I haven't actually worked directly with our mailing house, but have worked with others.
Essentially they pack and label everything according to our requirements, and the whole batch will be delivered direct to the post office as one huge batch. There are significant reductions in cost from pre-sorting according to input postcode (i.e. the first half) as then the PO can send each bundle to the correct sorting office.
We did have an occasion when all the magazines across two counties went missing in the post, quite feasible as they would have been pre-sorted together. Presumably this is why delays sometimes affect certain areas and not others.
Neil