# Additional Comments to the President's Commission on the United States Postal Service

Submitted By:

Lockheed Martin Distribution Technologies

1801 State Route 17C

Owego, New York 13827-3998

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# European Implementation of Mail Product Standardization

**Introduction:**

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:

-   Mail piece Standards

-   Standard Postal Markings - Indicia

-   Pricing Standards

Once standardized approaches are introduced they can then be optimized
and additional savings can be achieved.

# Mail piece Standardization

**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:

-   Standard

-   C4 Letter

-   Large (Maxi)

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:

-   Sorting information is included in the barcode which reduces sorting
    costs

-   Automatic payment processing is possible

-   Easily integrated with the existing hybrid mail solutions

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.

# Standard Pricing

**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:

-   A new full tariff

-   New conventional tariff

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.