Cutting the Costs of Postal Commincations

How to cut the cost of postal communications.A White Paper from Neopost

Cut Costs

Improve Productivity

Communicate more effectively

Manage the mail process

©2012 Neopost

©2012 Neopost

Contents

Introduction.A changing market and what it means for business. 03

Alternative Postal Providers. Making the most of new opportunities to cut costs. 04

Saving Money with Royal Mail. Why franking is better value than ever. 05

Mail Preparation. How to prepare mail to maximise savings and eliminate waste. 06

Outgoing Mail. Cost-effective alternatives to a first class stamp. 08

Incoming Mail. The impact of mail processing on labour costs. 09

Why Neopost. How Neopost can help you save money and improve efficiency. 10

How to cut the cost of postal communications | White Paper

Despite its

importance

to business,

mailing

remains

an under-

managed

activity.

©2012 Neopost


IntroductionEach day, Royal Mail delivers 59 million letters, packets and parcels to 29 million UK addresses. Almost nine out of 10 items (88%) are sent by business and the public sector. In an age of smartphones and social networks, the post remains an important channel that can help build relationships and generate business.

• It is a trusted medium: for important messages, many organisations will only ever use the post and a posted letter is still used as proof of identification;

• It is what customers want – in a Royal Mail survey1, 73% of respondents said they would feel inconvenienced if they no longer received paper statements – and for those without access to the internet, it is the only option;

• It is effective: using direct mail as part of an integrated marketing campaign increases payback by up to 20%2. The impact is strongest on the online components of a campaign, which have a 62% higher ROI when direct mail is added to the mix.

Despite its importance to business, mail remains an under-managed activity. At a time of major structural change in the industry and more options to automate the mailroom, too many businesses are failing to make the most of opportunities to cut costs, improve productivity and manage the mail process.

A Time of ChangeIn the last decade there have been two major developments: market liberalisation, which has brought in new postal operators; and a steady decline in mail volumes – down 25% since 20063 – as consumers and businesses embrace electronic communications.

What hasn’t changed is Royal Mail’s responsibility for ‘final mile’ delivery and the Universal Service Obligation (USO), which mandates nationwide pricing and daily deliveries to every address in the UK.

To enable Royal Mail to compete with rivals and bear the cost of the USO at a time of falling demand, postal regulator Ofcom has given it more freedom to set its own pricing. In April it lifted all restrictions on what Royal Mail can charge for First Class stamps and most business mail.

Another recent development designed to level the playing field for European postal operators is the imposition of VAT on retail mail services, bar those subject to the universal service obligation, such as 1st and 2nd class post.

Running in parallel with these changes, Royal Mail has been implementing a programme of modernisation to minimise the need for manual processing in mail centres, supported by pricing policies that encourage greater automation e.g. Pricing in Proportion (PiP) and the growing divergence between the cost of stamps and franked mail.

As postal services evolve, businesses that use mail in the same way as before will see costs rise, whereas those that adapt will be able to take advantage of new money-saving opportunities.

What hasn't

changed is

Royal Mail's

responsibility

for 'final mile'

delivery...

1 Royal Mail study comprising research by Brahm, GFK FRS and Quadrangle, 2010.

2 Royal Mail and Brand Science, Meta Analysis of Direct Mail, 2011

3 Safeguarding the UK's Universal Postal service in the digital age, Richard Hooper, 2010.

Alternative Postal Providers

The most far-reaching change affecting mail users is greater choice. Today, there are many alternatives to Royal Mail, all with the potential to save customers money. These include:

n Down Stream Access. Liberalisation of the UK postal market in 2004 gave alternative postal providers the ability to collect mail from customers, sort it and then pass it on to Royal Mail for ‘last mile’ delivery, a process known as down stream access or DSA. Downstream access licence holders, which include postal operators, commercial logistics companies and even some very large mail users, pay Royal Mail a fee for using their delivery network, but by focusing on the lucrative business market are sometimes able to undercut Royal Mail. DSA providers have taken a large share of the market: from April 2010 to March 2011, Royal Mail delivered 7,064 million DSA letters representing 41% of all deliveries (excluding unaddressed mail)4 and about 50% of business mail. However, their price advantage is eroding as Royal Mail raises prices for access to its delivery network and increases customer discounts for Business Mail products and high volume mailings.

n Private Exchanges. Another option, popular with solicitors, accountants and other professional services, are private networks or exchanges that operate independently of the national post. Companies like DX Document Exchange provide a network of collection points where members have secure lockers and can drop off and pick up post. These are closed networks and only deliver to other members, so will not meet a customer’s postal needs in their entirety. However, for specific mail flows, they can be cheaper and arguably more convenient than Royal Mail as there is no need to weigh, size or apply postage to mail.

n Hybrid mail. This is the term applied to the outsourcing of mail production to a third party provider who prints, encloses and posts mail sent electronically from a customer’s PC or network. Economies of scale in print production centres (for printing and stationery) and the preparation of mailings to take maximum benefit of discount schemes can result in big savings. Hybrid mail is a viable option for businesses of all sizes including small multi-site organisations, such as estate agents, that can consolidate output from branch offices to qualify for volume discounts. However, many companies are reluctant to lose control of their mailings and their data, which may explain why this option has not been more widely adopted.

n Electronic Substitution. Most people prefer to be contacted by post, but as the vast majority of letters are created on a PC, it can make sense to distribute them electronically and eliminate the costs of printing, processing and postage. Electronic substitution is a question of business strategy, but it can be useful where customers opt in to receive email or SMS messages.

The most far-

reaching change

affecting mail

users is greater

choice.

©2012 Neopost


4 Royal Mail Group Ltd Regulatory Financial Statements 2010-11

Saving Money with Royal Mail

Royal Mail has responded to greater competition in the postal market by increasing discounts for business products, to the extent that it is now worthwhile even for those who send very few letters to consider how they prepare and pay for postal communications.

Franking For AllFranking has always been a convenient way to pay for postage and in the last seven years it has become an increasingly economical one, as Royal Mail has applied smaller increases to the cost of franked mail than stamps. The differential between the price of a stamp and metered mail has grown to such an extent that first class metered mail now costs less than a second class stamp.

In April, Royal Mail increased the price of a 1st class stamp by 30%, from 46p to 60p, and the price of a 2nd class one by 39%, from 36p to 50p. Increases for franked mail were significantly lower, 13% for a First Class letter (39p to 44p) and 10% for a Second Class letter (28p to 31p).

With discounts of up to 19p per letter, franking is an economical option for businesses sending as few as 5 items a day even when you include meter rental and operating costs.

Volume DiscountsUsers sending between 500 and 25,000 letters per mailing can cut costs further by taking advantage of discounts for mail prepared in a way that can be read by Royal Mail sorting machines. To qualify, addresses must be printed with approved OCR-readable fonts or barcodes containing the postcode and delivery point.Royal Mail Business Mail (previously Cleanmail, Mailsort and Walksort) offers discounts on the cost of franked mail of as much as 23.5% depending on various factors including the number of letters sent; how the mail is addressed (OCR font or barcode); addressing accuracy; and whether mail is unsorted or pre-sorted by the customer into specific postcode areas.

Pricing in ProportionAnother change that has had a big impact on mailing costs is Pricing in Proportion (PiP). Introduced in 2006, PiP brought in the concept of differential pricing based on an item's size and weight. At today's prices, an unfolded A4 letter (Large Letter) costs 50% more to send than one that is folded and inserted into a DL or C5 envelope. Businesses that send high volumes of Large Letters can make big savings simply by using smaller envelopes.

First class

metered mail

now costs less

than a second

class stamp.

©2012 Neopost


A complete processThe price of a stamp or frank is the most visible indicator of mailing costs, but it is just one component of total expenditure, alongside equipment and labour costs. Mailing is a complete process encompassing mail preparation (how a letter is printed, enclosed and addressed); outgoing mail (how it is paid for and delivered to the customer); and incoming mail (how mail is opened and distributed). In order to reduce total mailing costs, it is necessary to consider all three stages of the mailing process and how they interact. For example, the decision to acquire a folder-inserter to speed up an invoice run and reduce labour costs can also reduce postage costs by folding A4 letters into DL or C5 envelopes.

1. Mail PreparationThe secret to lower mailing costs is to prepare mail properly to take advantage of the most economical rates and to eliminate the waste and expense of unnecessary mailings. Mailing solutions and machinery that can help you achieve this include:

Addressing Software. Good quality data is a pre-requisite for efficient, economical postal communications. Use addressing software such as Neopost’s Bulk Mailer to ensure that all addresses are complete, spelt correctly and comply with Royal Mail's database of Postal Address Files (PAF). Correct addressing will remove the expense of undeliverable mail and enable you to qualify for maximum discounts. Bulk Mailer can also be used to de-duplicate databases.

Folder-inserters: These useful time-savers speed up mailings by automatically folding and inserting letters and supporting documents into envelopes and sealing them ready for postage at least 13 times faster than by hand. Cost savings come from lower mailing costs (if folding an A4 letter into a DL or C5 envelope) and from reduced labour costs. Our calculations show that a folder-inserter with a monthly rental of £20 could save a company that sends 3,000 items a month as much as £1,920 a year in labour costs, on the basis that it costs 6p per item to fold and insert letters manually (100 items per hour @ £6 per hour).

Envelope printers: High-speed envelope printers print addresses, return addresses and PPI marks (postage paid impressions) in a format that qualifies for postal discounts and remove the need to buy labels or pay for and keep a stock of over-printed envelopes. They can also be used to add personalised marketing messages in colour or black and white.

Output Management Software. Businesses can save time and costs by using output management software to streamline mailings. Maximise postal savings by batch printing and sorting print jobs; combine multiple letters to the same address in a single envelope; print barcodes and optical marks on letters for fully automated, customised workflows; and create templates to remove the expense of pre-printed forms and stationery.

©2012 Neopost


Top Tips

• Fold A4 letters into DL or C5 envelopes to avoid paying more for a large letter.

• Automate time-consuming tasks, such as folding, collating and inserting documents.

• Print directly onto envelopes instead of using labels.

• Combine mailings to the same individual in a single envelope.

• Aggregate postal volumes across departments to maximise postal discounts.

• Make sure your address databases are compliant with Royal Mail Postal Address Files (PAF) to cut waste and qualify for Royal Mail discounts.

• Where appropriate consider substituting post for electronic communications.

CASE STUDY

A better service with PrintMachine

Greeting cards publisher and bespoke envelope manufacturer, the Regent Group has transformed the production of invoices and statements by installing Neopost's PrintMachine output management software in tandem with a DS-70 folder-inserter.

Each month the group produces 2,500 items of mail. This, as Associate Director of Finance Karen England explains, used to be a slow and expensive process. "Before we worked with Neopost, we used 4-part stationery for our invoices, credit and delivery notes, and 2-part stationery for our statements. These were printed on a dot matrix printer and formatted to a bespoke size. Once printed, the documents were manually inserted into envelopes."

Today, documents are designed, distributed and archived using PrintMachine software; output on standard office laser printers; and prepared for mailing on an automatic folder-inserter.

"We now use PrintMachine software to print all our customer invoices, delivery notes and statements, using our specified layout. The DS-70 then collates the documents into envelopes. Cost savings were possible as we have streamlined and automated our processes, whilst removing the requirement for expensive 4-part stationery," explains Karen.

For Regent's Head of IT, Rob Seaward, another of PrintMachine's benefits is improved customer service. "One of the most successful areas for us was PrintMachine's ability to store the image in different areas on the server. Stored images are transferred to our intranet overnight and made accessible to the Customer Services Department. This has improved the speed and efficiency with which we answer customer queries. Images can be viewed, emailed or printed, removing the reliance on finding a hard copy of the original, which had been an excessively manual process," he said.

©2012 Neopost


2. Outgoing MailPostage accounts for the lion's share of mailing costs and offers the greatest scope for savings. Customers can cut costs by sending mail via an alternative mail provider or by using franking machines to maximise savings offered by Royal Mail.

Franking machines. Franking is now an economical option for businesses sending as few as 5 letters a day – based purely on the cost of stamps – with further discounts for volume users (see page 4). But there are other areas in which franking has a direct or indirect bearing on costs. These include:• Time saved by not having to queue for stamps in the Post Office – franking

machines can be re-credited online at any time of day or night;• Applying the right postage to letters instead of over-stamping;• Easier compliance with the requirements of Royal Mail discount schemes;• Less wasteful mailings – print your business address on envelopes and Royal

Mail will return undeliverable mail so that you can update your database; • Integrated accounting features that let you track, monitor and charge-back

postal costs; and• Simpler management of VAT, which is now applied to certain postal services,

including Special Delivery and those that attract volume discounts such as Business Mail. Franking machines with smart technology frank at VAT-inclusive prices and produce VAT invoices to aid reclaiming.

Accounting Software. Businesses with more sophisticated needs can track postal expenditure across multiple sites using specialist mail accounting packages. By giving managers a view of postal expenditure across an enterprise, solutions like Neopost Mail Accounting Software (MAS) make it possible to identify where efficiencies and savings can be made.

CASE STUDY

Franking delivers 12% refund

Studio lighting specialist The Flash Centre has cut postage costs by 12% since installing a Neopost franking machine to process the 4,500 parcels and items of mail it sends each month. The Flash Centre was a long-time user of franking machines, but until it switched to Neopost it wasn't making the most of the savings on offer, explains Managing Director Chris Whittle: "After a month of using the new machine, we received a 12% refund from Royal Mail in keeping with their volume-related discounts scheme – something that we were completely unaware of before switching to Neopost. And the best thing is that since then we have continued to receive these discounts which have had a positive impact on our postal budget.”

Top Tips

• A franking machine pays for itself when sending as few as 5 items a day.

• Where appropriate send letters by Second Class post. It is 40% cheaper than First Class (if franking) and still 85% of letters are delivered the next working day.

• Print a return address on envelopes. Royal Mail will return undelivered mail free of charge so that you can update your database.

• Investigate alternative mail providers.

• Consider using hybrid mail to outsource the printing and processing of mailings.

©2012 Neopost


Top Tips

• Analyse incoming mail processes to identify bottlenecks.

• Use automatic letter openers to speed up mail processing.

• In mail-intensive environments, consider an automatic mail extraction system to free up staff for other tasks.

• Scan and log incoming packages.

• Automatically alert staff when a package has been delivered for them.

©2012 Neopost


3. Incoming Mail

Most savings come from the preparation and despatch of outgoing mail. Yet, it is also possible to cut costs from the processing of incoming mail, principally by streamlining processes for opening and delivering post. The main benefit is improved productivity, but in larger organisations there may be the opportunity to reduce staffing levels and associated costs.

Letter openers: Automatic letter openers that slit open envelopes and in some cases remove the contents are a valuable productivity tool in busy mailrooms. With some models capable of opening hundreds of envelopes a minute, they ensure that contents reach their destination inside the organisation more quickly for more productive workflows and improved cashflow.

Mail tracking: Track & Trace systems for incoming mail allow organisations to follow an item from the point at which it enters an organisations to the moment it is delivered to the intended recipient. Incoming items are scanned and logged onto the system and the recipient sent an email advising them that it has been delivered. Systems like Neopost's neoTrak can also be used to follow the movement of files, hardware assets and other items around an organisation.

Mail digitisation: Documents and incoming mail can be converted into digital documents to reduce storage, speed up internal communication, manage processing in a defined workflow and facilitiate retrieval.

CASE STUDY

Homeserve saves £35,000 through faster letter opening

Insurance company Homeserve estimates that it is saving £35,000 a year through faster mail processing after installing three Neopost IM-75 letter openers to help open the 7,500 items of mail it receives each day.

"The overall man hours spent on processing mail has dropped daily by 10 hours equating to a reduction of over 200 man hours a month!," explains Data Processing Manager Josie Bates. "As a result of using the three IM-75s, we can process our incoming mail 33% per cent faster equating to a saving of over £35,000 per year."

Homeserve had been using a basic letter opener to open incoming general correspondence, applications and renewals. Once the envelopes had been slit open on one side, general correspondence (500 envelopes per day) was passed to 12 staff in the main office who manually extracted the contents for scanning. The remaining 7,000 insurance applications and renewals were processed at a rate of 300 items per hour. In total, mailroom and office staff were taking 30 man hours a day to process 7,500 envelopes at a cost of

£4,428 per month.

The installation of three IM-75s that open envelopes on two sides and extract contents in a single process has reduced the time mailroom staff spend processing general correspondence and speeded up the processing of applications to 700 items an hours, reducing time spent on processing mail by 10 man hours a day or 200 hours a month.

Why NeopostNeopost is Europe’s number one supplier of mailing solutions, with annual sales of €1 billion in 2011. Its products and services are sold in more than 90 countries, and the Group has become a key player in the markets for mailroom equipment and logistics solutions.

Neopost supplies advanced solutions for franking, folding/inserting, addressing, logistics management and traceability, as well as a full range of services, including consultancy, maintenance and finance.

Its product range meets the needs of all mail users, from micro-businesses to the largest enterprises and public sector organisations, and covers the three main areas of mailroom activity: Incoming Mail; Mail Preparation; and Outgoing Mail.

Neopost products are designed to work together and can be integrated into complete mail processing systems that address the specific needs of individual customers.

Mail Preparation

Address Management. Neopost Bulk Mailer is a complete address management solution that can increase mail deliverability by cleaning address databases and maximise Royal Mail discounts by correctly formatting mail.

Output Management. Neopost has two solutions for automating document creation, distribution and dispatch, the entry-level OMS-100 for non-technical users and PrintMachine for larger volume applications. Both automatically process mailings to minimise manual sorting, for example by batch printing and grouping documents destined for the same address in the same envelope. Other useful features include the ability to print OMR marks and barcodes that encode instructions for other processes, such as folding and inserting. The intelligence these marks add to documents ensures accurate mailings (essential for confidential information), facilitates varied content by addressee and simplifies processing of returned mail.

Folding and Inserting Machines. Neopost's DS range of Folder Inserters includes models to suit any size business, from the desktop DS-35, with an insertion speed of up to 1,350 envelopes per hour, to the DS-1200 that can fill up to 12,000 envelopes per hour and handle inserts from flyers and business reply envelopes to thick booklets and CDs.

Outgoing Mail

Franking Machines. Neopost's IS series of franking machines ranges from the entry-level AutoStamp2 with integrated weighing scale and LAN connectivity to the IS-6000 with mixed mail feeding, dynamic scale, power conveyor and full colour touch-screen.

Mail Accounting. Neopost Mail Accounting Software is the next step up from a franking machine's built-in accounting features. The software collects and reports on data from multiple machines in multiple locations. As well as tracking all postal expenditure, it lets you set budgets and will send out alerts if expenditure exceeds limits.

©2012 Neopost


Neopost is

Europe’s

number one

supplier

of mailing

solutions, with

annual sales of

€1 billion

in 2011.

©2012 Neopost


Incoming Mail

Letter openers. Neopost's five-strong IM series ranges from the IM-16 with opening speeds of 300 letters per minute, to the production mail IM-75, which opens envelopes and extracts the contents.

Document Scanners. Neopost mail extraction systems can be combined with document scanners and software solutions that scan, archive and distribute incoming documents electronically.

Mail tracking. neoTrak automated parcel receiving software tracks packages from drop-off at the post room or reception to delivery to a named recipient. neoTrak can also track files, equipment, office supplies, computers and other equipment around a building.

Mail Security Scanners. Neopost's range includes scanners for screening bundles of mail and small packages for suspect items and security threats such as letter bombs and parcels.

Address Management. Neopost Return Mail Manager lets you scan undeliverable mail and keep your databases up-to-date

What Next?To find out how Neopost can help you cut mailing costs, please call us on 0800 731 1334 quoting WP2.

CASE STUDY

Neopost provides complete mailroom solution for Circle

Circle is one of the UK’s leading providers of affordable housing, managing more than 63,000 homes for around 200,000 people. Each day, Circle mails an average of 1,000 letters to tenants and contractors.

When the contract on Circle's franking machine came up for renewal, Facilities Officer Peter Morgan took the opportunity to upgrade Circle's mailroom equipment with new models recommended by Neopost.

These include the compact DS-62 folder-inserter, which collates, folds and inserts documents into envelopes and seals and stacks them ready for franking; and the IS-480 mailing system, which seals and franks envelopes at a rate of 150 letters per minute. Because the IS-480 handles mixed batches, there is no need manually to sort mail by size, thickness and weight prior to franking.

“The IS-480 has saved countless hours which used to be spent managing the workflow of our old franking machine,” said Peter. “It can also be configured to prepare mail so that it will qualify for Royal Mail’s Cleanmail® Advance (CMA) service which could save us up to 16% on the cost of our postage.”

Overall Peter is very happy with the service and solutions provided by Neopost and the cost savings they are bringing about. “Our new equipment has saved countless man hours and will soon provide us with sizeable discounts on our postage costs,” he said.

Cutting the Costs of Postal Commincations

Technology

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