# Presentation: 358263

## Corporate Flats Strategy

**MTAC November 7, 2002**

**Notes:**
Good Morning,

I would like to take this opportunity to share with you the Postal Service’s strategy for processing and delivering flats.
This strategy was initially developed over the last two years, has been shared with you at previous meetings, and is part of our Transformation Plan.

## Presentation Overview

**Background  **
**Near**** ****Term**** ****Actions**** ****(FY 2003 and 2004)**
**Longer**** ****Term**** ****Planning**** ****(FY 2005 and**** ****beyond)**
**Delivery Vision**
**Summary**

**Notes:**
The Postal Service has been very successful in automating the distribution of letter mail and this has allowed us to reduce processing costs while maintaining affordable rates.
In fact, productivity in our letter operations has increased  83 percent from 1993-2001 and we expect very similar results as we implement our flats strategy.
To meet the pledge of keeping mail service affordable for flats, the Postal Service is committed to achieving the types of breakthrough productivity it achieved with letter mail.
The Near Term actions I will cover in this presentation span the next two fiscal years and describe programs and opportunities that will increase flats processing performance.
The longer term planning includes a section describing the Delivery Vision where we expect to have a seamless operation resulting in one package of letters and flats for each delivery point. 
And, I will summarize at the end.

## Importance of Flats

**Notes:**
The Postal Service recognizes that flats are a valuable source of revenue.
In fact, we consider Periodicals Mail to be one of the mailbox “anchors.”
This is because customers who subscribe to them also look forward to receiving them.
And, if we all are lucky, they will order the products and services that are advertised and this will generate additional revenue for all of us.
Standard Mail is second only to first class in total revenue.
These 2 classes make up the majority of our flats mail stream.
However, because we did not apply technology to flats at the same speed as letters, both processing and delivery costs have steadily risen over the years.

## Corporate Flats Strategy

**USPS Committed to Flats**

**Grow Customer’s Business**

**Increase Capital Investment**
**Maintain Affordability**
**Improve Processes**

**Corporate Flats Strategy**

**Introduced at the September 2000 Postal Forum **

## Corporate Flats Strategy

**Corporate Flats Strategy**

**Distributed in July 2001**
**Introduced the Delivery**
**Vision**
**Focused on Improvements in the Near Term**
**Overviewed the Longer Term Plans**

**Notes:**
In July 2001, we formally issued the Corporate Flats Strategy document.
This document further explained our Delivery Vision and began the process to let our customers know about the  potential changes to their mailpiece design or our presorting and barcoding requirements.
It also explained in detail the near term actions  that we were taking to improve operations.
This document was designed to be dynamic in nature and easily updated to incorporate new improvements.
We are currently updating this document and copies will be available for you when this process is completed.

## Drive Down Costs Through Automation
Improve Processing Performance
	and Service
Create a Win-Win for Customers and the Postal Service

**Improve Processing Performance**
**	****and Service**
**Create a Win-Win for Customers and the Postal Service**

**Corporate Flats Strategy**

**Notes:**
Using the Corporate Flats Strategy as a roadmap to success, we are able to realize these three important guiding principles.
The Postal Service will use technology to increase the amount of flats sorted by automation.
We will constantly search for the most efficient distribution and delivery methods and thereby control and then reduce costs.
And, we will work together with the mailing industry to create a WIN-WIN situation. 

## Completed AFSM 100 Deployment

**Started FSM 1000 Modifications**
**Explored Mail Preparation Alternatives**
**Logs**
**Flats Feeder Assist Device**
**Fiberboard Trays**
**Pallet Movers**

**Last Year’s Progress**

**Notes:**
Lets go over our joint accomplishments for last year.
We finished deployment of 534 AFSM 100s.
We use these machines to process the flats that meet the standard size dimensions.
We started modifying the FSM 1000s to increase their throughput and accuracy.
We use these machines to process the thick and hard to handle pieces.
We jointly explored several mail prep alternatives such as those on the screen.
And, we updated the flats machinabliity guidelines.

**Manage the Base**
**Substitute Capital for Labor**
**Increase Customer Involvement**
**	**

**Near Term Actions**

**Notes:**
Now I’ll describe the actions the Postal Service will be taking in the Near Term.
These actions fall into the following categories:
Managing the Base
Substituting Capital for Labor
Increasing Customer Involvement

## Improve Operational Performance

**Up-the-Distribution-Ladder**
**Increase Productivity**
**Reduce Mail Preparation Costs**
**Standardize Opening Units**
**Standardize Flats Distribution**** **
**Capture Savings**

**Manage the Base**

**Notes:**
The term “Managing the Base” describes the actions that we will take on a daily basis  to increase operational efficiency.
These actions are evaluated using various performance management tools.
Listed on the slide are the four things that directly contribute to the Postal Service improving its bottom line.
We will improve our operational performance by moving mail up-the-distribution-ladder.
We will increase productivity.
We will reduce our mail preparation costs by standardizing our opening units.
We will standardize the way we distribute flats.
And, we will capture the savings associated with these efforts.

## Summary

**QTR 1 FY 2001**

**QTR 4 FY 2002**

**Notes:**
This slide provides you with a snapshot of how the Postal Service is moving the distribution of flats to the AFSM 100 from the more costly manual distribution.
It is our intention to completely remove the FSM 881s (which are our oldest flat sorters) from our system by the end of fiscal year 2003.
Note that in 2 years we have gone from 63% mechanized sort to 77% automated sort.
We have made substantial gains.

## FY 2001

**FY 2001**

**FY 2002**

**end of year FY 2000**

**piece handlings per workhour**

**Qtrs. 1 to 4**

**Qtrs. 1 to 4**

**Notes:**
As you can see from this graph, we are making tremendous improvements in flats productivity.
In fact, productivity has increased almost 78% between the end of FY 2000 and today.
The AFSM 100 deployment has made these improvements possible.
And, as we continue to “move mail up-the-ladder” we anticipate further increases.

**Take Advantage of Latest Technology**
**Automatic Tray Handling System**
**Flats Feeder Assist Device**
**The AFSM 100 Feeder Modification**
**Pallet Movers**
**UFSM 1000**
**ID Code Sort**
**Move More Mail to Our Processing Centers to Achieve Greater Depth of Sort**** ****(i.e., from the 5-digit level to carrier route)**

**Substitute Capital for Labor**

**Notes:**
Substituting capital for labor is not a new concept.
We are looking at the following equipment projects to improve efficiency even more:
Automatic Tray Handling System
Flats Feeder Assist Device
The AFSM 100 Feeder Modification to improve throughput and prevent torn covers.
Pallet Movers
Upgraded FSM 1000 which adds a high speed feeder and OCR
ID Code Sort
Another way we have increased our efficiency is to centralize the mail distribution operations from the smaller post offices to our larger processing centers.
This permits us to use automation to increase our efficiency.

## Structure Rate Incentives to Support Operations Objectives

**Match Make-up to Processing **
**	****Requirements**
**Increase Barcoded Flat Volumes**
**Improve Address & Barcode **
**	****Readability**

**Increase Customer Involvement**

**Notes:**
The Postal Service must continue to find ways to increase customer involvement.
Listed on the screen are four of the our main strategies for involving customers.
Our customers must be involved in the rate structure planning.
We will assure that make-up requirements are aligned with both of our processing needs.
We will rely on customers to barcode flats.
We must also find new and innovative ways to increase the amount of barcoded flats in the system, since barcoded flats are sorted quickly and at the lowest cost.
And, this is why it will continue to be important that both the addresses and barcodes are very readable.

## 4 Mail Streams:
Automated
Mechanized
FSM 1000
Manual
Significant Piece Handling Costs 
Increasing Mail Prep Costs
Increased Rates

**4 Mail Streams:**
**Automated**
**Mechanized**
**FSM 1000**
**Manual**
**Significant Piece Handling Costs **
**Increasing Mail Prep Costs**
**Increased Rates**

**Notes:**
I want to now take this opportunity to briefly explain our current operations.
Currently, we maintain an operating environment that supports FOUR different mail streams; with the removal of the FSM 881s, this number will soon be THREE.
And, maintaining 4 separate mail streams increases our piece handling costs.
The use of many different container types is a key driver of mail preparation costs.
Together, these factors contribute significantly to our operating costs and cause us to have to increase postage rates to cover those costs.
We are also cognizant of your preparation costs, and are working with you to reduce them where possible.

## From 4 Mail Streams to 2
Automated
Manual
Maximize 11 Digit Barcoded Volume
Minimize (eliminate) Small Bundles
Standardize
Physical Characteristics
Address Placement
Make-up and Presentation

**Automated**
**Manual**
**Maximize 11 Digit Barcoded Volume**
**Minimize (eliminate) Small Bundles**
**Standardize**
**Physical Characteristics**
**Address Placement**
**Make-up and Presentation**

**Where We Want To Go**

**Then to 1:****	****DPP**

**Notes:**
Our plan is to reduce the current 4 mail streams, first to 2 (automated and manual), and then hopefully to one (Delivery Point Packaging) if the technology is available.
Reducing the number of mail streams will reduce costs and improve service.
Ultimately, we want to extend the benefits of automation to delivery operations.
However, we need your help.
We need you to begin the process of moving from 9-digit barcoding to 11-digit barcoding.
We also need you to consider standardizing:
the Physical Characteristics
the Address Placement
and the Make-up and Presentation 

## Optimizing Readability
Conducting Mail Characteristics Study
Developing Alternative Flats Packaging
Developing Mail Preparation Alternatives
Reducing Bundle Breakage
Developing Irregularity Reporting

**Optimizing Readability**
**Conducting Mail Characteristics Study**
**Developing Alternative Flats Packaging**
**Developing Mail Preparation Alternatives**
**Reducing Bundle Breakage**
**Developing Irregularity Reporting**

**How Do We Get There?**

**Notes:**
Some of the flats issues MTAC has been involved with include:
 Optimizing Readability
 Mail Characteristics Study
 Alternative Flats Packaging
 Mail Preparation Alternatives
 Reducing Bundle Breakage
 Irregularity Reporting
In the next series of slides, I will cover each of these topics.

## Address Block Location
Destination Address Format
Barcode Placement
Adhesive Labels
Extraneous Information

**Address Block Location**
**Destination Address Format**
**Barcode Placement**
**Adhesive Labels**
**Extraneous Information**

**MTAC Workgroups**

**Optimizing Readability**

**Notes:**
Optimizing readability was one of the issues.
Originally the focus was on increasing barcode usage and providing a list of highly readable fonts.
After studying the issue, a more thorough list of recommendations to optimize readability were made, reviewed, and revised by the Postal Service and the mailers.

## Developed Voluntary Guidelines for Flat Mail

**Optimizing Readability**

**Developed Voluntary Guidelines for Flat Mail**

**MTAC Workgroups**

**Notes:**
The recommendations were then incorporated into a brochure and issued as voluntary guidelines for flat mail.
We did not make these guidelines mandatory at this time because they were not needed. 
However, in order to increase delivery efficiency at some point in the future, we may need to make some of these guidelines requirements.
As we automate flats processing, label placement will become more critical.
This will not be the result of any machine requirement.
It will be so the letter carrier can quickly locate the delivery address.

## Determining the Spectrum of Mail the AFSM Can Successfully Process
Basic size dimensions remain the same
Increase the maximum weight to 20 oz

**Mail Characteristics Study**

**Determining the Spectrum of Mail the AFSM Can Successfully Process**
**Basic size dimensions remain the same**
**Increase the maximum weight to 20 oz**

**MTAC Workgroups**

**Notes:**
The AFSM 100 was designed to process the flat mail previously processed on the FSM 881.
A mail characteristics study to identify the range of mail that could be processed on the AFSM 100 was completed and these were incorporated into the DMM.
While the basic size dimensions remained the same, the maximum weight was increased to 20 ounces

## Identify Cost Effective Bundle Packaging for Mailers and USPS
Balance Cost of Material With Package Integrity

**Balance Cost of Material With Package Integrity**

**Alternative Flats Packaging**

**MTAC Workgroups**

**Notes:**
In today’s environment, mailers prepare flats in packages to maintain integrity.
The Postal Service must sort the packages and then break them open to prepare them for the flat sorting machines.
Both the mailers and the Postal Service recognized an opportunity to pursue alternative flats packaging when we began deployment of the AFSM 100.
The challenge was to find a method for mailers to package and prepare flats that would allow us to feed the AFSM 100 in a cost effective manner in order to take advantage of the increased throughput of this equipment.
One improvement was to reduce the number of small packages in the system.
As our flats sorting operations become more efficient, we need to reassess our preparation requirements.
That is why, in the August 22nd Postal Bulletin, we offered mailers the option to increase the minimum number of Standard Mail flats in a 5-digit bundle from 10 to 17.
We expect that pieces now prepared in 5-digit packages using the current 10-piece minimum will move either to an existing 3-digit package or be consolidated into fewer new 3-digit packages when a higher minimum is selected.
This optional change should help to reduce overall processing costs, and will not have a negative impact on service.
This is only the first step.
We will continue to pursue opportunities to use this type of change to improve our operations.

## Mail Preparation Alternatives

**Working with Mailers through MTAC**
**  ****Mutually Acceptable Preparation and Handling Methods**
**    ****Drive Down Combined Cost**

**Mail Preparation Alternatives**

**MTAC Workgroups**

**Notes:**
The Mail Preparation Alternatives Work Group considered several mail preparation methods to evaluate their benefits and challenges for both the Postal Service and the mailers.
The workgroup has completed its mission and there appear to be some short-term alternatives that could be implemented.
One of these was preparing scheme sorts for flats, similar to those used for letters.
The initial results indicate that scheme sorts will reduce processing costs by reducing the number of packages or containers.
Less packages mean less cost for both you and us.
The scheme sort, in conjunction with larger packages, most likely will be the first recommendation from the workgroup as it works toward longer term solutions.

## Flats Feeder Assist Device allows operator to handle heavy loads

**MTAC Workgroups**

**Mail Preparation Alternatives**

**Notes:**
The second initiative was utilizing a lift-assist device in the mail prep operation.
This device is called the Flats Feeder Assist Device or FFAD for short.
The FFAD consists of a pneumatic crane with specially designed grippers to grasp a large amount of flats and then transfer them from ergo carts to the AFSM.
It can also be used to lift flats from a new style 3-sided  flat tray currently under review.
It allows the machine feeder to move flat mail from a container onto the machine faster, safer and efficiently.
We will continue to use this type of technology to improve our operations.

## Reducing Bundle Breakage

**Reducing Bundle Breakage**

**MTAC Workgroups**

**Notes:**
There was also a workgroup dealing with reducing bundle breakage.
This workgroup had to balance the bundle breakage solution with the potential productivity improvements gained from an easier to open and larger package size.
Fortunately, most of the broken bundles were associated with sacks while most package alternative testing was geared to trays, tubs and pallets.
One of the recommendations from the Bundle Breakage Workgroup was to palletize whenever possible.  
And, I would just like to reiterate the point that palletized bundle mailings are the way to go.

## Long Term Plan:  NO SACKS

**Long Term Plan:  NO SACKS**

**Notes:**
In fact, our long-term plan is to eventually eliminate sacks completely. 

## Develop a Mechanism to Report Preparation Irregularities to Mailers and Mail Owners In a Timely Manner to Prevent Recurrence

**Irregularity Reporting**

**MTAC Workgroups**

**Notes:**
Currently the Postal Service provides notification of irregularities to mailers via telephone contact or personal visit.
This process can take several days.
We have tested a WEB based mechanism to provide timely feedback when the mail is not properly prepared or would create processing difficulties.
We expect that this information will be available electronically via a WEB based application in the future.

## Evaluate Delivery Point Packaging

**Prioritize Key Decision Points**
**Identify Potential Customer Impacts**

**Longer Term Plans**

**Notes:**
Let me now move to our longer term plans.
The Delivery Vision is our long term plan to sequence letters and flats into one “package” for each delivery point.
We refer to this as Delivery Point Packaging or DPP.
However, DPP can’t be done overnight.
The concept needs to be evaluated to determine feasibility, equipment costs, and space requirements.
We have identified and prioritized key decision points and  recently obtained research and development funding approval.
Many different equipment prototypes will be evaluated.
And, perhaps most important, we need to identify any potential customer impacts.

## Implement the Delivery Vision

**Minimize In-Office Costs**
**Maximize Street Efficiency**

**Notes:**
Let me now share with you the Postal Service’s Delivery Vision.
The Delivery Vision is our long term plan to sequence letters and flats into one “package” for each delivery point.
This plan will serve as our road map to success.
It will enable us to:
Minimize in-office costs and
Maximize street efficiency.

## OPTION 1: Delivery Point Packaging

**	****Develop a machine that will use a one-pass system to sequence both letters and flats in delivery order.**
**OPTION 2: Flats Sequencing System**
**	****Develop a machine that will use a two-pass system to sequence flats in delivery order. **

**Evaluate Delivery Sequencing Options**

**Notes:**
Consistent with the Delivery Vision, the Postal Service will consider several alternative courses of action.
The speed with which either of these options can be implemented will be solely dependent on how quickly technological solutions can be found and on the level of customer involvement.
Simulation models will be run to estimate the savings associated with either moving directly to Delivery Point Packaging (Option 1) (THIS IS OUR PREFERRED SOLUTION).
or, pursuing the Flats Sequencing System (Option 2).

## OPTION 1: Delivery Point Packaging

**	****Develop a machine that will use a one-pass system to sequence both letters and flats in delivery order.**

**Evaluate Delivery Sequencing Options**

**Notes:**
The first option that I would like to describe is to implement DPP in one step.

## The Postal Service’s Delivery Vision

**NEAR TERM**
**FY 2003 & FY 2004**

**MID TERM**
**FY 2005 **
**to **
**FY 2006**

- Sector/Segment
- Firms
**Direct to Street**

- DPS Letters
**Direct to Street**

- Walk Sequence/ Marriage Mailings
**Direct to Street**

- Residue Letters & All Flats
**Cased**

**Current Operations**

**This time period will be used for planning purposes.**

- Option 1: _**Delivery Point Packaging**_

**Start Research & Development for DPP**

**Notes:**
NOTE:  Walk through the charts with the audience.

This chart shows the activities associated with DPP planning. 
In the near term, we do not expect to make any DPP related changes for operations.
However, we will be using this time to complete our research and development efforts.
We also expect to have a DPP machine simulation available for evaluation during FY 2005 or 2006.
This is the time period that we both should use to determine the impacts and on how to increase your participation.

## The Postal Service’s Delivery Vision

**LONG TERM**
**FY 2007**

**Letters**
**(DPS Not Required)**

**Flats**
**(5 Digit Presort, No Carrier Route)**

**Walk Sequence/ Marriage Mailings**
**(Entered at DPP Location)**

**One Bundle**
**100% Letters & Flats**
**Direct to Street**

- Sector/Segment
- Firms
**Direct to Street**

- DPS Letters
**Direct to Street**

- Walk Sequence/ Marriage Mailings
**Direct to Street**

- Residue Letters & All Flats
**Cased**

**Current Operations**

**NEAR TERM**
**FY 2003 & FY 2004**

**MID TERM**
**FY 2005 **
**to **
**FY 2006**

**Operational Planning**

- Start Research & Development for DPP

- Option 1: _**Delivery Point Packaging**_

**Notes:**
After we have completed evaluating the DPP machine prototype, our plan is to begin DPP implementation sometime during FY 2007.
As you can see from this chart, we intend to pass each letter and flat only once and the result will be one bundle for each delivery point.

## OPTION 1: Delivery Point Packaging

**	****Develop a machine that will use a one-pass system to sequence both letters and flats in delivery order.**
**OPTION 2: Flats Sequencing System**
**	****Develop a machine that will use a two-pass system to sequence flats in delivery order. **

**Evaluate Delivery Sequencing Options**

**Notes:**
If the DPP option is not feasible, we will actively  pursue our second Option:  the Flats Sequencing System.

## The Postal Service’s Delivery Vision

- Sector/Segment
- Firms
**Direct to Street**

- DPS Letters
**Direct to Street**

- Walk Sequence/ Marriage Mailings
**Direct to Street**

- Residue Letters & All Flats
**Cased**

**Current Operations**

**NEAR TERM**
**FY 2003 & FY 2004**

**MID TERM**
**FY 2005 **

**This time period will be used for planning purposes.**

**Start Research & Development for FSS**

- Option 2: _**Flats Sequencing System**_

**Notes:**
The FSS will be designed to sequence flat mail using 2 passes.
As with Option 1, we do not expect to make any FSS related changes during the near term, but will use the time for research and development.
And as with Option 1, this is the time that we should use jointly to determine the impacts on your operations and on how best to maximize your participation.

## The Postal Service’s Delivery Vision

- Sector/Segment
- Firms
**Direct to Street**

- DPS Letters
**Direct to Street**

- Walk Sequence/ Marriage Mailings
**Direct to Street**

- Residue Letters & All Flats
**Cased**

**Current Operations**

**FSS Flats**
**Direct to Street**

**Residue Letters & Flats**
**Walk Sequence/ Marriage Mailings**
**Cased**

**DPS Letters**
**Direct to Street**

**NEAR TERM**
**FY 2003 & FY 2004**

**LONG TERM**
**FY 2006**

**Operational Planning**

- Start Research & Development for FSS

- Option 2: _**Flats Sequencing System**_

**MID TERM**
**FY 2005 **

**Notes:**
After the research and development efforts have been completed, and we have selected this option, we expect to implement flats sequencing by FY 2006.
Our letter operations would remain unchanged.

## Fund Research and Development

**Examine Competitive Prototypes**
**Evaluate Impact on Plant & Delivery Operations**

**Prioritize Key Decision Points**

**Notes:**
During the planning and evaluation phase related to implementing the Delivery Vision, the Postal Service will be faced with certain key decision points.
As mentioned earlier, the Postal Service has obtained funding to research and develop machines that can sequence and package mail.
Next, we will need to examine and evaluate several prototypes in a competitive environment to properly determine what suits our operational needs best.
And, finally, we must evaluate the impacts of implementing Delivery Point Packaging on our Plant and Delivery Operations.

## Identify Potential Customer Impacts

**Standardized Piece Design**
**ID Tag**
**Presort ****(For Automated Zones)**
**Carrier Route Sorting**
**Make-up and Presentation **
**Entry Point**

**Identify Potential Customer Impacts**

**       ****DPP          FSS**

| REQ | REQ |
| --- | --- |
| ? | REQ |
| YES | YES |

| ? | ? |
| --- | --- |
| CHG | CHG |
| CHG | CHG |

**Notes:**
This next chart shows the potential impacts that implementing Delivery Point Packaging or FSS MAY have on your business.
This is by no means a FINAL list.
In fact, WE HAVE NOT YET BEGUN TO QUANTIFY THESE IMPACTS.
Please keep in mind that these impacts would be on mail destined for ZIP Codes that will be processed on the DPP or FSS machines only.
And, in order to minimize any impacts, we want to reassure you that adequate lead times will be identified for each of the items listed.

NOTE: DPP and FSS Targets:  7,040 zones and 135,000 routes

## Implement the Delivery Vision

**Implement the Delivery Vision**

**Minimize In-Office Costs**
**Sequencing Letters **_**and**_** Flats**
**Maximize Street Efficiency**
**Sequence Letters and Flats Together**
**One Delivery Point Package (DPP)**

**Notes:**
As we look to the future, the Delivery Vision will serve as the guiding principle.
Delivery Point Packaging will enable us to sequence letters and flats into one package using high-speed sorting equipment. 
This will allow us to minimize in-office costs by reducing the amount of time a carrier spends in the office.
And, since the mail for each address will be sorted into individual delivery packages, handlings on the street will be reduced and street efficiency will be maximized.
The savings potential of implementing Delivery Point Packaging in one step is very significant.
The savings will be somewhat smaller with FSS.

## Summary

**Near Term ****(FYs 2003 & 2004)****:**
** ****Increase Equipment Utilization**
** ****Reduce Mail Preparation Costs**
** ****Manage the Base**
** ****Involve Customers**

**Notes:**
In closing, let me summarize our near term goals:
We will increase equipment utilization.
We will work closely with MTAC to reduce both postal and industry mail preparation costs.
We will continue to improve our operational performance.
We also will involve our customers at every opportunity.

## Summary

**Longer Term ****(FY 2005 & beyond)****:**
** ****Refine the Delivery Vision**
** ****Evaluate DPP & FSS Options**
** ****Develop DPP & FSS Technologies**
** ****Involve Customers**

**Notes:**
In the longer term:
We will work toward refining the Delivery Vision that we have in our Transformation Plan.
We will evaluate DPP and FSS options.
We will research and develop DPP and FSS technologies.
And, most importantly:

WE WILL CONTINUE TO INVOLVE OUR CUSTOMERS TO ACHIEVE SUCCESS.

Thank you.

## Corporate Flats Strategy