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Corporate Flats Strategy

> Prepared by Strategic Operations Planning
>
> May 2003

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May 2003

Flat-shaped mail plays an important role in satisfying our customers'
business needs. Nearly 30 percent of the volume we process and deliver
is flats which represent a significant source of revenue and
contribution for the Postal Service.

Recognizing the importance of flats to both the USPS and mailers, we are
committed to doing all we can to control not only our internal operating
costs but to work with mailers to identify opportunities to reduce their
preparation costs as well. This Corporate Flats Strategy is evidence of
that commitment.

Modeled after the successful Corporate Automation Plan for letters, the
Flats Strategy identifies the near and longer term activities being
pursued by the Postal Service and highlights those areas of likely
customer impact. The Flats Strategy includes the USPS delivery vision
for the future and examines, in general terms, the steps we plan to take
to achieve that objective. While a detailed listing of tasks and
timelines is not included in this document, they are being managed
separately.

Customer involvement is an integral part of the Flats Strategy, and we
look forward to working with the mailing industry on this most important
endeavor. Comments regarding this document can be e-mailed to this
address: <FlatStrategyFeedback@usps.gov>

John A. Rapp

**TABLE OF CONTENTS**

**Introduction**

Near Term Fy2003 and FY2004

Improving CURRENT Flats operations [1](#__RefHeading___Toc32201044)

INCREASing CUSTOMER PARTICIPATION in worksharing programs
[7](#__RefHeading___Toc32201045)

Delivery Vision [9](#delivery-vision)

MID Term fy2005 through FY2006

IMPLEMENTing Flats sequencing [13](#__RefHeading___Toc32201049)

Identifying customer impacts and participation
[18](#__RefHeading___Toc32201050)

long Term fy2007 and beyond

IMPLEMENTing delivery point packaging [20](#__RefHeading___Toc32201052)

### Introduction

The United States Postal Service has been highly successful in
automating the distribution of letters and stabilizing postage rates by
reducing processing costs. At the beginning of the letter automation
process, Single-Line Optical Character Reader equipment replaced less
efficient mechanized Multi-Position Letter Sorting Machines. With the
introduction of Multi-Line OCRs, Bar Code Sorters, and later the Remote
Bar Coding System, most letter mail could be sorted to the carrier route
level. This helped to offset rising labor costs that would otherwise
have resulted in higher rate increases. Subsequently, Delivery Point
Sequencing (DPS), i.e., preparing letter mail in the order that the
carrier effects delivery, was implemented and dramatically reduced
carrier in-office work hours. The result of these improvements is that,
although letter volumes have increased significantly over the past five
years, automation and DPS have allowed the Postal Service to keep letter
postage increases below the rate of inflation.

Automating letters was made easier since most envelopes had predictable
address locations, no bound edges, and, most importantly, barcode clear
zones. The wide range of physical characteristics and preparation
requirements for flats presents unique challenges to automating flats
processing. As a result of the limited progress in this area, delivery
costs have grown steadily causing price increases that have exceeded the
rate of inflation. The Postal Service is, however, committed to
achieving breakthrough performance in the handling of flats just as it
did for letters. This document describes the Postal Service's plans to
achieve this overall objective.

The Corporate Flats Strategy begins with a review of the efforts under
way and plans to improve flats operations in the near term (FY2003 and
FY2004). This narrative is followed by a section that highlights the
importance of customer participation in worksharing programs.

This information is followed by a section describing the Postal
Service's delivery vision for the future. This vision extends the
benefits of automation to carrier in-office activities i.e., sequencing
flats into delivery point order, and will ultimately include combining
letters and flats into one Delivery Point Package (DPP) to improve
street efficiency significantly. This section contains a narrative
describing two options for attaining the delivery vision that the Postal
Service will consider. The decision on which option to implement will
for the most part be based on each program's economic return on
investment and system development timeframe.

In the next section, the document overviews the activities that will
take place to determine the feasibility of achieving the delivery vision
in the mid term period (FY2005 and part of FY2006). The activities are
organized under two headings: 1) Implementing Flats Sequencing and 2)
Identifying Customer Impacts and Participation. The Postal Service is
committed to applying the necessary resources to address both of these
issues.

The final section describes the actions that will be taken in the longer
term (part of FY2006 and beyond) to realize the delivery vision using
either a one-step or multiple-step process.

As with the letter automation plan, the Postal Service anticipates that
changes in strategy and tactics will occur and as a result options will
be added or eliminated from consideration. This document will be updated
regularly. Comments and/or questions related to a specific topic can be
directed to the appropriate functional group. Comments pertaining to the
plan in general should be directed to Strategic Operations Planning at
U. S. Postal Service Headquarters.

### Near Term FY2003 and FY2004

[]{#__RefHeading___Toc32201044 .anchor}Improving CURRENT Flats
operations

In previous years, flats processing and delivery costs have trended
upward and have caused substantial rate increases for flat shape mail.
Despite these adverse trends, flat shaped Standard Mail continues to be
second only to First-Class Mail in total revenue contribution. Standard
Mail is also a product line that is subject to substantial competition,
but can be price sensitive even without competition depending on the
economy. Periodicals Mail, while contributing significantly less to the
USPS bottom line, is considered the mailbox "anchor." That is,
Periodicals Mail is a product that consumers in most cases subscribe to
and look forward to receiving, therefore adding to the Postal Service's
overall value.

To ensure that these and other flat-shaped products remain affordable,
the Postal Service must continually work to minimize operating costs.
This section describes activities that will improve operating
performance in the near term. These activities fall into the following
general categories: deploying and using automation equipment and
programs, reducing mail preparation costs, standardizing operational
processes, improving manual productivity, tracking performance,
capturing savings, and adjusting complement.

The Postal Service will also take the initiative to research and develop
new methods to distribute and deliver flats. The Postal Service
anticipates that certain technological innovations under development
will make the following programs possible in the long run:

-   Delivery Point Packaging (DPP), a one-pass system of sorting both
    letters and flats.

-   Flats Sequencing System (FSS), a two-pass system for sorting flats
    in delivery sequence order.

Many of the tasks associated with evaluating DPP and FSS will be either
in progress or completed during the near term. The methods used by the
Postal Service to incorporate these results into the Corporate Flats
Strategy are described in the mid-term section of this document.

**1. DEPLOY FLAT SORTING EQUIPMENT IN THE NEAR TERM**

Deployment of the Automated Flat Sorting Machine (AFSM) 100s has been
completed. Based on their performance, the Postal Service has determined
that the entire fleet of FSM 881s can be excessed without a negative
impact on operational performance. Offices that use FSM 881s because
their flats distribution operations could not be centralized into larger
processing centers will be provided FSM 1000s as replacements. The table
below contains actual and projected end-of-fiscal-year national
equipment inventories. It is important to note that even though the
total number of FSMs will be reduced during the near term, the overall
system processing capacity will increase due to the higher throughput of
the AFSM 100s and modifications to the FSM 1000s (described later in
this section).

  -------------- -------------- -------------- -------------- --------------
  FLAT SORTING                                                
  MACHINE                                                     
  INVENTORIES                                                 

                 **FY2001**     **FY2002**     **FY2003**     **FY2004**

  **AFSM 100**   355            534            534            534

  **FSM 1000**   353            353            353            353

  **FSM 881**    379            66             0              0

  **Total**      **1,087**      **953**        **887**        **887**
  -------------- -------------- -------------- -------------- --------------

**2. DEPLOY PROGRAMS THAT INCREASE PERFORMANCE IN THE NEAR TERM**

The Postal Service will deploy several programs that incorporate
technological improvements into current operations and that support the
near term goals. An overview of each program is provided below:

**Upgraded FSM (UFSM) 1000 Conversion**

The FSM 1000 was originally deployed with three barcode readers and/or
keying stations. The UFSM 1000 conversion program will replace one
keying station with an automated high-speed flats feeder and replace the
three barcode readers with one Optical Character Reader (OCR).

**AFSM 100 Improvements**

Improvements to the AFSM 100 include adding a "doubles" detector to
identify and divert double fed mail pieces and enhancing the feeder
modules to reduce damage, reduce jams, and increase throughput.

**Flat Interim Remote Encoding System (FIRES)**

FIRES uses the current AFSM 100 Video Coding System (VCS), which has
been relocated from the AFSM site to a Remote Encoding Center (REC).
This system in effect simply \"stretches\" the wire between the AFSM and
VCS operation and uses the same hardware and software. Most sites use a
T-1 line to transmit images from the AFSM to the REC.

**Flat Remote Encoding System (FRES)**

The FRES program will be used to improve the efficiency of the AFSM 100
REC keying operation by allowing a larger "pooling" of image keyers at
each REC and by providing software and equipment to ensure the workload
is evenly balanced. As additional AFSM 100 keying workstations are
relocated from the processing centers to the RECs, images from up to six
individual machines from multiple locations can be processed at any
given time. Eventually, the FRES program will allow each AFSM 100 keying
workstation at the REC to process images for up to 99 machines at any
given time. The FRES will use commercial-off-the-shelf (COTS) computer
hardware and standard interfaces to ease maintenance, ensure long-term
viability of the technology, and provide the infrastructure needed for
future enhancements.

**Flat ID Coding System (FICS)**

The FICS program will print an ID TAG on a label that will then be
placed on non-barcoded flats. Pilot tests will be conducted to identify
the essential modifications needed for flats sequencing and to
incorporate flats processing into the Postal Automated Redirection
System (PARS).

**Secondary Address Readers (SAR)**

The SAR program will increase address recognition rates while decreasing
errors. The SAR program is part of the AFSM 100 OCR contract that
provides for incentive based software improvements. The Secondary
Address Readers add additional hardware processing equipment and new OCR
applications to the AFSM 100 OCR.

**Flats Recognition Improvement Program (FRIP)**

The FRIP will enhance the address recognition technology used in flat
mail automation equipment. It will improve Optical Character Reader
acceptance rates and reduce error rates on all AFSM 100 and UFSM 1000
equipment.

**Automatic Tray Handling System (ATHS)**

The ATHS program provides selected AFSM 100 machines with automatic tray
handling capabilities. The ATHS automatically places empty flat mail
trays onto the AFSM 100, removes the full trays, labels, and transports
the trays to the Tray Management System or other material handling
system. A requirements analysis will be conducted to determine how many
AFSM 100s will require the ATHS. Initial estimates suggest that only
those facilities with utilization times of 16 hours and higher will
receive the ATHS.

**Automatic Package Processing System (APPS)**

The APPS provides automatic (single or dual induction) package sorting,
capable of six-sided OCR/VCS keying with up to 200 output bins. The APPS
is projected to have throughput capacity of 11,000 packages per hour
with a productivity rate of 550 packages per hour.

**Mail Evaluation, Readability, and Lookup Instrument (MERLIN)**

The MERLIN program provides the Business Mail Entry Units with a method
of ensuring that flat mail received from customers is eligible for
worksharing discounts and automates verification procedures.

The table below provides an approximate period for the implementation of
each program or modification described above as well as a summary of the
impact each should have on operations:

  ---------------------------------------- ---------------- ----------------
  PROGRAM                                  IMPLEMENTATION   PRIMARY IMPACT
                                           PERIOD           ON OPERATIONS

  **UFSM 1000 Conversion**                 FY2003           Increased
                                                            Productivity

  **Flat Interim Remote Encoding System    FY2003           Increased
  (FIRES)**                                                 Productivity

  **AFSM 100 Improvements**                FY2003 & FY2004  Increased
                                                            Productivity

  **Flat Remote Encoding System (FRES)**   FY2003 & FY2004  Increased
                                                            Performance

  **Flat ID Coding System (FICS)**         FY2003 & FY2004  Increased
                                                            Performance

  **Secondary Address Readers (SARS)**     FY2003 & FY2004  Increased
                                                            Performance

  **Flat Recognition Improvement Program   FY2004 & FY2005  Increased
  (FRIP)**                                                  Productivity

  **Automated Tray Handling System         FY2003 & FY2004  Increased
  (ATHS)**                                                  Productivity

  **Automated Package Processing System    FY2003 & FY2004  Increased
  (APPS)**                                                  Performance

  **Mail Evaluation, Readability, and      FY2003 & FY2004  Increased
  Lookup Instrument (MERLIN)**                              Quality
  ---------------------------------------- ---------------- ----------------

**3. USE EQUIPMENT TO MOVE FLAT MAIL UP-THE-LADDER IN THE NEAR TERM**

The Postal Service is taking steps to move all AFSM 100 or FSM 1000
compatible flat volumes away from manual and keying distribution to more
efficient automated operations. This "up-the-ladder"[^1] approach will
continue to serve as a measure of operational efficiency. Incoming
secondary operations that process flats manually in both the processing
centers and post offices offer the greatest opportunity for reducing
costs. Centralizing the distribution of machinable flats from associate
offices, stations, and branches into locations that have AFSM 100s will
ensure that machine use is maximized and that Function 4 workload is
reduced. The table below lists the "up-the-ladder" goals for total flats
handlings:

  ------------------------------------- ---------------- ----------------
                                        **FY2003**       **FY2004**

  **Volume of Flats Processed on AFSM   57.5%            60.0%
  100s**                                                 

  **Volume of Flats Processed on FSM    8.8%             8.3%
  1000s & UFSM 1000s**                                   

  **Volume of Flats Processed on FSM    0.4%             0 %
  881s**[^2]                                             

  **Volume of Flats Processed Manually  5.0 %            5.1%
  in Processing Ctrs.**                                  

  **Volume of Flats Processed Manually  28.3%            26.6%
  in Post Offices**                                      
  ------------------------------------- ---------------- ----------------

The table below lists the national throughput goals for each operational
category:

  ----------------------- ----------------------- -----------------------
  **VOLUME PROCESSED PER                          
  MACHINE PER A/P**                               

                          **FY2003**              **FY2004**

  **AFSM 100**            4.3 million             4.8 million

  **FSM 1000 / UFSM       1.0 million             1.0 million
  1000**                                          
  ----------------------- ----------------------- -----------------------

The Postal Service will continue to increase the number of zones and
carrier routes processed on the FSMs. The table below provides the
national goals for the near term period:

  ----------------------- ----------------------- -----------------------
  **ZONES AND ROUTES                              
  DISTRIBUTED ON THE                              
  FSMs**                                          

                          **FY2003**              **FY2004**

  **Zones**               9,888                   10,382

  **Routes**              189,891                 199,386
  ----------------------- ----------------------- -----------------------

**4. REDUCE FLAT MAIL PREPARATION COSTS IN THE NEAR TERM**

Unlike letters, the majority of flat mail cannot be taken directly from
the opening units and acceptance points to the FSMs, especially the AFSM
100, for processing. Flats must be unpackaged and faced with addresses
and bound edges properly oriented to expedite processing. While incoming
secondary operations are permitted to mix classes of mail during
distribution, most opening units must prepare Periodicals separately
from Standard Mail to ensure that service expectations are met.

The Postal Service has taken action to control and reduce the number of
work hours used in mail preparation by assigning a unique MODS operation
number (035) to identify and track the time spent preparing mail for all
flats at opening units.

The following additional improvements will be evaluated during the near
term:

-   Flats Feeder Assist Device (FFAD) to move flat volumes from pallets
    to FSM feed tables.

-   Wheeled pallet carts to move pallets from the receiving units to
    processing areas.

-   Conveyor belts on SPBS machines to facilitate prepping operations.

-   Standardizing the flat mail preparation methods and procedures.

**5. STANDARDIZE FLATS PROCESSING OPERATIONS IN THE NEAR TERM**

The Postal Service has issued the AFSM 100 Standard Operating Procedures
(SOP), the National Standardization Guide (NSG), and the AFSM 100
Support Guide. The intent of these documents is to standardize AFSM 100
processing and distribution throughout the entire system. The NSG
explains critical processes that a site must implement in order to
achieve projected savings. The SOP, NSG, and Support Guide provide
references to all documents published in support of the AFSM 100. An
AFSM 100 checklist is used to certify that a site is following
established best practices. Areas of savings opportunities are
prioritized so that the field concentrates on those operations with the
greatest payback potential.

The table below lists the Postal Service's national flats operational
productivity goals for the near term:

  ------------------------------ -------------------- --------------------
  PRODUCTIVITY GOALS FOR FLATS                        
  OPERATIONS                                          

                                 **FY2003**           **FY2004**

  **AFSM 100**                   2,450 pcs/hr         2,450 pcs/hr

  **UFSM 1000**                  900 pcs/hr           1,128 pcs/hr

  **FSM 1000**[^3]               900 pcs/hr           N/A

  **Manual**                     450 pcs/hr           450 pcs/hr
  ------------------------------ -------------------- --------------------

**6. TRACK FLATS OPERATIONS PERFORMANCE IN THE NEAR TERM**

To keep focus on the operational improvements that are described in this
document, the Postal Service uses a set of key indicators against which
national and area performance are measured. These performance indicators
are evaluated each accounting period and are available for area review
on the Postal Service's internal WEB site. At the same time, an overall
operational performance report (which includes this information) is
disseminated to the headquarters managers along with a trend evaluation
narrative.

Information on these indicators is provided in the table below:

  ------------------------- ------------------ ---------------------------
  FLATS OPERATIONAL                            
  PERFORMANCE                                  

  **Indicator**             **Measurement**    **Expected Trend**

  **Throughput by Machine   Total Pieces       Increases in Volume
  Type**                    Handled            Processed

  **Work Hours by Machine   Hours Used         Decreases in Work Hour
  Type**                                       Usage

  **Productivity by         Pieces per Work    Increases in All Operations
  Operation**               Hour               

  **Up-the-Ladder           \% of Total        Increases in Automated
  Workload**                Workload           Operations

  **Up-the-Ladder Work      \% of Total Work   Increases in Automated
  Hours**                   Hours              Operations

  **Mail Preparation Work   Hours Used         Actual Below Plan
  Hours**                                      

  **\# of Zones on FSM**    Zone Totals by     Attain Plan
                            Area               

  **\# of Routes on FSM**   Route Totals by    Attain Plan
                            Area               
  ------------------------- ------------------ ---------------------------

**7. CAPTURE SAVINGS AND ADJUST COMPLEMENT IN THE NEAR TERM**

The Postal Service is committed to reducing the costs associated with
flats processing. This will be accomplished in two ways: 1) achieving
the budgeted work hour savings associated with programs and machine
deployments and 2) implementing local and national initiatives to
increase productivity. This approach proved successful when used during
the automation of letter processing and is working equally well with
flats.

**SUMMARY**

In the near term, actions will be ongoing that will ensure current flats
operations continually improve. These actions include upgrading the flat
sorting equipment to increase operational productivity and quality,
moving mail "up-the-ladder" from manual to automated distribution,
reducing opening unit mail preparation costs, standardizing flats
processing, tracking performance, and capturing savings through
complement management.

**NEAR TERM FY2003 TO FY2004**

[]{#__RefHeading___Toc32201045 .anchor}INCREASing CUSTOMER PARTICIPATION
in worksharing programs

Historically, a cornerstone of the Postal Service's efforts to hold down
operating costs has been an effective worksharing program. Providing
incentives to customers who perform work; i.e., presorting, barcoding,
destination entry, that would otherwise require postal resources has
helped to provide stable rates. The Postal Service expects that
affordability combined with service meeting customers' expectations will
continue to be the key to growth and customer satisfaction. The Postal
Service values customer involvement at each step in the development of
new worksharing programs and will continue working closely with the
mailing industry on initiatives that improve flats processing and reduce
costs.

In addition to working with individual customers, the Postal Service
also works collaboratively with the industry as a whole on many key
issues. For example, a joint Mailers' Technical Advisory Committee
(MTAC) workgroup identified the causes of bundle breakage and
recommended changes in requirements and training. Another joint
workgroup is examining how mail preparation irregularities are reported
to mailers while a third workgroup continues to look for ways to improve
worksharing opportunities for the industry. These joint postal/industry
groups like MTAC and the Mailing Industry Task Force provide avenues to
obtain customer input and feedback. Communicating via other methods such
as postal publications (Memo to Mailers, Mailer's Companion, and Postal
Bulletin, etc.), Federal Register notices, mailer's association
newsletters, Postal Forums, and Postal Customer Councils are critical
and will continue to be used.

The following section summarizes some of the initiatives being pursued
with customers to improve operating efficiency. These initiatives
recognize the importance of ensuring that mail makeup requirements are
fully compatible with postal processing and delivery operations.

**1. MATCH MAIL PREPARATION REQUIREMENTS TO NEAR TERM PROCESSING NEEDS**

Customer make-up and mail preparation directly affect Postal Service
processing costs. The Postal Service is committed to working with the
industry to find additional opportunities. Listed below are actions that
will be taken to ensure mail preparation matches processing needs:

-   Examine existing requirements for container presort levels, package
    piece minimums, and container weight and piece minimums.

-   Review the available presort choices. Until the Postal Service is
    able to find an effective means of automatically sequencing flats in
    the order of delivery as is now done for letters, the most desirable
    flats categories are enhanced carrier route or line-of-travel
    presort.

-   Reduce bundle breakage through improved customer preparation and
    Postal Service processing techniques. This effort was incorporated
    into the DMM during FY2002. Additional efforts are planned to
    measure improvement and determine if bundle breakage still remains a
    significant problem.

-   Determine scheme-based preparation requirements based on automation
    sort plans; 5-digit schemes for flats to be run on the AFSM 100.
    This effort will help to decrease the number of mailer prepared
    packages. The outcome will be lower USPS mail preparation costs and
    enhance customer presort and discount opportunities.

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-   Move away from using the current "A, 3, D", etc., pressure sensitive
    bundle labels to requiring more descriptive barcoded ones that
    indicate the Optional Endorsement Line (OEL) package presort level.
    This will ultimately enable automated sortation of flats packages on
    parcel and bundle sorting equipment that have the capability to read
    this type information. Many large mailers currently use the printed
    OEL to indicate presort level; this effort will focus on assisting
    the small to medium sized customers.

-   Examine bundle polywrap and packaging specifications; color,
    opaqueness, reflectivity, strapping locations, to ensure
    compatibility with future automated bundle sorting equipment.

**2. INCREASE CUSTOMER-APPLIED POSTNET BARCODED FLAT VOLUMES IN THE NEAR
TERM**

Unlike letters, flats automation continues to be entirely dependent upon
customer barcoding. More aggressive efforts to identify and remove
impediments to customer barcoding are key elements of the flats strategy
in the near term. Automated flats distribution will be done at all
levels using either the 9-digit barcode, OCR result, or image keying
result. The Postal Service will track the amount of 11-digit barcoded
flats being entered into the system and use this information to estimate
the growth in 11-digit barcoded volume.

The table below lists the projected[^4] total flat, and non-carrier
routed volumes, and barcoded flat volumes by class:

  ----------------------- ----------- ----------- ----------- -----------
  Flat Mail (Billions)    FY2001      FY2002      FY2003      FY2004
                          Actual      Actual      Projected   Projected

  **Total Flat Volume**   55.6        51.6        57.1        59.5

  **Total Non-CRRT        27.4        24.4        26.9        27.2
  Flats**                                                     

  **Total Barcoded Flat   **17.7**    **16.3**    **19.1**    **21.0**
  Mail**                                                      

  **Barcoded First        0.6         0.5         0.9         1.3
  Class**                                                     

  **Barcoded              4.0         3.9         4.4         5.1
  Periodicals**                                               

  **Barcoded Standard**   13.1        11.9        13.8        14.6
  ----------------------- ----------- ----------- ----------- -----------

**3. INCREASE ADDRESS AND BARCODE READABILITY IN THE NEAR TERM**

A joint postal/industry workgroup is studying flat mail readability
optimization and has made recommendations on how customers can improve
their address format quality and meet address location requirements for
automation. The focus of this ongoing effort will be to increase the
amount of OCR/BCR readable flats in the system.

**SUMMARY**

The goal of the near-term effort is to achieve significant improvement
in the current operating environment. Actions being taken to increase
customer participation in flats automation are focused on an effective
worksharing program and on increasing the OCR and BCR read rates. The
key components of worksharing are a rate structure that provides
incentives for desired mailer behavior and package make-up requirements
that best match USPS processing needs. Specifically, the Postal Service
must create rate structures that ensure that flats are entered at the
deepest level in the automation operations as possible, that they are
machinable on our most efficient equipment, and that high quality
barcoding is maximized. These customer related initiatives, coupled with
the operational activities described earlier, are the essential elements
of the overall flats strategy for the near term.

### Delivery Vision

Longer term, the Postal Service will take the next step of incorporating
automation into the delivery process. Several options for expanding
address sequencing of flats will be explored and these will extend the
full benefits of automation to carrier operations. Actions to improve
long-term delivery office and street efficiencies must be consistent
with the delivery environment of the future.

The Postal Service's ultimate vision for delivery is a seamless
operation that produces one package of mixed letters and flats for each
delivery point (Delivery Point Packaging or DPP). This vision is based
on having high-speed mail sorting and packaging equipment that will
efficiently sort and merge the letter and flat mail streams into
delivery sequence for the letter carrier. This equipment will be
optimally located so that the operational savings can be maximized.
Ideally, all presorted mail sequenced using this system would have an
11-digit POSTNET barcode[^5] with a standardized address, or address
label, format and placement so that the equipment output will result in
an address orientation that facilitates efficient delivery.

DPP would replace the labor-intensive carrier casing and pull downs
inherent in the existing manual system. This new carrier/delivery unit
environment will not involve delivery unit sortation, case pull down, or
fixed casing equipment. The packaged volume will then be made available
at a central carrier point or location, which may or may not be a
traditional delivery unit.

The Postal Service has a long history of testing innovative methods to
implement changes in distribution, delivery, and transportation systems
and is continuing this tradition by investing research and development
funds to evaluate the benefits and costs of implementing the delivery
vision.

Delivery Point Packaging (DPP) technology represents the best
opportunity to use innovation to improve operating performance. In
addition to saving work hours within the carrier function, the resulting
packaged volume would enable the Postal Service to explore new
transportation alternatives for letter carrier delivery. A major step in
the planning process will be determining customer and operating changes
needed to prepare and distribute flats prior to incorporating the volume
into delivery sequence. DPP planning will start in the near term (the
next two years) and should be completed during the mid-term period
(within three to five years).

DPP research will initially focus on developing a delivery point
packaging machine (Option 1) that uses a one-pass system to sequence
both letters and flats. While in-depth analysis of the DPP (Option 1)
simulation results is being performed, parallel evaluations of other
systems will take place. The Flats Sequencing System (Option 2), a
machine that will sequence flats in delivery order using a two-pass
system, will also be evaluated.

The research and development time frames for each option will be
different and therefore the results of the Flats Sequencing System (FSS)
may be available for consideration in advance of the Delivery Point
Packaging system. In that event, a corporate decision to postpone
implementation of FSS would be required, pending final results of the
DPP simulation. Since the Delivery Point Packaging system would use only
one pass to finalize letters and flats in delivery sequence, the
economic return for the Delivery Point Packaging system may eliminate
the need to develop and deploy FSS machines.

The following describes several specific steps leading to the
development of the delivery vision and includes diagrams of current and
future mail flows under Options 1 and 2.

**1. EVALUATE THE USE OF ZIP+4 TO ESTABLISH FIRM AND OTHER DIRECTS ON
THE FSMS, AFSM 100s, AND UFSM 1000s**

In order to reduce the overall volume of flats that must be sequenced,
the Postal Service will explore the possibility of using the POSTNET
barcode or ZIP+4 to establish additional firm holdouts and carrier shelf
sortation on the AFSM 100s. Using ZIP+4 to establish firm holdouts
proved to be very effective during letter automation implementation for
those firms that had a unique +4 add-on. This process was accelerated
when the volume sorted to each separation increased due to the shift
from a 9-digit to an 11-digit barcode.

Successful migration of the firm direct concept into flats sortation
will depend on whether bin assignment separations are available and
whether the volume can be finalized in a one-pass process. Flat sorting
machine depth of sort will depend on the number of routes being sorted
and on the volume destined for each firm or separation. The expected
benefit from this process is a reduction in carrier office time.

**2. SEQUENCE FLATS IN DELIVERY READY CONDITION**

The Postal Service will develop and deploy the Flats Sequencing System
to reduce carrier in-office costs for sequenced flats that do not
require casing. An overall reduction in the volume of cased flats will
result in a comparable reduction in carrier office time. The Postal
Service will work with customers and the Postal Rate Commission to
change the rate structure and mailing requirements to maximize the
amount of 11-digit barcoded flats produced by mailers.

While Option 2 (Flats Sequencing System) will support the delivery
vision by deploying flats sequencing machines, it does not fully realize
the delivery vision. The problem of incorporating the carrier cased
letters and flats with the sequenced volumes into a delivery point
package would remain. One possible solution would be to package the DPS
letters and FSS sequenced flats separately, with the carrier casing the
remaining volumes. Another solution may be to develop a mail merging
machine that could be used to combine machine and carrier sequenced
volumes.

Should Option 2 be selected, the Postal Service would need to determine
if these or other viable alternatives exist to sort sequenced letters
and flats and residual volumes together into a single package for each
delivery point. Lacking this, the Postal Service would forego much of
the potential street savings in the full delivery vision, but would
achieve smaller savings primarily from the reduced carrier casing time
in the office.

**3. IMPLEMENT DELIVERY POINT PACKAGING**

This option will provide a seamless carrier delivery operation while
reducing carrier in-office and street delivery costs. Packaging mail for
each delivery point as a single pre-packaged unit eliminates the need to
"finger the mail" to find breaks between delivery addresses. Additional
savings include reductions in loading times, improved mail orientation
in the delivery vehicle, and the elimination of carrier office time.

Businesses and residential customers have responded favorably to the
convenience and weather proofing afforded to their mail when it is
delivered as a packaged unit. Ergonomic impacts on street delivery for
letter carriers also provided significant improvements over current
delivery methods. Packaged mail also provides an opportunity for the
Postal Service to explore additional revenue generation potential for
"date certain" or "time sensitive" advertising.

-   The flow charts on the next two pages provide a graphic overview of
    the delivery vision showing the current process, the role that firm
    or carrier directs would play, the shifting of workload associated
    with walk sequence mailings, and any new or replacement operations.

### 

### 

### 

### MID Term FY2005 through FY2006 

[]{#__RefHeading___Toc32201049 .anchor}IMPLEMENTing Flats sequencing

As described in the previous sections, the Postal Service is exploring
several options for improving the delivery of flats and letters. Much of
the baseline work and the initial research and development of any
sequencing machines will take place during the near-term period.
Planning for the specific operational adjustments needed to do either
the Delivery Point Packaging (Option 1) or Flats Sequencing System
(Option 2) will occur during the mid-term time frame.

Consistent with the delivery vision, the Postal Service will consider
several alternative courses of action. The speed with which each can be
followed will depend on how quickly technological solutions can be found
and on the level of customer involvement. During the mid-term planning
period, the Postal Service will run simulation models to estimate the
savings associated with moving directly to Delivery Point Packaging
(DPP) or pursuing the Flats Sequencing System (FSS) options.

The Postal Service will work closely with several contractors to refine
the operating environment, overcome the technical challenges associated
with deployment, and implement flats sequencing in a timely manner. The
Postal Service will prepare a detailed cost/benefit analysis to identify
the most promising scenarios under varying product mix (classes of
mail), schedules, operating windows, etc. Once the Postal Service has
identified the viable options it will pursue, development of the
associated equipment, technology, systems, and methods will follow.

The decision points will be:

-   Proceed directly to Delivery Point Packaging (DPP) in order to
    sequence both letters and flats in delivery point order using one
    pass instead of two, or

-   Implement the Flats Sequencing System (FSS) in order to reduce the
    amount of time that carriers spend in the office casing flat mail.

**1. RESOLVING EQUIPMENT AND RELATED ISSUES**

The Postal Service is in the process of defining functional and design
requirements for the proposed DPP or FSS processing equipment. These
machines will be used exclusively for incoming secondary distribution to
the delivery sequence point and will not be used to process other
volumes. In addition to satisfying throughput and sortation quality
issues, there are other factors that must be considered including
calculating support costs, facility modifications, and service
expectations.

Several contractors that produce mail processing equipment and their
systems suppliers are collaborating with the Postal Service in
developing and testing prototypes. Each equipment type being tested
supports flats sequencing.

The Postal Service will also investigate mechanized material handling
systems (flats preparation, loading, induction, and sweeping) that could
improve the efficiency of either the DPP or FSS processing option.

Some developers have suggested that any one-pass DPP machine would, of
necessity, have a very large physical footprint. It has also been
suggested that the footprint might not fit into older facilities that
have closely spaced structural support columns. The design requirements
for these systems must incorporate physical plant layouts, specifically
recognizing that structural support columns are not standardized
throughout postal facilities. The obvious solution is to develop a
modular DPP machine that will be configurable to accommodate building
structural members.

The following information provides an overview of the decisions made
related to implementing either DPP or FSS:

> [Using the ASFM 100 to Sort Flats in Delivery Sequence]{.underline}
>
> Although the AFSM 100 was originally designed and deployed to sort
> flats to the carrier route level, computer simulations and limited
> field testing proved that the AFSM 100 could sequence flats in
> delivery point order. However, additional testing and research also
> confirmed that it could not produce the sequenced mail in a delivery
> ready condition efficiently within its current design configuration.
> Further, the inability to increase the mail sorting speed and the
> problems caused by improper mailpiece orientation in flat trays led to
> the decision to eliminate the AFSM 100 from contention as a delivery
> point sequencing machine. Therefore, **the Postal Service has decided
> not to use the AFSM 100 to sort flats in delivery sequence order**.
>
> [USPS Spraying POSTNET Barcodes Directly on Flats]{.underline}
>
> The Postal Service has determined, as a matter of policy, that it will
> not be cost effective to spray POSTNET barcodes on non-barcoded flats.
> Therefore, **the Postal Service has decided that it will not spray
> POSTNET barcodes directly on flats and will instead rely exclusively
> on the mailers to provide barcoded flats**.

In the near term, simulation results will be available to permit
decisions to be made on the following equipment and related issues:

> [ID Tag Requirements]{.underline}
>
> The Postal Service will determine whether applying ID tags to
> non-barcoded flats will be compatible with DPP or FSS. The Postal
> Service will investigate whether the Identification Code Sorting (ICS)
> tagging system (now used to process letters) can be modified for flats
> processing. As with letters, the ID tag would reference the address
> information that resulted from either OCR resolution or video image
> coding. Additional studies will be conducted to determine if the AFSM
> 100 and/or the UFSM 1000 machine can be modified to apply ID tags on
> non-barcoded flats prior to DPP or FSS processing.
>
> [Sortation Equipment and Support Requirements]{.underline}
>
> The Postal Service will study the feasibility of using the Flats
> Feeder Assist Device to increase the productivity of loading mail onto
> flat sorting machines. Flat bundle sequencing models and equipment
> from several contractors will be live-tested in the field to provide
> proofs of concept. This equipment will be thoroughly tested in both
> lab and operating environments to validate performance and to ensure
> the Postal Service procures state-of-the-art technology.

**2. RESOLVING OPERATIONS ISSUES**

The Postal Service is in the process of identifying and resolving
operational issues related to implementing DPP or FSS. Planning will
focus on:

-   Resolving issues associated with quantifying mailflow changes.

-   Projecting DPP or FSS candidate volumes and characteristics.

-   Determining transportation and scheduling requirements.

-   Locating and deploying equipment.

-   Quantifying facility space requirements.

-   Identifying processing center and carrier unit changes.

Simulation results from earlier modeling efforts will be available to
support decisions on the following operations issues:

> [Mailflow Changes]{.underline}
>
> The Postal Service will determine which operating plan, transportation
> scheduling, and mailflow changes will be required to implement DPP or
> FSS. Both the DPP and FSS programs will be considered at the same time
> providing an opportunity to incorporate possible improvements from one
> into the other.
>
> **Option 1:**
>
> Machines performing DPP will sort both letters and flats at the same
> time. This simultaneous processing emulates manual casing and
> represents a major change to automated mailstreams. The following is a
> list of items that will need to be considered during DPP planning:

-   Eliminating DPS letter processing for DPP zones.

-   Eliminating all FSM incoming secondary processing for DPP zones.

-   Eliminating manual letter and flat distribution and casing,
    pulldown, and tie-out for DPP zones.

-   Eliminating bundle sortation of carrier routed volumes for DPP
    zones.

> **Option 2:**
>
> Machines performing FSS will sort flats in delivery ready condition
> using a two-pass system. The FSS two-pass process may not be the same
> that is used now for DPS letters. This is due in part to there being
> only one first pass, followed immediately by the second pass. Each FSS
> zone will be scheduled for processing at a specific time which will be
> determined by the volume arrival profile. While several factors may
> mirror DPS letter sort plan construction (wrap factor, carrier ID
> usage, etc.), the actual number of second pass trays used will be
> predetermined based on an average of 900 flats per carrier and a
> maximum of 65 flats per tray.
>
> The economic justification for the FSS program requires the
> elimination of carrier route volumes (other than walk sequence
> volumes). Flats that are to be delivered within one or more 5-digit
> delivery zones and that satisfy several physical constraints; i.e.,
> the \"machinable" flats would be passed through this 220-400 bin
> machine twice, and be finalized in walk sequence order for each letter
> carrier. The following is a list of items that will need to be
> considered during FSS planning:

-   Eliminating AFSM 100 incoming secondary processing for FSS zones.

-   Eliminating bundle sortation of carrier routed volumes for FSS
    zones.

> [Transportation Requirements]{.underline}
>
> The Postal Service will determine the impact that DPP or FSS will have
> on transportation and scheduling requirements. Depending on equipment
> location, both of these programs could potentially create the need for
> additional transportation runs thereby increasing costs. The following
> is a list of items that will need to be considered during the planning
> period:

-   Determining the method to transport mail from the plants to the
    stations.

-   Determining the need to modify vehicles to accommodate mail
    transport equipment changes.

> [Equipment Requirement and Locations]{.underline}
>
> The Postal Service will use simulation modeling to determine the
> number of machines and optimal locations. Should the FSS option be
> chosen, the machines will most likely have to be located in larger
> processing centers or leased space. However, should DPP be selected,
> the requirement for Delivery Bar Code Sorters and Flat Sorting
> Machines will actually be reduced. This reduction can be translated
> into excess postal space that could be reused, depending on the zone
> and carrier route to machine ratio. The need for these facilities will
> be examined and should the potential for their reuse be identified,
> decisions on extending ownership will be made.
>
> [Processing Changes]{.underline}
>
> The Postal Service will determine which internal processing and
> distribution changes must be made prior to implementing DPP or FSS.
> These changes will focus on the following areas:

-   Operating Plan Windows.

-   Platform and Receiving.

-   Opening Unit and Mail Preparation.

-   Distribution Requirements.

-   Mail Transport Equipment Inventories and Staging.

> [Delivery Changes]{.underline}
>
> The Postal Service will determine which changes must be implemented to
> ensure savings are captured and complement reductions occur. These
> changes will focus on the following areas:

-   Scheduled Transportation.

-   Platform and Receiving.

-   Mail Staging.

-   Other Unit Activities.

-   Mail Transport Equipment Inventories and Staging.

**MID TERM FY2005 THROUGH FY2006**

[]{#__RefHeading___Toc32201050 .anchor}Identifying customer impacts and
participation

Customer involvement will continue to increase in value and will
initially be focused on improving the following:

> [Address Orientation]{.underline}
>
> Flats that are received at the delivery unit are generally presented
> to the carrier with the address side up and properly oriented for
> easier casing. In order for the potential operational savings from
> sequencing flats to be realized, there must be a comparable form of
> orientation so as to eliminate in-office casing without increasing
> street time. The Postal Service will work closely with the mailing
> industry to determine the proper address and address label locations
> for optimal efficiency in office and street handling.
>
> [Mail Characteristics]{.underline}
>
> The flat mail stream will continue to include a wide range of
> allowable variations in size, weight, shape, and thickness that makes
> flats processing more complex than letter mail processing. The Postal
> Service will work closely with the mailing industry to reduce the
> variations in mail piece design that hamper automated processing.
>
> The Postal Service has also determined that technological advances by
> themselves will not be enough to control costs. Continued increases in
> OCR readable and customer applied barcoded volume must serve as the
> ultimate basis for implementing DPP, FSS, and mail merging. The Postal
> Service will rely exclusively on customers to apply barcodes to flats
> (either sprayed directly onto the mail piece or on an address label)
> and will closely monitor volume increases.
>
> Likely customer impacts will be associated with:

-   11-digit barcode.

-   Mailpiece design and/or characteristics.

-   Presort level.

-   Mail verification and acceptance.

-   Mail preparation and presentation requirements.

-   Entry point and time of entry.

-   Carrier route presort.

-   USPS ID Tag application.

> [Marketing Support for DPP and FSS]{.underline}
>
> The Postal Service will reassess the economic and operational value of
> carrier route presorting in the DPP and FSS environments. For DPP, the
> Postal Service would not require presorting below the 5-digit or
> scheme based levels. For FSS, the Postal Service would substitute an
> 11-digit barcoded automation rate in lieu of a carrier route discount
> where possible.
>
> The Postal Service will work closely with mailers to maintain product
> affordability by driving down operating costs. All issues surrounding
> the manner in which customers prepare their mail will be explored,
> investigated, and resolved. Marketing will be responsible for
> communicating this information to customers through the appropriate
> channels.

Identifying POSSIBLE RATE STRUCTURE CHANGES

Changing the rate structure to better support the Postal Service's
operational needs may need to be an important part of the flats
strategy. Rate changes would serve to encourage customer participation
in mail preparation sortation levels and handling methods that are most
compatible with postal processing and customer processes. Areas to be
examined could include:

-   Incorporating a more explicit level of packaging/palletization into
    the rate structure.

-   Implementing containerization incentives to move flat mail from
    higher cost sacks to lower cost pallets.

-   Examining the effects of weight and shape on costs and
    machinability.

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-   Examining the pass-throughs of cost savings in workshare discounts.

-   Assessing the effect of distance on the transportation costs of
    flats.

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-   Determining drop ship entry locations based on where sorting is
    performed and supplying this information to customers.

**SUMMARY**

The Postal Service will continue to demonstrate that it is committed to
reducing overall costs while maintaining service for the flat mail
stream. In the mid-term period, the focus of the flats strategy is to
identify and develop equipment that allows the Postal Service to process
more flats at a lower cost.

In the next section, the Postal Service provides an overview of the
longer term implementation plans for each of the two options described
previously. The focus of each option will be on extending the benefits
of automation to the carrier operation. As explained earlier, the
optimal choice is to implement Delivery Point Packaging (Option 1). This
will enable the Postal Service to reduce carrier office time and
maximize street efficiency by combining letters and flats into a
Delivery Point Package. Should Option 1 prove not feasible, the Postal
Service will move to reduce carrier in-office time through the
deployment of the Flats Sequencing System (Option 2).

However, implementing FSS by itself may not be the final innovation.
Additional research will be done to determine if additional equipment or
systemic improvements would be required to implement the delivery
vision. The following section contains narrative on expanding the FSS
concept by merging the sequenced flats with other volumes to realize
one-bundle delivery.

### long Term FY2007 and beyond 

[]{#__RefHeading___Toc32201052 .anchor}IMPLEMENTing delivery point
packaging

In the near term, the focus of the Corporate Flats Strategy will be on
deployment and full utilization of existing flat sorting equipment,
minimizing manually distributed flat volumes, and working with mailers
to identify preparation alternatives that would improve USPS operating
efficiency and reduce mailers' production costs.

In the mid-term planning period, two distinct systems will be evaluated,
the Delivery Point Packager (DPP) and the Flats Sequencing System (FSS).
The potential benefits of each of these systems has been covered in the
preceding narrative and reasons given for the preferred solution.

Longer term, the corporate wide focus will be on extending the benefits
of automation to the carrier operation. Emphasis will be placed on
reducing carrier in-office time through the sequencing of flats in
delivery order and maximizing street efficiency by combining letters and
flats into Delivery Point Packages.

This section of the document provides an overview of the two
implementation options for delivery point packaging and a comparison of
activities by planning period. It should be noted that both options will
provide the same opportunity to maximize the return on investment while
minimizing costs and impacts on our customers.

**IMPLEMENT DELIVERY POINT PACKAGING**

The preferred choice would be to develop and deploy a single machine or
system that sequences both letters and flats and permits the Postal
Service to implement delivery point packaging using a one step process.
While many of the specific implementation action items that may be
required have not been identified, the general concept of sequencing
letters and flats together has been approved by senior management.

Pending a successful research and development outcome, the Postal
Service would be ready to implement DPP during FY2008, using one machine
to process both flats and letters. The DPP machines could be deployed at
optimal locations and all DPP related work could be performed at those
sites. The DPP machine output would be packages containing letters and
flats sorted by delivery point. Special handling procedures could be
designed for accountable mail and delivery points that cannot
accommodate packages. Shown below is a one-step DPP implementation time
period schematic, that highlights potential activities of each time
period:

**IMPLEMENT FLATS SEQUENCING SYSTEM**

Should a one-step DPP system prove unfeasible, the Postal Service could
begin implementing FSS during FY2006 (or earlier, depending on
technological advances) using one machine to sequence flats separately
from letters. Because of their size, the FSS machines would most likely
be deployed at large processing centers. DPS letter operations would
continue as they currently exist. Manual letter and flat distribution
operations would for the most part not be affected. Carrier casing times
would be reduced.

The schematic below provides an overview of the phases needed to
implement DPP using a multiple-step process. The first step in the
process would be to develop and deploy the FSS machines.

However, implementing FSS as a stand alone system does not realize the
full delivery vision. Should the FSS option be selected, it is
anticipated that the Postal Service could quickly begin studying the
development of a machine that could merge DPS letters, sequenced flats,
and carrier cased residue volume into one mail stream, or if not
feasible, individual letter and flats packages. If technically and
economically feasible, the optional steps shown below could be pursued:

[^1]: The "up-the-ladder" program focuses on using the FSMs (the most
    efficient level of distribution) to process flats instead of manual
    (the most costly and least efficient form of distribution).

[^2]: It is anticipated that all of the FSM 881s will be removed from
    service prior to the end of FY2003.

[^3]: All of the existing FSM 1000s should be converted to UFSM 1000s by
    the end of FY2003.

[^4]: These projections are trend-based and used for internal planning
    purposes only.

[^5]: Depending on the technology available during equipment design and
    development, it may be possible to substitute an OCR result or
    information derived from an ID Tag for the POSTNET barcode.