Postal Affairs Blog

The major small package shipping companies have announced their new rates for 2010, which become effective on January 4, 2010. FedEx_® announced an average increase of 4.9 percent, as did UPS™. Both companies announced increases for ground shipping options of 4.9%, with higher increases for expedited and international shipments. The higher increases, around 6.9%, are being offset somewhat by lowering the fuel surcharges by 2%. It is important to note that along with the increase to their base rates, UPS and FedEx are also increasing their accessorial charges and surcharges. It is important for shippers to take these additional increases into account as well as the base price increases, as the accessorial charges can really add up.

 The United States Postal Service^® (USPS^®) announced increases on their shipping prices of 3.3% on average. The USPS price structure does not include accessorial charges such as residential delivery, Saturday delivery or fuel surcharges.

 USPS Price Percentage Changes by Category

For companies who ship packages in bulk quantities, there are reduced rate Commercial Base prices and Commercial Plus prices. Commercial Base pricing reflects a savings of 5% to 10% over retail prices, depending on the shipping category. Commercial Base pricing is available for qualifying Express Mail, Priority Mail, Global Express Guaranteed, Express Mail International and Priority Mail International shippers. There are varying qualifying criteria for each category of shipper, such as using Permit, PC Postage, Click-N-Ship, or an approved Information Based Indicia (IBI) metering device.

 Commercial Plus prices are available for large volume shippers who meet the criteria for Commercial Base pricing, and who ship more than 100,000 Priority Mail packages per year, or more than 6,000 Express Mail packages per year, or who have a customer commitment agreement with the Postal Service. The savings over Retail prices for this category range from 9.6% for Priority Mail to 14.5% for Express Mail.

 The USPS also made some other interesting changes in their rate structure for 2010:

• There are some rates that are actually going DOWN! The retail price for Priority Mail Flat Rate Envelopes went down from $4.95 to $4.90.  These Priority Mail flat rate envelopes are already a super deal, so this rate reduction makes them even more attractive. Like the TV commercials say, “If it fits, it ships.” For mailers shipping in bulk quantities, they may be able to qualify for even lower rates if they meet the qualification requirements for Commercial Base or Commercial Plus pricing.
• The Priority Mail one pound price is now zoned (previously mailpieces under 1 lb. were the same price, regardless of the zone). I’m not sure why the USPS would want to complicate the rate structure with this move, so we’ll see what impact it has on shipping volumes.
• There is a “new” half-pound price for Commercial Plus items.
• The USPS added new Cubic Volume Commercial Plus price tiers (5 tiers) to encourage smaller & more space-efficient packaging. Cubic Volume is based on size rather than weight: the smaller the package, the lower the price (even if it’s up to 20 lbs.). Shippers should be able to save a lot of money using this option, both in packaging materials and in shipping charges. Shippers still have the option to use the weight-based rates.

Priority Mail Open and Distribute Made Easy

Back when I was in the printing business, I used to cringe whenever a client brought up the possibility of using Priority Mail Drop Shipping for distribution of their mail. As printing companies, we did not often recommend this delivery option to clients because it was, quite frankly, a real pain to implement. Luckily, that is no longer the case, due to true innovations in mailing and shipping software. For some mailers, Priority Mail Drop Shipping is a well-kept secret that they are not aware of, and as a result they are missing out on some great opportunities to improve delivery and reduce costs.

For those of you not familiar with this service, it is technically termed Priority Mail Open and Distribute (PMOD) by the United States Postal Service^® (USPS). It is a method of drop shipping mail to additional postal entry points using Priority Mail as the shipping method rather than more traditional methods such as truckload, less-than-load (LTL) or air freight. The same service is available using Express Mail Open and Distribute (EMOD), although it is more expensive due to the quicker delivery time (next day service).

Regardless of which level of service is used, Open and Distribute is a pretty nifty way to drop ship to entry points with smaller volumes of mail which make the more traditional shipping methods cost prohibitive. It works by entering the mailpieces at their normal postage prices (e.g. Periodicals, Standard, etc.) and then placing those trays or sacks of mail into Priority Mail sacks for delivery to the postal entry point. By use of special sack tags, these Priority Mail sacks are identified to the USPS as containing drop shipped mail, which the USPS then opens and distributes the sacks inside as they would normally be routed. The Priority Mail postage is paid on the weight of the mail inside the PM sack (and tare weight of the sacks/trays inside the PM sack), and essentially replaces the shipping charges that would have been charged by freight carriers if the more traditional shipping methods had been used.

In years past, this process was a real pain because this mail had to be manually separated, manually tagged with the PMOD tags, and postage statements were manually generated. Now, however, there are software solutions that allow these functions to be automated to the point that it is much more time and cost effective to use PMOD.

How can mailers take advantage of PMOD? There are three major benefits to using PMOD:

1) If you are experiencing delivery delays to remote or distant locations (e.g. Alaska, Hawaii, Guam, Puerto Rico), or any location for that matter, PMOD can be a great way to shorten the delivery time. Priority Mail has delivery standards of 2-3 days, so the mail gets entered into the postal entry points much more quickly than if the mail was locally entered at the printing plant or letter shop.

• 2) You can take advantage of drop ship discounts even for entry points with low mailing densities, such as Butte, MT or Fargo, ND.
• 3) You can mail at the less expensive Standard rates, but get very close to First-Class delivery standards if you use PMOD to drop ship to additional entry points.

Your mailings can be easily analyzed to determine whether PMOD will be beneficial for you to use. Using a mail.dat file, you can process this file through post-presort mail.dat management software in a “quick plan” mode. This will allow you to see all the possible drop ship entry points for which your mailing would qualify. You can then go a step further by applying freight charges to the entry points with significant mail volumes. Any entry points with small volumes can then be exported into PMOD software to determine the estimated cost of PMOD shipping.

If you do not have post-presort mail.dat management software, you can ask your printer/mailer to perform these analyses for you, or you can contact a provider of this type of software to request a demo or trial of the software. If you have been hesitant to use PMOD in the past due to implementation concerns, or if you are completely new to PMOD, you owe it to yourself and your company to check out the possibilities of this great USPS program.