2013 left USPS with no postal legislation, a continuing trend of decreasing mail volume and revenue with no relief to its debt obligations. While operations at USPS have made great strides to reduce costs, and prices have been increased above the inflation rate, there is no end in sight for the USPS cash flow issues. Required raises built into postal union contracts will add a billion dollars of additional expenses in 2014. Until meaningful postal legislation is implemented, the Postal Service will be forced to continue to look at ways to optimize the things it can control, which in many cases means changes in mail entry.

Network Rationalization Throughout 2012 and 2013, USPS consolidated 178 sorting and processing facilities, cutting the total number of SCFs, NDCs and processing plants significantly. The first phase of rationalization is now complete and USPS has been under substantial political pressure to not close any more facilities.

The first phase of network rationalization closed many Sectional Center Facilities (SCFs). Local mailers depositing mail at these close facilities were promised that they could continue to obtain the appealing DSCF discount at these facilities, even when the actual processing of the mail was not performed there. In the Federal Register notice for the January 2014 price change, USPS noted that this practice for local mailers will end with the January 2015 price change.

Starting in July, USPS will start allowing mail entry at HUBs, many of which are old SCF processing facilities that were closed. These HUBs have no processing capabilities, but do have transportation to downstream delivery units, DDUs. Mailers entering carrier route and 5-digit mail in containers that can be cross docked to DDUs will be able to be deposit them at these facilities and qualify for DSCF discounts.

Service Standards and Load Leveling
The second phase of network rationalization was scheduled to take place with changes in service standards that were originally scheduled to take effect in February 2014. These changes would have relaxed the service standards for local First-Class Mail processing, eliminating overnight delivery. This was wildly unpopular with postal unions, and has also been postponed indefinitely. This means that First-Class Mail with overnight standards today will continue to be delivered overnight. In addition, majority of the facility changes that were part of the second phase of network rationalization have also been postponed. USPS has indicated it will provide a minimum of 90-day notice before moving forward with any changes made to service standards and noted that several facility closures may still occur in 2014.

The same does not apply to Standard Mail, however. Standard Mail, entered at destination SCFs, is the most common type of mail processed by USPS. Mail carriers tend to have more mail to deliver on Mondays, and the vast majority of carrier overtime is logged on Mondays as well. During the fall of 2013, USPS conducted an experiment in New Jersey to "level" the mail, by allowing SCF mail entered on Friday to be delivered on Tuesday, rather than Monday. Days before 2014, USPS requested an advisory opinion from the Postal Regulatory Commission (PRC), to see if this new standard could be applied nationwide.

The two week test didn't result in much negative feedback from customers, and was well received by most postal employees. However, many in the mailing industry are convinced that the isolated test was not representative of all mailers, and was not conducted long enough to produce measurable impacts on mailing campaigns.

Information on how much money the load leveling initiative would save and the impact of the change on potential 5-day delivery and holidays were not calculated as part of the test. According to the PRC filing, USPS could implement this new schedule as soon as late March. If enacted, this initiative will have drastic effects on mailing campaigns that are date-sensitive. Any mailings that require an early week delivery date will need to adjust to the new schedule, where one less production day will be available. This will also impact mailings where early delivery is concerned.

What's Next for Mailers
Even without continued network rationalization, USPS still plans on moving some of the mail processing operations in 2014. To ensure mailers are preparing their mail correctly, the files used in mailing software, including labeling lists and the mail direction file, will be released monthly starting in July. Mailers will need to apply these updates as indicated by their software vendor as well as anticipate for more changes to mail entry throughout 2014 and beyond.