Proactive Approach Keeps Bills in the Mail

April 1, 2003
DST Output prints 105 million billing statements a month which accounts for two percent of all USPS business. Here?s how this company handles a staggering amount of material to meet its customers? drumbeat for fast delivery.

DST Output in El Dorado, California produces many of the billing statements you receive each month, and typical turnaround time is just 24 hours from receiving billing data from its customers to shipping a huge, presorted mass mailing. The company prints more than two billion bills a year. It accomplishes this speedy task for communications, financial, insurance and other industries by being ever watchful over production.

Landline phone companies, wireless phone companies, cable TV and the financial/brokerage industry are mainstay customers at DST. Price, quality, delivery speed and responsiveness are key factors when DST’s customers determine whether to keep their billing operations in-house or choose an outsource provider like DST Output. DST is the largest first-class mailer in the U.S.

In terms of brokerages, for example, if you buy a stock or security, DST might be sending your fulfillment pack on the stock. "We also send confirmations on any financial transaction which by SEC rules must be sent out within 48 hours of the transaction. This pushes DST toward that 24-hour delivery time," says Bob Logue III, director, business operations for DST.

The main aspects that distinguish DST are quality, turnaround time, customer intimacy and value-added services. "In these economic times, everyone wants more for less. We are competitive in what we do in turnaround time and intimacy with our customer, but our customers are being squeezed due to bad economic times," adds Logue.

DST helps its customers shave costs from their billing processes with value-added services like its Direct Access, Web-based visibility software. It allows a customer an inside look at when its billing statements hit the production floor and when statements are mailed. "We at times give Direct Access as part of a fee negotiation. Keep in mind that the faster the billing statements get into the mail to end-customers, the faster the cash flow turns as bills are in the hands of clients quicker. The bottom line is monetary," observes Logue.

"We're always looking at our processes with an eye toward improving them. We have a team that is right now flow charting our processes to evaluate each step and ask, 'Why are we doing this and what are the company and customer getting out of each step?'" says Gary Abitz, director of materials for DST Output. Abitz calls that process value stream mapping, and he focuses on cross-functional input from workers to learn how inventory can be presented more efficiently down the company’s warehouse and manufacturing lines. "We want to know what our production workers think. Is our Production Status Reporting (PST) shop floor software doing an effective job, or do we need to adjust the software? This proactive approach keeps us ahead of the game before production problems might develop," says Abitz.

DST always on the move

With a workforce of about 1,500 workers at its California locations, including 500 software and material handling engineers, DST Output has been able to increase its printing capacity by 12 percent over the past three years by fine tuning its material handling with minimal increase in workforce. The El Dorado Hills Data Control Center functions like an air traffic control tower and is key to managing the data stream that keeps the operation humming. Control center staffers oversee plant operations as tremendous volumes of billing data spill in over T1 phone lines.

Managers and engineers at the plant are always open to new ideas. Logue says most manufacturing plants the size of DST don't do the kind of research and development work that DST accomplishes. "We replaced a conveyor system at our receiving dock that once moved boxes of envelopes, inserts and forms into the warehouse for manual putaway. With an engineering study, we found that using lift trucks and pallet jacks for putaway into pallet rack was the faster, more flexible solution, and we added bar coding and a radio frequency data terminal network for better inventory control," says Logue. From a competitive standpoint, moving to a lift truck-based operation reduced cost, making DST more competitive.

"We measure our effectiveness by quality and turnaround," says Logue. "We make our due-out, Just-In-Time commitments as well as meet quality standards, which means the billing statement has the correct number and type of advertising inserts in the envelope."

DST's current turnaround performance goal at DST Output is 98.8 percent, and that goal was exceeded in 2002. The quality performance of putting correct material into the envelopes is in the 99th percentile. "We’re always thinking outside the box," says Logue. "Just because we’ve been doing a task a certain way doesn’t mean we need to keep it that way."

In order to achieve these stellar heights of performance, it takes a lot of systems integration effort among DST's planning group, vendors, purchasing, warehouse and production workers.

How DST rates material handling

"Our executives think efficient and accurate material handling is an absolute necessity," says Logue. Scott Shelton, senior vice president for DST is involved in all aspects of material management and is a strong advocate of material handling. "I tell people that they can drop a letter in a local mailbox, and we can send something through our mail stream, and ours will get there two days ahead of theirs," says Shelton. He accomplishes this feat by engaging workers in improving daily operations. "I don’t want a place where people have to check their brains at the door," he adds.

DST has a large engineering staff which is involved in research. The engineers solve handling problems by modifying or designing equipment to meet the facility's needs. And ergonomics tops the list of engineering concerns. Engineers also designed a custom dolly for moving three-to-four-foot tall stacks of fan-fold paper from the printing workstations to inserter workcells. This protects forms from damage while taking the strain off of workers who would otherwise carry these loads.

Material handling operations at DST

DST uses a combination of modern inventory control technology, software and material handling equipment to track and move large inventories of paper forms, envelopes and advertising inserts through its plant. And it's important to remember that no finished goods inventory is ever stored at the plant. DST sells what it makes every day.

At the receiving dock, envelopes, inserts and forms are inspected manually upon receipt. Forms and envelopes are inspected against a PDF file to double-check that color screens, window placement and logo placement are correct. Inserts are inspected for size, fold and weight, with a 35 lb maximum limit on box weight for ergonomic safety.

After inspection, items are weighed with an electronic scale (Weightronix) and measured for thickness. These data are automatically uploaded to the inventory and ERP software called MK (Manufacturing Knowledge by Computer Associates). The weighing process is key to help determine whether more or fewer advertising inserts can be included in the postal ounce that customers pay for, as the weight of the bill itself is usually not enough to fill the ounce. Weight and thickness are critical to determining necessary postage and the quantity of statements that will end up in one tray.

After inspection, cartons of material are scanned (Intermec scanners), with the bar codes identifying item number and quantity having already been applied by the vendor. Putaway is divided into three areas, envelopes, forms and inserts, and boxes are putaway randomly into storage locations in pallet rack using lift trucks (Clark) and pallet jacks (Crown). The local Clark lift truck distributor leases the trucks and handles all maintenance and loaner trucks. When putting away a box, the bar code on the box and the bar code on the storage location are both scanned to update the MK inventory control software. Communications are via radio frequency data communications network and portable terminals (Intermec).

The use of RF technology simplifies data entry and improves the accuracy of the putaway process. Requiring boxes shipped from vendors to have preprinted bar codes is an example of how DST streamlines processes and reduces cost.

Here the home-grown Production Status Reporting (PSR) software takes over. PSR manages two streams of production flow, one for raw forms being fed into printer workstations and another for inserting finished forms and advertisements at insertion workstations.

Forms are stored together to facilitate efficient picking for the printers, and envelopes and inserts are stored together to support the insertion process. Material is zoned manually using random storage locations in pallet rack. An assortment of Clark sit-down counterbalanced lift trucks, reach trucks and electric pallet jacks assist with moving 250 million pieces through the warehouse each month.

A "skey" is a work-in-process form that contains the bill of materials for any print job. About 30,000 skeys are pulled a month, which equates to 30,000 different print jobs and just as many orders pulled and jobs inserted each month. This calculates to a staggering 1.2 billion pieces of paper being handled. To control the flow of material through the factory, DST uses internally designed PSR shop floor control software that allows the monitoring of jobs and the tracking of priorities.

With all that paper come concerns for maintaining proper humidity at the plant, as toner doesn't adhere correctly to paper that is too wet or too dry. Improper humidity also affects static electric charge buildup as well as paper jams and binds in the machinery.

The PSR generates a paper work order, called a "cage header," for every skey. Bi-level postal carts are used to pick boxes of forms, inserts and envelopes. The case header lists the item, quantity and pallet rack location to pick from. When boxes are picked from storage, each is scanned to decrement inventory and move that inventory to work-in-process. The warehouse is structured so that forward pick locations are always full of the right material. Extra inventory is kept at bulk storage locations.

When goods are picked and ready for the shop floor, a sample of all items going into a statement are pulled to confirm a possible later postal audit on weight and thickness. The Postal Service conducts periodic audits to ensure that DST in compliance.

It's important to point out that customers can check every step of their statement processing with a Web-based portal called Direct Access, which was developed by DST Output. Knowing when statements are shipped helps customers forecast revenue and predict call volume. Direct Access also offers a full complement of detailed reports that include job processing status, production statistics, insert mailing, postage ex-penses and more. This software helps customers know at the click of a button which orders are in the mail and which are about to be shipped or printed.

The PSR manages the distribution of skeys to the 90 to 100 workcells at the plant.

As forms are inserted into envelopes along with advertising items, the worker performs a quality check on about every 105th item. The finished envelopes are placed into rectangular postal containers and are put on an automated conveyor line (Ermanco, Inc.). The container is bar coded (Intermec bar code printers) and the skey is married to the container code once scanned by in-conveyor scanners (Robotic Vision Systems Inc.). Containers are then fitted with a protective sleeve and strapped (StraPack strapper). Information is also attached on postal sort and airport destination for shipping to the Sacramento or San Francisco airport. Containers are delivered to primary post offices in the right region for distribution via the mail stream.

With such a strong commitment to engineering, automation and its workers, DST demonstrates an enlightened approach to solving its material handling and distribution challenges. And it’s that kind of business management that makes DST Output one of America’s Best Plants. MHM

America’s Best People Make America’s Best Plants

Bob Logue, III, director, business operations for DST Output says it's people that by far have made DST one of America’s Best Plants. "It starts from the top with our upper management’s philosophy. They empower people to make decisions without feeling there will be negative consequences."

Logue finds it's really important to empower production floor workers so that the printing, inserting and mailing processes can evolve more efficiently. "People are 95 percent of our success. You can have all the automation in the world, but you need a finely orchestrated symphony of people, processes and technology. Success stems from the people side of the business.

DST management finds that it comes down to workers making the right decision at the right time outside of the processes. This is what makes a difference between success and failure in shipping orders on time.

About 40 percent of the workforce is self-directed, empowered to make daily decisions without fear of being chastised. "I don’t think you get people willing to take those risks unless you build a supportive, comfortable working environment," says Gary Abitz, director of materials.

DST Suppliers

The following companies supplied equipment and software to the

El Dorado facility:

Banding machines, StraPack,

Conveyor system, Ermanco, Inc.,

Handheld bar code scanning terminals, RFDC network and label printers,

Intermec Technologies Corporation,

Humidifier, Nortec,

Hydraulic paper roll handlers, Dayton Electric Manufacturing Company, (847) 647-0124.

Inventory and ERP software, Manufacturing Knowledge by Computer Associates,

Lift trucks and pallet jacks, Clark Material Handling Company,

Lift trucks, Daewoo Heavy Industries America Corporation,

Pallet jacks, Crown Equipment Corporation,

Scanners embedded into conveyor lines, RVSI (Robotic Vision Systems Inc., formerly Computer Identics),, 781-821-0830

Weigh scale, Weightronix Inc.,

Wheeled dolly carts for transporting statements, Beste Bunch,

Reach DST Output at and drill down to DST Output.

[email protected]

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