One of the most common — and expensive — mailing and shipping problems is un-deliverability. Not only does it result in returned mail and parcels, it can negatively affect customer relations, billing, and other critical business processes.

Although mail volume is shrinking, “return to sender” mail is down just 0.62% since 2004, with around 1.6 billion pieces each year.* This is an acute problem for all types of mailers, but most of the topical published articles focus on letter and flat mail like billing, explanation of benefits (EOBs) and regulatory notifications. 

Let’s take a look at the impact to parcel mailers, which is significantly higher…

Scoping the True Costs
By our estimates, each piece of letter return mail costs the sender an average of $3 per piece, resulting in more than $4 billion to the mailing industry each year. The cost of an undeliverable parcel is significantly higher than $3 per piece because:
o Postage / shipping costs for parcels – Compare a first class stamp at $0.45 to a minimum charge of $0.80 for a lightweight parcel. 
o Labor cost of handling returned parcels
o Manual labor to physically process parcels
o Labor to retrieve order information
o Labor to facilitate credit or refund
o Inventory Management – Re-stocking merchandise returned to the warehouse. Restocking fees can cost upwards of $7 per item.
o Address Correction Fees - An expedited carrier may charge up to $10 in value-added service' fees in order to "correct" a single package address, a merchant with a million shipments per year may pay upwards of $100,000 - $400,000 in additional shipping costs annually.

What these costs don’t address is the impact to customers. A parcel mailing may be a company’s only chance to make a positive impression on a client. If I don’t receive a product that I ordered online, chances are that I won’t do business with that company again. I’m definitely going to call the customer service line or tweet and complain, and I’m likely to cancel my payment to the company. So the customer impact of an undelivered parcel is exponential compared to an undelivered letter communication.

When evaluating total cost, it is critical to look at the quality of name and address records that you are receiving. We’d all like to think that the quality of name and address records are the same for all mailings, but the source of a record for a parcel mailing will be different from a recurring statement. The package that you are sending may be the very first communication that you send, which means that it is the very first time that you are using their name and address information. 

Typos in an online ordering tool that doesn’t perform real-time delivery point matching can cause a higher undeliverable rate on parcels than on traditional letter mailings. If someone hasn’t updated their online profile with recent move information, that will impact your undeliverable rate. 


Point Solutions
Mailers can begin solving their return mail problem with USPS address tools. There are also third-party solutions, such as NCOALink and LACSLink, which work with postal certified databases. 

To make sure your return mail solution has maximum bottom line impact, you need the right tools and services to obtain, check and develop the data and then take proper actions. It's critical to work with a technology solution provider to develop a roadmap and constantly review the latest tools and services.

The Right Answer
The most effective solution for reducing operating costs and fines is to develop a centralized, automated managed address service. This integrates technology at different points in your end-to-end process and will close the loop between pre-shipping address processes and returned (undeliverable) packages. This centralized service model has five key places to get connected with your customers. 

1. Get it right at data-entry. Your best chance of getting the address correct is when your customers are interacting with your company. Leverage CASS (Coding Accuracy Support System) tools that validate to the delivery point that the address exists. Be sophisticated with your CASS engine -- missing or incorrect apartment numbers can make the difference between a package that gets delivered or ends up on the floor of the building.

2. Use postal certified address management tools prior to shipping. Postal hygiene tools will give you great indications as to which records are deliverable, which are suspect, and which ones will not get delivered. They will also correct many of the common addressing errors. 

3. Build a workflow that uses other (non-postal) data. If postal data tells you that an address is undeliverable, don’t just ship it. There are additional resources available today to update a person’s address using 3rd party data. 

4. Convert your returns to data. Barcodes and scanning technology have been used effectively in the industry for years. Put them to use when managing a parcel that has been returned because it was undeliverable. Once physical return mail is converted into data files, there are many options to update the address and resend the parcel to your client. 

5. Reporting, auditing and metrics. The information generated by your process gets you to the root causes of your company’s address issues. Tracking, analysis and documentation provide metrics to close the loop on your name and address management system. 

Because of the complexity of the issues, it's advisable to work with a consultant with postal expertise to design and implement the correct solution for your company -- the benefits can be huge. Our research confirms that taking a centralized, automated approach to return mail can reduce operational costs by up to 70%. The rest of the total cost, such as missed payments, are 100% returned to the bottom line!
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* USPS 2011 National Postal Forum

Jeff Stangle, CMDSM, MQC, Six Sigma Black Belt is Director of Solutions Development, Enterprise Postal Consulting, Pitney Bowes Management Services. For more information on how you can reduce your return mail expense or to engage a certified postal consultant, please go to www.pb.com/Management-Services
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