Turning Envelope Data into Actionable Information. January 2011: State-of-the-Art Recognition Technology Further Improves Mail Sorting Efficiency

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1 Turning Envelope Data into Actionable Information January 2011: State-of-the-Art Recognition Technology Further Improves Mail Sorting Efficiency Parascript Page 1 1/13/2011

2 State-of-the-Art Recognition Technology Further Improves Mail Sorting Efficiency Looking back over the past decades, the postal sector has been one of the most innovative market leaders in utilizing advanced technology to update the business of postal operators. Technological innovation has an important role in the battle for efficiency in the postal industry. A decade of intensive investment in Optical Character Recognition (OCR) systems applied to mail sorting equipment resulted in unparalleled success in the speeding up of mail sorting, the increase of OCR reading quality, and the reduction of manual data entry costs. This progress ensures the status of recognition technology as the most important factor influencing the efficiency of mail sorting equipment. The cost of processing mail dropped from an estimated $55 per 1,000 letters manually to less than $5 per 1,000 letters with automated sorting 1. Another significant achievement of the last decade is that technology has enabled the automation of formats that were difficult or impossible to automate 10 years ago, so that magazines, parcels, and even larger items are now automatically sorted by machine. Modern world market trends require the postal industry to adapt to increasing competition, changing customer behaviors, and uncertain or lower mail volumes. This situation raises the bar in performance and efficiency standards at all stages of mail processing; from mail sorting to the quality and variety of the services provided by posts. Requirements for recognition technology and its efficiency are growing as well. Today postal operators are dealing with lower mail volume, and with the high read rates already achieved by the industry, these are either residual items that have yet to be processed automatically, or mail in countries with lower mail volume that previously could not afford a high level of automation. The automatic processing of lower mail volumes provides fewer savings and less efficiency when compared to those achieved in the past. This is why the standards in recognizing and interpreting the destination and return addresses, the leading-edge of yesterday, are not sufficient to meet the needs of modern services today. However, state-of-the-art recognition technology proves that it has significant potential to further improve mail sorting efficiency and enable additional postal services. Not only can it read more addresses with higher accuracy, but modern technology is able to read address elements and data from an envelope that could not be reliably read before. It also applies advanced algorithms to intelligently analyze captured address data and convert it into actionable information. Areas of Further Improvement For example, the automatic reading of an addressee name is the next important step in improving the quality of mail sorting technology. This capability will increase the finest depth of sort: the ability to extract a maximum of information from an address on a mailpiece. It will also help to correct errors that may occur at the stage of address reading, and thereby improve the accuracy of postal sorting 1 Arthur D Little, Technology and Innovation in the Postal Sector, A Competitive Market Review, Report to Postcomm, 25 June 2004, p. 17 Parascript Page 2 1/13/2011

3 and the deliverability of mail. Moreover, in some countries mail sent to high-rise buildings is not distributed by apartment number but by the recipient s name alone. In some places there are even separate mailboxes for members of one household. This convention raises the importance of automatic name reading tasks in mail sorting applications used in such countries. The current state of OCR technology, grounded in the intelligent and intensive use of context, allows for the accurate reading of addressee names both in handwritten and machine printed addresses. Therefore, a comprehensive and accurate database of names is one of the key components that influence the future success of automatic reading technology. The capability to read addressee names not only helps to improve the final depth of sort, but also allows companies to provide better and expanded services to customers. In particular, OCR technology is used in the provision of the mail redirection service to customers. Redirection is a cost-effective and convenient way for a customer to temporarily or permanently continue to receive mail, within the same country or overseas, when the home or business is relocated. About 17 percent of the U.S. population moves each year, resulting in approximately 43 million change-of-address cards and over five billion pieces of mail that must be forwarded, returned to sender or alternatively handled, with an annual cost of more than $1 billion 2. Europe is also experiencing an upward trend in population migration, in particular between different European Union (EU) countries. The mail redirection process is initiated when a postal customer is no longer able to receive mail at a particular address and thus fills out a mail redirection form. In the U.S. it is a Change of Address (COA) form. When a carrier receives a mailpiece that is undeliverable-as-addressed due to customer relocation, an attempt is made to match the name and address to a COA on file. If a match is attained, the COA notification is provided. Depending on its mail class and endorsements, the mailpiece is forwarded, discarded, or returned to sender. Today the USPS relies on an automated OCR-based system for mail redirection, which helps make processing mail redirection more timely, accurate and cost-effective. Mail redirection is one of the most challenging postal applications and exploits one of the most sophisticated, automated systems for mail processing. State-of-the-art recognition technology performs a variety of recognition tasks on images of U.S. letter mail, going beyond mere address reading. In addition to the destination address, it reads and matches personal/business names contained in the destination address block with names contained in the USPS Change of Address (COA) database. The capability to automatically read the addressee name eliminates long and costly mail forwarding procedures, improves the speed and accuracy of mail forwarding, and substantially reduces expenditures on logistics. Moreover, advanced OCR technology also reads the return 2 Distribution Technology in the Postal Service, Past, Present, and Future, Parascript Page 3 1/13/2011

4 address, executes Address Change Service (ACS) determination, and endorsement determination. Businesses commonly use the name and address data for many different purposes (e.g. customer relationship management, address validation, marketing, data quality, data validation, customer profiling, personal information, etc.). While extracting information from the endorsement and ACS line, the technology enables further services for customers, allowing the utilization of an electronic address change service. The ACS service helps meet the needs of business mailers by providing an efficient, cost-effective means of obtaining accurate change-of-address (COA) information. This saves mailers time and money by reducing the amount of undeliverable-as-addressed (UAA) mailpieces and labor needed to manually re-key addresses. Thus, the updated address data made available by OCR technology can be passed on to business customers for a fee, helping banks, insurance companies, and other businesses to ensure that their customer address databases are always up-to-date. Automated mail forwarding solutions have been installed and are in use at USPS processing plants, reducing operating costs and providing significant savings. However, fast and constant advances in OCR technology offer great potential for further improvements to the efficiency of this application. Another example of an issue that can be solved using new technology is the processing of incomplete addresses, which is part of a bigger, undeliverable-as-addressed (UAA) problem that costs the USPS over $1 billion annually alone 3. The accuracy of address information is often neglected and mailpieces are sent with an incomplete or inaccurate address. These mailpieces require additional handling: currently they are not only automatically processed, but when the address cannot be resolved, the mail pieces are also sent to manual processing, just to make the conclusion that the address on them is unreadable and that they cannot be processed further. If automatic technology is able to analyze the address and reliably conclude that this address is incomplete, then there is no need to send a mail piece to manual keying, resulting in significant savings in mail sorting. The latest OCR technologies come with an arsenal of sophisticated techniques to enable a conclusive judgment on the quality of address information. Thus, address parsing helps to analyze the structure of an address on a mailpiece to see if certain components are missing. The analysis of noise and its structure allows the system to automatically detect mailpieces with unrecoverable distortion or loss of information. Intelligent recognition can identify intrusions like white stripes, blots, or such common issues as shifted or partially covered destination addresses that cannot be seen in an envelope address window. The advanced mechanism of result appraisals makes it possible to conclude that if all of the address components are read reliably but cannot be cross-validated, then the address may be incomplete or inaccurate. 3 USPS, 2009 Comprehensive Statement on Postal Operations. Parascript Page 4 1/13/2011

5 Conclusion For two decades automated recognition has played a key role in improving the efficiency and reducing the cost of mail sorting, yet, even today, not all of the potential of the technology is being discovered and utilized by the industry. Postal operators have to take advantage of innovative technology not only by squeezing more productivity improvement from already automated areas, but by utilizing broader capabilities and complex, integrated approaches to automating different segments of postal operations and services. Technical innovations may also offer new opportunities for business. For example, while OCR technology continues to improve mail sorting operations, the integration of that technology with image processing and pattern recognition into a single product may provide a solution to other challenging problems, such as postage revenue losses. Technological innovations available on the market deserve a closer look, as they will continue to become an integral prerequisite for keeping up with the rapidly changing infrastructure of the modern economy. Parascript Page 5 1/13/2011

6 About Parascript The Parascript image analysis suite extracts meaningful information from images. Employing patented digital image analysis and pattern recognition technologies, the Parascript image analysis automates costly data entry and improves decision quality in postal automation, check and remittance processing, fraud detection and forms processing operations. Parascript software processes over 100 billion imaged documents per year. Fortune 500 companies, postal operators, major government and financial institutions rely on Parascript products. Organizations include the U.S. Postal Service, Böwe Bell & Howell, CheckFree Now Part of Fiserv, Elsag, Lockheed Martin, NCR, Siemens, and Unisys. Parascript is online at For more information about Parascript s products and services, please contact us at: Phone: Copyright 2011 Parascript, LLC. All rights reserved. No part of this document may be reproduced or transmitted in any form, by any means without the prior written permission of Parascript. Parascript Page 6 1/13/2011

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