This article originally appeared in the May/June, 2018 issue of Mailing Systems Technology.

It was July 6, 1976. “Silly Love Songs,” and “Afternoon Delight” topped the music charts. Gerald Ford was President. The first class of women was inducted at the U.S. Naval Academy in Annapolis, MD. The Soyuz 21 carried two cosmonauts to the Salyut 5 space station. The Cincinnati Reds beat the Montreal Expos 10-7. Steve Jobs was 21 and had recently built a new kind of computer circuit board in his garage, which later that year started a business called Apple…

…and the U.S. Postal Service introduced the first ever “workshare” discount for presorted First-Class Mail letters sorted in ZIP Code sequence.

Flash forward to today’s huge, diverse, and complex mailing industry supply chain. In its 2015 Mailing Industry Jobs Study, the EMA Foundation determined that there were approximately 7.5 million jobs (six percent of the nation’s jobs) and $1.4 trillion in sales revenue (4.6% of total US output) associated with the mailing industry in 2014. A significant segment of these jobs and revenue come from the “mail service provider” part of the supply chain – from businesses developing software and technology to support presort, barcoding, electronic documentation; to those transporting mail in drop ship programs; to those providing “co” services to improve presort density and drop ship penetration; to those offering pre- and post-mailing data services around visibility, address quality, and more.

HOW DID WE GET HERE? A QUICK HISTORY LESSON...

To understand the genesis of workshare, one may need a short history lesson. Luckily, the Smithsonian’s National Postal Museum has put together wonderful exhibits and documentation around the USPS’ long history, including the origins of workshare and the evolution of the private mailing industry. The Smithsonian, in its overview of the birth of the mailing industry, says,

“An explosion of mail in the late nineteenth and early twentieth century drove post offices and large-volume mailers to work together to handle mail more efficiently. Mailers used new methods of paying for postage which reduced mail handling by postal clerks and enabled the presorting of mail by destination, speeding dispatch and delivery. Mail volume continued to grow to such an extent that by the 1960s, it threatened to overwhelm post offices when deposited en masse by businesses at the end of each work day. This pushed the Post Office Department to embark on a concerted, nationwide campaign to enlist the aid of large mailers in leveling out the daily ‘mountains’ of mail. So began a unique public-private partnership, unprecedented in scope and scale, which continues to this day.”

Anyone who has not read about the explosion of mail by the 1960s and the challenges the USPS was facing, which led to the birth of many innovations – including workshare – should take the time to do so, and if you have not visited the National Postal Museum recently, I highly recommend it!

If it had not been for the implementation of workshare programs, a significant portion of the mailing industry would not exist as it does today — and the Postal Service also would not exist as it does today.

Workshare discounts promote economic efficiency because the private sector can perform certain activities far more efficiently and at less cost than the USPS can. Just taking one of many documented regulatory oversight procedures looking at workshare, the Postal Regulatory Commission (PRC) in 1999 employed four economists to look at workshare, and they said if workshare were ended, the USPS would have to add 187,000 employees to perform the same activities being done by the private sector through workshare.

Workshare comes in several flavors – the main ones being presort (sorting mail in ZIP Code or delivery sequence prior to entering it with the USPS); barcoding (applying Intelligent Mail barcodes on mail pieces); and drop-ship (transporting mail closer to its final destination). There are also “incentives” for the mailing industry to perform work such as IMb Full-Service requirements (electronic documentation, unique piece/handling unit/container identification, etc.). These differ from workshare discounts in terms of regulation and how they are developed/implemented by the USPS, but they are similar in that private industry performs work that the USPS then provides a price incentive for.

WORKSHARE: GOOD FOR THE USPS

Workshare makes the USPS more profitable because it earns more profit on each piece of workshared mail than it does on mail that is not workshared, which is thus costlier for the USPS to handle. Presorted mail bypasses many USPS operations, for example, making it less costly for USPS. Looking at the USPS’ data for FY2017, it earns $0.262 profit on First-Class Mail (FCM) presort letters, compared to $0.191 profit on FCM single-piece letters – so the USPS makes an additional $0.071 profit on every five-digit FCM presort letter compared to single-piece.

There are other benefits to the USPS from workshared mail. Presorted or drop-shipped mail achieves much better USPS service performance than mail that is not presorted or drop-shipped. For FY2017, all FCM presort letters achieved better service than FCM single-piece letters – particularly in the category that has three- to five-day delivery standards, where FCM presort performance was 93.2% on time vs. single-piece performance, which was 85.6% on time. The same performance benefits can be seen in USPS Marketing Mail as well, both at finer presort levels as well as destination entry vs. origin entry. For USPS Marketing Mail letters with five to 10-day service standards, for example, destination-entered pieces achieved a 95.3% on-time service performance, whereas origin-entered pieces in that category achieved 61.4% on-time performance.

Workshared mail also is better quality mail – designed and barcoded for automated processing by the USPS, with addresses that are evaluated by the USPS for accurate recipient delivery, and in the case of IMb Full-Service mail, providing the USPS with data down to the mail piece level that the Postal Service is using to reduce costs, streamline operations, and improve efficiency.

Beyond the more obvious benefits of workshare to the USPS, there are other ways that workshare and the mailing industry it supports benefit the USPS. An entire industry of professional mail service providers (MSPs), for example, provides front-line marketing, sales, and customer services to end mail owners, taking much of that burden off the USPS to provide. MSPs pick up mail from end users and transport mail to postal facilities, reducing USPS transportation/collection costs.

WORKSHARE: GOOD FOR ALL USERS OF MAIL

For many of the same reasons workshare is good for the USPS, it also benefits all users of the mail. By utilizing workshare, business mail senders are able to save on postage, achieve better delivery service, and enhance consumer response to the mail. Workshare helps keep mail affordable, predictable, and viable as a communications choice for many businesses. Without workshare, many businesses might have left the mail long ago in search of other more affordable and efficient means of reaching their customers.

As mentioned previously, workshared mail is more efficient for the USPS to handle, thus helping the USPS keep its costs down. The USPS likely could not have streamlined its facility network and consolidated facilities without drop-ship and other workshare initiatives reducing the need for some of its facility and transportation infrastructure.

MSPs – who are dependent on workshare for their livelihood – act as strong mail advocates, with marketing and sales teams constantly selling business on the use of mail and helping them mail at the lowest possible cost, with high quality mail pieces and successful campaigns.

Workshare also supports the USPS’ ability to provide affordable mail service to all Americans by helping generate revenue for the USPS to maintain its infrastructure and delivery network. All citizens in the US enjoy the benefits of a postal system providing universal service and a universal price for consumers to use the system – which could not exist without the foundation of workshared mail.

WE'VE COME A LONG WAY...

The industry that has been built on workshare is amazing in terms of its scope and size, and it is recognized as one of the most sophisticated and extensive in the world.

For 2017, 64.8% of all FCM was presorted (67.2% of those to five-digit), and 32% of all USPS Marketing Mail was presorted to carrier-route level. Looking at drop-ship, 12.2% of carrier-route USPS Marketing Mail was not drop-shipped at all in 1997, compared to 1.8% not drop-shipped in 2017; 19.6% of carrier route was drop-shipped to destination bulk mail centers (DBMC) vs. six percent to a destination network distribution center (DNDC) in 2017; and 47.1% was drop shipped to a destination sectional center facility (DSCF) vs. 91% in 2017. For 2017, 89% of all USPS Marketing Mail was drop-shipped, which shows the growth of the workshare transportation network over the past 20 years.

In the EMA Foundation’s study referenced earlier, 92% of the 7.5 million jobs in the mailing industry are private industry (vs. eight percent USPS). That means the private business side of the mailing industry represented nearly seven million jobs in 2014. We’ve come a long way since the 1800s, when businesses first used post cards to advertise in the mail and Montgomery Ward sent its first single-page catalog in 1872. And this vibrant mailing industry would not be where it is today without workshare.

BUT ARE WE THERE YET?

As the mail mix may continue to change and some mail volumes may continue to decline, both the USPS and the mailing industry must look for ways to add value to the mail and keep it affordable, efficient, and with predictable service. Just like in the past, the USPS, commercial mail users, and service providers should partner to explore new or enhanced workshare opportunities that will help keep mail competitive with alternative channels and competing delivery networks.

Those who think workshare opportunities have been maximized may not be thinking outside the box enough – for innovative MSPs, there are lots of ideas for ways to enhance some of the existing workshare offerings as well as new workshare opportunities that should be explored.

Kathleen J. Siviter is Asst. Executive Director of the National Association of Presort Mailers (NAPM) as well President of Postal Consulting Services Inc. (PCSi), and she has over 30 years’ experience in the postal industry. She has worked for the U.S. Postal Service, Association for Postal Commerce (PostCom), and others, as well as providing consulting services to a diverse set of clients with interest in the postal industry. She also works with PostalVision 2020, an initiative designed to engage stakeholders in discussions about the future of the American postal system.