Print
Solutions June 2005
Manufacturing
IN
BRIEF: It’s a great
time to speak with your clients
about the possibility of a postal
increase, and find out what you
can do to minimize their delivery
costs.
Preparing
for a Postal Rate Increase
BY
C. CLINT BOLTE
For
the first time since 2002, the
U.S. Postal Service has requested
a rate increase from the Postal
Rate Commission. The 5.4 percent
overall increase likely will take
effect by January 2006. What impact
will this have on the printing
industry, its publishing clients
and direct mail customers?
The
universal reaction is relief—a
number of industry prognosticators
predicted a higher rate increase,
even a double-digit one. “Rate
stability is essential to the
growth and vitality of the mailing
industry,” says Michael
J. Critelli, chairman and CEO
of Pitney Bowes Inc., Stamford,
Conn. “Ours is a $900 billion
industry that collectively employs
9 million Americans and accounts
for 8 percent of U.S. gross domestic
product,” he says. “To
the extent that rates must rise,
a measured increase like the one
proposed by the U.S. Postal Service
is preferable.”
Ironically,
the Postal Reform legislation
Congress is considering, coupled
with the Postal Service’s
favorable operational results
in fiscal 2004, may have a dampening
effect on the proposed increase.
But
first let’s consider the
potential impact of the increase.
The first-class stamp for a 1-oz.
letter will increase from 37 cents
to 39 cents. The variety of classes
of mail for periodicals, non-profits,
etc., which have different levels
of sorting discounts, also will
increase.
The
complete Postal Service filing
is available at www. prc.gov.
(Select samples of the rates are
shown in the table, right.) Additional
proposed rate tables for parcel
post, bound printed matter, media
mail, library mail and special
services also are available at
www.usps.com/ratecase.
The
Postal Service distributes 85
percent of periodicals. Larger
publishers will continue to move
up the logistical stream, consolidating
their titles at their printers,
while smaller publishers will
do so at centralized consolidation
centers, according to Cathleen
Black, president of Hearst Magazines
and a member of the Mailing Industry
CEO Council. These vendors then
drop-ship full truckloads closer
to the final destination for delivery
by the Postal Service. “That
is the perfect scenario, where
private sector entities become
the consolidators and the Postal
Service does the final delivery,”
Black says in the April 2005 issue
of CEO Magazine.
At
the Print Outlook 2005 Conference,
Bruce Biegel, managing director
of direct mail consultant Winterberry
Group LLC, said he expects direct
mail to grow at a rate of more
than 5 percent for the next few
years. Historically, when a postal
rate increase is announced, there’s
a flurry of project activity before
the increase, then a brief hiatus
immediately following the increase.
The net result historically has
been no decrease in volume due
to rate increases, a scenario
Biegel forecasts for 2006.
Taking
Biegel’s advice, it’s
logical for printers to encourage
clients to ramp up direct mail
programs now and implement them
during the third and fourth quarters
of 2005 to beat the proposed increase.
It’s
possible that the effective start
date for the proposed increase
will be delayed for several months.
The reason: The Postal Service
needs to generate funds to meet
an escrow payment mandated by
the 2003 Civil Service Retirement
System Reform legislation. Unless
changed by Congress as part of
its postal reform consideration,
these escrow payments will be
required annually and in increasing
amounts.
After
several years of cost-cutting,
the Postal Service turned a profit
in fiscal 2004, its first since
1971. While earlier projections
were for losses in fiscal 2005,
the Postal Service now expects
to break even this year. If that
happens, it won’t need the
rate increase to be implemented
until 2007 to cover its operating
expenses and other obligations.
Currently,
the Coalition for a 21st Century
Postal Service is working with
members of Congress to endorse
the Postal Reform legislation
stalled in Congress. DMIA is a
member of the coalition. One issue
involved in postal reform is freeing
up some escrow funds for the Postal
Service, which could defer an
increase. The coalition says that
any postal increase now would
have a detrimental effect on the
printing industry because it will
cause mailers to adopt electronic
means of delivery.
It’s
a great time to speak with your
clients about the possibility
of a postal increase, and find
out what you can do to minimize
their delivery costs.
C.
Clint Bolte is president of C.
Clint Bolte & Associates,
a consulting firm in Chambersburg,
Pa. Email him your comments at
cbolte3@comcast.net.
Current
and Proposed Postal Rates
Mail
Category
Current
Rate
Proposed
Rate
SELECT
STANDARD MAIL:
Regular
letters (per piece <3.3 oz.)
Presorted
3/5 (no entry discount)
$0.248
$0.261
Automation
3-digit
$0.203
$0.214
Nonprofit
letters (per piece <3.3 oz.)
Presorted
basic (no entry discount)
$0.165
$0.174
Automation
3-digit
$0.129
$0.136
Non-letters
(per piece <3.3 oz.)
Presorted
basic (no entry discount)
$0.230
$0.242
Automation
3/5 digit
$0.166
$0.175
SELECT
PERIODICAL MAIL:
Periodical
(outside county) with advertising
Destinating
SCF
$0.203
$0.214
Destinating
ADC
$0.223
$0.235
Zones
1 & 2
$0.248
$0.261
Zone
5
$0.389
$0.410
Zone
8
$0.638
$0.672
Nonadvertising
Periodical
$0.193
$0.203
Discount
per piece
Worksharing
DSCF
$0.008
$0.008
Copalletization
1
$0.010
$0.011
Discount
per pound
Zones
1 & 2 avoided
$0.014
$0.015
Zone
5 avoided
$0.056
$0.059
Zone
8 avoided
$0.131
$0.138
Ride-along
(per piece)
$0.124
$0.131
