Addressing Unnecessary Costs of the USPS Flat Sequencing System

August 22, 2018

In late July, the United States Postal Service Office of Inspector General (OIG) published an audit of the Flats Sequencing System (FSS) in the Cap Metro Area. The report focuses on ten FSS machines the USPS has installed there and that constitute ten percent of the national installed base. The findings came as no surprise to those who have been monitoring the whole FSS situation for years, as the report verified much what the industry’s own thoughts.

In 2016 Joe Schick, Quad’s retired VP of Postal Affairs, wrote a blog titled FSS – A Four Letter Word about the USPS decision to insert a FSS price for flat mail that was between 5-digit and Carrier Route rates. Joe felt that the move was unjustified, as it led to reduced mail volume in the FSS zones. The USPS saw the error of its ways and retracted the FSS price at the next consumer price index change in January, 2017.

In his post, Joe laid out nine facts about the FSS. Two related to that pricing the USPS fixed in 2017, and the other seven focused on the functionality and justification of the FSS. The OIG audit reviewed recent data and agreed with Joe on each of his seven facts, and added information about the amount of FSS-eligible mail bypassing the FSS. It’s no coincidence the OIG got the same response from USPS management as Joe had when he presented his facts to the USPS: “Management disputes the need for this recommendation.”

The good news is the OIG will not let the issue die, and will instead insist the USPS leave open these issues — at least until they give the OIG satisfactory data to prove the FSS can run efficiently. It will be interesting to see what one new Governor will have to say about this open issue when he takes office — he who trained the current OIG staff.

Quad recently testified before the Presidential Task Force on the USPS to discuss, in part, the value of the FSS. During this session we noted that the USPS continues to invest in FSS technology without a proven return on investment, and recommended the postal service acknowledge that the time has come to let FSS go. We added that the USPS last mile delivery network needs to leverage the production and logistics capabilities of companies like Quad.

Mail Service Providers create and deliver mail ready for carrier route casing, bypassing all machine processing. Of course, there’s a price component to accomplish this, but there should also be a regulatory change — a change the USPS could easily make right now. Current regulations for flats assume processes with multiple machines. This is unnecessary, though, and Quad has asked the USPS to implement changes in regulation for Delivery Unit-ready carrier route mail — we also commented to the Task Force about this concern.

With two new Governors slated to take their positions this fall, Quad hopes they will reiterate the issue we laid out in 2016 and the OIG reaffirmed in 2018. The USPS has failed to effectively manage the FSS debacle. And if their goal is to keep mail an affordable communication channel, they should reach out to the mailing industry to explore ways to create efficient carrier route mail and bypass the unnecessary automation that can damage mail pieces, and which certainly adds cost.