1. ADDRESS QUALITY Joe Lubenow Lubenow and Associates Chair, PostCom Postal Operations Committee PostCom Letter Mail Summit Presented at MTAC 18 May 2006

2. 2 DIMENSIONS OF ADDRESS QUALITY Move Update Address Accuracy Address Presentation On Mail Piece

3. 3 PHASES OF ADDRESS QUALITY Address Acquisition Parsing: Address Elements Address Standardization Address Matching Database Storage Address Data Transmission

4. 4 R2006-1 ADDRESS CORRECTIONS Manual corrections –Now 75 cents, proposed 50 cents Electronic corrections –Now 21 cents –Proposed 6 cents (First-Class), 25 cents (other) Automated corrections (letters only) –First-Class, first two per address free, additional 5 cents –Standard Mail, first two 2 cents, additional 15 cents –4-state bar code required under One Code ACS –Additional address quality requirements to be specified

5. 5 R2006-1 SELECTED RATE DIFFERENTIALS First-Class presorted letters 40 cents First-Class automation letters at worst 34.6 cents Additional ounce differential another 4.5 cents per ounce for automation versus presorted First-Class presorted cards 24.1 cents First-Class automated card at worst 22.2 cents

6. 6 R2006-1 SELECTED RATE DIFFERENTIALS Standard Mail nonautomation letters vs. automation letters –Mixed AADC 29.2 cents versus 25.2 cents –AADC 28.7 cents versus 24.2 cents –3-digit automation 23.5 cents (not for nonautomation) –5-digit automation 21.9 cents (not for nonautomation)

7. 7 2002 FEDERAL REGISTER NOTICE Would extend move update requirements beyond First-Class to other classes Not included in R2006-1

8. 8 AUGUST 2007 CASS REQUIREMENT CASS currently has a Delivery Point Validation (DPV) option DPV is becoming mandatory in August 2007 National average 95% ZIP+4, 90% DPV according to USPS Full DPV match requires complete and correct addresses But July 2007 requirement is only for correct addresses in terms of primary numbers So incomplete addresses with missing apartment and suite numbers are still OK That is the main reason for failure to make a full DPV match So a 5% shortfall in DPV may mean a 2% loss of automation discounts

9. 9 AUGUST 2007 CASS REQUIREMENT Naturally, your results may differ and testing is required If your ZIP+4 rate is 93% and your full DPV match rate is 85%, your shortfall could be 4% If your ZIP+4 rate is 97% and your full DPV match rate is 95%, your shortfall could be 1% Some mailers can suppress DPV match failures as they may do with ZIP+4 match failures Some cannot do this for various reasons This remedy should not be adopted without testing as DPV match failures may be deliverable

10. 10 MTAC WORK GROUP #97 BEST PRACTICES IN ADDRESS QUALITY Report is available on USPS Web site Recommends a new approach to address quality Not line by line, but element by element has four address elements Store parsed address elements and assemble them to create address block Store dates of address hygiene performance Vendors have yet to fully support this approach See Address Data Interchange Specification (ADIS) from IDEAlliance (www.idealliance.org) for an example This approach is used in UPU S42 international addressing standard

11. 11 ADDRESS QUALITY AND THE 4-STATE CODE The 4-state bar code will be available for limited application in September on letter mail Used for OneCode ACS and OneCode Confirm Combines information from Postnet and Planet code Can identify mailer, mailpiece, and address uniquely Could be used to receive address element corrections Could be used to guarantee complete and correct addresses allowing postal verification without statistical risk

12. 12 R2006-1 UAA COST STUDY By Christensen Associates First study since 1999 Studies Undeliverable As Addressed (UAA) Mail Studies Personal Knowledge Required (PKR) Mail Outgrowth of USPS/industry Product Redesign Based on 2004 (pre-PARS) environment

13. 13 R2006-1 UAA COST STUDY: KEY POINTS Jack Potter in 2005: cut UAA in half by 2010 UAA is 10 billion pieces and $1.8 billion R2006-1 starts with 2004 pre-PARS environment PARS rollout calculated through 2008 2008 is R2006-1 test year 2008 is also date of full PARS implementation for letters

14. 14 R2006-1 UAA COST STUDY: KEY NUMBERS 2004 Forwarding cost: 21.3 cents Return cost: 51.3 cents Wasted mail cost: 4.4 cents 2008 (projected) Forwarding cost: 18.2 cents Return cost: 50.6 cents Wasted mail cost: 5.3 cents

15. 15 R2006-1 UAA COST STUDY: BREAKDOWN OF COSTS 2004 PRE-PARS2004 WITH PARS2008 WITH PARS FORWARD $422 M $319 M $326 M RETURN $822 M $697 M $727 M WASTED $270 M $290 M $365 M CORRECTION $318 M $200 M $221 M SUBTOTAL$1832 M$1506 M$1639 M ADMIN/SUPP $24 Mnot est.not est.

16. 16 R2006-1 UAA COST STUDY: KEY RESULTS By 2008 UAA is still a projected 10 billion pieces By 2008 projected UAA cost is $1.6 billion These results look unspectacular But let’s look deeper First: more delivery points Second: increase in labor and other costs Third: conservative assumptions on interaction effects of PARS and other programs on mailers

17. 17 R2006-1 UAA COST STUDY: PKR MAIL What about PKR mail? We may think of this as incomplete addresses It is a likely cause of inconsistent delivery MITF studies show this as a serious problem Also it is not affected by PARS, as USPS concedes So the 2004 figures are not reduced by PARS The 2008 increased costs are not estimated

18. 18 R2006-1 UAA COST STUDY: PKR MAIL 2004 PKR pieces are 2,332 M 2004 PKR costs are $160 M, or 6.9 cents per piece This is based on sortation rejects, redirects within route and redirects within station But this may leave out some factors What about carrier delivery slowdowns? PKR mail will have different delivery point barcodes for high rise apartments and suites PKR mail may not DPS to a contiguous location in the tray This could add to the PKR cost totals

19. 19 R2006-1 UAA COST STUDY: PKR MAIL Apartment and suite numbers are only included in the barcode so far for high rise addresses Non high rise MFDU’s need delivery point differentiation This will at some point be achieved by a Total DPS program Total DPS is needed for unique delivery point differentiation This also could add to the PKR cost totals Finally there will be growth in labor and other costs This also would increase the PKR costs totals So it is not unreasonable to expect that total costs of address quality deficiencies will still exceed $1.8 billion for 2008

20. 20 R2006-1 UAA COST STUDY: PKR MAIL So what can the USPS do about missing apartment and suite numbers? SuiteLink can help for suites ApartmentLink is technically feasible At the NPF Jan Caldwell stated that ApartmentLink is not to be expected because of privacy concerns So what can the USPS do about missing apartment numbers? We have contended that there are four main approaches to this issue: –Inform –Invent –Infer –Incent

21. 21 R2006-1 UAA COST STUDY: PKR MAIL The USPS cannot be expected to inform mailers about apartment numbers due to privacy concerns The USPS cannot be expected to invent substitute virtual apartment numbers due to cost and complexity factors (remember the ill-fated Kelly plan in NYC in the 90’s) USPS equipment could infer some apartment numbers, but not when name and address formats vary or when the apartment number is not in private databases Therefore it is time for the USPS to incent mailers to obtain and share available apartment numbers This can best be done by de-averaging the rates for complete and incomplete addresses

22. 22 CONCLUSIONS The highest levels of address quality needed to support the maximum system efficiency cannot be achieved through USPS technology alone The highest levels of address quality needed to support the maximum system efficiency cannot be achieved through mandated address quality regulation alone or in conjunction with USPS technology The highest levels of address quality needed to support the maximum system efficiency can only be achieved by combining technology and regulation with the cooperation of industry and the USPS through work sharing incentives