1. [1]
Deconstructing the Postal System
Biasi / Pintsov
10th Conference on Postal and Delivery Economics
Potsdam, Germany
June 5-8, 2002
10th Conference on Postal and Delivery Economics
June 5-8, 2002 Potsdam, Germany

2. Observations [2]
1985 - End of SLOCR era
OCR recognition rate ~ 50% (with machine
% Gain in printed adresses)
Productivity
2000
OCR recognition rate ~ 90%
$$ Investment in Automation
• Current postal systems were not designed, they evolved
• Requirements imposed 200 years ago are still in force
but not necessarily applicable
• Postal systems developed with a focus on operational
efficiency, not distribution and marketing
• Rewards of automation are reaching the point of
diminishing returns
10th Conference on Postal and Delivery Economics
June 5-8, 2002 Potsdam, Germany

3. Motivation [3]
• A more efficient postal system should be possible if
historical requirements were modified and market
forces applied
• New businesses would emerge under these
conditions driven by different economic models
10th Conference on Postal and Delivery Economics
June 5-8, 2002 Potsdam, Germany

4. Mail Communication System Analysis [4]
• Identify users of mail communication system and their
applications (why they are using mail as a communication tool)
• Applications define requirements
• Requirements define homogeneous mail streams
• Requirements define services for user groups and mail streams
10th Conference on Postal and Delivery Economics
June 5-8, 2002 Potsdam, Germany

5. User / Application / Requirements Analysis [5]
Business Users
Primarily to / from consumers
TO: Cost sensitivity to postage & material
(less to equipment & process)
Applications – limited number
HH SOHO BUS
Transaction
Statement
HH 5.7B 1.5B 6.1B Direct Marketing
Remittance
Application Characteristics
High volumes (mainly to consumers)
FROM: SOHO 10B 10B 9B
Computer generated
Good address quality
Regular, stable patterns
BUS 86B 56B 5B Segment Requirements
Total mail process control
mailpieces / year Predictable delivery
based on US estimates Cost controls (especially postage, high level
usage of postal discounts)
10th Conference on Postal and Delivery Economics
June 5-8, 2002 Potsdam, Germany

6. User / Application / Requirements Analysis [6]
SOHO / HH Users
Cost sensitivity to equipment &
TO:
software (less to postage & material)
Applications – wide variety
HH SOHO BUS
Billing
Correspondence
HH 5.7B 1.5B 6.1B
Direct marketing
Application Characteristics
FROM: SOHO 10B 10B 9B Low volumes, small batches
Unpredictable timing
Unreliable address quality*
BUS 86B 56B 5B Segment Requirements
Timely delivery
mailpieces / year Identity- based services
based on US estimates
Cost
* 80% of postal costs are associated
with exception handling processes
10th Conference on Postal and Delivery Economics
June 5-8, 2002 Potsdam, Germany

7. New Business Entities [7]
Entry Points Exit Points
Pick up at business location Delivery to business location
~ 20,000 large businesses
Small number of entry & exit points
High value
Business Acceptance and Delivery
SOHO / HH Acceptance & Delivery
Mail Sorting (including transportation)
10th Conference on Postal and Delivery Economics
June 5-8, 2002 Potsdam, Germany

8. New Business Entities [8]
Entry Points Exit Points
Drop off at retail outlet or street Delivery to destination or pickup
letter box at PO Box
~ 130 million households & small
businesses
Open access with multiple
unmanned entry and exit points
Special services available
Business Acceptance and Delivery
SOHO / HH Acceptance and Delivery
Mail Sorting (including transportation)
10th Conference on Postal and Delivery Economics
June 5-8, 2002 Potsdam, Germany

9. New Business Entities [9]
BUSINESS A&D
SOHO / HH A&D
SOHO / HH A&D
Focus on Economies of Scale BUSINESS A&D
State-of-the-Art Equipment
Business Acceptance and Delivery
SOHO / HH Acceptance and Delivery
Mail Sorting (including transportation)
10th Conference on Postal and Delivery Economics
June 5-8, 2002 Potsdam, Germany

10. Cooperative Model [10]
Postal Processing Nodes
acceptance sorting delivery
Senders Receivers
• Deconstructed postal network has multiple service providers for different
functions
• Senders can select the route of their physical items through the network
using information to control the process
10th Conference on Postal and Delivery Economics
June 5-8, 2002 Potsdam, Germany

11. Key Role of Information in the Cooperative Model [11]
Postal Processing Nodes
acceptance sorting delivery
Senders Receivers
Between Between
senders and service
service providers
providers and
recipients
Among service providers Between sender
and receiver
Information flow is critical in cooperative model
10th Conference on Postal and Delivery Economics
June 5-8, 2002 Potsdam, Germany

12. Information Types [12]
Service
Description
Information from all providers about available services and related parameters
• Stable service parameters - timing, geographic location, capacity as a
function of price
• Variable service parameters – contract terms, pricing
10th Conference on Postal and Delivery Economics
June 5-8, 2002 Potsdam, Germany

13. Information Types [13]
Service
Description
Dynamic
Process
Information about the progress of a mail piece within the system
• Job information – number of pieces, services selected, business
rules defined by mailer
• Planned events – location of a mail piece within the system as
desired by the mailer
• Exception events
10th Conference on Postal and Delivery Economics
June 5-8, 2002 Potsdam, Germany

14. Information Types [14]
Electronic mail file
sent to the postal
Machine-readable node containing Information gathered
codes on the mail piece unique references as part of postal
(e.g. mailing label) to all mail items in processing activities
the job
Mail job process information is generated in several ways
10th Conference on Postal and Delivery Economics
June 5-8, 2002 Potsdam, Germany

15. Information Types [15]
Service
Description
Payment & Dynamic
Accounting Process
Information about the payment due, accounting and the payment itself
• Quality control information for reporting and payment
• Account reconciliation, dispute resolution
• Accounting provided for services delivered to mailer or exchanged
among providers
10th Conference on Postal and Delivery Economics
June 5-8, 2002 Potsdam, Germany

16. Cooperative Model [16]
Postal Processing Nodes
acceptance sorting delivery
Senders Receivers
Internet
Central “postal” node provides Postal
Trusted Third Party services and Node
information linkages
10th Conference on Postal and Delivery Economics
June 5-8, 2002 Potsdam, Germany

17. Cooperative Model Observations [17]
Standards and protocols are critical
• Critical to smooth information flow
• Industry standards and protocols are emerging
– XML (eXtended Markup Language), UDDI (Universal Description & Discovery
Integration), SOAP (Simple Object Access Protocol), WSDL (Web Services
Description Language)
Functionality of nodes determines configuration
• Hardware may be PCs or Internet appliance (e.g. network enabled meter)
• Software for management of the applications for business rules, job
definitions, requests for service, accounting, etc. resides on the node
10th Conference on Postal and Delivery Economics
June 5-8, 2002 Potsdam, Germany

18. Reaching an Equilibrium [18]
Effective organization Broad variety of services
Physical mail remains an important tool in the
communication arsenal of businesses and individuals
10th Conference on Postal and Delivery Economics
June 5-8, 2002 Potsdam, Germany

19. In Conclusion [19]
• What kind of mail communication system would emerge if
all artificial (regulatory) constraints are abandoned?
• From a purely economical viewpoint, the system will evolve
in the direction of a more logical organization of services /
cost allocation and pricing
• New models are feasible from a technical viewpoint
– Information technology has reached the stage when meeting all
technical requirements is possible and cost effective
• Future research
– What would happen when some combinations of external
constraints are preserved?
– How can the model be improved? – detailed economic analysis and
comparison
10th Conference on Postal and Delivery Economics
June 5-8, 2002 Potsdam, Germany