The Expected

First and foremost, the CPI increase is predictable. On the surface, it is a relatively straightforward adjustment across the mail classes, and should not have a major impact on printers’ and mailers’ profit margins. These are not the heavy handed increases that some might have been expecting, especially in regard to classes that are arguably not covering their attributable costs. While the Postal Service, given their current financial circumstances, would have certainly been justified in filing an exigency rate case, I am glad that they did not. Marked increases in mail class rates would run a potential risk of driving away customers, and have long been a major concern for printers and mailers regarding what they believe would be a negative impact on the success of their businesses.

What does the USPS plan to do in lieu of excessive rate increases to cover costs and increase revenue other than the proposal they submitted? As hoped, they will continue to urge Congress to make public policy adjustments to mitigate the Postal Service’s anticipated losses and provide them with the flexibility they need to get back on track. In particular, this includes returning some (preferably all) the overpayment of the pre-funded retiree healthcare coverage. The USPS is also anticipating the President and Congress to support the five-day delivery request that in itself could save the USPS over $3 billion.

The Unexpected

There was one important element to the rate adjustment proposal that was very welcomed, and that is the Second Ounce Free plan for First-Class Mail. Even though this might not make much sense when one focuses on the pure profit-growing objective that the Postal Service is trying to reach, there is great potential in this. In talking to some major First-Class mailers, they are approaching it with caution but are also optimistic because it could mean expanded business opportunities.

Having access to a second ounce at no additional fee can be extremely beneficial to mailers. For example, they can use the extra ounce to include additional marketing materials that will help them bring in additional revenue. In turn, given the return they are seeing on their investment, there’s a chance those mailers will invest extra money in more mailpieces. Furthermore, with this extra space, mailers will have more opportunities to experiment with ways to tie direct mail in with electronic communications, inserting materials that leverage the mobile barcode, personalized URLs, and more. These, too, show great promise in growing business, and can strengthen the value of direct mail as well.

Will it truly slow the accelerated decline in First-Class Mail? The USPS sure hopes it will, as do we, since First-Class Mail is the largest contribution margin to the Postal Service.

What All of This Means to Our Customers

In the end, the adjustments in any rate case are going to be unique to each mailer because each mailing is unique. I assure you that we will be by your side to help you adjust to any impact these rates may have on your operations. We will also be here to help you leverage the potential of offerings such as the Second Ounce Free program. And, as always, one thing our customers can continue to count on is our dedication and our deliverance of rate case ready technology in order to make each mailpiece count.

You can learn more about the 2012 Rate Changes by reviewing the BCC Solutions November eBulletin.

One of the solutions that Skip and I spent a lot of time discussing was JETVision Navigator, our next-generation system controller. This product is an innovative inserting user interface that uses voice commands and other automated technologies so that operators can send and receive machine status updates while efficiently working the machine. This helps the operator avoid time-consuming tasks like searching for system errors and updates to production results, and results in dramatic improvement in productivity.

Additionally, live chat technologies have been integrated into the user interface to provide even faster response to any technical issue an operator may encounter.

JETVision Navigator offers hands-free, intelligent system operation — just one of the many new innovations from Bell and Howell.

To hear more about Skip’s feedback after seeing JETVision Navigator and other products at Graph Expo, view his interview below:

Source: http://www.myprintresource.com/video/10415129/karen-hall-speaks-with-skip-henk-ceo-xplor

The video below to showcases live interviews and footage from Bell and Howell at Graph Expo 2011:

We’re introducing so many new solutions that one booth couldn’t hold them all!

• Booth 3611: Software and finishing solutions
• Booth 4050: High-speed inserting system and Plastic Card System
• Booth 4622: BCC and ADF software solutions, and our Presentation Theater

We will also be featuring regularly scheduled presentations by industry, product and service experts in Booth 4622. The full line-up of presentations can be found by clicking here.

We hope to see you at the show, and below is a short video that highlights some of the exciting new offerings we will be demonstrating live at Graph Expo.

The new Bell and Howell includes all existing operations in North America, including BCC Software in Rochester, N.Y. and Bell and Howell Canada.

Our new company has strong and stable financing from Versa Capital Management and Access Value Investors that will support the growth and strategic vision of the organization.

Gartner offers its opinion on our new ownership here: http://www.gartner.com/DisplayDocument?doc_cd=214667&ref=g_sitelink

I invite you to take a moment to watch a video of our management team introducing the new company and discussing our strategy and new innovations.

Many companies performing the co-mingle process have little influence over the mail coming to them. And often, mail finishing from a press run, inserting process, or table-top ink-jet is provided to the co-mingle process without understanding the value and cost of the additional process.

Digital Co-mingle offers the ability to understand the overall value a mailpiece has in a single mailing or in a co-mingled mailing. Diagram A describes the typical process of mail flowing from data, through finishing and into co-mingling.

Diagram A (click to enlarge)

Diagram B demonstrates the process when driven from a complete analysis of all the data being presented.

Diagram B (click to enlarge)

The opportunity is identified; the value is realized in process and execution. With the Digital Co-mingle process you define data from different mailings with various rules. This allows playing digitally with the data, before creating the physical mail, to determine the optimum value and establish a plan for the manufacturing and presentation of mail for acceptance.

When an optimum plan is determined, the analysis allows you to set data flags in the data files used to drive the process. The data flags are used to select process methods through BCC software, and onto print and inserting or mail finishing processes. The output from finishing will result in finished mail trays receiving maximum value or mail designated for a co-mingling process for enhanced value.

The Digital Co-mingle process does not just consider 5-digit levels for finishing from an inserter. All levels provide opportunities. The analysis considers finishing a Mixed AADC piece at the inserter when it is determined that it remains as a Mixed AADC mailpiece in a co-mingle process.

You may have noticed mention of BCC in our process. We are working to enable a more integrated approach with BCC software that will allow more automation throughout the platform. In addition, the analysis tool creates data for pushing to NetSort. Overall, our Digital Co-mingle solution creates opportunities to move 90% or more mail into a one-pass process.

We look forward to sharing more innovation and upcoming capabilities in our solutions in the coming months.

• Site Sharing — For companies sharing mail or with multiple sites, NetSort now supports moving Full Service mail data. Site Sharing moves data from the site sharing to the site needing to process the mail. The data updates automatically.
• Sub Mailing — For companies processing single mailings having many drops, the Sub-Mailing function allows for sub-groups to be created with separate paperwork or Mail.dat for Full Service to be submitted for each drop. Upon completion of the mailing a complete set of documentation and Mail.dat is available.
• Reply Rides Free — This feature is available for mailers taking Full Service discounts. When set in the profile, the Full Service Mail.dat is created with the appropriate settings. The USPS validates after submission and a rebate is given back to the mail owner. Mail owners must be pre-qualified with the USPS to receive the rebate.
• Mail.dat 11-1 — This version is required to support Reply Rides Free. It is also becoming the industry standard. BBH and the USPS support Mail.dat versions 09-1 and 11-1.
• MASS Cycle N — Includes several improvements to address assignment. We are offering an upgrade license to MMT SABRE Prime from MMT SABRE that includes a new computer and camera that provides optimum addressing on our OCR platform.
• Uniqueness over 45-days for Full Service — Validates all Full Service unique IMB data across the 45 days mailed in your NetSort mailings. The 45-day period is based on the mail date set within NetSort for the mailing. After each mailing is done, and prior to generating the paperwork, mailers can check the accuracy of the Full Service data. Any duplicate IMbs found can be eliminated, downgraded to Basic Service, or accepted as-is.
• APEX Bin, Feeder, and LDU upgrade — Over the past few months we have made significant updates to the APEX sorter to improve mailpiece throughput. This has enabled companies using APEX or X-Class Bins to achieve significant improvement in mailpiece throughput and handling.

In addition, we will also have several other features coming in2011 that enable faster and more efficient processing. Some of the other things we are working on include more flexibility in how and when pallet placards are produced, as well as our new brand Digital Co-mingle.

The remote tray and pallet application provides connectivity to NetSort from other areas of your facility where pallets are finalized. The application can tie into your pallet scale so that the pallet weights can be captured. It also provides the ability to produce the placard on demand.

This can be accomplished by manually selecting the placard you want to produce from the menu, or by scanning a tray tag on the pallet to automatically print the placard. When the pallet is weighed, the weight is captured and provided back to NetSort for posting in Mail.dat and on the 8125 documents. This is an important addition for Standard Mail for freight planning logistics.

When drop shipping Standard Mail pallets with your freight provider, you will now be able to send an electronic Mail.dat file containing the pallet weights for each pallet. And using Full Service, you will get barcoded placards that can be scanned and tied back to the data for additional quality control.

For companies using Full Service, the USPS did relax other January 2, 2011 requirements.

Specifically, they delayed the penalty assessments. To date, BBH has over 100 companies capable of taking Full Service discounts with over 60 receiving the discounts in both First-Class and Standard Mail as of January 31, 2011. Our Professional Services team has engaged with many companies through this process, providing education and assistance with the Test Environment for Mailers (TEM) and Parallel processing requirements.

While we have been successful in working with our customers moving into Full Service, it was evident through MTAC and industry association discussions that the USPS, some vendors, and many companies were not well prepared to meet the new requirements and therefore the implementation date was delayed.

We continue to offer services and work with companies in reviewing and cleaning up potential compliance problems so that when the rules do go into effect our Full Service customers will not be at risk.

As we started 2011, we had barely recovered from the holidays and first of the year changes, when on January 12th the USPS announced a postage price increase that will take effect on April 17th. While an increase was anticipated in May, the April date simply accelerated the inevitable.

The increase impacts presort levels in First Class and Standard Mail categories, leaving First Class single-piece letters at $0.44. The First-Class letter increases affect each automation level, with 5-digit seeing an increase of $.005 per piece while the other levels will see an increase of $.008 per piece.

While the gap between single piece and 5-digit reduced, the new rates reward mailers that can achieve 5-digit discounts by increasing the gap between 3-digit and 5-digit.

An example impact is shown below showing postage increases $3,668.

* Click to enlarge

Similarly, First-Class flats will see postage improve by $.007 per piece for 5-digit, with postage for a 1 ounce piece going from $.38 to $.373 and will increase by $.005 per piece from $.542 to $547 for 3-digit, and $.002 per piece from $.603 to $.605 for ADC.

Standard Mail letters increased $.004 per piece across all levels for local entry, NDC increased $.005 per piece, and SCF increased $.004 per piece.

Using the same qualification data from the First Class example above, the cost for NDC drop shipment goes up by $2,513. The same counts for SCF only go up by $2,014. The $.001 additional savings on SCF results in $499 savings over NDC drop ship.

In Standard Mail flats, while the 5-digit and 3-digit increased, the ADC and mixed ADC decreased. In doing so, the gap between ADC and 5-digit increased by $.007 per piece for local entry while the ADC to 5-digit gap for NDC and SCF decreased by $.005 per piece.

Overall, the changes in Standard Mail flats encourage automation and this creates opportunities for co-mingling. Standard Mail flats and bundle-based system software supported by our NetSort software also offer the Full Service discount.

While the price change takes away some value in postage it does create incentives for mail owners to consider co-mingling in an effort to achieve the best discounts while also improving in-home delivery by creating better qualification to 5-digit.

With a number of market alternatives available to mail owners, postage costs have become a key negotiating point. Mail owners are now challenging the explanation of "postage is what it is." They are looking for the best options to manage postage costs in consideration of other services such as co-palletization, co-mingling and tracking to validate in-home dates.

The direct mail industry continues to increasingly rely upon targeted marketing programs. Customers who used to mail several million pieces in a single cell (batch) are now fracturing them into multiple offers to fewer prospects, often using a variety of media. While these targeted mailings can have higher response rates, they frequently result in lower efficiency with higher production and postage costs.

The effect of smaller cells on postage is twofold. Mail that formerly qualified at the optimum qualification discount is now moving into higher cost levels. Not only does this negatively impact the cost of qualified postage per piece, but it adversely affects delivery. With direct mail, smaller mailings cannot be accepted at a Network Distribution Center or Section Center Facility (SCF), and instead enter the mailstream at the local post office. The result: higher costs to the mailing service company and ultimately, to the mail owner.

Much of the industry has widely accepted the process of co-mingling smaller list mailings and cells using sophisticated high-speed sorters. Smaller jobs sent to a co-mingle department or outside presort bureau not only gained postage discounts by combining many smaller mailings, but also realized deeper penetration and faster delivery by achieving SCF entry.

The economic benefits of co-mingling are clear, and the challenge for mailers is how to determine the best value in a co-mingle environment—without adding complexity or cost. New software from BÖWE BELL + HOWELL helps mailers measure the impact of co-mingling on mailings using a variety of variables and can set thresholds based on operational factors. Plant managers can now quantify the benefits of co-mingling as they make strategic decisions on how to manage their operations.

Additionally, digital co-mingling provides mailers with the ability to apportion individual mailings to achieve larger mailings, with heavy concentrations of 5-digit automation qualified pieces, and thus benefit from the lift provided to the less-qualified pieces. This added benefit of digital co-mingling helps reduce the overall size of the mailing, limiting the amount of labor, equipment and time required to process the job while providing the maximum postage benefit per piece.

The postage savings of co-mingling has never been greater. Potential savings from co-mingling are up to $18 per thousand for local-entry mail and up to $43 per thousand for SCF-entered mail. Postage savings can yield $1 million or more for companies that mail millions of pieces annually.

Digital co-mingling tools become increasingly important to enable companies to identify, execute, and track their ability to achieve desired results and return on investment, while continuing to use mail as a viable communication channel for their customers.

The questions in the paper have been discussed many times in the media and elsewhere — but usually piecemeal, one topic at a time. In this paper, because they list virtually all of the key issues facing the USPS in one place, as well as alternatives, it adds depth and context to the topic: http://www.uspsoig.gov/foia_files/RARC-WP-11-001.pdf

In a related note, Senator Susan M. Collins has requested that the OIG conduct a review to determine the effects USPS Compliance Rules have on business mailers. If you would like to participate in this anonymous online survey, go to: http://survey.uspsoig.gov/cgi-bin/qwebcorporate.dll?idx=P9XUT7.

You can also go to a site they created for exchanging comments with mailers and OIG employees: http://auditprojects.uspsoig.gov/2011/01/25/congressional-request-senator-susan-m-collins-effects-usps-compliance-rules-have-on-mailers-11ro002ms000/

While these changes will not happen overnight, it is a good time to step back and assess where the presort industry can add more value in the future. There are several areas – however, clearly this will take new thinking and perhaps changes to existing business models. Priority one is achieving maximum discounts – e.g. 5-digit discounts for a large portion of your sorted mail volumes (First Class or Standard A). The First Class presort industry has already been transformed by one very large player to become an industry that has national large mailers and local mailers. In either case – the main value that the industry can add is to commingle mail volumes to achieve the highest 5-digit discount volumes that are possible.

Increasingly, mailers who handle non-local mailings need to work with partners to achieve these discount levels. Given the competitive threat of national networks and the USPS designating AADC and 3-digit sorting as optional – maximizing 5-digit is the best option for remaining competitive. To achieve this, presorters should look for local partners – data/manifest-prepared mailings or other presorters – to share mail in a manner that maximizes discounts.

BBH has implemented tools in our BCC and Sorting software offerings, and we continue to refine them to help mailers achieve these goals. Our vision is to create a connected set of offerings, from list processing or from meter-prepared mailings, which seamlessly connect to NetSort to enable mailers to achieve maximum 5-digit discounts. Unique IMbs are a foundational building block for achieving these goals and receiving USPS approvals for multi-site mail movement.

Beyond optimizing postage, the data-rich platform from IMb enables dramatically improved opportunities for customer service. Our postal software offerings enable significantly improved customer service – recently implemented features that improve transparency and feedback for your customers. Some of these features include the ability to import Mail.dat files from your clients, optimize sort schemes and report back based upon actual processing results.

It also includes mail tracking through the USPS IMb Confirm platform and the ability for your customers to access your NetSort server via the internet to check on job status. Some mailers are also beginning evaluate the sorting and delivery process. Mailpiece tracking from data (pre-print) throughout the document lifecycle is now readily available in the toolset that is part of our offerings. All of these items are examples of new services that you can provide to your clients.

** This article was originally published in the 2010 Q4 edition of the The Broadcast, BÖWE BELL + HOWELL’s sorting customer newsletter. If you would like to subscribe to the email list to receive these newsletters, please send an email to marketing@bowebellhowell.com.