June 17, 2014. Value of the Area Mailer Industry Focus Groups: Immediate Issue Resolution Provides a Forum for Crucial Feedback / Suggestions / Ideas.

DREW ALIPERTOWESTERN AREA VICE PRESIDENT

ERICA BRIXWESTERN AREA MANAGER, OPERATIONS SUPPORT

WESTERN AREA FOCUS GROUP

June 17, 2014

THANK YOU FOR YOUR PARTICIPATIONIN THIS VALUABLE PROCESS

Value of the Area Mailer Industry Focus Groups:

Immediate Issue Resolution

Provides a Forum for Crucial Feedback / Suggestions / Ideas

Builds Critical Relationships at All Levels of the Organization

Forum to Communicate Operational Changes

2

Western Area Focus Group

3

Volume

Price Labor Costs

Universal Service Obligation

Limited pricing flexibility

Postal network driven by: Delivery points Retail locations Sortation facilities Six-day delivery

~80% of total costs COLA increases Benefits: pensions, retiree

health, health insurance Limited flexibility Retiree prefunding

obligation, rising workers’ compensation costs

These trends will continue to put

pressure on USPS ability to provide

affordable universal service

Decliningsteadily 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

Fixed cost base

Rising but capped

Rising cost per hour

Business Imperative for Change

800

696

'06

685

'07

663

'08

623

'09

584

'10

557

'11

528

'12

491

13

DESPITE SIGNIFICANT COST

REDUCTIONS LOSSES REMAIN

AT UNSUSTAINABLE LEVELS

$15.8

$1.2

$3.2

$9.3

$12.3$13.7

$14.8

1,074

1,1491,183

1,258

1,122

1,459

1,110

1,373

1,423

1,000

1,100

1,200

1,300

1,400

1,500

2006 2007 2008 2009 2010 2011 2012 2013 2014IFP

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

Career Employees – Reduced by 205K since 2006, without layoffs

Postal Service is More Efficient Than Ever

$16 Billion of Annualized Savings in the past seven fiscal years with workhours reduced by 24%

Tota

l Wo

rkh

ou

rs (M

illio

ns)

Sav

ing

s (B

illio

ns)

Annual Growth 1.2% [2000 – 2013]

0

5

10

15

20

25

30T

FP

Cu

mu

lati

ve T

ren

d

24.2

1972 1980 1990 2000 2013

Annual Growth 0.3% [1972 – 1999]

4

Continuous Efficiency Improvements HaveHelped Mitigate the Impact of Business Threats

5

A Deep Financial Hole

Unrestricted Cash

Buildings & Equipment, net of depreciation

Other assets

Total Assets

$ 2.3B

$ 17.5B

$ 1.8B

$21.6B

Retiree Health Benefits

Workers’ Compensation

Debt

Accrued Compensation, benefits and leave

Deferred Revenue*

Other

Total Liabilities**

$16.8B

$17.2B

$15.0B

$ 3.5B

$ 3.6B

$ 5.4B

$61.5B

ASSETS LIABILITIES

• Liabilities exceed assets by approx. $40 billion

• The USPS has only 35 cents of assets to cover each dollar of its liabilities

* Newly available data on forever stamp usage resulted in a $1.3B reduction in Deferred Revenue – Prepaid Postage** Under multi-employer accounting rules, there are approximately $51B in obligations not shown on the balance sheet.

Significant profits over years and legislation are needed to recover.

CLOSING THE GAP

6

LEGISLATIVE INITIATIVES

2016 SAVINGS

OPERATIONAL INITIATIVES TRANSFORMING INFRASTRUCTURE

CONTINUOUS IMPROVEMENT

$6.0

WORKFORCE REDUCE THE UNIT COST OF LABOR INCREASED FLEXIBILITY

$2.6B

$11.1B

USPS Business Plan

7

Key Legislative Goals

Require USPS Health Care Plan

Resolves RHB Prefunding Issue

Refund FERS Overpayment

Adjust Delivery Frequency (6-Day Packages, 5-Day Mail)

Streamline Governance Model

Authority to Expand Products and Services

Require Defined Contribution System for Future Postal Employees

Instructions to Arbitrator

Reform Workers’ Compensation

Right to Appeal EEOC Class Action Decisions

TRANSFORMING INFRASTRUCTURE

8


Facilities

Delivery and Post Office Operations

Network Operations

Ret

ail O

ps

DELIVERY OPTIMIZATION

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DELIVERY OPTIMIZATION

Major Optimization Initiative

TRANSFORMING INFRASTRUCTURE

Units 2,513 Delivery Unit Consolidated

Routes 24,000 City Routes Reduced

Deliveries Efficient Mode of Delivery

10

Delivery Mode Conversions

USPS DELIVERY MODES

TOTAL STREET DELIVERIES – 133.3M 11

CURBLINE

DOOR CENTRAL

37.8M 40.5M

31%28%

55.0M

41.0%

FY 2013 GROWTH BY MODE

Door

Curbline

(61.2K)

490.9K

(6%)

47%

Centralized 607.6K 59%

Current Policy/Strategies are Driving Migration to More Efficient Delivery Mode

FY 2013 Growth % Total

Total Growth 1.04M - -

Fiscal Year 2013

12

ACCESS OPTIMIZATION


13

USPS Retail Network

Grow Revenue

Reduce the Cost to Serve

Transform Customer Experience in High Traffic Post Offices

Enhance Customer Convenience Through Expanded

Retail Partnerships

Preserve Retail Services in Rural America 50% of Post Offices realigned to match community needs

Retail Strategy

RETAIL CHANNEL STRATEGY FOCUS

14

FACILITIES MANAGEMENT & DISPOSAL

15


16

OWNED 8,596

LEASED 23,763

Facilities Optimization

USPS FACILITIES

New Jersey Network Distribution Center – 1.4M Sq Ft

Ochopee FL Post Office – 62 Sq Ft

17

Generate Revenue and Reduce Expenses by:

Selling owned buildings

Terminating leases

Re-purposing space

OBJECTIVE

Facilities Optimization

Over 6.7M Sq. Ft. Eliminated

18

Advantages of a Transformed Infrastructure

Fewer Facilities Denser Bundles/Trays and Pallets Increased Equipment Utilization Increased Productivities

Maximized Transportation Better Utilization of Air/Surface Trips Gain Economies of Scale

Right-sized Workforce Employee Flexibility Revised Pay Structure

Complement

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MAJOR FY 2014 INITIATIVEDSCF STANDARD MAIL LOAD LEVELING


Erica BrixManager, Operations Support

Western Area

20

Imbalance of Mail Delivered by DOW

Postal Quarter 1 FY 13

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

Disproportionate amount of Standard Mail is scheduled for delivery on Monday resulting in:

Service Variability Operational Inefficiencies Increased Cost

SAT MON TUE WED THU FRI

21

Prior to April 10 Current

Thursday Friday, Saturday, Monday Friday, Saturday, Monday

Friday Saturday, Monday Saturday, Monday, Tuesday

Saturday Monday, Tuesday Monday, Tuesday, Wednesday

Sunday Monday, Tuesday, Wednesday Monday, Tuesday, Wednesday

*The current Critical Entry Time (CET) for Standard mail is 4 pm

**For delivery in the continental United States

DSCF Standard Mail**Dropped Before 4pm* on

DELIVERY DAYS MEETING SERVICE STANDARD

Expected Days of Delivery

SCOPE OF LIMITED CHANGE

22

Expected Days of Delivery

WHAT HASN’T CHANGED

Standard mail dropped at a DDU does not change

Standard mail dropped at a NDC does not change

EDDM Retail does not change

Periodical/Newspaper processing does not change

First-Class does not change

Priority does not change

Delivered Volume

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% OF TOTAL DELIVERED VOLUME BY DAY

BASELINE PERIOD DSCF LOAD LEVELING TO DATE *

* 4/19 through 6/6

Monday Tuesday Wednesday Thursday Friday Saturday14.0%

16.0%

18.0%

20.0%

22.0%

24.0%

19.3%

16.7%16.0%

16.3%15.9% 15.7%

Service Performance

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DSCF STANDARD LETTERS

DSCF STANDARD FLATS

4/12 – 5/23

4/12 – 5/23

UCL / LCL TargetStandard SCF Letters SPLY

UCL / LCL TargetStandard SCF Flats SPLY

25

Standard DSCF Flats

April 11 – May 30

Friday Start-the-Clock

% of Total 23.82% 53.99% 19.00% 2.19% 0.58% 0.21% 0.21%

Cumulative 23.82% 77.81% 96.81% 99.00% 99.58% 99.79% 100.00%

Sat Mon Tue Wed Thu Fri Sat0%

10%

20%

30%

40%

50%

60%

Perc

ent o

f Tot

al

Service Variance

Day 1 – Saturday 23.82%Day 2 – Monday 53.99%Day 3 – Tuesday 19.00%

DSCF Standard Mail Load Leveling

Results are Promising Mail Processing working to capacity Reducing average hours per route Balanced workload with consistent service performance

Controls and Monitoring Facility Audits New data driven diagnostic reports Address the Vital Few Opportunities Operational Tiger Teams for site visits and improvement

recommendations

26

27

Benefits

Consistent Delivery Times by Day of the Week

Cost Containment – Maintain Affordable Prices

Predictable and Reliable Service

Less Competition in the Mailbox

Benefit to Mailers and Customers

Increase Visibility

100% PRODUCT VISIBILITY

PROVIDES THE ABILITY TO TRACK MAIL PIECES AND CONTAINERS THROUGH THE POSTAL NETWORK AND PROVIDE BUSINESS INTELLIGENCE TO ENHANCE OPERATIONAL PERFORMANCE AND PROVIDE CUSTOMER VALUE

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100% Visibility

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Attributes of 100% Product Visibility

Unique barcodes on letters, flats, packages, trays and containers

Access to analytical capabilities for forecasting and predictive workloads

Real-timeData & Intelligence

30

Next Generation Equipment

C007

Nov 2012-Sept 2013

Delivery Sortation System

Scanning Units

800

Dec 2012- March 2014Feb-May 2013

Scanning Units

1,030

PASS Real-Time Scanners

Jan–Dec 2014 Deployment

Scanning Units

11,700

Scanning Units

3,137

Scanning Units

210,608

May-Nov 2014 Deployment

Total – 12,500 Total – 4,167

Jul 2014-Dec 2014

Mobile Delivery Device(Replaces Real-Time Scanners)

Scanning Units

75,000

Scanning Units

150,000

Jan 2015 – Aug 2015

Total – 225,000

31

Delivery Management System (DMS)

Evaluates Carrier Route Status to plan and color-coded route status

Estimates Delivery Time for all packages in unit Currently being tested in limited ZIP Codes

32

Predictable and Measureable

Does USPShave the

mail?

Where is it in the process?

When will itbe

delivered?

How did the overall mailing

perform?

An optimized plan for:

Consistent, predictable

delivery

Avoidingbottle necks

Response Rates & ROI

Balance resources & reduce costs

Business Intelligence Enhances the Performance

& Value of Your Mailings

HOW?

Full ServiceIntelligent MailStrategies

PHASE 2 NETWORK

RATIONALIZATION

34

VOLUME REALITIESMail Volume Shifting to a Less Profitable Mix

Volume in Billions of Pieces

PHASE 2 NETWORK RATIONALIZATION

35

NETWORK RATIONALIZATION STATISTICS


36

FIRST-CLASS MAIL SERVICE AFTER IMPLEMENTATION

Overnight – 20.05%2 Day – 35.6%3 Day – 44.1%


The time it takes First-Class Mail to reach its destination will increase from an overall average of 2.14 days to 2.25 days

37

NETWORK CAPACITY

1970 2014

2006

Network Rationalization

Plant Consolidations

200

300

400

500

600

700

800

Phase 1

673

623 614599

528

461

417

487

320

PROCESSING PLANT CONSOLIDATIONS

38

• Over 350 Facilities Eliminated• Reduced over 75M miles

39

EMPLOYEE IMPACT

Approximately 15,000 employees affected

Will work within negotiated employee agreements, laws, and regulations to place employees in other vacant positions available through normal attrition


GROWTHOPPORTUNITIES

40


Drew AlipertoVice PresidentWestern Area

Continue to Optimize the Value of the Infrastructure

41

Enhance the value of Direct Mail and Catalogs

Increase Market Share of Packages

Innovate across USPS Business Platforms

Growth Opportunities

12%.....the share of total American marketing spend on mail. It’s been consistently about 12 percent for the past 30 years.

Four Key Ideas:

1. Personally Relevant – Interest

2. Actionable – Speed to purchase

3. Functional – Imbed technology in paper

4. Creative – Color, construction, size

Mail is Relevant – Most Direct Way to Communicate

42

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Using direct mail and email in integrated campaigns creates synergies that boost response more than using either medium alone.

The Impact of Direct Mail is Significant

Growing Direct Mail

Source: Marketing Sherpa Study

44

Mobile Commerce

Mobile Technology Helping Drive Long-Term Value with Direct Mail and Catalogs.

• Smartphones and tablets interact with the printed page

• Direct Mail or Catalog becomes “catalyst” for mobile commerce

• Direct Mail and Catalog integration with technology increases:• Relevance• Effectiveness• Convenience• Responsiveness• Engagement

NFCMobile Barcode Image Recognition Augmented Reality

Committed to Mail

We remain committed to growing mail

Will collaborate with the industry to grow and enhance direct mail and catalogs

Embrace technology to attract consumers to new possibilities

Continue to seek promotional ideas from customers

45

The power of mail enhances package delivery & returns.

OPPORTUNITY IN PACKAGES

46

Building a World Class Package Platform

Growth Opportunity

ATTAIN MARKET SHARE NOW GROW WITH HYPER-GROWTH OF MARKET

E-Commerce Continues to Grow Rapidly

47

48

Elements to Building a World Class Platform

• Integrated Package Network Plan

• Product Development Plan

• Package Delivery Optimization Plan

• Next Generation Equipment

• International Package Processing Plan

• Improve Customer Pick-up Experience

• 100% Product Visibility

Package Growth Opportunity

SEVEN KEY ELEMENTS

Build a World Class Package Platform

49

Create a simpler returns product line• Consolidate disparate offerings to

Network and First Mile

Eliminate obstacles to onboarding• Fees• Separate permits

Make products easier for users• Roundtrip label• Print and Deliver label• Expand customer base for Scan-based

Payment

Align Our Returns Portfolio with the Needs of Ecommerce Shippers

Growth Opportunity

50

Sunday Delivery• Leveraging Sunday delivery to grow our

overall package business

Parcel Select Next-Day• Next-day delivery for SCF-dropped packages

(last mile and a half)

MetroPost• Same-day, competitive-priced delivery • Talking with larger retailers with NYC

introduction

Customized Products to Meet the Needs of Large Ecommerce Shippers

Customized Shipping

51

52

THE FUTURE IS NOWINNOVATION PLATFORMS


53

Growing Consumer

Expectations

Consumers’ busy lifestyles demand more delivery convenience

New businesses take notice of these demands and offer more expedient deliveries

Existing players improve their offerings

to meet demand

These changes set new

consumer expectations

54

Emerging Trends

Directional patterns that may generate market, customer, or organizational needs or opportunities.

TechnologyThe application of scientific knowledge

and engineering in the digital age

SocialPatterns of human interaction,

movement, and preference

IndustryDevelopments shaping how businesses are organized and how transactions take place

E-Commerce

Same-Day Delivery

Public-Private Partnerships

Do-It-Yourself Consumer

Simplicity

Collaborative ConsumptionBig Data 3D Printing Automation

Innovate Across Business Platforms

55

Physical NetworkFirst Mile Last Mile Digital

Leverage market-leading physical assets

Incorporate

evolving logistics solutions

Develop a

structure that fosters agility and innovation

Boost the demand for mail and packages

Expand and simplify induction points

Integrate emerging digital, big data, and consumer trends to grow

Expand delivery solutions

Capitalize on the expansion of E-commerce and technology

Optimize route flexibility and productivity

Leverage USPS’s brand, trust, and reputation to drive profit

Optimizing the Value of the Infrastructure

56

Enable American Commerce with a World - Class Shipping Platform

57

COLLABORATION & OUTREACH


58

USPS – Industry

USPS – INDUSTRY COLLABORATION & OUTREACH

Commitment to Communicate

SUCCESS REQUIRES COLLECTIVE EFFORT

Continue to collaborate through: MTAC Assn. Meetings NPF Trade shows and other events

Leverage PCC’s & Area Focus Groups to Work With Local Leadership to Resolve Issues

Area Mailing Industry Focus Groups – Calendar by Area at https://ribbs.usps.gov/index.cfm?page=periodicalsfocus

https://ribbs.usps.gov/index.cfm?page=periodicalsfocus

59

Thank YouQuestions?

Thank YouQuestions?


June 17, 2014. Value of the Area Mailer Industry Focus Groups: Immediate Issue Resolution Provides a Forum for Crucial Feedback / Suggestions / Ideas.

Documents

b reduction

change slide

usps business plan slide

assets total assets

day delivery

western area focus group

total liabilities

delivery frequency