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All Options Using ZIP+4 (Options A, B, D, E, G, H)

o

Incentive rates for ZIP+4 use. OTA assumed that the incentive rates offered to volume mailers who use ZIP+4 (0.5 cent for presorted first class and 0.9 cent for nonpresorted first class) is a cost. USPS argues that this is a return to mailers and thus a benefit of ZIP+4, not a cost. However, OTA concluded

that and

the are

incentive rates are required to get large mailers to convert to

therefore

appropriately

considered

a

cost.

OTA

assumed

ZIP+4, a fixed

incentive rate, given level of

and that escalating rates would

ZIP+4

usage.

Based

on

these

not be necessary incentives and a

to maintain a detailed mail

flow analysis, the for incentive rates

General Accounting of $140 million at

Office (GAO) estimated 90 percent ZIP+4 usage

an annual cost (GAO, 1983a,

p.152).

OTA assumed the GAO estimate, with the cost reduced

proportionately at lower ZIP+4 usage levels.

o

Savings as a function of ZIP+4 use. OTA assumed for these options that some portions of clerk/carrier savings resulting from automation is a function of the level of ZIP+4 use. For single-line OCRs, OTA used the curve of savings

versus ZIP+4 use developed by USPS.

For multi-line OCRs,

that and

the USPS curve was pessimistic and developed additional optimistic). These curves are presented and discussed in a

OTA assumed curves (median later section.

All options using multi-line OCRs (Options B, C, D, E,G,H).

o

OTA concluded that USPS assumptions about multi-line OCR performance were pessimistic with respect to the multi-line OCRs ability to read, code,

and sort 5-digit ZIP mail to the 9-digit level. curves, as noted above and discussed later.

OTA developed additional

All options using single- or multi-line OCRs (options A, B, C, D,E,G, H).

  • o

    OTA concluded that the USPS baseline estimates of clerk/carrier savings were likely to be optimistic, for a variety of reasons discussed later. Therefore, OTA analyzed savings at 100 percent, 90 percent, and 80 percent of the USPS estimates.

Additional assumptions that apply to individual options are presented below.

Option A: Single-line OCR. OTA used the USPS cash flow estimate as the base line, and treated ZIP+4 usage as an uncertainty. During 1985-1988, the deployment period for single-line OCRs, OTA reduced USPS savings estimates by an amount proportional to reduced ZIP+4 usage. For example, if projected clerk/carrier savings in 1986 were based on an USPS-assumed ZIP+4 usage of 57 percent, but estimated by OTA

37

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