Saturday, April 26, 2014

People vs. Computers: What's the Best Way To Fix Bad Mailing Addresses?

The U.S. Postal Service’s traditional reliance on “carrier knowledge” to deliver mis-addressed mail is breaking down. But is that good news or bad news?

A USPS executive recently warned that the shift to more non-career carriers is likely to reduce the chances that mail with incomplete or incorrect addresses will be delivered correctly. Comments from both front-line employees and mailers confirm that the trouble has already started.

“Up until about five years ago there was always one carrier on one route meaning that every route was staffed properly,” a 27-year veteran letter carrier commented recently on my article New Postal Hires Mean More 'Return To Sender' Mail. “Plus, we had ‘fixed’ floaters for our days off. This
ensured that the mail was delivered with adequate knowledge. Now, every day is nothing short of chaos. Carriers are scrambling around the office to ‘case up’ vacant routes then doing a two- or three-hour split in addition to your own route. It’s a recipe for failure.”

“I place a big VACANT sticker in my vacant boxes,” a letter carrier wrote on another web site. “Evidently every CCA [city carrier assistant] thinks this is the resident’s name because they stuff it with mail -- every one of ‘em.”

Some commenters believe that relying on carrier knowledge rather than good databases and systems is the real recipe for failure:

“My rural carriers have always re-routed mail because of their personal knowledge and it drives me nuts,” wrote a 20-year postmaster. “I don't condone it because when the sub works, mail gets RTS
[Return to Sender, address unknown. No such number, no such zone]. I can't help the sub, because I don't know either. You'd be a better carrier to push your customers to correct their mail pieces misaddressed, and put their house number on their mailboxes.”

“I could not believe the comments from USPS employees that seemed to be saying that the issue would at least be partially resolved if full time/career employees were the only ones delivering mail because they would know ‘where these people live’," one person commented in the Printing Impressions LinkedIn group for mailers.

“The mail should be addressed properly. That is the only way the system works and especially in a time when people are moving seemingly more frequently. No human can possibly keep track of this for a route of any size (I can barely do it for my family!!!). Address hygiene is key!”

Statistics vs. service
Some postal workers blame the growing delivery problems on postal management that is increasingly emphasizing statistics over service. Said one: “A missed scan point is so much more important to upper management than mis-delivered mail, undelivered mail, or even deliverable mail that ends up being returned to sender because carriers are not given time to properly deal with it.”

Postal workers also complain about businesses and other institutional mailers using outdated address databases. But even industry-standard address-hygiene practices don’t solve all problems.

People often move without notifying the Postal Service, especially since USPS made it harder to obtain the proper forms. And folks forget (or choose not) to share the new address with all of the other organizations with which they have regular dealings.It can take awhile to get updates into the USPS’s address-correction system and even longer to correct data that's just plain wrong.

Stir it up In the interest of stirring up discussion of this knotty problem, here is a selection of other comments made to Dead Tree Edition, other web sites, and LinkedIn groups: 
  • "Hmmmmm, where I work many of the subs deliver everything because they're not given the time, they just don't care or they're too incompetent to figure out who does and doesn't live at a certain address."
  • "We are not allowed to leave mail at the case for the regular carrier to look at the next day to review. 'There's no such thing as review mail!' So I'll send it to the forwarding system, if there is a change of address in the system it's forwarded, if not then it hopefully comes back when the regular will get a chance to check it. Inefficient, but have to follow bonehead instructions."
  • “Maybe the USPS needs to use the new scanners/data collection devices to get real time info from those experienced carriers. Part of the USPS problem is not utilizing technology to the fullest.” 
  • "A few tips: 1. The Processing Center I work for does NOT have nixie or uncoded clerks. This means mail without zip codes will be returned. 2. Mail with incorrect zip codes will be sent to the zip code on the mail. A letter sent to Los Angeles, Ca. 10010 will be sent to New York and then returned as undeliverable. 3. First class mail that is undeliverable and does not have a return address will go to the Mail Recovery Center and if no valid address can be determined the mail will be destroyed."
  • "I’ve been hearing a lot of complaints about returned mail from my customers lately. This is excellent info."
  • "The worst part about this is that the USPS is too stupid and inept to create a return to sender shipping label that is trackable and machineable. So your return to sender Priority Mail package goes to a sorting center to be hand sorted and takes two weeks or more to get back to you."
  • “It [mis-addressed mail] won`t be returned. It will be delivered. Many of our PTFs [Part-Time Flexible employees] just deliver the DPS [delivery-point sequenced] errors. They couldn`t care less if it goes to the wrong address.” To which someone responded, “Goes hand-in-hand with management that couldn't give a sh1t about the training of these subs......numbers and PFP [pay for performance] uber alles."

Thursday, April 24, 2014

Old Ladies' Journal Sent to the Home

The 131-year-old “Seven Sister” title Ladies' Home Journal was consigned today to the magazine industry’s version of the old folks’ home – “special interest publication.”

Meredith announced it will discontinue publishing the 3.2-million-circulation magazine as a monthly and transfer its subscribers to other Meredith titles.

This promo was still on hours after the announcement.
LHJ will travel the same path as some other venerable titles whose audiences became a bit too venerable for advertisers’ tastes – such as Life, U.S. News & World Report, and Country Home: The LHJ brand will appear in print only on newsstand-oriented special-interest publications, often referred to as bookazines because of their lack of advertising, high prices, and focus on a single theme.

Meredith was mum on the future of the magazine's web site, which was still promoting a cheap subscription offer hours after the magazine's demise was announced.

The magazine “has been challenged from an advertising perspective, in particular, primarily due to its higher-than-normal, if you will, median age, which takes it out of a number of the buys,” Stephen M. Lacy, chairman and CEO, said during a conference call today, according to a transcript published by SeekingAlpha. (In the inimitable, no-BS words of The Ad Contrarian: “Marketers, it seems, would rather pander fruitlessly to young people than make real money selling things to old people.”)

“So the objective here and the strategy here is to continue to make the brand available to the individual consumer who has been loyal to Ladies' Home Journal by moving it to a newsstand-only publication,” Lacy added.

That makes sense, considering the title's continued strength at retail: An Association of Audited Media Report showed average newsstand sales of 131,212 per issue in the second half of last year, up 4% over 2012 despite continued shrinkage of newsstand venues.

The transition “significantly eliminates any advertising dependency and a lot of the costs that go along with creating that business,” Lacy said. “It allows us to take those resources and focus them on our very robust parenthood category, where we absolutely lead with the Parents brand and related brands: American Baby, FamilyFun, Family Circle, in the home category with Better Homes and Gardens and all those related activities.”

It’s sort of like starving gramma so you can feed the babies.

The injection of nearly 3 million subscribers transitioned from LHJ will also create a windfall for other Meredith titles. They will be spared from some of the usual low-ball pricing, gimmicks, and direct-mail campaigns that consumer publications so often need to maintain their high circulation levels.

But it's not good news for everyone, of course. More than 100 jobs are being eliminated at the magazine, which spent north of $9 million annually on Periodicals mail, plus additional for letter mail, according to Postcom. Dead Tree Edition estimates the magazine was using well over 6,000 tons of coated paper annually.

Related articles:

Sunday, April 13, 2014

Lower Pay Rates Are Boosting USPS's Finances

Partly because of a shift to lower-paid employees, the U.S. Postal Service experienced a rare improvement in its business last year, according to a Postal Regulatory Commission analysis. But the PRC warned that USPS is still on shaky ground – losing money for the seventh year in a row, short on cash, and unable to borrow money or invest in new equipment.

In other words, the good ship Postal Service is still sinking, but it’s not taking on quite as much water as it used to.

The PRC calculates that USPS’s financial loss from operations was “only” $1 billion in FY2013, down from nearly $2.5 billion the previous year. The PRC’s calculation excludes prepaid retiree health benefits (a budgeting gimmick created by Congress that USPS has stopped paying) and one-time accounting adjustments.

“The Postal Service reduced expenses in FY 2013” despite a minuscule decline in mail volume, says the PRC’s analysis of the Postal Service’s annual 10K financial report, released a few days ago. “Workhours and the average hourly compensation and benefits rate were both lower than last year. This indicates that the Postal Service’s finances may be improving.”

“Personnel expenses, including compensation and benefits expenses and systemwide benefit expenses, account for 78 percent of total expenses. The Postal Service reduced compensation and benefits almost $1 billion by increased use of non-career workforce and voluntary retirement incentives.”

Lower average pay rates
With the help of early-retirement incentives, the number of career employees declined by 37,000, all from attrition. In many cases, they were replaced by lower-paid non-career employees, especially because of a union contract allowing more hiring of non-career postal clerks. As a result, in most segments of the Postal Service the “productive hourly rate” of pay actually declined during FY2013.

On the negative side, fuel costs were higher, and USPS had to spend an additional $137 million on supplies when Express Mail was re-branded as Priority Mail Express.

Growth in packages and Standard Mail almost made up for the ongoing decline in First Class Mail. Boosted by price increases, revenue rose by $700 million (1.2%) during the year.

USPS’s strength in residential delivery could enable it to continue prospering from the growth of e-commerce, but the agency is not prepared for such growth, the PRC warned.

“For the burgeoning e-commerce market to become a viable option, the Postal Service needs to replace and improve its existing aging vehicles to accommodate the shift in mail mix toward a higher fraction of packages and to invest in new and efficient mail processing technologies and equipment. The Postal Service’s ability to make these investments is affected by the lack of available working capital.”

Related articles:

Thursday, April 10, 2014

What the Quad/Graphics-Brown Deal Tells Us About U.S. Printing, Publishing, and Postal Services

Although Wall Street mostly yawned when Quad/Graphics announced this week it is acquiring Brown Printing, the pending transaction is a big deal for many major publishers. And it provides some interesting insights into the U.S. printing and publishing industries and even into the U.S. Postal Service.

For publishers of major magazines and catalogs – those with a print order of at least, say, 200,000 copies – the country’s third largest magazine printer has been the chief supplier of Duopoly Insurance. When Quad acquired its larger rival Worldcolor in 2010, Brown’s business reportedly surged as the big publishers worried about being at the mercy of printing giants Quad and R.R. Donnelley.

“Brown prints titles like Elle, Esquire, Family Circle and glossy catalogs for Macy's, Lord and Taylor and Saks Fifth Avenue,” noted the Milwaukee Journal Sentinel’s John Schmid (the only mainstream U.S. reporter who regularly covers the printing and paper industries, as far as I can tell).

Few other U.S. printers have the equipment or capacity to handle such large print runs of publications. And as part of Gruner + Jahr, a huge German printing and publishing firm, there was little concern about Brown’s financial strength or its ability to stay current with technology.

An underdog run by German engineers
Brown seems to have performed admirably. I don’t recall hearing anything really negative about the company, perhaps reflecting Americans’ natural tendency to root for the underdog. German engineers have been in key management roles at Brown, and it shows – in precise procedures and practices as well as in a nearly obsessive focus on plant loading (that is, smooth, predictable workloads rather than peaks and valleys).

Rather than trying to squeeze more years out of ancient equipment, as some Worldcolor plants used to do, Brown kept pace with Quad and RRD when it came to investing in new presses and bindery lines. But it wasn’t enough.

Installing the latest 64-page offset press was just table stakes when it came to competing with the Big Boys for prestigious publications. Brown’s investments kept it in the game but gave it no “sustainable source of competitive advantage,” as the MBA-types would say.

Brown may have had a true competitive advantage for awhile in the tabloid magazine market that was dominated by trade publications. Colleagues describe an unusual configuration of its press folders (there’s that German engineering at work) that enabled Brown to run magazine-formatted and tabloid-formatted pages on the same press.

Combined with Brown’s expertise in producing small-circulation weekly magazines (many of the tabloid trade magazines were weeklies) and its infrastructure for delivering them, Brown seemed to have a sizable market share in the niche.

A drooping niche
Then came the droop test. (See Viagra to the Rescue? Postal Regulations Are Taking the Life Out of Tabloid Magazines.) USPS instituted regulations in 2010 penalizing flat mail that wasn’t stiff enough to be handled efficiently by sorting machines. In advances of the new regulations, B2B publishers rushed to transform their tabloids to the shorter, less droop-prone magazine format.

Rising postage rates, a challenging advertising market, and improvements in browser-based magazine formats have meant continuing declines in B2B print orders. (Despite all the hype about iPads and fancy e-magazines, I suspect fewer Americans read magazine apps than read the more pedestrian browser-based page-flip magazines.)

Brown also has another distribution challenge: scale. “In every printing-contract negotiation I’ve witnessed, distribution has been the tie breaker,” a publishing colleague tells me.

When every printer in a market has the same or similar presses and bindery lines, the ability to provide co-mailing, dropshipping, and other distribution options tends to become the chief differentiator. In fact, much of Quad’s growth in its early days came from focusing more on distribution than the competition did.

Brown has plenty of equipment and expertise devoted to distribution. But without the volume that Quad and RRD have, it struggles to provide the same kinds of postage discounts and shipping efficiencies that they offer.

Brown's spokesperson acknowledged the issue in a statement to the Waseca County News that "Customers will have a lot of opportunity to benefit from this acquisition" because of Quad's "robust distribution service."

Ultimately, what may have caused Brown to be labeled “non-core” by Gruner + Jahr and sold for “only” $100 million was the realization that the U.S. isn’t Europe.

Schmid notes that, as a printing company owned by a publishing firm, Brown is “an anomaly” in the U.S. But that’s standard practice in Germany, where G+J is both the largest publishing company and the largest printer. (I don't pretend to understand why vertical integration of printing and magazine publishing is so common in Europe but virtually non-existent in the U.S.)

G+J was once a major player in the U.S. magazine market as well, with titles like Family Circle and Fast Company, and did much of its printing at Brown. But after several big deals turned into disasters, it turned tail and exited the U.S. publishing market in 2005.

You would think Wall Street would view the removal of a competitor as a favorable event for Quad, but the company’s stock is actually down a bit since Monday’s announcement. Standard & Poor's downgraded Quad, focusing not on competitive gains from the Brown acquisition but rather on Quad’s increased indebtedness amid “lower industry capacity utilization and aggressive pricing tactics by market participants that have eroded profitability.”

Related articles:

Tuesday, April 1, 2014

Postal Service Dragging Its Feet on Fixing Periodicals

Postal officials, who frequently complain about losing money on Periodicals mail, bear much of the blame for that loss, according to the Postal Regulatory Commission.

“The Commission is increasingly concerned that the Postal Service’s Periodicals pricing strategy is leading to inefficient mailer preparation,” the commission wrote recently in its review of 2013 postal rates, echoing a complaint that magazines have been making for the past decade.

“The inefficient pricing signals being sent by the Postal Service’s prices prevent the Postal Service from maximizing contribution from Periodicals. Further, the inefficient price signals are increasingly creating winners and losers within the Periodicals class.”

The Postal Service’s flawed accounting shows that it receives only 76 cents in Periodicals-class revenue for every dollar it spends delivering magazines and newspapers. That was an improvement of 4 cents over the previous year – the first improvement since 2008 – but it hasn’t eliminated the political and legal pressure to jack up Periodicals rates.

A year ago, in considering whether Periodicals rates are legal, the PRC directed USPS to “leverage its pricing flexibility to improve Periodicals bundle and container pricing to incent more efficient mailer preparation and increase contribution from Periodicals.”

The efficient subsidize the inefficient

Instead, the commission chided, USPS has followed its same old approach to Periodicals pricing – just raising rates by the same percentage across the board. As a result, efficient Periodicals mailers are subsidizing inefficient ones, and USPS is losing out on a change to get publications to mail in ways that reduce its costs.

For example, the PRC wrote, the Postal Service’s own study shows that copies in carrier-route bundles are among the most profitable type of Periodicals mail, yet USPS steadfastly refuses to improve the incentives for carrier-route bundles. [In fact, it’s actually watered down the incentive over the years.]

The PRC noted that the Postal Service has undertaken various initiatives to reduce the cost of Periodicals and other flat mail, but “the Commission is concerned that the Postal Service is not measuring the success of the operational initiatives it has implemented to reduce the costs of Flats.”

It cited a statement from two trade associations urging the PRC “to ‘confront directly the elephant in the living room of Periodicals mail pricing: the Postal Service’s failure to rein in the out-of-control costs of Periodicals Mail despite large investments in automation equipment by the Postal Service, and large increases in worksharing by periodical publishers and their mail service providers.’”

No explanation

Postal officials never have offered a plausible explanation for the USPS's allegedly escalating costs for handling Periodicals.

If the saying that “what gets measured gets done” is true, the Postal Service is shooting itself in the foot by not tracking which of its cost-cutting efforts are working. How can it decide which ones need to be tweaked or scrapped and which ones are worthy of expanding and emulating?

Are postal officials more interested in avoiding the embarrassment that comes with owning up to failures than they are in improving their operations?
Related articles: