Time Inc.’s O’Brien Raises USPS ‘Automation Refugee’ Cost Factor

Periodicals class costs going up, but automated processing still inefficient.

By Bill Mickey
Wednesday, March 31, 2010

The USPS is projecting a staggering $238 billion loss over the next 10 years. In the middle of a raft of significant cost-saving initiatives proposed by Postmaster General John E. Potter is the future of the Periodicals class and how the organization views it as a cost center.

At odds are the USPS’ position that periodicals are only covering 75 percent of the cost to process the category and the publishing industry’s contention that it has cooperated more than enough to reduce costs. Rather, say publishers, the USPS should examine its own automated processing of flat mail as a key factor to closing the gap. Namely, the emergence of a category of Postal Service employees who were displaced by automated processing into manual sortation roles, a group dubbed “automation refugees.”

Indeed, the anonymous blog Dead Tree Edition points out that the Postal Regulatory Commission is waiting on a “Joint Report” before it begins any initiatives to bring Periodicals class to break-even.

Jim O’Brien, vice president of distribution and postal affairs for Time Inc. [pictured], recently contributed a post on the USPS Office of Inspector General blog that raises the issue of an increase in manual processing despite ample automation capabilities. Here, O’Brien explains some of the background on his post.

Describe the situation that led to “automation refugees.”

That really started way back in the eighties when the postal service began automating letter mail. The rules prohibited them from laying anyone off, so they had to migrate them over to manually processing flat mail.

Over the years, in spite of huge improvements in co-mailing and other initiatives, we’ve seen periodical costs increase. It makes you ask what’s wrong with this picture.

What has been done to look into this?

In 1998, the industry got together with the MPA to get to the bottom of this. At the time, the Postal Service agreed to form a joint task force. We did that and issued a significant report that talked about some of the inefficiencies we saw. We visited 17 facilities during the hours when they were supposed to be at peak processing time for magazines. During the visits the machines were always down. We never saw the machines running.

We did see one running in a California facility—it was running standard mail, not periodicals. But the employee was feeding the machine by hand and right next to him was an automated feeder that wasn’t being used. These were the types of things that were happening to keep people busy.

And so all of this culminated with the latest reports that periodicals are only covering 75 percent of their costs. And it screams there is a problem.

You note in your post on the OIG blog that there’s more Periodicals mail being manually processed than ever before. How did you determine this?

The Postal Service issues regular reports. We have a consultant, Halstein Stralberg, who culled the data and determined there’s more manual processing now and the productivity is lower.

Is this the key contributor to the 25 percent shortfall in cost coverage by Periodicals?

It’s one of a number of contributors. One of the things that the Postal Service points to is that ad pages are down, which means our magazines weigh less and we’re paying less postage. Less postage and the same or more costs mean lower coverage. But I don’t think we’re to blame for that. This is a 20-plus year-old problem.

Our costs coverage was under water even when we were flush with advertising.

Describe how mailers have increased their worksharing. Where is this evident?

As a result of co-mailing and selective binding, over 50 percent of periodical mail is now carrier-route sorted and that’s a huge improvement from years past.

This means that we can create a bundle that travels through the entire system as a bundle and wont’ get opened to be processed on sorting equipment. The bundle doesn’t get opened until the carrier opens it and sorts it for the route. It’s a huge labor-saving effort for the postal service.

What actions would you like to see from the OIG and the USPS to solve this?

I would like the OIG and the Postal Service to look into their in-office cost system (IOCS) and determine how data is being captured. I would like them to look into how employees are being assigned to various work assignments and whether those work assignments are being created to keep people busy or if they’re actually necessary.

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