The Future of Packages
Bright or Dim?
National PCC Day
Chicago Postal Customer Council
September 10, 2014
Dennis Nicoski
1
 USPS  FY15 STRATEGIES
®
Agenda
 Marketplace trends – mail and packages
 What is dimensional weighting?
DIM 101
 Why does it matter? What does it mean?
 How do you capitalize?
 Proposed Priority Mail price reductions
 Q&A
2
 USPS  FY15 STRATEGIES
®
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
®
3
 USPS  FY15 STRATEGIES
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 USPS  FY15 STRATEGIES
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2014 Mail Promotions
 USPS  FY15 STRATEGIES
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6
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
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7
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
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8
USPS Innovation Platforms
First Mile
Enhance efficiency and
convenience of pickup services
and induction by fully utilizing
USPS data, engaging with
potential partners, and
recognizing emerging
customer needs.
Physical
Network
Last Mile
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.
Digital
Develop technological solutions
to enhance customer experience,
increase revenue to USPS, and
cut operating costs.
Enablers
IT / Engineering
Systems
People / Human
Capital
Customer
Experience
Brand
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
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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
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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
12
 USPS  FY15 STRATEGIES
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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
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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
14
 USPS  FY15 STRATEGIES
®
Dimensional Weight Benchmarks
Dim
Wt
15
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
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Max Sample
Max Sample
Box (Notebook Box (iPad) = PM CPP
Paid Max Cu paper) = 8.5 x 9.5 x 7.25 x Cubic
Wt
In
11 x ?"
?"
Tier
Dimensional Weight Benchmarks
W
H
7.6875
5.5625
1.5
64.1
0.037
0.1
0.4
1
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
SFRB
16
DIM
DIM
WEIGHT
L
PM E-MEDIA
 USPS  FY15 STRATEGIES
®
CU IN CU FT
Cubic
Tier
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
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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
®
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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
®
20
How to measure non-rectangular packages
For soft packs, tuck the flap under
the package when measuring.
For triangular packages, measure it
as though it would fit into a
rectangular box.
Measure the height at
the thickest point.
Measure length and width as usual,
and measure height at the tallest
point.
 USPS  FY15 STRATEGIES
®
21
Standard Priority Mail Packaging
Packaging
L
W
H
CU IN
CU FT
TIER
7.6875
5.5625
1.5
64.1
0.037
0.1
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
PM E-MEDIA
SFRB
22  USPS® FY15 STRATEGIES
Specialized Priority Mail Packaging
Spec Pkg
#2
#9
#12
#10
#1
#4
#13
#18
#14
#3
#11
#5
#16
#15
#6
23  USPS® FY15 STRATEGIES
L
W
H
CU IN
CU FT
TIER
5
7.75
5
8.75
11.1875
6
9
10
11
12
10
12
13
12
10
7.5
5.625
5
11.75
8.5625
6
7
6
8
9
8
10
11
9
10
1.5
2.5
5
1.5
2
6
4
5
4
3.5
6
4
5
7
8
56.3
109.0
125.0
154.2
191.6
216.0
252.0
300.0
352.0
378.0
480.0
480.0
715.0
756.0
800.0
0.033
0.063
0.072
0.089
0.111
0.125
0.146
0.174
0.204
0.219
0.278
0.278
0.414
0.438
0.463
0.1
0.1
0.1
0.1
0.2
0.2
0.2
0.2
0.3
0.3
0.3
0.3
0.5
0.5
0.5
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
®
24
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
WT
0.5
1
2
3
4
5
6
7
8
9
10
11
12
13
14
23
28
25
2
(27,754)
(9,190)
(1,443)
11,489
(16,378)
2,394
(10,920)
7,167
(6,517)
(10,813)
(11,361)
19,233
(3,110)
(4,222)
20,762
19,306
22,327
 USPS  FY15 STRATEGIES
®
3
(22,482)
(8,819)
4,466
8,663
(11,441)
(633)
(7,767)
6,317
(5,068)
(7,335)
(8,154)
11,568
(3,327)
(2,351)
15,377
14,189
16,273
4
(34,752)
(17,062)
12,786
11,047
(18,800)
3,169
(11,823)
10,156
(8,542)
(14,113)
(12,618)
18,073
(6,209)
(3,512)
22,361
24,328
24,136
5
(27,446)
(15,558)
7,228
11,238
(15,736)
2,669
(9,744)
9,639
(7,150)
(10,621)
(9,685)
13,906
(3,673)
(3,035)
17,944
20,182
17,201
6
(7,937)
(4,474)
2,063
2,786
(5,225)
1,605
(3,016)
2,705
(2,244)
(3,988)
(2,774)
4,291
(1,341)
(692)
5,565
5,856
5,139
7
(7,637)
(3,859)
1,190
3,215
(5,471)
1,741
(2,846)
2,531
(2,309)
(3,008)
(2,924)
3,222
(1,144)
(1,287)
6,002
6,561
5,149
8
(9,091)
(1,897)
(3,565)
3,526
(8,769)
5,623
(3,964)
1,526
(2,703)
(3,042)
(3,965)
4,388
(2,021)
(669)
8,605
8,265
6,995
Total
(137,099)
(60,859)
22,725
51,964
(81,820)
16,568
(50,080)
40,041
(34,533)
(52,920)
(51,481)
74,681
(20,825)
(15,768)
96,616
98,687
97,220
Proposed Sept 2014 PM Commercial
Base Price Reductions
(Pounds)
26
L, 1 & 2
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
®
Zone 3
Zone 4
Proposed Sept 2014 PM Commercial
Plus Price Reductions
(Pounds)
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
27
L, 1 & 2
$
$ (0.49)
$ (1.12)
$ (1.50)
$ (1.77)
$ (1.99)
$ (2.58)
$ (3.71)
$ (4.09)
$ (3.38)
$ (3.49)
$ (3.73)
$ (4.10)
$ (2.94)
$ (3.21)
$ (3.38)
$ (3.69)
$ (3.83)
 USPS  FY15 STRATEGIES
®
Zone 3
$(0.54)
$(1.36)
$(1.67)
$(1.84)
$(1.99)
$(3.98)
$(4.82)
$(5.59)
$(5.61)
$(6.04)
$(6.19)
$(6.58)
$(6.97)
$(5.87)
$(6.08)
$(6.44)
$(6.47)
$(6.41)
Zone 4
$ (1.02)
$ (2.12)
$ (1.57)
$ (1.62)
$ (3.17)
$ (5.85)
$ (6.62)
$ (7.26)
$ (8.05)
$ (8.85)
$ (9.22)
$ (9.90)
$(10.66)
$ (9.67)
$ (9.76)
$ (9.94)
$ (9.92)
$ (9.96)
Zone 5
$ $(1.28)
$(2.54)
$(4.02)
$(5.32)
$(6.29)
$(7.04)
$(7.58)
$(7.80)
$(8.26)
$(8.75)
$(9.21)
$(9.65)
$(8.98)
$(9.15)
$(9.35)
$(9.51)
$(9.54)
L, 1 & 2
0%
-8%
-17%
-22%
-25%
-27%
-32%
-40%
-42%
-33%
-33%
-35%
-36%
-25%
-27%
-28%
-29%
-30%
Zone 3
-9%
-20%
-23%
-25%
-26%
-41%
-45%
-46%
-45%
-46%
-46%
-47%
-48%
-39%
-39%
-40%
-39%
-38%
Zone 4
-15%
-26%
-19%
-19%
-31%
-45%
-48%
-50%
-52%
-54%
-55%
-56%
-58%
-51%
-50%
-50%
-49%
-49%
Zone 5
0%
-12%
-21%
-28%
-32%
-35%
-36%
-36%
-36%
-36%
-36%
-36%
-37%
-34%
-34%
-34%
-33%
-33%
What Shippers Can Do?
 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
28
 USPS  FY15 STRATEGIES
®
Questions?
29
 USPS  FY15 STRATEGIES
®
Thank you.
30
 USPS  FY15 STRATEGIES
®