Network Distribution Center (NDC) Activations

1. Network Distribution Center (NDC) Activations July 2009

2. Agenda • Overview of Network Reengineering • Status of Phase 1 Activation • Accelerated Phase 2-4 Schedule • Customer Impacts • Summary

3. Overview Network Reengineering • Transformation of Bulk Mail Centers (BMC) to Network Distribution Centers (NDC) • Enhanced mail preparation • Consolidate package distribution • Combine BMC & Surface Transfer Center (STC) containerization and dispatch plans • Leverage multiple trailer loading and dispatching techniques Transformation BMC NDC

4. NDC Responsibilities • 11 - Tier 1 NDC (Springfield, Philadelphia, Washington, Atlanta, Detroit, Cincinnati, Chicago, St. Louis, St. Paul, Kansas City, San Francisco) • Distribution of local (turnaround) and destination Standard Mail, Periodicals, and Package Services • 6 - Tier 2 NDC (New Jersey, Greensboro, Jacksonville, Dallas, Seattle, Los Angeles) • Tier 1 responsibilities • Distribution of outgoing Standard Mail, Periodicals, and Package Services to the network • Including, MXD States Outgoing single piece sort • STC containerization & dispatch operations – outgoing / incoming Priority, First Class, Periodicals, Standard Mail • 4 - Tier 3 NDC (Pittsburgh, Memphis, Des Moines, Denver) • Tier 1 and Tier 2 responsibilities • Consolidation points for less than truck load volumes from Tier 2 sites

5. Tiers 1, 2, and 3 • Directional dispatch for 4 NDCs (noted by *) • Reduces backtracking • Improves service • Highlighted indicates Phase I sites • ASFs will be Tier 1 NDC for package processing

6. Impacts • Operational Impacts • NDCs operate like P&DCs • Live loads and unloads at all NDCs • Operating plan changes required to coincide with STC containerization & dispatch plan • NDC sort to ADCs, AADCs and NDCs • Transportation Impacts • Streamline network • Increase utilization of assets • Improve transit time

7. Status of NDC Phase I Activation • Activation began on May 18 in New Jersey, Philadelphia, and Springfield NDCs • Phase I was originally scheduled to be completed – 8/07 • Accelerated completion date – 7/17 • Redesign is yielding anticipated benefits • Package Service Performance is up 20.0% • Successful integration of STC & NDC transportation • Beginning to eliminate transportation and reduce workhours

8. Origin Package Service Improvement from NJ NDC

9. Accelerated Phase 2 – 4 Schedule • Network fully activated by 11/14

10. Customer Impacts • Improved Service • No expansion to the number of entry points • No required changes to FAST or Critical Entry Times (CETs) • Minimal changes to origin induction preparation

11. Mail Preparation • Separation requirements • Local NDC service area • Network NDC split(s) • Multiple splits required for directional dispatch sites • Integration of Origin mail preparation • USPS Retail and BMEU separation enabled through the use of Retail Distribution Codes • Establish customer supplier agreements (CSA) to mirror required make-up during implementation

12. Summary • Objective –Create a flexible distribution and logistics network to reduce cost and improve the consistency of service • Manage cost –consolidation of outgoing operations (match workhours to workload) • Improve service –reduce cycle time by eliminating some destinating BMC handlings and shared product transportation • Need your help –origin separations to move mail on right network as quickly as possible • Change is needed to keep the network viable for years to come