Flats Sequencing System Update Managers of Delivery Programs Support March 5, 2008

1. Flats Sequencing SystemUpdateManagers of Delivery Programs SupportMarch 5, 2008

2. Agenda • Flat Volume • Phase 1 Deployment Update • Dulles Pre-production Operation • Mailing Industry Changes / Update • Field Implementation

3. First-Class Mail 8% Standard Mail 75% Periodicals 17% Annual Flats Volume FY 2007 52 Billion Flats FY 2006 54 Billion Flats Percent Change -3.3% Class Breakdown Unchanged

4. Flat Volume – Class Breakdown FY 2008 Other First-Class Saturation Periodicals Standard w/o Saturation

5. Post Rate Case Flat Volume Comparison

6. Post Rate Case Flat Volume Comparison

7. Post Rate Case Flat Volume Comparison

8. Post Rate Case Flat Volume Comparison

9. YTD - FY 2008 SPLY Comparison

10. Cased Flats FY 08 vs. SPLY Comparison

11. Flats by Product Class: RPW (Qtr 1 2006 - Qtr 4 2007) Seasonal variation from yearly average

12. Flats by Product Class: RPW (Qtr 1 2006 - Qtr 4 2007) FSS Candidate Volume DPS% Impact Planning

13. Phase 1 Deployment 29 Districts 33 Processing Facilities (FSS Locations) 28 Existing Processing Centers 5 New Facility Project (Integrated FSS Space) 2 - 5 Systems per Facility 1,500 Zones, or more

14. Phase 1 FSS Deployment Sites

15. Phase 1 FSS Deployment Sites

16. Dulles VA P & DCPre-production Operation Update

17. Dulles Pre-production Status • Install Complete Oct 2007 • Integration/ Machine Testing Nov 2007 • Live Mail Ramp-up Dec 2007 • Second Zone Added Jan 2008 • Field Pre-Test/Test Feb/Mar 2008 • Full Machine Ramp Up May 2008

18. Dulles FSS Installed & Sequencing Flats

19. Dulles FSS Installed & Sequencing Flats

20. Dulles Live Mail Ramp-up

21. Dulles Stand Alone Mail Prep (SAMP)

22. Dulles AFSM 100 Dolly Induction

23. Dulles Live Mail Ramp-up • Reston VA, Zones 20190 and 20194 Started December 4th • December Low Flat Volumes • Runs Have Exceeded 40K • Taking DPS Flats to the Street • Fairfax VA, Zones 22030 Started Jan 22nd • Runs Have Exceeded 40K • Taking DPS Flats to the Street Testing and Ongoing Zone Ramp-up in March

24. Dulles Pre-production Operation • Operational for 1 Year • December & January Zones: • Reston 20194 and 20190 • Fairfax 22030 • March and Beyond • Burke 22015 • Culpepper 22701 • McLean 22101 • Alexandria Belleview 22307 • Alexandria Engleside 22309 • Falls Church 22043 and 22046 • Sterling 20164

25. Mailing Industry Concerns • Address Location / Address Construction • Mail Entry • Entry Points • Critical Entry Times • Mail Prep in FSS Environment

26. Standard Address Construction / Placement • Federal Register Proposed Rule • Published 10/10/07 • Comment Period Through 12/10/07 • Final Rule Targeted in the Next 30 to 45 Days • Address Construction / Barcode • 11-Digit POSTNET or IMB Barcode • Minimum 8-point Type (approximately 1/10-inch high) • Address Lines Cannot Touch or Overlap • No More Than 3 Blank Spaces

27. Standard Address Placement • Orient Address Location for Carrier Street Handling Specific Standards • Bound or Folded Pieces • If parallel to top edge, entire address block within top half • If perpendicular to top edge, one edge within 2.5 inches of top • Enveloped or Polywrapped • No “bound edge” applies- top is either shorter edge • Inserts must be secured • Both • Address block must be at least 1 inch closer to the top than to the bottom John Doe 123 Main St Anywhere, USA 12345 John Doe 123 Main St Anywhere, USA 12345 John Doe 123 Main St Anywhere, USA 12345 Can be left or right justified, or centered. Can face left or right Basic Standards • Parallel or perpendicular to top edge • Cannot be upside down in relation to top edge

28. Mail Entry • Number of Entry Points? • Critical Entry Times (CET’s)? • Service Measurement Proposal • National Standardized CET’s • Standard Mail and Package Services • Local CET’s • First-Class Mail and Periodicals • Local Operating Conditions • What About CET’s for FSS?

29. Preparation • What Prep Changes Will be Needed? • Current State → Future State • Transition from CR-RT to FSS Schemes • How and When to Transition to FSS Environment? • What is Being Considered Now? • MTAC Workgroup 115 • Bulk Flats Processor / Bundle Make-up • USPS Looking at End-to-End Flats Flow and Data Exchange • Federal Register Proposed Rule – Address Facing for Presort Bundles on Pallets

30. Field Integration Strategy / Planning • Field • Implementation • Infrastructure • Road Map • Communication • Training • Readiness • Support • Tracking

31. Communicating Change Corporate Knowledge / Technical Information Media, Resources, & Training Planning & Readiness Day-to-Day Strategies & General Knowledge Strategic Transformation Plan & Presentations Area & District Leadership Strategies, Operating Basics & Policies FSS Overview & Understanding Materials In-Plant , OPS & Support Functions Tools, Handbooks, Planning Models, Project Plans, Graphics, Videos & Training Comprehensive Operating Knowledge, Planning, Program Management & Policies MDOs, Postmasters & Station Managers Tools, Handbooks, Graphics, Videos & Training Comprehensive Operating Knowledge Handbooks, Visuals, Videos, Quick Reference Guides & Training Line Supervisors Operating Policies & Procedures Craft Job Aids & Training Job Instructions

32. Field Implementation • Field Resources / Infrastructure • Area FSS Program Managers • District FSS Coordinators • REATLs – FSS Impacted Districts • Field Resource Training • Major Program Management / Project Leaders • Delivery/Customer Service Planning & Readiness Sessions • Competed in January • FSS University – Leverage Dulles Pre-production Operation • Beginning March 2008 • Cross-functional Classroom, Workroom Floor & Hands-on Experience

33. Field Implementation Planning – In Progress • Line Manager & Supervisor Training Strategy • Comprehensive Operating Knowledge • Effectively Implement Change • Craft Training Strategy • Standardization • Training Within Industry (TWI) • Toyota Talent • Readiness Assessment Process • Utilize Cross-Functional Focus Group to Define Process

34. Begin FSS Planning Activities