MTAC Work Group 109

Optimizing Parcel Preparation and Entry for Seamless Acceptance

Face to Face meeting – February 8, 2007

Participants-

Industry Members:

DENNIS MACHARG
JAMES SEBASTIAN III
SCOTT KLINKERFUES
WENDY SMITH
TOM UNDERKOFFLER
CAROL KLIEWER
STEVE WHEELER FOR CHRIS FINLEY
MAIK GOETTEL
RICHARD PORRAS
JOHN MCCALPIN
SANDY GLICK

USPS Members:

JIM COCHRANE
JIM HESS
JOHN GULLO
KRISTA FINAZZO
MARC MCCRERY
MARY-ANNE PENNER

Introductions & Opening Remarks

·  Meeting began with introductions and opening remarks by Jim Cochrane and Wendy Smith.

-  Agenda topics were reviewed. They consisted of; Industry Cost Analysis, Industry Input, Postal Input, eVS, Reform, future issues, and a timeline of activity for this work group.

Presentation – Swiss Colony Cost Analysis (RDC’s)

·  Steve Wheeler from Swiss Colony presented their cost analysis which was described in the rate case testimony. This spoke to the areas of impact that included incremental labor (picking and sortation handling), equipment (e.g. gaylords and forklifts) and transportation costs (FTL vs. LTL; palletized vs. bed loads), productivity and efficiency. The hypothesized scenario that was assumed was sorting and hauling to 5 Texas RDCs (Dallas, Houston, San Antonio, Austin, El Paso) vs. the Dallas BMC. Incremental costs were estimated at $1.18 to $1.55 less a potential postage savings (e.g. more zone 1&2 rates) of roughly $0.57 to $0.59, for a net incremental cost of ~$0.59 to $0.98/package.

·  Group discussed if there was a “correct” number of RDCs that would allow them to operate efficiently without a negative impact on service. The industry was not able to respond.

Industry Input

·  The discussion turned to the issue of Cost vs. Service. Market value vs. time in transit. Most industry members were in agreement that better service would be great, however there is greater sensitivity to cost than service. This is the competitive advantage of the USPS. The incremental handling and transportation costs associated with an RDC expansions narrows the cost gap with postal competition, making these alternate carriers more attractive.

·  Newgistics discussed their modeling initiative, and it was determined that they would not have the density for more numerous RDC hauls anywhere but in the Northeast where there are large concentrations of population. To achieve density, they would have to wait to build volume and thus haul less often; this would counter desired service levels.

·  The industry expressed their concern and wanted it known that there should be no degradation in service, it must be at least what it is today.

·  Question was raised as to whether there is more sensitivity to palletizing or added stops (e.g. 1 trailer with 5 stops in the Texas area. The industry expressed their desire to continue to bed load as being more important and cost effective. If USPS could sustain bed loading, at least at existing BMC facilities, industry would bedload as much as possible and load pallets for the other entry points on the tail.

·  It was noted that having to load trucks under both bedload and palletized methods also presents difficulties such as the lack of dock area space to build pallets where currently, telescoping conveyers are staged at the dock doors for bedloading. Capital expenditures would be needed to reconfigure dock areas. This very real cost was not included in the Swiss Colony cost example which focused on variable costs.

·  Cornerstone representative, Scott Klinkerfues, spoke to his consolidator model which was built on LTL. His model was built on a cost per pound basis. Density overall shipment.

·  Additionally, the industry expressed that rate consideration be given to Bulk shippers who would be allowed to drop at “old” points and then density could be created and maintained.

·  There was also discussion of potential benefit to de-averaging Zone 1 & 2 rates; more modeling would be needed

·  The industry expressed that co-mingling across package categories and between mail classes is very beneficial.

·  Co-mingling discussion covered manifest issues (not a problem with eVS).

·  Industry members recapped desired preparation and induction options discussed at previous conference calls. This included allowing drop & picks for less than ¾ full trailers, faster live unloads and speed lines and extended drop ship hours. Additionally, there was discussion of possibly changing the height requirements for packages vs. other items. Packages in gaylords will stack and keep integrity – where as items such as magazines cannot.

·  Cornerstone spoke to their internal use of 50-51 inch gaylords. They double stack to 102” into their own facilities so they can cube out their trailers. They must then break these down to haul into the USPS.

·  Jim Cochrane decided that there would be a subgroup formed to examine palletization and induction rules. USPS participants: John Gullo, Marc McCrery, Krista Finnazo, and Jim Hess. Scott Klinkerfues will lead this up for the Industry.

·  Jim Cochrane then summarized the industry input and the following items were industry concerns/issues viewed as “take aways” from this discussion:

-  significant change in costs

-  continuing bed loading would be beneficial

-  decoupling of Zones 1 & 2

-  10/20 RDC’s may need alternative solutions. There is no incentive for the industry to haul to incremental RDC locations.

-  DBMC pricing does not fit the model

-  Co-mingling helps the density issue

-  Increase time in transit is a bad outcome (current daily dispatches could be replaced with every other day type scenarios to build density)

-  Non-retrofitted BMCs

-  Drop & Pick vs. live loads needs to be evaluated

-  Equipment such as gaylords should be provided, or at a minimum, returned to mailers for re-use.

-  Subgroup to be formed to examine palletization and induction rules

Postal Input

·  Marc McCrery began this discussion talking about the AMP process. The consolidation of plant processes, maintaining an acceptable service level, and right sizing the USPS network. Other considerations are being given to the network structure, new alignment of facilities, better use of transportation, and better utilization of technology. END is an evolutionary process, and will take time.

·  USPS is continuing the process of modeling to determine the best way to proceed

·  It is not expected that the RDCs as previously envisioned will be activated before the end of calendar year 2007... Industry expressed a lot of concern that more specific target dates and locations are not available. Will share more information when available.

·  RDC concept –

-focused on use of APPS machine for handling bundles and Standard / Irregular parcels; it’s less clear as to what extent they may be used for Parcel Select

-still looking at APPS locations

-current modeling placing greater emphasis on the space needs of FSS

·  2007 FSS pre-production machines will be in Dulles in late summer. FSS migration will happen gradually.

·  Moving away from FSS carrier route to 5 digit bundling and containerized to move into FSS.

·  Industry requested to be allowed to test prior.

·  Information is critical to the industry concerning APPS & FSS.

·  Shape, size, characteristics determine what can be run on which machines. (Industry felt they could possibly sort to FSS “packages” if these factors were defined).

·  Clarity & timeline should be available and will be disclosed. May 17th is the Flat Summit in DC – more information should be available at that time.

·  AMPs – (done locally – includes human resources, productivities, etc.) This will help control costs now and in the future. More transparency in the AMP process.

·  Discussion around the 2 things that drive facilities

-  service commitments (overnight delivery)

-  equipment space issues

eVS – Maik Goettel/John Gullo

·  Maik Goettel led a discussion on eVS and USPS readiness to beginactivating customers. The main issues/concerns centered around who was currently managing the program from the USPS side and the lack of a documented process from applying and testing for the program.

·  John Gullo responded to the concerns and acknowledged the issues/concerns voiced by Maik Goettel. He added that Pritha Mehra has taken on the leadership role and hascommitted to provide documentation outlining the application and testing criteria by the first week of March.The field domiciled Business Mailer Support Analysts have been identified as the support group to bring new customers on line and will be trained during the last week of February on the process. Additionally, the technical support activities are being transitioned to the National Customer Support Center in Memphis, TN, and will be included in the responsibilities of the PostalOne! helpdesk.

·  Carol Kliewer from Clarke American offered a resource to help USPS document the eVS process flows if needed.

·  Discussion was heldon how "start-the-clock" information will be provided using the“Scan 5”process.

·  The "Scan 5" process is only used as the “start the clock” event scan for delivery reporting, notforpayment sampling;;

·  This process replaced the scanning of the 8125 barcode;

·  The current process requires at least one of the pieces scanned to be Parcel Select;

·  This process will update the entire manifest similar to the existing process of scanning the barcode on an 8125.

·  Visibility is importantto both the industry and the USPSand can only be accomplished through the inclusion of barcodes on packages. The USPS goal is to get a barcode on every package.

·  The Industrywanted to make sureconsolidators are communicated to properly. They need to coordinate the labeling requirements with their clients. They do not want to be in a position of over labeling as that is a cost neither want to incur.

·  Discussion was held around the possibility of using a shorter barcodeto accommodatesmaller Standard Parcels, and having it tested. This would provide for more opportunity for mailers to commingle Standard and Parcel Select packages. This discussion includedthe reduction of “white area” and railroad tracks.Clarke American plans to supply more samples with a smaller barcode. Publishers Clearing House will also provide samples. John Gullo to provide the details on how to coordinate this.

·  A question was raised as to whether these smaller barcodes need to be run onHigh Speed Induction Units (HSIU) at BMCs (where the prior Clarke American samples did not read well) if Standard Parcels are to be run on APPS.The future role of the HSIUs needs to be discussed with USPS operations to understand this impact. John Gullo will take the lead on this and report back to the group.

·  Consolidators can co-mingle today.

Next Steps: Work Group Direction and Timeline

Since the network realignment framework is still being defined, keep completion as January ‘08 as currently listed. Subgroups & activities will continue

·  Take aways will be reviewed by USPS & communicated back to the Industry; plan on monthly conference calls to monitor progress.

·  Industry Work Group members should let Scott Klinkerfues know by month-end if they are interested in participating in the Subgroup for Reviewing Palletization and Induction rules.

·  eVS will be addressed by the MTAC WG 109 umbrella. eVS is also being covered by MTAC WG 107 as it relates to integration with FAST.

·  Wendy to work the “takeaways” into a formal document to be submitted as part of the Industry input that Reform requires and that the PRC recommended as it relates to the network realignment. A draft will be issued to all Work Group members for review and ultimately, company signatures.

·  Additional information

-  new MTAC #114 (Service Standards and Measurement) has been formed & looking for members

-  more information/clarity of RDCs will be forthcoming

-  Reform & Service standards should be two areas of future concentration