but your breakables increase by more than $500,000, your goodwill with customers will be lost — forever,” Elefante says.
Even though parcel dimensions are becoming more of a factor in determining shipping costs, weight is still a factor as well. Removing a catalog or a package insert can in some cases reduce the weight and thickness of your package. Say a 9-oz. parcel costs $2.60 to ship. If you shave 3 oz. from the parcel, you can cut costs by $0.60, to $2.00 for the parcel.
— MDF
