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USPS® FY15 STRATEGIES« «1
«The Future of Packages«
«Bright or Dim?«National PCC Day
Chicago Postal Customer CouncilSeptember 10, 2014
Dennis Nicoski
USPS® FY15 STRATEGIES« «
Agenda
Marketplace trends – mail and packagesWhat is dimensional weighting?
DIM 101
Why does it matter? What does it mean?How do you capitalize?Proposed Priority Mail price reductionsQ&A
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USPS® FY15 STRATEGIES« « 3
Industry Trends – Mail
• FCM erosion continues
• Battle for advertising dollars
• Changing demographics and buyer behavior
• Pace of change
• Security / privacy concerns escalating
• Technology integration / promotions
• Paper/print
• Exigency
USPS® FY15 STRATEGIES« «
USPS® FY15 STRATEGIES« «
USPS® FY15 STRATEGIES« « 6
2014 Mail Promotions
USPS® FY15 STRATEGIES« « 7
Mail NSA’s
• First catalog NSA filed March 5, 2014 – pending before PRC
• Key principles• Tiered discount on growth above base• Annual logical adjustment to baseline• 5 year term• Multiplier effect• Package commitment
• 25+ currently in discussion
USPS® FY15 STRATEGIES« « 8
Current Marketplace Trends FedEx and UPS DIM Changes
Proposed Priority Mail price reductions
Sunday, MetroPost/Same Day, Holiday, Next Day
Omnichannel (Ship-from-store, Endless Aisle, Flexible delivery)
Residential growing, commercial flat
Mode shifts – Air to Ground
Zone optimization
Business need assessment
Free shipping vs. transit time pressure from market leaders
Returns
DSV’s
Multi-carrier
Peak
USPS® FY15 STRATEGIES« «
IT / Engineering
Systems
People / Human Capital
Customer Experienc
e
Brand
First Mile Physical Network
Last Mile Digital
USPS Innovation Platforms
Enhance efficiency and convenience of pickup services and induction by fully utilizing USPS data, engaging with potential partners, and recognizing emerging customer needs. Enablers
Enhance efficiency and capacity of processing and transport networks by fully utilizing existing assets and augmenting services.
Maximize the value of USPS delivery by improving customer experience, cutting costs, and experimenting with adjacent offerings.
Develop technological solutions to enhance customer experience, increase revenue to USPS, and cut operating costs.
Four “Enablers” will build the capabilities necessary within the organization to support the development and implementation of
the Innovation Platforms.
USPS® FY15 STRATEGIES« «
Dimensional Weight 101
Shipping carriers use dimensional (also called volumetric) weight to compensate for the additional costs associated with handling packages that are light for their size
They take up more space on transportation and are more expensive to process and deliver
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USPS® FY15 STRATEGIES« «
Dimensional Weight 101 With dimensional weighting, packages pay the greater
of the actual weight, or the result of a simple formula:
Length X Width X Height
Dimensional Weight Factor
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USPS® FY15 STRATEGIES« «
Dimensional Weight 101 Step 1
weigh the package to determine actual weight For example, say the package weighs 4 lbs
Step 2 Measure the length, width, and height of the package Multiply the dimensions to determine volume/cube in cubic inches
(UPS rounds – 0.4” down, 0.5” up) For example – a box that’s 12” long by 12” wide by 6” high would be 12X12X6 =
864
Divide by the dimensional weight factor to determine dimensional weight
864 / 166 factor = 5.2
Step 3 – Compare the two Pay the greater of the actual weight or dimensional weight, which
now becomes the billable weight 5.2 rounds up to 6 lbs, which is greater than the 4 lb actual weight –
package pays the 6 lb price
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USPS® FY15 STRATEGIES« «
Dimensional Weight 101 Today, the major commercial carriers apply
dimensional weighting in the following manner
Domestic Air (ON, 2D, 3D) – All packages – Factor = 166
Domestic Ground – Only >3 cf (5184 ci) – Factor = 166
Postal Service Priority Mail – Only >1 cf (1728 ci) – Only Zones 5-8 – Factor = 194
International – Factor = 139 (Canada import 166)
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USPS® FY15 STRATEGIES« «
Dimensional Weight 101 In January 2015, dimensional weight will apply to ALL
domestic Ground shipments with Fedex and UPS
Domestic Air (ON, 2D, 3D) – All packages – Factor = 166
Domestic Ground – All Packages – Factor = 166
Postal Service Priority Mail – Only >1 cf (1728 ci) – Only Zones 5-8 – Factor = 194
International – Factor = 139
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USPS® FY15 STRATEGIES« «
Dimensional Weight Benchmarks
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Dim Wt
Paid Wt
Max Cu In
Max Sample Box (Notebook paper) = 8.5 x
11 x ?"
Max Sample Box (iPad) = 9.5 x 7.25
x ?"
PM CPP Cubic Tier
0.99 1 164 1.76 2.39 0.1
1.99 2 330 3.53 4.80 0.2
2.99 3 496 5.31 7.21 0.3
3.99 4 662 7.08 9.62 0.4
4.99 5 828 8.86 12.03 0.5
5.99 6 994 10.63 14.44
6.99 7 1160 12.41 16.85
7.99 8 1326 14.19 19.26
8.99 9 1492 15.96 21.67
9.99 10 1658 17.74 24.08
USPS® FY15 STRATEGIES« «
Dimensional Weight Benchmarks
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L W H CU IN CU FTCubic
Tier DIMDIM
WEIGHT
PM E-MEDIA 7.6875 5.5625 1.5 64.1 0.037 0.1 0.4 1
SFRB 5.5 8.75 1.75 84.2 0.049 0.1 0.5 1
O-1096L 9.375 6.375 2.125 127.0 0.073 0.1 0.8 1
O-BOX4 7.25 7.25 6.25 328.5 0.190 0.2 2.0 2
O-1097 11.75 13.375 2.625 412.5 0.239 0.3 2.5 3
O-1092 12.375 13.625 3 505.8 0.293 0.3 3.0 3
MFRB 11.25 8.75 5.75 566.0 0.328 0.4 3.4 4
SHOE 7.75 5.375 14.625 609.2 0.353 0.4 3.7 4
MFRB-2 12.125 3.625 13.875 609.8 0.353 0.4 3.7 4
O-1095 12.75 15.75 3.25 652.6 0.378 0.4 3.9 4
LFRB 12.25 12.25 5.75 862.9 0.499 0.5 5.2 5
O-BOX7 12.25 12.25 8.25 1238.0 0.716 NA 7.5 7
USPS® FY15 STRATEGIES« «
Dim Weight vs. Cubic Pricing
Dimensional weighting effectively penalizes customers who have poor density
Large boxes that are light
Cubic pricing is exactly the opposite – it REWARDS customers who have good density
Example:
A 2 lb shipment in a 8.5x11x6” box (0.3 cf) would pay the 4 lb price by dimensional weight
The same item in a slightly smaller box that’s 8.5x11x3.5” (0.2 cf) would pay the 0.2 cf Tier PM CPP Cubic price, or roughly a 2 lb price
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USPS® FY15 STRATEGIES« « 19
Why PM CPP Cubic?
Incent small rather than penalize large packages
Weight is a traditional, “easy” proxy for cube
Cube never used before – difficult to measure
Transportation and delivery costs based more on cube than weight
Planes and trucks virtually always “cube-out” before reaching weight limits
Drives smarter, more environmentally-responsible packaging policies
Less corrugated, less void-fill, less fuel
USPS® FY15 STRATEGIES« « 20
Calculating the Cube
What is the “cube?”The cube is a term for the cubic volume of the package, in inches or cubic feet.Calculating this figure correctly is one of the most important parts of the qualification process.
How do I calculate cube? Measure the length by the width by the height, in inches, rounded down to the nearest 1/4”(6.375” or 6 3/8” rounds down to 6.25 or 6 ¼” )Multiply the length X width X height and divide that number by 1728. This number is the “cube,” or cubic volume in cubic feet.
What do I do with the cube I’ve calculated?Take that number and consult the pricing table to see where the package fits. Always round
up.
Here’s an example:A box measuring 11”” by 8.5” by 3” has a volume of 297 cubic inches (11x9x3).297 cubic inches ÷ 1728 = 0.172 cubic feet.Because 0.172 is greater than 0.1, it falls in the next higher cubic category: 0.2.
USPS® FY15 STRATEGIES« « 21
How to measure non-rectangular packages
For soft packs, tuck the flap under the package when measuring.
Measure the height at the thickest point.
For triangular packages, measure it as though it would fit into a rectangular box.
Measure length and width as usual, and measure height at the tallest point.
USPS® FY15 STRATEGIES« «22
Packaging L W H CU IN CU FT TIER
PM E-MEDIA 7.6875 5.5625 1.5 64.1 0.037 0.1
SFRB 5.5 8.75 1.75 84.2 0.049 0.1
O-1096L 9.375 6.375 2.125 127.0 0.073 0.1
O-BOX4 7.25 7.25 6.25 328.5 0.190 0.2
O-1097 11.75 13.375 2.625 412.5 0.239 0.3
O-1092 12.375 13.625 3 505.8 0.293 0.3
MFRB 11.25 8.75 5.75 566.0 0.328 0.4
SHOE 7.75 5.375 14.625 609.2 0.353 0.4
MFRB-2 12.125 3.625 13.875 609.8 0.353 0.4
O-1095 12.75 15.75 3.25 652.6 0.378 0.4
LFRB 12.25 12.25 5.75 862.9 0.499 0.5
Standard Priority Mail Packaging
USPS® FY15 STRATEGIES« «23
Specialized Priority Mail PackagingSpec Pkg L W H CU IN CU FT TIER#2 5 7.5 1.5 56.3 0.033 0.1
#9 7.75 5.625 2.5 109.0 0.063 0.1
#12 5 5 5 125.0 0.072 0.1
#10 8.75 11.75 1.5 154.2 0.089 0.1
#1 11.1875 8.5625 2 191.6 0.111 0.2
#4 6 6 6 216.0 0.125 0.2
#13 9 7 4 252.0 0.146 0.2
#18 10 6 5 300.0 0.174 0.2
#14 11 8 4 352.0 0.204 0.3
#3 12 9 3.5 378.0 0.219 0.3
#11 10 8 6 480.0 0.278 0.3
#5 12 10 4 480.0 0.278 0.3
#16 13 11 5 715.0 0.414 0.5
#15 12 9 7 756.0 0.438 0.5
#6 10 10 8 800.0 0.463 0.5
USPS® FY15 STRATEGIES« « 24
CPP Cubic Opportunities
Who fits? Anyone with good density► Any printed matter (includes literature fulfillment, books, photos, forms,
documents)► Foodstuffs (coffee, candy, fruit, etc.)► Parts► Electronics (cell phones, cameras, laptops, pda’s)► Lotions, potions, and pills
USPS® FY15 STRATEGIES« «
Jan 2015 Published Dim Impact (166) Package count that changes by cell between from today to January
63% of packages will now be paid by dim weight rather than actual weight
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WT 2 3 4 5 6 7 8 Total 0.5 (27,754) (22,482) (34,752) (27,446) (7,937) (7,637) (9,091) (137,099) 1 (9,190) (8,819) (17,062) (15,558) (4,474) (3,859) (1,897) (60,859) 2 (1,443) 4,466 12,786 7,228 2,063 1,190 (3,565) 22,725 3 11,489 8,663 11,047 11,238 2,786 3,215 3,526 51,964 4 (16,378) (11,441) (18,800) (15,736) (5,225) (5,471) (8,769) (81,820) 5 2,394 (633) 3,169 2,669 1,605 1,741 5,623 16,568 6 (10,920) (7,767) (11,823) (9,744) (3,016) (2,846) (3,964) (50,080) 7 7,167 6,317 10,156 9,639 2,705 2,531 1,526 40,041 8 (6,517) (5,068) (8,542) (7,150) (2,244) (2,309) (2,703) (34,533) 9 (10,813) (7,335) (14,113) (10,621) (3,988) (3,008) (3,042) (52,920) 10 (11,361) (8,154) (12,618) (9,685) (2,774) (2,924) (3,965) (51,481) 11 19,233 11,568 18,073 13,906 4,291 3,222 4,388 74,681 12 (3,110) (3,327) (6,209) (3,673) (1,341) (1,144) (2,021) (20,825) 13 (4,222) (2,351) (3,512) (3,035) (692) (1,287) (669) (15,768) 14 20,762 15,377 22,361 17,944 5,565 6,002 8,605 96,616 23 19,306 14,189 24,328 20,182 5,856 6,561 8,265 98,687 28 22,327 16,273 24,136 17,201 5,139 5,149 6,995 97,220
USPS® FY15 STRATEGIES« «
Proposed Sept 2014 PM Commercial Base Price Reductions
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(Pounds) L, 1 & 2 Zone 3 Zone 4 Zone 5 L, 1 & 2 Zone 3 Zone 4 Zone 5
10 $ (1.13) $ (4.69) $ (5.99) $ (6.43) -12% -36% -39% -30%
11 $ (2.79) $ (5.28) $ (7.18) $ (7.45) -25% -37% -43% -32%
12 $ (3.39) $ (6.00) $ (8.29) $ (8.31) -28% -40% -46% -33%
13 $ (3.91) $ (6.74) $ (9.14) $ (8.74) -30% -42% -48% -33%
14 $ (4.53) $ (7.47) $ (10.19) $ (9.70) -33% -44% -51% -35%
15 $ (5.01) $ (8.13) $ (11.20) $ (10.96) -35% -45% -53% -37%
16 $ (4.93) $ (8.60) $ (11.95) $ (12.08) -34% -45% -53% -39%
17 $ (5.40) $ (9.19) $ (12.88) $ (13.25) -35% -46% -55% -40%
18 $ (5.60) $ (9.73) $ (13.70) $ (14.36) -36% -47% -55% -41%
19 $ (5.89) $ (9.81) $ (13.83) $ (14.79) -37% -47% -55% -42%
20 $ (6.42) $ (9.70) $ (13.90) $ (14.89) -38% -46% -54% -41%
USPS® FY15 STRATEGIES« «
Proposed Sept 2014 PM Commercial Plus Price Reductions
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(Pounds) L, 1 & 2 Zone 3 Zone 4 Zone 5 L, 1 & 2 Zone 3 Zone 4 Zone 53 $ - $(0.54) $ (1.02) $ - 0% -9% -15% 0%4 $ (0.49) $(1.36) $ (2.12) $(1.28) -8% -20% -26% -12%5 $ (1.12) $(1.67) $ (1.57) $(2.54) -17% -23% -19% -21%6 $ (1.50) $(1.84) $ (1.62) $(4.02) -22% -25% -19% -28%7 $ (1.77) $(1.99) $ (3.17) $(5.32) -25% -26% -31% -32%8 $ (1.99) $(3.98) $ (5.85) $(6.29) -27% -41% -45% -35%9 $ (2.58) $(4.82) $ (6.62) $(7.04) -32% -45% -48% -36%
10 $ (3.71) $(5.59) $ (7.26) $(7.58) -40% -46% -50% -36%11 $ (4.09) $(5.61) $ (8.05) $(7.80) -42% -45% -52% -36%12 $ (3.38) $(6.04) $ (8.85) $(8.26) -33% -46% -54% -36%13 $ (3.49) $(6.19) $ (9.22) $(8.75) -33% -46% -55% -36%14 $ (3.73) $(6.58) $ (9.90) $(9.21) -35% -47% -56% -36%15 $ (4.10) $(6.97) $(10.66) $(9.65) -36% -48% -58% -37%16 $ (2.94) $(5.87) $ (9.67) $(8.98) -25% -39% -51% -34%17 $ (3.21) $(6.08) $ (9.76) $(9.15) -27% -39% -50% -34%18 $ (3.38) $(6.44) $ (9.94) $(9.35) -28% -40% -50% -34%19 $ (3.69) $(6.47) $ (9.92) $(9.51) -29% -39% -49% -33%20 $ (3.83) $(6.41) $ (9.96) $(9.54) -30% -38% -49% -33%
USPS® FY15 STRATEGIES« «
What Shippers Can Do?
28
Know the data – PLD Rules
Get data on box sizes – if not through systems, from the current carrier, or collect box usage data
Evaluate packaging usage compared to weight – How many boxes of each size vs. how many shipments of each weight?
Watch for bulging packages
Know the round rules - Rounding (0.5 up, 0.4 down)
Renegotiate – new dim factor, phased approach, or net minimum
Look at product packaging - designed for retail or b2c fulfillment
Poly vs corrugated
Void fill
USPS® FY15 STRATEGIES« «29
Questions?
USPS® FY15 STRATEGIES« «30
Thank you.