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Stretching the envelope Featured

5:41pm EDT October 20, 2004
And you think your company sends out a lot of letters.

No matter how many letters your operation sends out every day, it's a pretty good bet that Paul Bailey, president of ProSORT Services, sends out more.

ProSORT is one of several presort bureaus that works with companies mailing enormous volumes of first class and standard (read: junk) mail and provides them with discounts that range from a penny to several cents for each letter. For companies mailing millions of letters a year, the savings can add up quickly.

Bailey's team processes about 300 million letters each year, working 24 hours a day, seven days a week, and closing only for the major holidays.

ProSORT is a natural, albeit tangential, outgrowth of Bailey's background in banking. He worked at Continental Bank in operations, sorting checks and rendering and mailing out statements. When Continental was sold to Bank of America, Bailey went to another company and had his first direct experience with a presort operation.

It wasn't a good one.

"I just wasn't really happy with the level of service and commitment that I was getting," Bailey says. "So, I did what a lot of people do. If you don't like it, do it yourself. I contacted some of my friends in banking, and was fortunate to get enough people to give me commitments that if I would open this business, they would give me mail to process. It was a nice transition."

Bailey has created a successful enterprise, the second largest presort operation in Chicago. Now, his challenge is to make sure it's not a secret.

"My mission is to just let people know that there is this process out there, this business that's called a presort bureau -- that we do work with the postal service, we do work with companies," Bailey says. "And you're going to hear a lot more about us. It's a fascinating process, very high-tech and very interesting."

Smart Business spoke with Bailey to learn how he plans to stretch the envelope.


How has the presort industry changed in your 20 years in the business?


Dramatically. In the early days, everything was sorted by hand. You prepared (letters) into bundles with handfuls and a rubber band around them. It went to the postal service, and the post service would toss it into different bins. The mail would be taken out to a post office, and a carrier would come in and get his bundles, and he would sort them down into his route order. Then he'd go out and deliver them.

We've gone from that to where we are now -- mail goes through an automated system, typically at the rate of 35,000 to 45,000 letters per hour. It's barcoded and sorted into a tray. It is given to the postal service; they put on a machine that reads those codes and automatically sorts it into carrier walk-sequence order. The carrier doesn't have to do his own hand-sorting any more.


How big is the presort business?


The private mail business, which includes presort bureaus, letter shops and companies that prepare the mail, account for over 70 percent of the mail that goes into the system every day. How much of that goes to presort bureaus, it's hard for me to say.

There are presort bureaus in every major market across the country, and probably cities as small as less than 100,000 people. A city with 50,000 to 80,000 people may have a presort bureau.


How do you plan to grow your operation?


In handling first-class mail, you are limited to a geographic area of certain ZIP code ranges. There are companies that are acquiring presort bureaus in major markets across the country and establishing networks. Most presorters stay within the market that they are established in.

We are growing our standard mail business, and in that business, we are not limited, we can move mail anywhere. We just negotiated an agreement where we will be moving mail from Virginia, Texas, Oklahoma and Iowa to be commingled and sorted. We commingle multiple clients' mail into one big mailing. At this point, that's my objective, to focus on that part of the business.


So acquiring smaller operations isn't an option?


The companies that are acquiring presort bureaus are looking down the road and speculating that at some point in time, the postal service will offer additional discounts for a presorter to move mail from one city to the next. First-class mail currently has to be moved by the postal service and their authorized contract carriers. Standard mail I can move with my own contract carriers, and there are additional discount incentives built into the process for me to do that.

There are some who believe that the postal service will provide additional discounts for first-class mail, and those companies are looking down the road and saying, in order to be effective, I'm going to need to need presort operations in major metropolitan areas. I'm just not sure that that is going to happen, but I'm keeping my options open.


Did Sept. 11 and the anthrax scare have an effect on your industry?


The anthrax scare itself, no. There are different types of mail. There is individual to individual, there's individual to a company and there is company to an individual.

The companies that we deal with go to great lengths to secure their mail to make sure that it is clean and safe. And they want us to be able to do the same until it gets into the hands of the postal service.

Anthrax is not a major issue with a presort bureau. We're simply not dealing with an individual's mail. 9/11 did have an impact on another segment of mail that we do handle -- marketing mail, standard mail -- some people call it junk mail. What happened after Sept. 11 is that if you were doing a major mailing to New York, you couldn't get mail delivered. There was a huge drop in standard mail from 2001 until now.

Finally, this year, market mail has really started to come back strong, and the volume will probably exceed the volume of first-class mail for the first time in history.


How about the National Do Not Call registry?


The Do Not Call, I believe, has (helped the presort industry). Instead of letting telemarketers try and promote your service or product, I think a lot of those companies are going back to direct mail, saying this is the way to do it.


Are you expecting the volume of standard mail to increase?


That is the part of the mail business that is growing the fastest. That's the part where, this year, the volume of mail will exceed the first class volume. (The U.S.) Postal Service will handle somewhere in the area around 200 billion pieces of mail this year. Traditionally, it's been about 52 percent first class, 48 percent standard. We think that is going to swing to about 51 percent standard, 49 percent first class.

The volume of first-class mail will decrease for a number of reasons. One is individual-to-individual correspondence. People will use e-mails, people will send faxes. They will look for ways to get their messages to someone else faster. E-mails and instant messages are great for that.


Can smaller operations take advantage of presort bureau service?


Last year, we developed a new service we call ProSORT Now. And what we're doing, we're taking the postage savings to smaller mailer that mails maybe only one letter a day. And the way we're doing that -- one of the major costs involved in processing mail is going out and picking it up and bringing it back -- a vehicle, a driver, insurance, gasoline, all that.

We've come up with our own mailbox. We go to an office building, we work with a property manager for that building, and we are saying we are offering another amenity for your clients -- that is the ability to use basic discounted postage, which saves them about two cents a letter, and all you have to do is use the lower rate and drop your letter in this box.

Our objective is to collect a thousand, 2,000 letters out of each box each day. So, instead of putting it in a blue box, we say put it into our white box. That's how we want to disseminate those savings even down further.


How is that offering being received?


It's an educational thing. When you're dealing with people who only mail a few letters a day, everyone thinks that only the (U.S.) postal office can do this.

Nobody's paying 37 cents. Everybody's getting a discounted rate, and you can, too. But what really sells them is the delivery service. I think it is going to be something that is really going to take off across the country.

I think presort boxes are going to become as common as a FedEx box, a UPS box, a DHL box. I think you're going to see them everywhere.


Does you operation have any special security requirements?


Security is very important. When you're talking about mail, we're talking about a public trust here, particularly first-class mail because we're dealing with correspondence between a company and a client -- invoices, statements, payments, credit cards. This is extremely important information, and it must be safeguarded.

My clients go to great lengths to make sure their facilities are safe and secure. When they hand that mail to me, they have to have a great deal of confidence that it's going to be as safe in my hands as it was in theirs and as it will be in the hands of the postal service.

We do handle a huge volume of negotiable instruments; we've gone the extra mile and adapted the mail handling security recommendations of Visa and MasterCard. It's a closed facility (with) a security guard, cameras and everything else -- background checks on employees.

The last thing you want is a situation where a customer trusted you with mail, and it got lost or stolen or damaged in any way.


What's next for ProSORT Services?


I see a lot of really good things. I think that presort is going to become a much more commonplace product that people are familiar with, that a lot more people are going to use and smaller businesses will be able to use. The relationship that we have with the postal service continues to get stronger and stronger. We are very strong allies and partners.

I see the postal service looking for ways to expand that relationship. There's definitely the possibility there might be additional incentives for us to start moving first-class mail to entry points closer to where it's going to be delivered.

I think there's also the possibility that postal will look at us and say, 'You guys have got buildings and you've got capital tied up in equipment and trucks and people, and you can help us do some of our overflow processing. HOW TO REACH: ProSORT Services, (630) 323-0606 or www.prosort.com