Printed Postage Impressions

1.1. The Printed Postage Impressions (PPI) system is available through the Royal Mail for the despatch of letters and packets. Permission to make use of the system is subject to a requirement that:

at least Ł5,000 a year is spent on letters, for a Standard Tariff Letter account;
or at least 5,000 packets are sent each year, for a daily-rate packet account;
or at least 10,000 packets are sent each year, for a flat-rate packet account.

1.2. Letters are defined by the Royal Mail as envelopes weighing less than 60 grams: packets are envelopes weighing more than 60 grams and up to one kilogram.

1.3. Under the PPI system, envelopes are pre-printed with a first or second class postage impression, which bears the number of the contract established by the customer with the Royal Mail. The PPI system eliminates the franking of envelopes or the use of postage stamps. The facility also allows the printing of the customer's logo on each envelope at no extra cost.

1.4. PPI mail is collected by the Royal Mail from designated collection points. Any PPI mail that is despatched other than through those collection points will be returned undelivered by the Royal Mail. That arrangement prevents fraudulent use of PPI envelopes.

1.5. The PPI system is widely used for the despatch of outgoing mail by commercial and industrial organisations and by public bodies. A growing number of Higher Education institutions has also implemented the PPI system.

2. Charges and Payment

2.1. Postal charges for letters bearing printed postage impressions are the same as for letters that are franked or affixed with a postage stamp: ie the standard rates of 27 pence (first class) and 19 pence (second class). Those rates are not negotiable.

2.2. Postal rates for packets under the PPI system are based on an assessed average weight of packets, which is initially determined by a survey prior to the implementation of the system, and which is subsequently monitored and adjusted in the light of experience. Separate average weights are determined for first and second class packets.

2.3. Alternatively, a table of charges for PPI Packets from over 60 grams to one kilo, in increments of 10 grams, can be used to average out the actual cost per consignment. For example, if 2300 Packets have an average weight of 229 grams the charge would be based on the 220-230 band. That facility gives a much greater range of charges than franked mail, for which, after 60 grams, charges increase in 50-gram increments. It also gives an extra 50 grams for second class mail, which can only be franked up to 750 grams: packets over that weight must go first class.

2.4. The customer is required to count and record the number of envelopes despatched in each of the four separate categories: first and second class letters and packets. The customer is invoiced by the Royal Mail by reference to the records submitted by the customer when the mail is collected. Payment under the PPI system is therefore in arrears - unlike franking and postage stamps, for which payment is made in advance of use.

3. Benefits of the PPI System

3.1. The PPI system provides several operational and financial benefits:

it is easy to use for departmental and mailroom staff;

it is less labour intensive than franking;

it eliminates costs associated with the purchase/leasing and maintenance of franking machines;

it avoids the potential problems of mechanical failure that can arise with franking machines;

the cost of postage is paid in arrears rather than in advance;

it provides a more flexible range of charges for packet mail;

the printed postage impression and logo enhances the image of the organisation;

it provides a profile of the usage of first and second class postage.

3.2. As a direct result of the implementation of PPI at one northern university, a reduction of ten percent has been achieved on annual postage costs. The university operates a fully centralised system, which is monitored, controlled and managed as a corporate facility. Postal costs are not recharged to departments.

3.3. The benefits achieved at the university include a ten-percent reduction in the cost of postage relating to packet mail. A similar reduction might be achievable by other universities. However, as no such reduction can be guaranteed and as the Royal Mail describes any reduction in postage costs directly related to flat rate charges for PPI packages to be fortuitous rather than deliberate, AIMS is hesitant to include it as a substantial benefit of the PPI system.

4. Problems with the PPI System

4.1. AIMS has identified four disadvantages of the PPI system:

additional costs arise from the printing of envelopes with the postage impression;

it severely complicates the task of recharging postal costs to departments;

as envelopes are not weighed before despatch, it is difficult to determine whether the flat rate charged by the Royal Mail is appropriate;

as envelopes are not date marked, it does not provide proof of the date of posting.

4.2. After carefully evaluating the potential benefits of PPI, another northern university decided to retain its existing franking arrangements. It does use the PPI system for the despatch of prospectuses. However, it has concluded that it would not be appropriate to use the PPI system for all outgoing mail. Three of the disadvantages listed above (ii to iv) have been cited by the university concerned as the main reasons for its decision, but particular emphasis has been placed on the fact that under PPI the recharging of postal costs would be an extremely time consuming task.

4.3. All outgoing mail is collected from the various buildings of the university and delivered by van to the central mailroom where it is franked. Two franking machines are connected to a personal computer, which contains a database to record the amount and cost of postage from each department. The computerised system requires only minimal involvement by the postal services staff: the entering of a departmental code and the identification, by a single keystroke, of the appropriate postal service (ie first or second class letter or packet mail). A monthly report is printed in the mailroom and sent to the Finance Office for the recharging of departmental accounts to be effected.

4.4. Under the PPI system, in addition to the completion of the Royal Mail documentation, a manual record would need to be kept for each department showing the number of envelopes despatched in each postal service category, by reference to which the following data could be entered into a computerised database: departmental code, postal service and number of envelopes despatched per service.

4.5. From 7th April 2003, all undeliverable PPI mail not bearing a return address on the outside of the envelope will be disposed of by the Royal Mail and not returned to the sender. That policy imposes the additional requirement on the sender of PPI mail to ensure that a return address is printed, stamped or written on each despatched envelope.

5. Recharging of Postal Costs

The Rationale of Recharging

5.1. The rationale behind the recharging of postal costs is that departments, having been given responsibility for managing a devolved postal budget, will monitor, control and reduce their expenditure.

5.2. The counter argument suggests that it is unlikely that devolved postal budgets will be closely monitored or controlled for three main reasons:

the cost of postage will be considered in many departments to be less important than the need for documents and correspondence to be despatched;

in many departments, the relative cost of postage will not be seen to be significant;

without virement, there is no incentive for departments to reduce expenditure on postage.

5.3. Furthermore, it is argued that the assignment of responsibility for the postal budget to an individual member of staff managing the central postal service would be more likely to tighten the monitoring and control of expenditure. That conclusion is based on the assumption that the officer concerned would be responsible for a substantial budget and be in a position to ensure that a corporate policy was followed by all departments.

5.4. There are also substantial clerical costs associated with the procedures involved in recharging: the recording of details of despatched mail, the entry of data into the university accounting system, the production of departmental statements, the checking of those statements in departments and the referral and resolution of queries relating to recharged costs.

5.5. Despite the persuasive arguments to the contrary, it is recognised that some institutions have decided, and undoubtedly others will decide, to recharge postage costs under the PPI system. For costs to be recharged, details need to be recorded of mail despatched from departments. The necessary records can be created centrally or in departments.

Recording Undertaken in the Central Mailroom

5.6. An arrangement whereby records of mail despatched by each department are created by central mailroom staff has the following strengths and weaknesses.

Strengths

it would avoid the difficulties arising from the other options shown below

Weaknesses

it would add hugely to the workload of the staff in the central mailroom
the collection time of outgoing mail from departments would have to be brought forward considerably or the staffing level in the central mailroom significantly increased.

5.7. On balance, its inherent weaknesses make it an impractical option.

Recording Undertaken in Departments

5.8. Arranging for details of outgoing mail to be recorded in departments has the following strengths and weaknesses:

Strengths

it would avoid the difficulties arising from the previous option

Weaknesses

Some departments might deliberately or accidentally enter incorrect information on the sheets
the presented data would need to be accepted (which could lead to errors of over- or undercharging) or be checked by the central mailroom staff (which would be hugely time-consuming.

5.9. This option would avoid placing additional work on the staff of the central mailroom, but would add slightly to the workload of departmental staff.

Distributed Collections by the Royal Mail

5.10. Another option is to arrange the collection of outgoing mail by the Royal Mail from several buildings. The mail despatched from each building has to be accompanied by a form recording details of the outgoing mail. Each collection point will receive a separate invoice from the Royal Mail. The strengths and weaknesses of this option are shown below.

Strengths

collections of outgoing mail from departments will be able to be delayed, as it will not need to be collected by a mail services van and sorted in a central mailroom before collection by the Royal Mail
it will reduce work in the central mailroom
it will avoid the difficulties arising from the option involving the central recording of outgoing mail

Weaknesses

building managers/porters would have to record numbers of outgoing envelopes by category and complete Royal Mail documentation
building manager/porters would have to record despatches by special delivery etc from their buildings
in multi-department buildings, separate records would need to be kept for each departMent
in multi-department buildings, recharges would have to be effected through the institution's finance system.

5.11. This option has been implemented by at least one university. However, in some multi-department buildings in that university the PPI system has not been implemented and distributed franking has been retained.

Including a Postage Charge in Envelope Prices

5.12. A number of institutions have avoided the complications associated with the retrospective recharging of postage costs under the PPI system by adding a postage charge to the price of envelopes issued from their stationery stores. The strengths and weaknesses of that arrangement are shown below.

Strengths

avoids recording the number of departmental envelopes despatched in the various categories of outgoing mail
avoids the need to effect recharging through the University finance system
avoids the need to check that recharging has been correctly carried out.

Weaknesses

as it is not known at the time an envelope is purchased from the stores whether it will be a letter or a packet, the postage charge added to the price of each envelope is somewhat arbitrary
there will be many non-standard envelopes that will not be PPI envelopes if a postage charge is added to blank envelopes by the stores, departments might buy blank envelopes from other sources
problems will occur whenever the Royal Mail increases its postage charges (ie departments will have been charged a lower postage charge on each envelope that they have already purchased) - the postage-related income from the sale of envelopes will not cover the postage costs
problems will occur whenever the Royal Mail reduces its postage charges (eg if the average weight of packages is adjusted after periodic checking) - departments will have effectively been overcharged for their postage
the destruction or abuse of envelopes is very expensive to departments
it would make desktop delivery by suppliers difficult, if not impossible, to implement.

5.13. There are two options for adding the cost of postage to the price of envelopes:

create four clearly distinguishable categories for each size of envelope: first and second class letters and first and second class envelopes;
for charging purposes, categorise all smaller envelopes (say, DL, C5 and smaller) as letters and all other envelopes as packets, irrespective of the subsequent weight of their contents.

5.14. The former option will more accurately reflect the weight of the respective envelope contents: the latter option will be less accurate in that respect, but simpler to operate as it will require fewer categories of envelopes to be ordered and stored.

5.15 The arrangement would be complicated in institutions that use desktop delivery of envelopes by suppliers. It would be inappropriate for departments to pay to the suppliers the inclusive prices for envelopes, as the suppliers would then have to repay to the institution the postage element of all envelope purchases.

5.16. Other options include:

the submission by the supplier to the institution of details of envelope sales for each department, from which the institution would determine the postage element to be recharged to departments;
the routing of all envelope orders from departments to a central point in the institution, where details of the postage element would be recorded for recharging to departments.

5.17. The first option might be unacceptable to suppliers. The second option would delay the ordering process. Both options would entail a significant amount of clerical effort in a central section of the institution.

Recharging External Organisations

5.18. Even if it were decided that postal costs should not be recharged to departments, it would still be necessary to recharge costs to external organisations that use the facilities of an institution to despatch their mail.

5.19. One option would be for separate PPI contracts to be established for each external organisation. However, it is unlikely that any of the external organisations concerned would meet the requirements determined by the Royal Mail for a PPI rate to be applicable - see paragraph 1.1 at the start of this document.

5.20. Alternatively, the external organisations could be allowed to use the PPI arrangements of the university but be required to submit weekly or monthly statements showing the number of envelopes despatched in each of the four charging categories. Invoices could be raised by reference to those statements, and random checks could be made in the mailroom to monitor their probity. A third option would be for the external organisations to obtain their own individual or shared franking facilities.

6. Conclusions

6.1. There are several crucial factors that need to be considered when choosing between the PPI system and the franking of despatched mail: whether postage costs are to be recharged to departments; whether envelopes are delivered to departments from a central stationery store or by desktop delivery by suppliers; whether the collection of outgoing mail by the Royal Mail is from a central mailroom or several dispersed locations.
6.2. It is the view of AIMS that the recharging of postage costs to departments is unlikely to have a significant effect on expenditure. The despatch of mail is not normally undertaken frivolously. The essential consideration, therefore, is whether it needs to be sent out by first class mail. 6.3 It is important that responsibility for an institution's postage budget is clearly assigned to an individual member of staff. In order to fulfil that responsibility, the designated postholder will need to be given the authority to challenge any contravention of the institution's postage policy.
6.4 The PPI system is operationally more efficient and more reliable than franking. It also offers significant scope for reduced costs. 6.5 Under a central franking system, requests by departments to send mail out by first class post can be ignored (where appropriate authority is assigned to mailroom staff) or questioned (by reference to departments). Under the PPI system, departments insert their mail in first or second class envelopes, which effectively precludes any intervention by mailroom staff.
6.6. Three options are worthy of consideration as a means of reducing the use of first class envelopes: restrict the purchase of first class envelopes by departments by limiting their maximum order levels; empower the staff who issue stationery (or external suppliers, if desktop delivery has been implemented) to challenge large orders of first class envelopes; recharge for first class mail those departments that persistently use it on a large scale in contravention of the established policy of the institution.
6.7. It should be recognised that retrospective recharging of postage costs to departments under the PPI system is a tedious and time-consuming manual operation. Furthermore, as charges for packet mail are determined on the basis of an average price related to the average weight of packets, departments whose packet mail is predominantly of a light weight will pay a significantly higher charge under PPI than under a franking system. 6.8. If an institution does decide to begin or continue to recharge postage costs, the best PPI option would be to seek to arrange for the Royal Mail to provide distributed collection and invoicing.
6.9. There are two other PPI options: add a postage charge to the price of envelopes; arrange for departments to record and submit details of their despatched mail. 6.10. Both options present difficulties. The former can be compromised by changing prices and precludes desktop delivery of envelopes from suppliers. The latter creates significant clerical activity, which is prone to accidental or deliberate inaccuracy and a possible lack of cooperation. 6.11. If it is decided that postage costs are to be recharged to departments, therefore, but the distributed collection of outgoing post by the Royal Mail is inappropriate, consideration should be given to attaching a computer system to a central franking machine rather than the adoption of the PPI system. That arrangement will facilitate the electronic transfer of data to the institution's Finance Office for recharging purposes.

7. Summary of Good Practice

7.1. Good practice in respect of the PPI system can be summarised as follows:

decide whether to have a policy of recharging postage costs - AIMS would advise against such a policy for the reasons discussed above;

if it is decided not to recharge postage costs, implement the PPI system;

assign responsibility for the institution's postage budget to an individual member of staff together with the authority to challenge any contravention of the institution's policy;

determine an institutional policy for the use of first class mail, including an arrangement to charge departments that consistently ignore the policy;

if it is decided to recharge postal costs, investigate the possibility of arranging collections of mail from individual buildings and separate invoicing by the Royal Mail - this option will be less appropriate in buildings that are shared by several departments;

if it is decided to recharge postal costs but distributed collections by the Royal Mail are inappropriate, consider attaching a computer system to a central franking machine to facilitate the collection of data and its electronic transfer to the institution's financial system for the recharging of postage costs.

Academic Institutions
Management Services
December 2001, revised April 2003