Progress with the Postal Act of 2006 November 18, 2009.

Progress with the Postal Act of 2006

November 18, 2009

SERVICE

COSTSOX

COST

SERVICEIncreaseServicePerformance

Establish Modern Service Standards Establish Goals Establish Service Measurement Systems

FY 2009 Service PerformanceMarket Dominant

Mail Class Target EOY

First-Class MailSingle-Piece Overnight 96.5 96.32 Single-Piece Two-Day 94.0 94.80 Single-Piece Three-Day + 92.7 93.71 Commercial Overnight 96.5 95.60 Commercial Two-Day 94.0 93.90 Commercial Three-Day + 92.7 82.50

Package ServicesParcels 90.0 82.17

PeriodicalsLetters and Flats 91.0 75.90

Standard Mail Wk Ending 10/ 31/ 2009

Composite Standard Mail 90.0 82.88

%OfVolume

WeekEnding

10/30/2009Standard Mail

Unweighted Orig Entry 0.18 51.87

Unweighted Dest Entry 0.72 89.73

DDU (Saturation Mail) 0.10 94.00

Composite Standard Mail Performance 83.34

Standard Mail Composite

6

Actions Taken:

Implement 24 Hour Clock process Reduce cycle time in Plants Simplified transportation network Improved process quality Establish IMB as service measurement

foundation

99.31% 99.31% 99.31% 99.31%

Acceptance

Process

ing

Transporta

tion

Process

ing

Delivery

Quality is key at each step in the process to achieve an end to end 96.6%

Address & barcode quality is key to achieving service Address & barcode quality is key to achieving service

FY 2010 Service Performance GoalsMarket Dominant

Mail Class TargetFirst-Class Mail

Single-Piece Overnight 96.6 Single-Piece Two-Day 94.1 Single-Piece Three-Day + 92.8 Commercial Overnight 96.6 Commercial Two-Day 94.1 Commercial Three-Day + 92.8

Package ServicesParcels 90.0

PeriodicalsLetters and Flats 91.0

Standard MailComposite Standard Mail 90.0

9

Service Measurement and Reporting

Focus on Passive Service Measurement System using Intelligent Mail and existing equipment

Further Service Reporting Implementation for March 2010

For Measurement systems beyond passive collection, the expense will need to be covered through an exigent rate case

Basic Intelligent Mail Option

Full-Service Intelligent Mail Option- Prepare Mail with Intelligent Barcodes- Provision Electronic Documentation- Receive Full-Service Benefits

Address CorrectionStart-the-ClockContainer Visibility

Phase One - Intelligent Mail launched in May 2009

Intelligent Mail: Customers On-Board

Intelligent Mail: Customers Authorized to Move to Production

Lower prices for Full-Service

Intelligent Mail® Basic option: - Same prices as POSTNET™

Intelligent Mail Full-Service option:- Discounts

$0.003 for First-Class Mail®

$0.001 for Periodicals, Standard Mail®, Bound Printed Matter

Phase Two - Intelligent Mail will be launched in November 2009

Hardcopy Postage Statement Process Improvements

Service Performance Measurement Support for SOX Compliance Support for NDC Consolidation Mailer ID [MID] / Customer Registration ID [CRID] MLOCR/Continuous/One Pass Mailers

Improvements Enhanced Performance Based Verification [PBV]

Phase Three - Intelligent Mail is planned for March 2010

15

Compliance required in FY2010

The Risk Analysis by the auditor

highlighted Revenue Assurance issues

SOX is an issue for the Mailers as

much as the Postal Service

SOXIncreaseSOXCompliance

Business Mail Acceptance & Dropship

Proper acceptance and verification - Right Mail, Right Location, Right Time

- Make-up

- Address/Barcode Quality

Timely and accurate Revenue Reporting

Negative/Inactive Mailer Accounts

Significant Issues

DM-109 (Business Mail Acceptance Guidelines)- Managing Business Mail Entry- Acceptance & Verification Procedures

Acceptance Employee Training SOX Checklist

Process ImprovementsAcceptance Policies

Process Improvements

Reduced Cycle Time to Process each mailing by 6 minutes

Increased Verifications from 86% to 93%- MERLINS Verifications from 48% to 88%

Reduced Staff by 2

LMAP - Results

COST

ReduceOperationalCosts

COST

Operations Focus- Day-to-Day Management

Efficiency & Service Performance - Adjust Staffing to Changes in Workload- Implement National Programs to Improve System Efficiency

NDC Accelerated Implementation AMP Planning and Implementation MIARAP Activity and Savings Capture FSS Preparation and Implementation Facility and Tour Consolidation

FY09 VolumeReduction:

25B

175

185

195

205

215

2005 2006 2007 2008 2009

Bill

ion

s

Total Mail Volume

FY09 WorkhourReduction:

115M

1,250

1,300

1,350

1,400

1,450

1,500

2005 2006 2007 2008 2009

Mill

ion

s

Total Workhours

-12.7%

-14.3%

-12.4%

-6.1%

-4.7% -5.0%

-8.4%

-15.0%

-13.0%

-11.0%

-9.0%

-7.0%

-5.0%

-3.0%

-1.0%

VolumeMail

ProcessingCustomerServices

CityDelivery

RuralDelivery Other Total

(% S

PL

Y)

FY2009 Workhours

FY09 Career CompReduction:

40K

620

640

660

680

700

720

2005 2006 2007 2008 2009

Th

ou

san

ds

Total Career Complement

FY09 WorkhourReduction:

42M

250

280

310

340

2005 2006 2007 2008 2009

Mill

ion

s

Mail Processing Workhour Reductions

FY09 WorkhourReduction:

28M

424

434

444

454

464

474

2005 2006 2007 2008 2009

Mill

ion

s

City Delivery Workhour Reductions

FY09 RouteReduction:

11K

150,000

154,000

158,000

162,000

166,000

2005 2006 2007 2008 2009

City Delivery Route Reductions

FY09 WorkhourReduction:

9M

179

183

187

191

2005 2006 2007 2008 2009

Mil

lio

ns

Rural Delivery Workhour Reductions

FY09 RouteReduction:

1.2K

72,500

73,500

74,500

75,500

76,500

77,500

2005 2006 2007 2008 2009

Rural Delivery Route Reductions

FY09 WorkhourReduction:

25M

175

195

215

235

2005 2006 2007 2008 2009

Mill

ion

s

Customer Service Workhour Reductions

29

31

33

35

37

2005 2006 2007 2008 2009

Deliveries per Hour

FY09 TransportationCost:

$ -826M

5.0

5.4

5.8

6.2

6.6

7.0

2005 2006 2007 2008 2009

Bill

ion

s

Headquarters and Field Transportation

65%

70%

75%

80%

85%

90%04

/03/0

9

04

/10/0

9

04

/17/0

9

04

/24/0

9

05

/01/0

9

05

/08/0

9

05

/15/0

9

05

/22/0

9

05

/29/0

9

06

/05/0

9

06

/12/0

9

06

/19/0

9

06

/26/0

9

07

/03/0

9

07

/10/0

9

07

/17/0

9

07

/24/0

9

07

/31/0

9

08

/07/0

9

08

/14/0

9

08

/21/0

9

08

/28/0

9

09

/04/0

9

09

/11/0

9

09

/18/0

9

09

/25/0

9

10

/02/0

9 $(60)

$(50)

$(40)

$(30)

$(20)

$(10)

$-

$10

$20

$30

$40

$50

Inter-NDC Service Trans Cost

Network Distribution Center Service and Cost

Lean Six Sigma

Expand Focus on Continuous Improvement/Lean Six Sigma

Initiated 17 National Projects and awarded 122 belts

TOTAL ADMIN TREND FY 2005 TO FY 2009

50

55

60

65

70

75

80

85

90

FY 2005 FY 2006 FY 2007 FY 2008 FY 2009

WO

RK

HO

UR

S (

mill

ion

s)

TOTAL ADMIN/GENERAL MANAGEMENT PM/INSTALLATION HEADSIncludes LDCs 80, 81, 82, 83, 84, 85, 88, 89, and 98

Total Administrative Hours

TOTAL OPERATING EXPENSES

$68

$70

$72

$74

$76

$78

$80

$82

FY 2005 FY 2006 FY 2007 FY 2008 FY 2009

BIL

LIO

NS

Total Operating Expense

SERVICE

COST

SOX

QUALITY

IncreaseServicePerformance

IncreaseSOXCompliance

ReduceOperationalCosts

SOX

37

Quality is everyone's responsibility USPS

- Continuous improvement - Improve efficiency & reduce errors- Manage cost and improve service

Mailing Industry- Adherence to mailing requirements- Address/barcode quality- Right Mail, Right Location, Right Time

Summary