Fulfillment’s growing demand changing for the better with postal reform

As corporate print buyers choose to do business with fewer and fewer vendors, they expect these vendors to provide more and more complementary services. Mailing services are expanding into fulfillment services. Third-party fulfillment (3PFs) vendors are adding digital printing. General commercial printers are adding both mailing and fulfillment services. Is there room for all these vendors?

There has not been a printing industry conference held in North America during the past two years that has not at least had a user panel discussion on how to get into and make the value-added services of fulfillment and mailing profitable. Likewise, every printing trade journal has published at least one feature article on this topic.

The Printing Economic Research Center (PERC) of the National Association for Printing Leadership (NAPL) conducts quarterly surveys on future growth and expansion expectations. In recent survey results published in NAPL's State of the Industry report, fulfillment (59.6 percent) and mailing services (47.7 percent) were two of the top three services expected to grow the most over the next two years. Actually, six of the top nine growth markets–digital printing (56.2 percent), database management (30.8 percent), Web/Internet (23.5 percent), and digital asset management (17.7 percent)–are an integral link to and under the umbrella of information fulfillment services.

This same survey showed the growth potential of the respondents' primary markets to be highest for direct mail with 58.2 percent expecting above average growth. The postal service is undergoing unprecedented market dynamics. The United States Postal Service (USPS) delivered 206 billion of the 415 billion pieces of mail sent throughout the world in 2001. More than half of its revenue stream is dictated by first-class mail, which has been adversely impacted by the Internet, as more corporations are sending correspondence, including bills, by email or Web site access.

This continuing deleterious product shift, coupled with the growing debt of the USPS, prompted the President to assign a bi-partisan group of experts to recommend change. This presidential commission on postal reform delivered their findings July 31, 2003. The details of their report are available for download from treasury.gov/offices/domestic-finance/usps. The 208-page epistle contained 35 recommendations, which were assigned as responsibilities to the Postal Service, Congress, or both parties. No priorities were mentioned in the report.

Getting Outside Help

The gist of these recommendations is that the USPS should function more as a major corporation, with its own board of directors, rather than a quasi-government organization. It should continue to outsource as many services as possible as the work sharing initiatives have all proven to be both a tremendous cost savings to the post office and service enhancement provided by the private sector.

One example of suggested outsourcing was the low activity post offices in rural communities. These could be located within other establishments to save money. The postal service's core strength is acknowledged as "the first mile" and "the last mile" of the mail delivery stream.

While mailing industry pundits don't expect much immediate policy change on those responsibilities assigned to the USPS due to the resistance of the postal unions, change may be inevitable as two thirds of the current postal work force are eligible to retire in the near future.

The Print Outlook '04 Conference has its traditional White House briefing by Roger Kodat, deputy assistant secretary of the treasury for government financial policy; John Kilvington, legislative assistant to Senator Tom Carper (D-DE), who is expected to sponsor postal reform legislation; Jack Callender, counsel to the house committee on government reform; and PIA's lobbyist, Ben Cooper.

While the group expressed optimism about getting a postal reform bill presented to the House in early winter so that it can get to the floor by next summer, they would not respond to any priorities from the recommendations of the earlier report. Mr. Kodat was pleased that the USPS pension bill diverted the excess pension moneys to help pay down the $11 billion postal debt (to a little over $7 billion currently). While previous rate hikes were supposed to accomplish that, postal fiscal priorities always seemed to shift the moneys to postal executive bonuses and other purposes leaving the debt to climb.

Mr. Cooper emphasized the need for the printing industry to speak with one voice so that there are no conflicting messages or priorities given to legislators. The Mailing and Fulfillment Service Association (MFSA), an Alexandria, Va., neighbor to PIA, has been a national trade association representing mailers and fulfillment houses for the past 80 years. Printers, who offer mailing and fulfillment services, comprise nearly half of MFSA's membership. Therefore, if PIA tries to drive this postal change wagon without the full involvement and concurrence of MFSA, DMA (Direct Marketing Association) and other vested printing/ publishing groups, it could be an extraordinary missed opportunity.

It matters little to the printing industry who gets credit for postal reform so long as it happens. Moreover, there are other print-related associations that have been more intimately involved with USPS operations than PIA.

For example, the USPS rollout of Merlin has several associations scrambling to represent their members with examples of Merlin problems. Merlin machines are being used by the USPS to test, accept, and potentially reject (for discount purposes) mailing jobs based upon a series of DMM address placement criteria.

An Idea That Sticks

To bolster its first-class revenue streams, the USPS has initiated product development efforts with the private sector. One, titled "Repositionable Notes," was approved in April 2003. This is a prime example of the postal service's efforts to help improve response rates for direct marketing projects. 3M's Post it Notes product underwent extensive testing to be applied to the outside of bulk mail envelopes.

With only a double-wide strip of adhesive on the back, these 3" square notes have proven to withstand the rigors of the postal services high-speed automated zip code sorting equipment.

Pat Peick, 3M product manager for USPS' repositionable notes product, spoke at the October NAPL Conference on "Redefining Your Future with Fulfillment and Mailing Services." He emphasized, "Design the note to take advantage of proven buyer behavior. People remove the note and put it next to their phone or computer terminal as a reminder for future action."

Consequently, the three key design elements are the offer/event, the identity or brand, and the phone number or URL that the prospect can enter to place the order. In addition to experiencing response rates from 4-17 percent per project, clients are finding the repositionable notes continue to draw responses three to four months after the mailing, as buyers are keeping the notes as reminders to act when they are ready.

Trackable Mail

The technology of intelligent mail is not that far away. Utilizing an adaptation of the radio frequency identification (RFID) chip "printed" in the stamp will allow the envelope to be traced to its destination. At the Executive Outlook 2003 Conference, Rochester (N.Y.) Institute of Technology's (RIT) Frank Cost discussed their project of printing RFID tag antennas using inks containing metal nanoparticles.

RFID has been recognized as an improvement over bar code technology for inventory management due to its larger data capacity. Additionally, it can serve in theft detection due to its ability to be scanned even if visually obscured. Wal-Mart announced last summer that it expects its 100 largest suppliers to apply RFID to pallet shipments by 2005 with all suppliers complying by the end of 2006. This is expected to create a ripple effect for further development and adoption of RFID tools.

Currently, RFID tags are expensive–about a dollar–and complex to produce. There are passive and active tags with the latter powered by a battery. The antenna coil is printed with conductive inks, and cured, producing the passive units. A microchip is then attached to the antenna to complete the RFID tag. In time, the microchip could also be printed to further streamline the production.

Current inkjet and screen techniques are considered slow with limited volumes and resolution. RIT has been experimenting with a Mark Andy flexo press and patented conductive Parelec Parmod inks, which contain silver nanoparticles. Mr. Cost and RIT conclude, "Printable electronics may represent a large potential new market for printing equipment manufacturers."

Product Presentations

NPES' dedicated Mail and Fulfillment Center hit a home run at Graph Expo 2003. The area included a 100-seat open theater for free, continuous, hour-long lectures by suppliers and consultants on various pertinent topics to these vital value-added services. Thirty vendors clustered in this area and received much deserved traffic.

Ironically, the Bindery Institute of America (BIA) had another isolated area some distance away. Several of these specialty vendors actually offer products often purchased by fulfillment services, such as unique CD printing and packaging services.

PrintCafe had a booth in the Mail and Fulfillment Center as well, as they were seeking beta sites for their new Web-based fulfillment module. It could be an add-on to existing users of Hagen, PSI, or Logic SQL print management systems. It was quite basic, but an important initiative for a major MIS supplier that needs a more dedicated product offering in this specialty application.

Any small commercial printer considering adding mailing services would have been well pleased to meet both BCC and Satori Software. Both vendors tenaciously explained their exhaustive capabilities as ZIP+4, CASS, Presort, and Move Update agents.

Kirk-Rudy demonstrated a new solvent-based inkjet addressing system targeting the aqueous coated stock applications. While the production line will be twice the investment of the cartridge inkjet line ($75,000 versus $35,000), the cost of solvent inks will be 92 percent less expensive.

Bowe Bell and Howell is the contracted manufacturer of the Merlin units. While no printer can buy a Merlin, Bowe Bell and Howell is offering an inline verification system that can be adapted to existing inkjet equipment. It utilizes the same algorithms as Merlin and therefore should be an excellent quality control check prior to releasing the job to the post office to run through one of its thousand Merlins located throughout the country. It costs $25,000 and can be purchased from Bowe Bell and Howell or Videojet.

Bowe Bell and Howell also demonstrated its DemandWorks Compact Polywrapping system. Built as either a two- or four-station unitized inserter with shuttle feeder and 8,000 per hour rated speed, this polywrapping unit will cost $140,000. This is less than half the competitive models and occupies 25 percent less floor space.

Unicor is known as a vendor that specializes in setting up production operations in federal prison installations that produce work for the public sector. This might initially appear as if it is designed to compete against free enterprise vendors at subsidized low rates. The clear benefit is the training of inmates in valuable vocational skills. Unicor was in the Mailing and Fulfillment Center as well trying to attract customers who have already decided to move their fulfillment operations, off shore because of more favorable economics.

There continues to be innovations and technologies to enhance both mailing and fulfillment services for printers wanting to expand their full-service offerings and distinguish themselves from the competition. Software and new equipment will be beneficial to the small- to medium-sized printers, as well the large firms.