ASK DAN: What can I do to reduce my mail costs?

Published: August 15, 2011

Question: With the recent Royal Mail price increases, we have seen our mail spend increase by 18%, despite sending fewer volumes. What can be done to reduce mail costs?

Answer: You are not alone in this regard. Royal Mail price increases for this year across both Retail and Wholesale are around 20%, but the main increases have been in the Access Charge, which is the charge Royal Mail Wholesale levies for doing the final mile delivery for access operators. Because of this difference in price increases, it means the price gap between Retail and Wholesale has become smaller, thus reducing the reason for change. However, this does not answer your question.

At the moment, I do not know what volumes you currently send or whether you use Royal Mail directly or a Down Stream Access (DSA) provider. I will assume you utilise Royal Mail, as this would be the most expensive option. There are a number of options you can use, although they do have prerequisites, which must be met in order to achieve the discount.

Cleanmail

If you are not doing some form of mail sortation, then you can prepare your mail to a standard whereby it can be machine readable and sorted automatically. This can be OCR (Optical Character Recognition) or CBC (Customer Bar Code). You will also need to ensure your address database is tidy, as you will need at least a 90% accuracy rate. There are two further versions of Cleanmail – Cleanmail Plus and Cleanmail Advance. The Plus version requires a 95% address accuracy rate. The Advance version must meet defined letter dimensions, address location, clear zones, applied licence, be presented in trays and you must complete a sales order on-line. For all of the above, you will also need at least 500 mail items per posting to qualify.

Mailsort

This where you would do a level of pre-sort (into specific postcode areas) prior to handing the mail over to Royal Mail. There are a number of options: 70, 120, 700 and 1400. There is also Walksort, but we will not discuss that in this instance. To qualify you will again need to have your mail as machine readable, as with Cleanmail. Also trays or bags, depending upon which option is taken, and a 90% address accuracy rate are required. For 70, you will also need a minimum of 20,000 items per posting and use trays. For 120 and 700, you will need at least 4,000 and 10,000 items respectively. For 700, you can only use the CBC format. The 1400 variant has a requirement of at least 4,000 normal letter items.

Sustainable Mail

You can use this in regards to the Mailsort option to obtain further discounts. You will need to meet all the recycling requirements in the construct of your material, as well as a 95% address accuracy rate. There are two levels, which can be obtained – Entry and Intermediate.

You can also choose to utilise a DSA carrier. There are a number of these and Postcomm (Regulator)  can provide you a list, or you can download the names and contact details from its web site. Note: Postcomm ceases to exist later this year and its duties will be assumed by Ofcom.

A DSA provider can save you considerable money. If you do not have the volumes for Mailsort, then they can sort your mail with other mail items they have, thus generating a discount. Even if you utilise Mailsort, you can still generate a saving by utilising their network. I have seen as much as 33% savings identified.

Whilst VAT is applicable if utilising a DSA provider, this charge is relatively small. The VAT is only applicable, at the moment, to the element of work being done by the DSA provider, which is a small percentage of your overall cost, as the majority of the item price paid (95% – 97%), still goes to Royal Mail for their activity in the final mile delivery.

I hope this answer will enable you to review your mail operation and find ways of increasing savings.

OPS has considerable experience in delivering mail savings; for example, we assisted a customer to identify £6.5m worth of savings per annum. You can learn more about this at www.opslc.com/casestudies/clients. OPS also provide a Health Check package for Mail, which is designed to quickly identify any potential savings. To find out more, go to www.opslc.com/interior/healthchecks.

Ed's note: If you have a question you wish to ask our friendly logistics consultant, please send an email to petermacleod@quartzltd.com, with 'Ask Dan' in the subject line.