The Benefits of Comailing and Co-palletization
On July 15, postage rates for magazine publishers will increase by an average of 11.7 percent. The upcoming postage increase is the result of the recently concluded postal rate case the first fully-litigated case since 2000. The case involved a ten-month proceeding at the Postal Regulatory Commission, in which MPA and dozens of other intervenors conducted formal discovery, sponsored witnesses, and wrote briefs. After hearings concluded, the Commission deliberated two months before issuing its decision at the end of February. Following a comment period, the Board of Governors accepted the Commissions recommended rates for periodicals on March 19th. At MPAs urging, the Postal Service Board of Governors agreed to delay implementation of the new Periodicals rates until July 15 (two months later than for all other classes of mail) to ease transition to the new rate structure recommended by the Commission and accepted by the Board of Governors.
The Commissions recommended rate structure includes significant changes and additions to the existing rate structure, designed to encourage publishers to adopt more efficient mailing practices, such as comailing and co-palletization. The Commission explained that a movement to greater efficiency by publishers would help moderate the growth in the Postal Services handling costs for periodicals. Over the past several decades, periodicals postal costs have increased dramatically, far outpacing inflation and increases for other classes. Greater efficiency will benefit all periodicals mailers by driving costs from the postal system.
Due to the substantial restructuring of periodicals rates, there is significant variation in the rate increases facing individual publishers and publications. While final calculations must await completion of the software changes to postage calculation programs, it appears that most magazine publishers who do not make changes in their mailing practices will see rate increases in the five to twenty percent range. Some would experience larger increases, particularly if a magazine is not machinable. Some small, local periodicals may actually receive rate decreases.
In addition to promoting efficiency, the Commission recognized the educational, cultural, scientific and informational value of Periodicals by retaining the very low contribution that Periodicals make to Postal Service overhead costs, enhancing the long-standing favorable treatment of the editorial content in magazines, and maintaining the unzoned editorial pound rate to facilitate nationwide dissemination of periodicals. Also, to mitigate rate shock, it based many of the new rates on significantly-less-than-full passthroughs of the underlying Postal Service costs.
How Will Periodicals Rates Change in July?
In its recommendation, the Commission added a number of new rates and discounts to the Periodicals rate schedule, including:
These changes will increase the alignment between periodicals rates and Postal Service costs as well as encourage publishers to engage in efficient mailing practices. Balancing the desire to drive costs from the system by encouraging greater efficiency with the need to avoid rate shock for publishers unable to change their mailing practices, at least in the short term, the Commission based the new rates and discounts on less-than-full passthroughs of Postal Service costs and cost differences, thereby moderating impact.
In addition to introducing these new rates and discounts, the Commission made two other notable changes to Periodicals rates.
First, a primary theme throughout the Commissions Recommended Decision was that the shape of a piece of mail has a far greater impact on the Postal Services cost to process and deliver the piece than does the weight of the piece. Thus, the Commission recommended reductions in per-pound and additional-ounce rates in all of the major classes of mail. For example, in First-Class Mail, the Commission reduced the additional-ounce rate from 24 cents to 17 cents. Similarly, it reduced the proportion of Periodicals revenue that is derived from pound rates. This shift results in relatively larger increases for lightweight publications and relatively smaller increases for heavier publications.
Second, the existing discounts for barcoding magazines substantially exceed the cost savings that mailer-applied barcodes provide to the Postal Service (e.g., the discount for barcoding a magazine that is presorted to a 5-Digit zip code is 3.2 cents per piece while the USPS cost savings from the barcode is significantly less than a penny). In its recommendation, the Commission reduced barcode discounts to more accurately reflect this lower cost savings. The reduction in barcode discounts resulted in higher rates for barcoded, non-Carrier Route presorted flats.
What Can Publishers Do to Mitigate Impact?
With the increased alignment between rates and costs and increased incentives for efficiency, magazine publishers of all sizes will want to re-examine their mailing practices. Printers and consultants can help a publisher review todays mailing profile with an eye to the new rate structure. Publishers who find themselves facing larger than average increases will likely want to explore worksharing opportunities that could help reduce the impact of the upcoming rate changes. Two major strategies available to publishers include dropshipping -- which means using a private trucker to transport the magazine to multiple postal entry points close to the final destinations and comailing/co-palletization which means merging multiple magazines for postal processing.
What Are Comailing and Co-palletization?
Comailing and co-palletization combine multiple magazines into a single mailing. Through these processes, multiple smaller-circulation magazines are combined and prepared in a manner that resembles the preparation of a larger publication, thus allowing the publications to qualify for substantial worksharing discounts for presorting, palletizing, and dropshipping. In addition to postage savings, frequently-cited benefits of comailing and co-palletization include:
Comailing combines copies of multiple publications into the same bundles and onto the same pallets. Comailing can be performed by selectively binding multiple publications at the same time on a bindery line (referred to as co-binding or inline comailing) or through a separate offline process after the magazines are bound. Co-palletization is an offline process that combines bundles of multiple different publications onto the same pallet. The best option for a particular publication depends on a number of factors. For example:
What Companies Provide Comailing and Co-palletization Services?
The primary providers of comailing and co-palletization services are printers and, encouragingly, the number offering these services has increased significantly over the last several years. Printers that currently (or will soon) offer these services to their customers (either through their own operations or relationships with other providers) include Brown Printing; Cadmus Communications; Conley Printing; Cummings Printing; Dartmouth Printing; Dingley Press; Fry Communications; Highlighter Graphics; Lane Press; Ovid Bell Press; The Press of Ohio; Publishers Press; Quad/Graphics; Quebecor World; R.R. Donnelley; and United Litho.
Third-party logistics providers have also begun offering these services. In 2005, Fairrington began offering co-palletization services. ALG Worldwide Logistics is opening a comail facility this year. In addition, a number of printers have made their comailing services available to other printers, increasing the availability of these services.
How Much Can be Saved?
As mentioned above, comailing and co-palletization allow publishers to qualify for additional worksharing discounts. Both processes increase the percentage of a mailing that can be palletized. This directly reduces postage by decreasing the number of containers that are subject to the newly-established container charges. For example, instead of entering mail in 50-piece sacks, comailing and co-palletization allow the same mailing to be entered on shared 1,500-piece pallets. Another benefit of preparing mail on pallets is that pallets can be transported more efficiently than sacks. Thus, comailed and co-palletized publications are generally dropshipped, qualifying for dropship discounts that reduce postage even more.
A further benefit of comailing is that, in addition to increasing the percentage of pieces in a mailing that are entered on pallets, it increases the presort level of the mailing. For example, under the new rates, increasing the presort level of a machinable, barcoded piece from 5-Digit to Carrier Route presort will reduce piece-rate postage by 9.9 cents from 26.8 cents to 16.9 cents. This 9.9-cent discount is fifty percent larger than the corresponding 6.6-cent discount under current rates. Thus, the postage savings from comailing is larger than for co-palletization.
Additionally, because offline comailing merges as many as fifty publications into a single mailing while inline comailing generally merges just a few, offline comailing offers the largest opportunity for postage savings. For example:
Of course, providers of these services charge publishers for comailing/co-palletizing and then dropshipping the publications to a postal facility close to their final destination. The net savings, therefore, depends on the charges negotiated between your company and its service provider(s).
How to Get Started with Comailing and Co-palletization
Publishers should begin their discussions with their current printer and transportation provider. Each provider offers somewhat different worksharing services and configurations. If your current service providers do not offer comailing or co-palletization, encourage them to explore the possibility. If they dont have the resources to undertake comailing or co-palletization on their own, they can work with one of the third-party providers. Ask them to explain how their program works, how many publishers participate, how often comail and co-palletization pools are processed, and what charges you will incur to obtain the providers worksharing services.
MPA staff is available to assist in answering questions on comailing and co-palletization and in exploring the best combination of services for individual MPA member magazines. In particular, MPA can offer advice for publishers of magazines requiring special consideration with regard to comailing and co-palletization: