BEFORE THE POSTAL RATE COMMISSION WASHINGTON, D.C. …

BEFORE THE POSTAL RATE COMMISSION WASHINGTON, D.C. 20268-0001

SPECIAL SERVICES REFORM, 1996

Docket No. MC96-:3

REBUTTAL TESTIMONY OF JOE DEMAY

ON BEHALF OF UNITED STATES POSTAL SERVICE

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TABLE OF CONTENTS

Autobiographical Sketch.. ..........................................................

1

I. Purpose of Testimony.. ..........................................................

2

II. Standard Method ..................................................................

3

Ill. Weight Averaging Method.. ...................................................

4

IV. Weight Averaging of Mystic Color Lab Business Reply Mail .......

6

A. How Weight Averaging is Performed for Mystic.. .............

7

B. Problems With the Weight Averaging of Mystic BRM ........

8

V. Reverse Manifesting of Nashua Business Reply Mail.. ................

10

A. How Reverse Manifesting is Performed by Nashua.. ..........

13

B. Problems With the Current

Reverse Manifest System at Nashua.. .............................

15

C. Nashua Reverse Manifest System Performance.. ...............

16

1. Individual Piece Errors ...........................................

16

2. Individual Sampling Errors.. ....................................

18

3. Total Postage Errors.. .............................................

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D. Analysis of Individual Piece Errors. ....................................

20

1. Film Canister Errors.. ..............................................

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2. No BRM Price Errors.. .............................................

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3. Missing Piece Errors. ..............................................

23

4. Breakpoint Errors.. .................................................

25

E. Lack of A Manifest Printout ...............................................

25

F. Other Operational Issues.. ................................................

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G. Summary of Nashua's System Performance ........................

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VI. Conclusion ...............................................................................

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1 AUTOBIOGRAPHICAL SKETCH

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3

My name is Joe DeMay. I am a Classification Support Specialist from

4 the Northern Virginia Rates and Classification Service Center (RCSC) andi am

5 domiciled at the Youngstown, Ohio post office located at 99 S. Walnut !jt.,

6 Youngstown OH 44501-9609.

I have worked for the Postal Service for 24

7 years.

8

I have been in my current position since 1993 and I am r'esponsible for

9 reviewing 80 postage payment systems in the Akron, Cleveland, Columbus,

10 Pittsburgh, Erie and Charleston, WV postal districts. I also provide technical

11 assistance to postal customers and employees in those areas as well. Part of

12 this assistance includes working with Nashua Photo Inc. (Nashua) of

13 Parkersburg, WV to develop several postage payment systems.

14

Prior to coming to the RCSC, I was the Akron Management Sectional

15 Center (MSC) Manager of Mailing Requirements from 1987 to 11993. M,y

16 previous positions include Youngstown MSC Manager of Mailin,g

17 Requirements from 1985 to 1987 and bulk mail clerk from 1983 to 1985. I

18 also have served as acting Manager of the Northern Virginia RCSC. This; is

19 my first appearance before the Postal Rate Commission.

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1 I. Purpose Of Testimony

2

The purpose of this testimony is to explain why the Commission

3 should not recommend either of the alternative rate classification proposals

4 for Business Reply Mail (BRM) set forth in the testimony of witrtess John

5 Haldi (NMS-T-1; Tr. 6/2051). In doing so, I will provide information

6 describing some. of the current procedures utilized by the Postal Service to

7 calculate and collect the postage and fees for nonletter-size Business Reply

8 Mail (BRM). Three different methods of calculating BRM postage and fees

9 for nonletter-size BRM will be described - the standard method, and two of

10 the alternative methods, weight averaging and reverse manifestiing.

11

Much of my testimony will focus on the problems with weight

12 averaging as it is being conducted at Mystic Color Lab (Mystic) and with

13 reverse manifesting as it is being conducted at Nashua. I will also point out

14 numerous instances in which witness Haldi mischaracterizes ho,N the Mystic

15 and Nashua systems operate and exaggerates their accuracy and reliability.

16 This mischaracterization and exaggeration is more than trivial. Rather, it

17 goes to the heart of whether the Commission can confidently rely on witness

18 Haldi's testimony alone to make a recommended change in the `BRM fee

19 schedule.

20

Some of the problems I will discuss, which are associated with the

21 operation and administration of the alternative methods utilized to calculate

22 and collect postage and fees for Mystic's and Nashua's Business Reply Mail,

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23 were known prior to the Postal Service's establishment of the &usiness Reply

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1 Mail Re-engineering task force (BRM task force) which is described in the

2 rebuttal testimony of Gary lnfante (USPS-RT-6). Other problems, however,

3 were only discovered in recent months as the BRM task group sitarted

4 working. It is evident from a review of the previously known problems and

5 the newly discovered problems that additional work is still needsed to improve 6 the operation and administration of these alternative methods to ensure t:hat 7 postal revenues are properly protected.

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9 II. Standard Method

10

Nonletter-size BRM is part of the regular mailstream until the Postal

11 Service removes it in order for the postage and fees to be calculated. This

12 normally takes place at the destination post office. In larger facilities, this 13 function is usually performed by full-time, postage due clerks. At smaller 14 offices, this function is usually performed by distribution and window clerks,

15 or postmasters.

16

Depending on the volume received, the nonletter-size pieces may be

17 separated by customer permit holder into two categories - flats and parcels.

18 The postal employee weighs each piece of mail individually to determine the

19 appropriate amount of postage, as well as the BRM handling fee.

20

The employee uses an adding machine or worksheet to elnter the

21 amount of postage for each piece of mail as it is weighed. When all the

22 pieces for a particular permit holder are weighed, the clerk enters the total

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1 postage amount on a Postage Due Bill, PS Form 3582-A.' This amount is

2 then deducted from the permit holder's account (unless the customer is Iusing

3 the cash payment option) and a postage due meter tape for the amount iof

4 postage is affixed to the Postage Due Bill. The Postage Due Bill is then

5 forwarded with the mail when it is placed back into the mailstream for

6 delivery. For smaller volume customers, a Postage Due Bill may not be

7 prepared and the postage due meter tape will be affixed directly on the top

8 piece of mail of the bundle.

9

The standard method is utilized at all post offices and requires Postal

10 Service employees to calculate the postage for each individual piece of BRM.

11 In situations where a customer receives large volumes of nonletter-size EIRM,

12 the standard method of handling each piece of mail individually may not be

13 practical. In these situations, some local post offices have implemented

14 alternative methods based on weight averaging.

15

16 III. Weight Averaging Method

17

One method used to calculate postage for incoming Business Reply

16 (and Postage Due) Mail is weight averaging. Weight averaging is normally 19 implemented by local post offices which receive large volumes of nonletter-

20 size return and/or reply mail in order to speed up the processing of the mail.

21

In preparation for implementation of weight averaging, the local post

22 office analyzes the types of mail which make up the return maill universe and

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' Attachment A to this testimony.

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1 what type of separation may be required. Since Business Reply Mail is all

2 First-Class Mail, the only separation which might be required is between the

3 l-l 1 ounce pieces and Priority (over 1 l-ounce) Mail pieces. Once the mail is

4 separated, the local post office then calculates and records the postage due

5 (postage plus BRM fee) and weight for each individual piece, as well as the

6 total pounds and total postage. This is done over several days or several

7 weeks until the local post office determines a large enough volume has been

8 sampled. The postage and weight information for the individual1 pieces is

9 then used to determine a postage per pound for the return mail. Once the

10 postage per pound has been established, all future postage is determined by

11 obtaining the bulk, net weight of the return mail and multiplying1 that weight

12 by the current postage per pound factor. That postage per pouind factor is

13 used until it is updated.

14

The BRM task force has discovered that weight averaging is

15 somewhat common in the Postal Service. Generally weight averaging is used

16 for regular returned parcels, but it is also utilized for Business Reply Mail as

17 well. The team also discovered that there are no standard operating

18 procedures for establishing and maintaining weight averaging. The sampling

19 procedures for the initial sampling, as well as the procedures for updating the 20 postage per pound factor, vary by site. This has resulted in inconsistencies. 21 also, in general, weight averaging has been designed and implemented by 22 local postal employees who have little, or no, background or training in 23 statistical methods. The primary objective of weight averaging is to move

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1 the mail faster. The BRM task force has determined there is a need to see

2 that statistically valid methods are developed and implemented at offices

3 utilizing weight averaging. The team has also found that the administration

4 of these weight averaging needs to be improved to ensure the required

5 updating of the cost per pound is completed. The collection of the proper

6 postage and fees can be compromised when the frequency for updating the

7 cost per pound is not maintained. The lack of these standardized procedures

8 and the improper administration of the procedures currently in place have led

9 to the utilization of weight averaging which is functional, but flawed.

10

11 IV. Weight Averaging of Mystic Color Lab Business Reply Mail

12

Mystic is a large mail order film processing company with a plant

13 located in Mystic, CT. Currently, Mystic's customers send envelopes

14 containing their undeveloped film to a post office box located in INew

15 London, CT. These orders are then picked up by Mystic employees twice 16 daily, six days a week, at the New London, CT post office.

17

Mystic has been a Business Reply Mail customer since 19'70. Initially

18 the postage and fees for each piece of their Business Reply Mail were 19 calculated individually. As their volume grew, it became less pr?lctical for the 20 local post office to handle each piece of Mystic's nonletter-size 8RM

21 individually. `This large volume resulted in the New London Post Office

22 implementing weight averaging for Mystic in December of 1984.. Weight

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23 averaging eliminated the handling of each individual piece for po:stage

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