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Network Rationalization APWU Article 12.4.B Meeting

Network Rationalization APWU Article 12.4.B Meeting. February 13, 2012. Volume. Universal Service Obligation. Declining steadily. Fixed Cost Base. Transactional volume declining due to e-diversion

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Network Rationalization APWU Article 12.4.B Meeting

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  1. Network RationalizationAPWUArticle 12.4.B Meeting February 13, 2012

  2. Volume Universal Service Obligation Declining steadily Fixed Cost Base • Transactional volume declining due to e-diversion • Advertising mail is subject to more substitution options • Mail volume highly sensitive to economic changes • Mail mix changes – lost profit contributions Postal network driven by: • Delivery points • Retail locations • Sortation facilities • Six-day delivery These trends will continue to put pressure on USPS’s ability to provide affordable universal service Price Labor Costs • ~80% of total costs • COLA increases • Benefits: pensions, retiree health, health insurance • Limited flexibility • Retiree prefunding obligation, rising workman's compensation costs • Capped by inflation • Price elasticities are in flux due to growing alternatives Rising Cost per hour Rising but capped Situation Assessment: Mail

  3. Mail Volume Shifting to Less Profitable Mix Volume in Billions of Pieces

  4. RealigningOur Network Reducing annual operating costs by $2.6 billion

  5. Mail Processing Facility Footprint 461 Facilities Today Current Mail Processing Sites

  6. Mail Processing Facility Footprint Potential Network

  7. Our Employees 559,000 151,000 35,000 Total Career Employees Total Mail Processing Employees Fewer Mail Processing Positions

  8. Deactivation Site Complement - APWU Potentially Impacted Employees

  9. What is not Changing? • Service Standards for: • Priority Mail • Express Mail • Standard Mail • Packages • BMEU locations, in the near term

  10. What is Changing? First-Class Mail Standards Today’s Delivery Distribution 2 Day 3 Day 1 Day Likely Future Distribution* 1 Day 2 Day 3 Day *Dependent upon market adaptation 10

  11. Proposed 24-Hour Plant Operations Outgoing Operations (5:00PM – 12:30 AM) Continuous DPS/Secondary Operations (12:00PM-0400AM) 24:00 04:00 18:00 06:00 08:00 Incoming Primary Operations (0800-1200) 12:00 BMEU (8:00AM –7:00PM) 11

  12. Proposed Area Hubs Hub Processing Plant Hub Hub Hub Hub 12 For Illustrative Purposes Only

  13. Timeline Service Standard Change • Final Rule Mid-April • Implementation After May 15 Network Realignment • AMP Decisions End of February • Overall Realignment begins after May 15 • No major changes during Fall mailing/peak season

  14. Planning for Implementation Our Commitment • Robust site-specific project plans • Deliberate timing of operational moves • Critical activities include: • Employee moves • Equipment moves • Transportation contracts • Facility modifications • Ongoing communications

  15. Concluding Thoughts • Maintain the long-term affordability of mail and high level of service • Network changes imperceptible to 150 million residential customers and seamless for business customers • Create giant efficiency improvements throughout our network

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