Episode 16 – Industry Corner Podcast

IN THIS EPISODE: We talk about The 2019 Idealliance Postal Exchange Conference, topics included: the shape of the mail supply chain 2-3 years from now, mail preparation and intelligent worksharing, and using data to drive a healthier supply chain

Show Companion

Links to the resources mentioned in the podcast.

Idealliance Postal Exchange 2019

MTAC: https://postalpro.usps.com/mtac

Transcript

Chris: Hi, this is Chris Lien.

Anita: And I'm Anita Pursley. Welcome to Industry Corner, a podcast where we share postal industry news to help you stay informed.

Chris: In this podcast we discuss the recent Idealliance Postal Exchange Conference, where such topics included a discussion on the shape of the mail supply chain two to three years from now, mail preparation and intelligent worksharing, and using data to drive a healthier supply chain. So let's get into it. Well, welcome to the podcast. Hi Anita.

Anita: Hey Chris. How are you?

Chris: I am doing great. You know it's February in Rochester though, and it's cold and it's windy and it's that time of year, folks, where I think everybody has cabin fever. Uh, that's what we used to call it, right? You know, living up north and stuff. But boy, you know, just can't wait for winter to be gone and any chance to get away from it, that's a welcome opportunity, wouldn't you agree?

Anita: Oh, I would agree. And you know what? I was really lucky last week.

Chris: Yes you were. You were in Florida, weren't you? Nice warm Florida.

Anita: Exactly. The Idealliance Postal Exchange Conference in Clearwater beach. Chris, you know, February in Florida is always really iffy, but we had 80 plus degrees weather. Jealous?

Chris: Yes, yes, we were, I think where at single digits at a couple of points. And of course my, uh, my dad who still lives up in northern Minnesota, he was looking at 30 below still, and Gosh, I think it's over six feet of snow in some places, so. Wow, that's great. Well, I'm glad you had an opportunity to go down to Florida and that's really an important conference that you went to that Postal Exchange Conference. I know Anita, you've been going to that for many, many years. I have as well. And it's an important event that Idealalliance continues to host and and I think it even goes before Ideallliance, back to the old Graphic Communication Association or GCA days. Right?

Anita: Right. I think this summit has been held over 50 years now.

Chris: Oh my goodness. Wow. Well, that's always a great, great venue and I know there's a lot of good conversations that happen. Great speakers, some of the top postal officials are there just a wonderful opportunity. And as a reminder to our listeners, Idealliance is really one of the premier industry associations. If you have an opportunity to become a member of Idealliance, I think that is money well spent. So many different ways that your voice can be added to the conversation with all the different specifications and things that they're doing. There's a lot of associations out there. I recommend many of them, but Idealliance has always been at the top of my list and I'm so glad that you went last week.

Anita: And you know, I think more than any year, this year was more of a think tank kind of a conference. I think it had a really great underlying purpose and the idea is really that we should be looking at our industry as a supply chain two to three years out. We've got a new board of governors, or at least a temporary emergency committee, but they're really looking at things differently. And so David Steinhart the president emeritus, he's asked us to view it as the art of the possible rather than this will never happen. It was just a really, really good way to view it because when you think about it, the Board of Governors has a lot of power. They choose the management teams. So if we look two to three years out is Megan, our PMG, is she still going to be the PMG, are we going to have the same executive leadership team? It's very possible that we could see an entire change in that makeup and then the governors might look at things entirely differently. So we need to do that as well.

Chris: Yeah, no, that's a great idea. So what were some of the topics that were discussed?

Anita: Well, I think you mentioned there were round tables. We had four round tables, mail preparation and intelligent work sharing was one, pricing, measuring what matters, using data to drive a healthier supply chain. And then the last one was the postal service has a supply chain partner. But before we talk about those, I just want to mention Joe Corbett was our keynote speaker and you know how we hear from him pretty much at every MTAC meeting and we get the standard slides with the financial recap and so forth. It was really, really refreshing to have a discussion with him because he talked a lot about their challenges and what they're doing. They're planning to spend $1.8 billion in capital this year, and that's the most that they've spent in eight years. What's interesting is very little of it is going to letter or flat technology,

Chris: They're really doubling down on their package market. Then right?

Anita: Correct. It's kind of like they're playing catch up because their competition is so fierce, and so they've got to make some changes, but also they've got some safety issues. I think he mentioned some facades falling off of buildings and so forth, and then of course the fleet and then investing in more automation to help them. But here's the one thing before we go on, sorry, the ALPS, remember the Advanced Letter Processing System? Yeah. It had the industry all up in arms just because, oh gosh, here we go again. You know…

Chris: is this going to be another FSS type of an investment?

Anita: Exactly. Right. And you know, and Idealliance was very paramount and pushing back to the postal service and saying, “hey, you know, you should engage the supply chain in the discussion like this or an investment”. So Joe told us that the cost is just too high right now and that it's not economically feasible. So at this point anyway, they're not going forward with that unless the vendors come back with something cheaper.

Chris: That's encouraging. So a couple of thoughts on it. One is that I'm glad that Joe was more relaxed to be able to have that conversation. I mean, he does a nice job at MTAC and certainly presents the financials there. And that's an important part of the MTAC meetings. But I think in that particular venue, which a little bit difficult for him to be as open or conversational. And so I'm glad to hear that he was more conversational and I'm really glad that the postal service is investing, which is good. They need to start making some investments to prepare for the future because it's critical. The Postal Service is a platform upon which our entire industry is based. So the postal service sneezes or whatever, right? We all catch a cold and we need to make sure that it's a viable, healthy postal service that's prepared for the future, but when they've got opportunities that they're looking at that just don't financially make sense, like ALPS, I'm pleased to hear that the are now looking at it judiciously, like any business should and say, look, it just doesn't make sense right now. We've looked at the numbers. This doesn't make sense. Maybe it'll make sense in the future. We'll see. We'll get some input from others. But um, I'm glad to hear that that's been at least taken off the table for right now because I'm really concerned that it was going to go right down into another process of FSS where the numbers today might've looked good or like it was going to work, but a couple of years down the road and boom, now we got a big problem.

Anita: Exactly. And too, with a governor like Dave Williams, I think there's going to be more dialogue with the industry and I don't think we're going to see back kind of activity happening where they go so far down the road on a big purchase like that without engaging the industries.

Chris: That they can't reel it back.

Anita: Exactly. Yeah. And he shared one other thing I want to tell you that tomorrow governor nominees, which we've talked about in the past, Bloom and Martinez, they've both been interviewed and apparently that's like the first step before committee hearings. So there is some activity I think I made a prediction that that would not happen. But anyway, so, so there's activity there as well.

Chris: That's great. And are they familiar with the industry or they hit a background in mail preparation?

Anita: I believe they are both Investment bankers.

Chris: Okay.

Anita: I think we do need a fresh set of eyes.

Chris: Well that's true. You know, somebody to look at the balance sheet. Right. To make sure that it makes sense, so.

Anita: Right. So the first round table was on mail prep and intelligent worksharing. And it's funny, 10 12 years after PAEA, I'm still learning things or I'm hearing them more than once and they're actually sinking in. But one of the things that Mike Plunkett pointed out is that PAEA, the Postal Accountability and Enhancement Act, of course, creates an incentive for the postal service to roll back workshare incentives. And of course that's a startling statement in itself that when you think about it, it requires the postal service to bring any pass throughs above 100% down to 100% okay. So in other words, you know, if the postal service is saving more than they had actually costs, then obviously they're saying bring that down to 100% but it does not require them to bring any workshare activities that are below. So in other words, it gives a postal service an incentive to have a larger pool of revenue subject to a CPI increase. So that's a pretty serious situation. So that's, that's one of the things that we discussed in the fact that this asymmetry, for lack of a better word in the law, was actually a way to appease the unions because they've always been opposed to passthroughs greater than 100%

Chris: Right. They've been pretty vocal on that part of it. So what that means is the industry has to sharpen our pencils and look very closely at the workshare discounts. The pass through ans the workshare and the costs avoided. From my perspective, that means, okay, Sharon Owens, VP of costing, we need to make sure that we have more granularity and understanding what are the actual attributable costs so that we can have an intelligent conversation. And maybe that's the whole point of this is that if we're going to do this work sharing, and that's the whole point behind it, right, is that the industry believes that we can prepare mail in advanced pre-sorting better than the postal service can do with that and thus reduce the cost for the postal service and that should be passed through as a workshare discount.

Anita: Exactly. The next round table was on pricing. And of course that was, you know, it kind of, um, was one of those discussions or topics that was discussed in every one of the round tables because pricing is so important and apparently the board is looking at a multiyear strategy for pricing, but there's a lot of things that we need to discuss. Value-based pricing, drop ship discounts, you know, uh, why do we have the same discount to every destination in marketing mail, you know…

Chris: I think that topic alone has been discussed for years and years and years. Frankly, I never understood that either coming into the, you know, the mailing industry in the 90s and you start looking at destination entry of mail, how can it be the same discount for a bulk mail center in Buffalo, New York, and the same discount if I bring it to a bulk mail center back in the day you know, out in Denver or something like that. It didn't make sense to me at the time because obviously the costs, transportation is going to be different than handling is different. That just never made sense to me.

Anita: Right. So there's all kinds of things. You know, the list of issues, for lack of a better word, under the pricing category is quite lengthy. There's an a joint Idealliance PostCom pricing committee and it's been a little bit dormant over the last six months because of, you know, the President's Task Force report and no board and all of that kind of thing. So there's going to be a lot more discussion that area, I don't know if I mentioned this, but the whole reason for having these type of discussions is for us as an industry or as a supply chain to come up with what are we aligned on? So when the association leaders like David Steinhart or Michael Plunkett and Bob Gallaher from NAPM, when they have the meetings with the executive leadership team or the board of governors and they can say, well this is the view of the supply chain as a whole and we're looking two to three years out and we want to be aligned on so many important subjects. And one of them of course was using data to measure what matters. And you remember Jim Cochran always said, measure what you treasure, right?

Chris: Measure what you treasure. I like that. Jim was always great adding these little phrases like that. I mean he's right though. If it's important to you and if it's an important area that you're looking at for growth and strategy, you need to measure it. Otherwise how do you measure success and if it's going to be based on that, we need to do it. Before we jump into that, I do want to say that I'm pleased when I heard you say earlier that the board of governors is looking at a multi year pricing strategy. I can't recall the last time I heard something like that and the postal service, they always feels like each year was just rushing to make something different or are trying to get things done and you know, I'm sure PAEA was what contributed to that with a CPI cap, but I'm really pleased to hear that phrase by itself. A multi year pricing strategy. That's exactly what we need.

Anita: I agree. And then communicate that to the industry so that we'll have a goal that we're reaching towards. So, the data, measuring what matters round table was really interesting because we had five or six topics and, and you know, tables were assigned a topic and then we had a template that we came up with. How does the postal service measuring this now and what other data points are there that they could look at and how often are they measuring it and, and is there a better way to do it? So it was very, very active and the attendees were very engaged and they're going to recap all of these different table results and then share with the postal and operations technology committee. So I'm, I'm anxious for that.

Chris: So kind of a quantitative way of looking at data and what's measurable and important for that. Right,

Anita: Exactly. And you know, I think we probably only have one more round table that we can talk about or have time to talk about, I should say. And, and that is the postal service as a supply chain partner. So in the beginning of the conference we were all given a survey to complete and then the survey result was, you know, what are the top five, top six, issues that we're concerned about. So let me read them off to you real quick. 1. Lack of a targeted focus or strategic direction, 2. inconsistent or unpredictable delivery. 3. Seamless change to a hundred percent requirement. 4. Lack of department/industry knowledge. It was interesting because Tom Foti was there for that discussion and, and he agreed, you know, you can't build a relationship over the phone and are these new product managers reaching out to the industry and visiting facilities and so forth. That was a real good discussion. And then 5. Federal register notices used as a vetting process. Let me tell you, they are not going to make that mistake again. Mark McCreary was there and he was listening very intensively and he has that draft of the Federal Register notice out there on the seamless change to 100% so he is definitely getting industry feedback on that. And then 6. the ACR trends going in the wrong direction. So those were the top things. But one thing I was a little bit surprised of is that the group is entirely unsatisfied with service performance and the fact that service performance are reported on a national basis that make it look like, you know, composite report that makes it look like, well yeah, they're below their targets but they're still, you know, relatively good.

Chris: Relatively close to it. So that's the problem, right? On an aggregate or like you said, a composite level, it appears to have a high score, but at the end of the day of getting a response rate or, or really the customer of the mail owner coming back and saying that I'm not getting the same consistent delivery that I used to get before. Is that really what it is?

Anita: Right. And the different service from each facility. So if you have an in home date, apparently there's a lot of variability out there and, and what we wanted from day one is delivery predictability. Even though we have IMB full service now, it appears that the mailers are not happy.

Chris: Interesting. Okay. Well, you know, predictability of arrival is the key part in this and always has been. That sets the stage for when does the mail have to reproduce, when does it have to be inducted, all of that and then just setting the right expectation with the customer. So that's unfortunate because you're right, we're going to be at MTAC year shortly and I fully expect that Dave Williams, the chief operating officer is going to be presenting service performance scores as he does, but there'll be at an aggregate at that national level and I would fully expect that he's going to talk about good news story as they often say and yet I think the key here is the feet on the street. What's the end result of the in home delivery for the mail owner and speaking of feet on the street. I have to agree with what Tom Foti I think said it relative to product management. When I worked in product management for software, obviously on a much, much smaller level, there's no way that you can gain appreciation for what your product or your services are doing unless you are visiting your customer. You have to go to the printing plant, you have to go to where the mail is being produced, sitting in an MTAC meeting, which is wonderful. But sitting in an MTAC meeting or an industry meeting and listening to people talk about their business doesn't come close to what it's like to actually walk the plant floor, see the containers being produced, see how it's being inducted. That is so critical. So I hope that Tom Foti and his product management team is planning on doing a lot of field trips and a lot of visits and really seeing it firsthand how it works. And I guess I would extend that to the board of governors too. It would make sense for senior postal leadership, including the board to get out there and see how this industry is really performing and working. Um, because it can be very eyeopening. And again, back to performance and delivery. That's the thing. If we're going to grow mail in this industry and if we're going to grow the value of mail that's being produced, that's where we need to see where it's happening, where, where it's actually produced and delivered.

Anita: Right. So this conference is really just the beginning of the discussion, but it's going to guide the association forward. We're going to really delve into these topics further and share with the postal service, you know, include them so as a supply chain where we're aligned going forward.

Chris: Alright. Well Great. Well that's a great recap. Sounds like it was a wonderful conference. A little envious that you got some nice sunshine in a cold February.

Anita: I bet, Chris.

Chris: Yup. Yup. But so glad that you were there representing our customers and the industry and bringing this valuable information back. Anything else to add?

Anita: No, just that our next podcast should be interesting since we're going to be reporting on the MTAC meetings and the national postal policy council meeting on Tuesdays.

Chris: Oh, that's right. Yeah a lot of good conversations coming up here, folks. Thanks Anita.

Anita: Thank you, Chris.

Chris: All right, and thanks again to our listeners. If you have any questions, please don't hesitate to visit BCCsoftware.com or give us a phone call. As always, we'd like to know how can we help? Have a great day.