Comment on Inefficiency at Periodical

Comment on Inefficiency at Periodical - Before The...

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Before The President's Commission On The United States Postal Service Testimony Of James R. O'Brien Director, Distribution & Postal Affairs TIME INC. May 28, 2003 Time & Life Building, 38th Floor Rockefeller Center New York, NY 10020-1393 Phone: (212) 522-3036 Fax: (212) 522-7214 jim_o'brien@timeinc.com
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2 Before The President's Commission On The United States Postal Service Testimony Of James R. O'Brien Director, Distribution & Postal Affairs TIME INC. Executive Summary AOL Time Warner is concerned about the ever higher costs that the Postal Service incurs in handling Periodicals. Despite major efforts by mailers to workshare (i.e., do much of the sorting work ourselves and prepare our mail to make it easier for the Postal Service to do the rest), and despite the Postal Service’s use of ever more sophisticated machinery, Periodicals costs have continued to climb for many years at rates much higher than the rate of inflation and much higher than the rate of increase in postal wages, as was illustrated in AOL Time Warner's earlier comments before this Commission. We are concerned that the Postal Service appears to follow a misguided strategy that relies too much on unproven technology, is too driven by the desires of equipment vendors, ignores some of the fundamental differences between flats and letters, and fails to address the fundamental management issues that are the root cause of its problems. The Postal Service could reduce Periodicals costs and other flats costs by providing cost-based, bottom-up rate schedules. This testimony will explain and illustrate how current Periodicals rates encourage inefficient, costly mailing practices and how a bottom-up approach to rate setting would save costs by encouraging efficient practices. If costs by mailers were recognized more effectively in rates by reducing the degree of rate averaging and requiring high-cost mailers to pay rates that cover the costs their mail causes, there would be efficiency gains benefiting the Nation and all Periodicals mailers. High-cost mailers would find it in their best interest to prepare their mail in efficient ways, and their postage would decrease much more than any costs they incur to change their mail. At the same time, low-cost mailers would see rates that bear a closer relation to the costs of their mail. These things simply will not happen under the current rate structure – high-cost mailers are given no signals about the costs they are causing and no options relating to what they could do to lower those costs. It is also essential that the Postal Service be more successful in adjusting its workforce, downsizing when necessary, in response not only to declining volumes but also to the great cost savings opportunities generated by increases in worksharing and advances in automation. Worksharing is an essential part of the relationship between mailers and the Postal Service,
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This note was uploaded on 10/12/2011 for the course ECON 102 taught by Professor Clague during the Spring '08 term at San Diego State.

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Comment on Inefficiency at Periodical - Before The...

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