industry has had to overcome to reach this level of participation and to make some suggestions on how we might expand our participation in the Postal service's automation plans to achieve the Postal Service's stated objective to provide mailers the lowest combined costs. Background. The National Association of Presort Mailers was founded in June 1984, and has 96 members. These members consist of all business segments that participate in the mailing industry including equipment vendors, consultants, mailers, lettershops and presort service bureaus. The purpose of our association is to foster communications between members and to represent the members before the Postal Service, in Rate Cases, before this committee and in various, other forums. Association Members Described. The vast majority of our members are presort service bureaus. Presort Bureaus are service businesses that provide mailers an avenue to participate in the Postal Service's worksharing incentive programs. Mailers choose service bureaus for several reasons including cost, avoidance of technological risks, relative size and frequency of mailings as well as to benefit from the expertise presort service bureaus possess. The basic services mailers obtain from our members include the aggregation of many mailers' letters at one place and at one time for the best possible discounts; use of the bureau's expensive automated prebarcoding equipment which mailers cannot financially justify themselves; to isolate themselves from direct dealings with the Postal Service and for the variety of ancillary services that presort service bureaus provide including pick-up and transportation of mail to the post office. Presort Service Bureaus are small businesses that employ more than 10,000 persons and service more than 25,000 businesses. Collectively, we process approximately 12 billion first class letters annually as an association and, when non-members are added, presorters tender more than 20 billion letters to the Postal Service annually. It's estimated that one of every three first class letters processed by the Postal Service are presorted. Presorters have saved billions in processing costs for the Postal Service over the past 15 years and will continue to do so as long as the USPS cost avoidance statistics continue to show increasing savings for presort activities as was reported in the most recent USPS Cost and Revenue Analysis. With such significant savings accruing to the USPS presort is, without doubt, the most successful worksharing program. Our service bureau members vary in size and automation capabilities. Our smallest member processes less than 20,000 pieces per day while the largest, one-city operation handles more than 3,000,000 pieces each day. We surveyed some of our members last December and found that more than 50% have automated equipment for producing 9-digit barcodes. some form of This is up from only 20% just two years ago and shows rapid investment in the equipment necessary to participate in the automation programs. Last year we testified that our members were producing about seven and one-half million barcoded letters each day. Moreover, we thought that our totals might double over the next year barring further restraints by the Postal Service. In fact, there have been further restrictions placed on our industry by the USPS but nevertheless, we have met our prediction; we now produce over 14 million 9-digit barcodes each day. NAPM Member's Significant Capital Investments. The basic barcoding machine used by presort service bureaus is the Multiline Optical Character Reader. The MLOCR is a device that feeds mail past a camera where each letter's address image is captured, digitized and sent to a data base containing a list of all United States addresses. Computers analyze the information and match the image information to the data base so as to determine the correct 9-digit information. This information is then printed on each envelope in the form of a barcode. Barcoded letters are then sorted to correct destinations, either mechanically or manually, and tendered to the Post Office. The value of automated machinery is that MLOCR's are able to determine the 9-digit code regardless of whether it appears in the letter's delivery address. Many of our members use machines nearly identical to the units used by the USPS; these differ only in the capability to produce accounting reports not normally necessary for internal USPS operations. Other members use larger or smaller machines but all have the capability to perform data base look-ups and print 9-digit barcodes. These machines are expensive. Nevertheless, members have invested many millions of dollars to participate in the Postal Service's automation programs. We are proud of our contribution to these programs and we believe we can do even better without newly developing obstacles placed in the industry's path by the Postal Service. Let's investigate the issues that face both the USPS and the presort industry. USPS Marketing Plans. Essentially, the Postal Service permits the presort industry to exist to help the Postal Service meet its responsibilities to the nation. To its credit, the Service has developed a marketing plan to meet those responsibilities that recognizes four segments of mailers: three sophistication levels of business mailers and household mailers. Each segment has a plan to help the Service control costs ranging from encouraging prebarcoding by the most sophisticated mailers to encouraging prebarcoded courtesy return envelopes correspondence. businesses to include with their customer The 40/40/20 Plan. In February 1990, the USPS provided industry with its plans to 9digit barcode all letter mail by 1995. This plan called for industry to produce 40% of these barcodes; another 40% were to be produced on Postal Service MLOCR's while the remainder would be processed and barcoded on the "Remote Barcoding System" either internally or through contracting out. Since that time, the Service's marketing efforts have been directed towards achieving that goal and indications are that they may actually be ahead of The presort industry is an important element in the plan; a cursory examination of USPS volume statistics in context of the marketing plan shows why. schedule. Since most presorters operate in the first class arena, let's look at that area in approximate terms. Total lettermail volume in first class annually amounts to about 74 billion pieces. The "40/40/20" operating plan therefore calls for the private sector to produce some 30 billion prebarcoded mailpieces annually. The marketing plan assigns the 40% prebarcoding target to the most sophisticated mailers however, these companies only produce 20% of the mail volume, or half the target. Moreover, it's unlikely that all these sophisticated mailers will prebarcode; we conclude that perhaps 90% will and thus produce 13-14 billion prebarcoded, first class mailpieces. This leaves an intolerable annual shortfall of 16-17 billion mailpieces in the 40/40/20 plan. Presorters have stepped in to fill that void and have become indispensable for the |