02-21189. Optional Increase in Minimum Number of Pieces Required for Preparation of 5-Digit Packages of Standard Mail Flats

AGENCY:

Postal Service.

ACTION:

Final rule.

SUMMARY:

This final rule sets forth Domestic Mail Manual (DMM) standards adopted by the Postal Service to allow mailers to select a number from 10 to 17 as the minimum number of pieces at which 5-digit packages may be prepared in a Standard Mail job of flat-size pieces (DMM C050.3.0) that are not more than 3/4-inch thick. Currently mailers must prepare 5-digit packages whenever there are 10 or more pieces to a 5-digit ZIP Code destination.

EFFECTIVE DATE:

September 5, 2002.

FOR FURTHER INFORMATION CONTACT:

Cheryl Beller [phone]; or Patricia Bennett [phone].

SUPPLEMENTARY INFORMATION:

Under these new standards, mailers can select a minimum number of pieces greater than 10 at which 5-digit packages of automation rate and Presorted rate Standard Mail flat-size pieces not more than 3/4-inch thick, including co-packaged pieces (DMM M950), are prepared within a mailing job. Mailers must use a consistent minimum for 5-digit packages throughout a mailing job. The minimum may not be set higher than 17 pieces, which means that whenever there are 17 or more pieces to a 5-digit ZIP Code destination, those pieces must be prepared in 5-digit packages. The preparation standards for other package levels and for containers are unchanged, and mailers must continue to prepare 3-digit and area distribution center (ADC) packages whenever there are 10 or more pieces to those destinations. 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 of 11 to 17 pieces is selected. In either case, the overall number of packages prepared by mailers and processed by the Postal Service should decrease. For example, a 4-ounce catalog prepared in four 5-digit packages for the same 3-digit destination that each contain 10 pieces could be combined in one new 3-digit package (that weighs less than 20 pounds) under the new standards if the minimum 5-digit package size is set at 17.

Any movement of pieces from 5-digit packages to 3-digit packages that results from this new option will not impact postage paid by mailers or Postal Service revenues because Standard Mail flats are eligible for the 3/5 presort rates whether prepared in 5-digit or 3-digit packages. Pieces moving from small 5-digit packages to larger 3-digit packages would not be subject to any additional postage, and mailers are encouraged to set their 5-digit package minimum at 17 pieces to prepare fewer packages. However, anyone wanting to use the current 10-piece package minimum, or to set the minimum between 10 and 17, could do so. Mailers are reminded that the 3/5 Presorted rate for Standard Mail flats is applicable to 5-digit or 3-digit packages prepared in 5-digit or 3-digit sacks containing a minimum of 125 pieces or 15 pounds of pieces or placed on any level pallet. Automation rates are always based on the package presort level and the 3/5 automation rate applies to any pieces in 5-digit and 3-digit packages. It is possible that the selection of a higher 5-digit package minimum may improve the presort level of some pieces that would otherwise fall to a lower package level after all 5-digit packages are prepared. For example, after all 5-digit packages are prepared using the current 10-piece package minimum, less than 10 pieces may remain for the 3-digit destination and the remaining pieces would be prepared in an ADC or mixed ADC package and be subject to the basic rate. When combined with pieces from one or more small 5-digit packages to the same 3-digit destination, these pieces could move to a 3-digit package and be subject to the 3/5 rates.

Because of the operational efficiencies that are expected for mailers and the Postal Service due to the creation and handling of fewer flats packages as a result of this new optional preparation, the Postal Service finds no need to solicit comments or to delay implementation.

Background

Exploratory modeling of piece, package, and container handling costs indicates that the appropriate minimum for 5-digit packages of Standard Mail flat-size pieces is clearly above 10 and could be increased to 17 pieces for flats likely to be processed on the automated flat sorting machine (AFSM) 100. The modeling, conducted by the Postal Service in conjunction with its product redesign efforts, indicates that changing the minimum package size for 5-digit packages is not likely to increase the Postal Service's combined package and piece handling costs. It also suggests that the net gain from reduced package handling using the 17-piece minimum will be greatest for pieces that weigh less than 6 ounces and somewhat less for heavier pieces. Because of the 20-pound maximum package weight (DMM M020.1.8), the elimination of 5-digit packages of heavier pieces will result in the creation of an almost equal number of 3-digit packages and the costs for additional piece handlings will not be offset by reduced package handling costs. As with any change of this type, the impact on a specific mailing will vary based on mail characteristics such as piece weight and presort density. However, it is expected that this optional change should help to reduce overall Postal Service processing costs as well as mailer production costs, and that it should not have any negative impact on service for pieces that move from 5-digit to 3-digit packages.

The expected benefits of this change are based, in large part, on productivities and piece processing efficiencies of the AFSM 100, which can process pieces up to 3/4-inch thick. Pieces greater than 3/4-inch thick may be processed on the FSM 1000, on the small parcel and bundle sorter (SPBS), or manually, all at lower productivities than if processed on the AFSM 100. Furthermore, very little incoming secondary processing of pieces to carrier routes occurs on FSM 1000s, and it is more desirable to have mail prepared in 5-digit packages that can be sent directly to the delivery office for distribution to carrier routes. For this reason, the optional higher minimums are limited to flat-size pieces likely to receive AFSM 100 processing, and mailers must continue to use the current 10-piece minimum when preparing 5-digit packages of automation rate flat-size pieces greater than 3/4-inch thick.

Two important goals of product redesign are to align rates and preparation requirements with customer needs and capabilities, and to provide products that reduce combined Postal Service and customer costs and fit within the future postal operations environment. The Postal Service believes there are major opportunities to improve flats processing efficiency and that, in the mid-term (within approximately 2 to 5 years), these opportunities can be fully captured only by restructuring rate categories and the corresponding preparation requirements for flats. Although approximately 40 percent of Postal Service mail processing costs for Standard Mail flats are in package and container handling, there are currently few rate incentives to induce customers to package and containerize their mail in ways that reduce Postal Service costs. Beyond the minimums and maximums for packages and containers, there is very little guidance or flexibility for preparing packages and containers. In contrast, to reduce Postal Service piece handling costs, customers are offered a detailed structure of rate incentives for presorting, barcoding, and dropshipping. Implementation of a flexible minimum for 5-digit packages of Standard Mail flats is an attempt to provide guidance for preparing more efficient packages.

The Postal Service discussed the potential for implementing this change with software vendors and major flats printers and mailers at the Mailers Technical Advisory Committee (MTAC) Presort Optimization Work Group meeting in May 2002. Attendees were receptive and indicated that software revisions necessary to implement this preparation change would not be difficult. However, they also noted that the Postal Service would need to act quickly to formalize the changes and inform the mailing industry of their value in order to obtain the greatest benefit for the 2002 fall mailing season, when the Postal Service normally experiences a Standard Mail volume peak. If mailers take advantage of this option quickly, the associated reduction in the volume of packages of flats could help the Postal Service avoid more costly manual processing that may occur during volume peaks.

Although mailers who want to select a higher 5-digit package minimum than 10 pieces will not be required to use Presort Accuracy Validation and Evaluation (PAVE)-certified software, PAVE tests are available for presort software vendors who will support this option.

Based on the expected efficiencies resulting from this change, the Postal Service plans to raise the minimum quantity for preparation of 5-digit packages of Standard Mail AFSM 100 flats from the current 10 pieces in conjunction with the next omnibus rate case.

The Postal Service is interested in receiving feedback about the volume shift in specific mailings from mailers who change their minimum package size. The following information may be sent to Cheryl Beller, Product Redesign, U.S. Postal Service, Room 4039, 1735 N Lynn St, Arlington, VA 22209-6360 (E-mail address: [e-mail]): Total number of pieces in mailing; mailpiece weight; number of pieces prepared in 5-digit packages and the number of 5-digit packages; number of pieces prepared in 3-digit packages and the number of 3-digit packages; and the maximum package parameter (weight or number of pieces). If the maximum package size setting reflects a total package weight lower than 20 pounds, please indicate the maximum package height that correlates to the maximum package size. The number of pieces and number of packages (5-digit and 3-digit) should be shown using both the current 10-piece minimum and the new minimum selected for presort (from 11 and 17).

List of Subjects in 39 CFR Part 111

• Postal Service

For the reasons discussed above, the Postal Service hereby adopts the following amendments to the Domestic Mail Manual (DMM), which is incorporated by reference in the Code of Federal Regulations (CFR). See 39 CFR part 111.

PART 111—[AMENDED]

1. The authority citation for 39 CFR part 111 continues to read as follows:

Authority: 5 U.S.C. 552(a); 39 U.S.C. 101, 401, 403, 404, 3001-3011, 3201-3219, 3403-3406, 3621, 3626, 5001.

2. Amend the Domestic Mail Manual (DMM) as follows:

Domestic Mail Manual (DMM)

* * * * *

M Mail Preparation and Sortation

* * * * *

M600 Standard Mail (Nonautomation)

M610 Presorted Standard Mail

* * * * *

4.0 FLAT-SIZE PIECES AND IRREGULAR PARCELS

* * * * *

4.3 Package Preparation

Package size, preparation sequence, and labeling:

[Revise item a to read as follows:]

a. 5-digit:

(1) Flats: required with 17 pieces, optional with 10 to 16 pieces (use of a consistent minimum is required for a mailing job); red label D or optional endorsement line (OEL).

(2) Irregular Parcels: required (10-piece minimum); red label D or optional endorsement line (OEL).

* * * * *

M800 All Automation Mail

* * * * *

M820 Flat-Size Mail

* * * * *

5.0 STANDARD MAIL

5.1 Package Preparation

Package size, preparation sequence, and labeling:

[Revise item a to read as follows:]

a. 5-digit:

(1) Packages containing pieces not more than 3/4-inch thick only: required with 17 pieces, optional with 10 to 16 pieces (use of a consistent minimum is required for a mailing job); red label D or optional endorsement line (OEL).

(2) Packages containing pieces with a thickness greater than 3/4-inch: required with 10 pieces; red label D or optional endorsement line (OEL).

* * * * *

M900 Advanced Preparation Options for Flats

* * * * *

M950 Co-Packaging Automation Rate and Presorted Rate Pieces

* * * * *

3.0 STANDARD MAIL

* * * * *

3.2 Package Preparation

Package size, preparation sequence, and labeling:

[Revise item a to read as follows:]

a. 5-digit:

(1) Packages containing pieces not more than 3/4-inch thick only: required with 17 pieces, optional with 10 to 16 pieces (use of a consistent minimum is required for a mailing job); red label D or optional endorsement line (OEL).

(2) Packages containing pieces with a thickness greater than 3/4-inch: required with 10 pieces; red label D or optional endorsement line (OEL).

* * * * *

We will publish an appropriate amendment to 39 CFR 111.3 to reflect these changes.

Stanley F. Mires,

Chief Counsel, Legislative.