DM sector demands more transparency in mail surcharges
Wednesday, August 8, 2012
Royal Mail has gone some way to addressing the direct mail industry's concerns over reversion charges, but fears about implementation remain
Emotions were running high among members of the 80-strong audience at the DMA’s Poste Haste summit last week, where Royal Mail’s efforts to step up policing of its specification requirements were up for debate.
To recap, since the start of the year, the DM sector has been hit with millions in reversion charges on mailings that failed to meet Royal Mail’s sealing specifications. The outcry this provoked caused the postal operator to refund the majority of charges and to put an embargo on future charges until September, to give the industry time to discuss the matter.
The proposals presented by Royal Mail’s Stephen Agar and Jenny Ledgar demonstrated that the company had heeded some of the criticisms from the DM sector and the fact the conference even took place has been hailed as progress. Ledgar, Royal Mail’s network access director, said at the summit: "We need the mail to be as clean and efficient as possible so it can fly through the machines. When envelopes jam in the machines it costs us money to sort out and it costs you money.
"We need to work with the industry to establish how to do this better.We want to tell you what we will focus on over the next 12 months to give you the opportunity to fix the things you need to fix and give you the key reasons that reversions are being made," she added.
In addition to publishing a league table of the most common faults on its website, Royal Mail will adopt a phased approach to the reimplementation of sealing surcharges after the grace period ends on 15 September, starting at 20% and rising to 50% by November and 100% in January 2013.
On the issue of proportionality – a particular bugbear of the direct mail industry – Royal Mail says it will introduce a sliding scale of surcharges. This will be based on both the proportion of failed items – low, medium or high – and the impact of the fault on equipment – low or high.
So, whereas currently, Royal Mail Wholesale customers can face reversion charges of up to 3p per item across an entire mailing if failed containers are found in just two Inward Mailing Centres (IMCs), under the new proposal, a reversion charge would only be applied to the mail at those two IMCs (for a high-impact fault) or, if the fault had a low operational impact, a surcharge of 0.5-1.5p per item would be applied rather than the full 3p reversion charge.
For high-volume faults – understood to be where failed containers are found in more than 10% of IMCs – the same low/high impact charges would be applied, but across 100% of the mailing rather than just the identified IMCs.
Examples of high-impact faults include: sealing specifications; visibility of address for OCR scanning; clear route and tag zones for OCR; and 2mm clear zone around customer barcodes. Royal Mail listed flexibility requirements, the width of individual bars of a barcode, delivery address punctuation and typeface as low impact faults.
As ever though, the devil is in the detail, and frustration remains at what is seen as a lack of transparency by Royal Mail over the charges and its insistence on 100% specification compliance, which industry sources describe as "unachievable".
Loricas chief executive and vice-chair of the DMA mailing house council Howard Matthews argued: "Even with these new proposals, we don’t know if they are proportionate because there is nobody to say what the true costs to Royal Mail are. There has to be an independent source to come in and verify this because at the moment Royal Mail is judge, jury and executioner.
"What Royal Mail still refuses to acknowledge is that within every 2m-3m mailing there will be some faulty envelopes because the mail is handled too many times. This means that if a revenue protections officer wishes to fail a container, they will be able to find a fault because there is no such thing as a perfect mailing.
"Every mailing house has machinery that will stop several times a day for various reasons, but you would never go back to the client and impose extra charges."
Matthews believes Royal Mail should be more co-operative in sharing its testing and sampling process with the direct mail industry, which the company has declined to do so far. TNT Post group services director Charles Neilson, who spoke at the DMA event, agreed: "We want Royal Mail to share their sampling methodology with the industry or a third party, such as Ofcom or the DMA. Unless it’s transparent, how do we know that it’s fair or reasonable?"
Matthews has called for an independent forum to be set up before the current moratorium on envelope sealing reversion charges ends in September.
Royal Mail insisted at the summit that reversion charges are not a revenue-raising exercise, with managing director for consumer and network access Agar claiming the £12m generated by the charges is "out of proportion with the heat we get from it".
However, while that £12m may be a drop in the ocean to Royal Mail it is a hammer blow to the DM industry and, some argue, could threaten the future of the whole sector. While progress is being made, the need to resolve the stalemate on outstanding issues such as transparency and Royal Mail’s insistence on 100% compliance is as urgent and important as ever.
- Around 80 delegates attended the DMA Post Haste summit to hear Royal Mail’s new reversion charge proposals
- Royal Mail says reversion charges, which generate around £12m a year for the company, are not aimed at increasing revenues but ensuring efficiency
- The postal operator intends to address concerns over proportionality by introducing different surcharges for low, medium or high volumes of mail that do not meet its specification requirements
- It is to publish a league table of common faults and how they can be avoided
- A phased approach to the re-implementation of sealing surcharges will be introduced after the current moratorium ends on 15 September
- The direct mail industry is still concerned over a lack of transparency and Royal Mail’s insistence on 100% compliance, which it feels is unachievable
- DMA members want Royal Mail’s testing processes to be shared with the industry, along with its methodology for calculating reversion charges
- The DMA also wants an independent forum to be set up to address concerns about transparency
Has Royal Mail answered your questions on reversions?
Keith Bartlett, quality manager, Encore Envelopes, and vice-chairman, Envelope Manufacturers and Suppliers Association
"The sudden increase in charges caused a lot of kneejerk reactions. Envelope manufacturers are taking a lot of the fallout as, if a mailing house gets stung, the first thing it will do is go back to the envelope manufacturer. Royal Mail has paid back 90% of these reversion surcharges, so that has taken the sting out, but individual mailing houses are writing their own specifications that are tighter and that not all machines in the marketplace will be able to produce."
Lance Hill, group sales and marketing director, 4DM
"Reversion charges are a very sensitive issue so it was not surprising to see some hostility at the DMA summit. The positives are that Royal Mail is listening to the industry and has made changes; however, it will not be able to please everybody. It’s important to acknowledge the role of the Strategic Mailing Partnership in ensuring a dialogue with high-level decision-makers. I am confident a workable solution will be found that will lay to rest much of the fear generated by this issue."
Patrick Headley, client services director, GI Direct
"The meeting was useful; it was good to see people from Royal Mail, including Stephen Agar and Jenny Ledgar, get up and face the industry – they didn’t have to do that. These reversion charges are scary and can cost more than we get from the job itself. I have a different concern about one-piece mailings – my concern is that the specification Royal Mail is enforcing is out of date. What we need is to produce a mailing that our clients are happy with and to run some tests in conjunction with Royal Mail to see if it will go through its machines."