Mail Network Optimisation Project Introduction of the project to the Unions July 15, 2010

| India Post1 Agenda for today's meeting Background of the Mail Network Optimisation Project 11: :30 11: :15 Explaining the Project details: Strategy, Work plan, Process re- design, expected outcome 12: :00 Suggestions and view points of the staff side on the project and its status Lunch13:00 – 14:00

| India Post India Post: Mail Traffic % p.a % p.a Constant decline in ordinary mail traffic, while Speed Post has witnessed positive growth Mail volume (unregd. and regd.) Crores Speed Post Traffic Crores SOURCE: India Post

| India Post Need for Network Review as a basis for significant increase in volumes, revenues, and market share 333 External Drivers ▪ Declining mail volumes ▪ Competition from Domestic and Inter- national players ▪ Absence of regulation ▪ Change in mail profile ▪ Customer Demands (e.g. Track & Trace) Internal Drivers ▪ Difficulties of existing mail network vis-à-vis changed mail profile ▪ Low level of IT induction in mail processing ▪ Low productivity ▪ Delivery inconsistencies and visibility ▪ Lack of customer focus Impact ▪ Inconsistent quality of service ▪ High operational costs ▪ Eroding customer base SOURCE: India Post

| India Post Recent Initiatives in Mail Operations 444 ▪ Setting up of Automated Mail processing Systems ▪ Induction of freighter aircraft for carriage of mail for NE ▪ Setting up of Mail Business Centres ▪ National Address database management system ▪ Popularization of PIN Codes ▪ RFID in Mail Processing ▪ GPS tracking in MMS vehicles ▪ Mechanization of Delivery Plan Projects ▪ Part of Plan Scheme for Setting up of MBCs ▪ Seeks to undertake restructuring of the existing mail network ▪ McKinsey & Co. appointed as the Project Consultant ▪ 36 month long project Mail Network Optimization SOURCE: India Post

| India Post55 Why do we need a Consultant on board? ▪ Give focused attention to Mail Operations with a fully dedicated team in project mode ▪ Have external and objective perspective ▪ Learn from best practices in postal services world- wide Why a consultant SOURCE: India Post

| India Post66 Deliverables & Time lines contained in the RFP Sl. No.Description of deliverables Completion target month no. Completion of the analysis of current network structure, products and performance, review of customer requirements Finalization of the optimal scenario, optimization objectives, evaluation and prioritization of design options and definition of the target network, implementation planning Identification of appropriate technology, costing exercise for the preferred technology options, assistance in selection of technology service provider, migration planning Finalization of process specification and blue print, definition of Key Performance Indicators (KPIs) and measurement systems, description of roles and responsibilities along the mail business managerial set up, development of training modules, sequencing of implementation of defined processes, systems and structures Roll out / implementation, pilots Full implementation SOURCE: RfP issued by India Post

| India Post77 Objectives of the Project: getting the core right and improving look and feel of mail offices "Get the core right" "Modernise the look and feel" SOURCE: Mail Network Optimisation Project ▪ End-to-end network optimisation: Optimise India Post's mail network from collection to delivery ▪ Significant quality improvement: Standardise and improve processes and reduce network complexity ▪ Rigorous performance management: Establish an effective performance management structure using KPIs and regular reviews ▪ Customers: Improve India Post's appearance to make it more trustworthy and reliable for customers ▪ Employees: Improve working conditions to make staff proud of being associated with India Post ▪ Management: Significantly improve the management's ability to steer a huge organisation

| India Post88 Getting everybody on board SOURCE: Mail Network Optimisation Project Customers ▪ India Post as trustworthy organisation with high-quality reliable service ▪ Value for money Employees ▪ Improved working conditions as key benefit ▪ Pride in being part of an efficient and widely respected organization Unions ▪ Improved working conditions leading to greater employee confidence ▪ Constructive role in decision making Management ▪ Improved ability to steer a huge organisation and pride in being a part of a successful organization ▪ Usage of state-of the art management principles and tools (e.g., Key Performance Indicators)

| India Post99 Project Strategy SOURCE: Mail Network Optimisation Project PROJECT APPROACH Start with a few products for big cities Add more products for the same cities Expand to all products across India ▪ Early and broad involvement of Circles and Staff side ▪ Constant Monitoring by the Directorate

| India Post10 Geographical reach Speed Post and International mail I st classII nd class Product range Priority cities All India Scenario-based design and pilots Scenario- based design Roll-out "Wave 1"2010 The Project Roadmap for mail operations revamp Approach particularly reflects strong need for immediate tangible impact SOURCE: Mail Network Optimisation Project

| India Post11 Why begin with Speed Post and International Mail ? ▪ Attractive market – Speed Post grows 20% every year – Quality is very important for SpeedPost customers ▪ Important for India Post revenue and volume – ~10% of total volume – ~20% of postal revenue ▪ Easiest product for monitoring success – SpeedNet has very helpful data for the project – Track & trace is the much needed customer demand ▪ International Mail is India Post's face to the world – Very important to meet international service standards – Payments increasingly linked to service standards SOURCE: Mail Network Optimisation Project

| India Post12 The approach to "get the core right" "Modernise the look and feel" SOURCE: Mail Network Optimisation Project ▪ Customers: Improve India Post's appearance to make it more trustworthy and reliable for customers ▪ Employees: Improve working conditions to make staff proud of being associated with India Post ▪ Management: Significantly improve the management's ability to steer a huge organisation "Get the core right" ▪ End-to-end network optimisation: Optimise India Post's mail network from collection to delivery ▪ Significant quality improvement: Standardise and improve processes and reduce network complexity ▪ Rigorous performance management: Establish an effective performance management structure using KPIs and regular reviews Focus now

| India Post13 Optimisation of delivery in wave 2 (1st class mail) as SpeedPost only accounts for ~10% of delivery volume Work Plan for Revamp of Speed Post operations (collection to delivery): Wave 1 SOURCE: Mail Network Optimisation Project Proof of concept ▪ What are the right processes within the facility? – How to ensure standardisation? – How to maximise throughput and quality? ▪ What is the right network schedule? – Which cut-off times and processing windows per processing step across the value chain allow the best possible next-day delivery? ▪ How to measure India Post's performance? – What is the share of next day delivery (D+1)? – Track & trace: Are 100% scans ensured across the network? – Which are supporting KPIs to ensure people do not seek workarounds/shortcuts? ▪ What is the right network design? – How should the optimal network of sorting hubs look like to ensure maximum D+1 quality? City 1 SPC 1 PO 1 PO 3 PO 2 SPC 2 City 3 SPC City 2 SPC PO 1 PO 3 PO 2 TMO

| India Post14 The Project assigns high importance to the "look and feel" aspect as well SOURCE: Mail Network Optimisation Project "Get the core right" ▪ End-to-end network optimisation: Optimise India Post's mail network from collection to delivery ▪ Significant quality improvement: Standardise and improve processes and reduce network complexity ▪ Rigorous performance management: Establish an effective performance management structure using KPIs and regular reviews "Modernise the look and feel" ▪ Customers: Improve India Post's appearance to make it more trustworthy & reliable for customers ▪ Employees: Improve working conditions to make staff proud of being associated with India Post ▪ Management: Significantly improve the management's ability to steer a huge organisation Focus now

| India Post15 The "look and feel" Component SOURCE: Mail Network Optimisation Project Identify new tools and technologies and also upgrade exiting ones to ensure faster, better services Develop scheme for recognising star circles/performers Ensure 100% trained staff on field Look and feel BrandingInfrastructureTechnology Recognition and training Ensure uniform branding as well as consistency across locations Develop standardised and consistent interiors and exteriors of buildings and give clean and supportive infrastructure to the line team

| India Post We have worked together in the 6 metros (mainly SPCs) over the last months ` 16 Impact of the Project Pilot SOURCE: Mail Network Optimisation Project

| India Post The project has brought some significant improvements over the last months Days (average delivery time) SOURCE: Postal Tech Centre NSPC SpeedNet data, Mail Network Optimization Project... to From... Mumbai New Delhi Chennai Kolkata Airport Bangalore Hyderabad Mumbai New Delhi Chennai Kolkata Airport Bangalore Hyderabad During project – June to From... Mumbai New Delhi Chennai Kolkata Airport Bangalore Hyderabad Mumbai New Delhi Chennai Kolkata Airport Bangalore Hyderabad Before project - December

| India Post18 Bangalore SPC example: Throughput doubled by standardization Date 07-Jun Jun May May Apr-2010 Items handled by shift Items per manhour Average (Day & Night)Set 1 (Day)Set 3 (Night) SOURCE: Bangalore SPC, Mail Network Optimization Project

| India Post19 The project team seeks involvement of all levels in the Circle Very high focus and involvement of leadership … ▪ Secretary, CGM visit to Kolkata SPC ▪ Member (O) visit to Bangalore SPC ▪ Regular visits by Director (Mail &SP) & CPMGs to SPCs Visits by leadership Consultative approach ▪ Regular meetings to understand & resolve ground team concerns (staff and unions) ▪ Joint work and discussion of changes on ground (staff and unions) Attendance of ~50 group C & D staff across shifts 1, 2, 3A, 3B Circle director and SPC manager answered questions and clarified doubts Layout map handed to all; new role cards discussed and distributed … as well as regular interaction with staff side – Chennai example SOURCE: Mail Network Optimisation Project

| India Post20 Agenda for today's meeting Background of the Mail Network Optimisation Project 11: :30 11: :15 Explaining the Project details: Strategy, Work plan, Process re- design, expected outcome 12: :00 Suggestions and view points of the staff side on the project and its status Lunch13:00 – 14:00

| India Post21 Initial Impact of the Project in terms of Operational Improvement Easier sorting – Ensure minimum multiple handling Less workload – reduce no. of bags & missorts between different locations Better equipment – Ease of working for staff at SPCs with new equipments Higher throughput – Ensure higher processing with improved process design Streamlined workflow – by having optimised inflow of mails in the processing centers Prioritized processing – Ensure processing prioritisation based on the time of the day for maximum connectivity Keep everyone informed – Regular interaction and display of SPC's daily performance, suggestions and feedback encouraged Training & Incentives – Incentivise high performers and help all staff with newly developed trainings SOURCE: Mail Network Optimisation Project

| India Post22SOURCE: Mail Network Optimisation Project Reduce sorter distress by ensuring minimum multiple handling Example – Hyderabad 1.16 … toFrom … 2.00 From … … to ▪ Pre-sorting for all items before final sorting ▪ All sorting done with the same priority ▪ Ensure maximum sorting with only one handling ▪ TD/NTD mails to come separately to enable prioritised sorting Large multiple handling Minimum multiple handling Number of handlings per item

| India Post23 Reduce number of bags and missorts between different locations within 1 city SOURCE: Mail Network Optimisation Project ▪ We are trying to reduce sorting complexity in the city through streamlining of operations subject to other constraints like distance, connectivity etc. ▪ This should lead to less confusion, less missorts and less bag closing ▪ Volume throughput and productivity at Mumbai SPC increased after merging of GPO volumes into SPC From sorting complexity… … to streamlined operations 250 (12%) GPO Around GPO 3,072 (78%) Other areas 283 (10%) Overall articles 3,605 (100%) Feb 04, Analysis down for several days with same results Mumbai GPO, Speed Post section in Feb 2010  Volumes now get processed at SPC

| India Post24 Ease staff work by giving better equipments SOURCE: Mail Network Optimisation Project Bag cutters instead of razor knifes prevent from injuries Economic sorting cages and chairs allow for productive and yet relaxed working Roller trays ease movement of heavy trays and allow for back-friendly work

| India Post25 Ensure faster and higher processing in improved process design SOURCE: Mail Network Optimisation Project ▪ Ensure 100% scan compliance, both for receipt and delivery ▪ No article can enter or leave sorting area unless scanned Ensure improved sorting productivity by ▪ Optimizing sorting cages ▪ Reducing multi-level sorting ▪ Revising sorting logic (where necessary) Key features Open bagReceipt scan Sorting 1 st level 2 nd level Dispatch scan Close bag Scanning desk ▪ Ensure 100% scan compliance, both for receipt and delivery ▪ No article can enter or leave sorting area unless scanned Clearly defined job de- scription helps in faster and higher processing Assembly line like processes where one task is given to a person … to From … All people doing all tasks together Lack of role clarity can lead to lack of ownership and can cause confusion

| India Post Some pictures of Bangalore SPC where this process has been put in place successfully SOURCE: Mail network optimisation project MumbaiDelhiChennaiHyderabadBangaloreKolkata What are the right processes within the facility? 2 What is the right network schedule? 3 How to measure India Post's performance? 4 What is the right network topology? 1 Activities Completed ▪ Implementation of assembly line layout in the SPC hall ▪ Training of staff in every shift on the revised processes SPC hall – nowSPC hall – before Category Layout Neat and Tidy

| India Post27 Reduce work pressure by having optimised inflow of mails in processing centers … to From … ▪ All mail coming to the SPC late evening ▪ Sudden mail volume to be processed in very short time window… ▪ …resulting in bag transfer despite maximum efforts … to SOURCE: Mail Network Optimisation Project Uniform volume inflow leads to ▪ Less pressure for staff on ground ▪ Better connectivity and therefore better quality Remaining volume collec- ted at 7 p.m. Good share of daily volume collected at 2 p.m.

| India Post28 … to Ensure processing prioritisation based on the time of the day for maximum connectivity TD, NTD all being processed at the same time Same amount of effort will lead to better quality and speed for next day delivery SOURCE: Mail Network Optimisation Project Sort rest of India volumes before outgoing flight Sort TD from own P.O.s while "waiting" for flight receipts Sort TD from rest of India after receipt from incoming flight Rationale Non-TD 1 sorting TD sorting (from own P.O.s) TD sorting (from rest of India) Receipt from P.O.s Cut-off to ensure flight connectivity Receipt of items from other cities Cut-off for P.O.s Demarcated shift (set) planning to optimize D+X quality From …

| India Post29 Providing information to each employee at SPC on how their center is performing SOURCE: Mail Network Optimisation Project … to ▪ Opportunity to identify 'STARS' ▪ Opportunity for knowledge sharing across sets/SPCs Web based performance mapping both for speed and quality D+X KPI for SpeedMis-Sort KPI for quality No visibility of individual, set, SPC per- formance From …

| India Post Overall, we have developed a set of 18 KPIs to create transparency Inter- national reports SOURCE: Mail Network Optimisation Team Scan com- pliance reports 1a Transit analysis within city 1b Transit analysis across city 1c Time per leg of transit within city 1d Time per leg of transit across city 2a Scans compliance in the entire network 2b Scan analysis per leg of transit within city 2c Scan analysis per leg of transit across city 3a Percent of F-scans in SpeedNet vs. F-scans in IPS 1 3c Share of SpeedNet Delivery scans vs. IPS F-scans (TBD) 4a Articles processed per hour per FTE 4b Staff absenteeism 4c Share of bags without bag labels 4d Share of articles not processed in SpeedNet 4e Share of articles closed after cut-off time 4f Share of missorted articles 4g Share of articles with missing pin codes 4h Share of articles not dispatched same set 3b Percent of F-scans in IPS vs. D-scans in IPS D+X reports KPIWhat does it do? Measures for international inbound article the efficiency of movement at every step before merger with Speed Post Support- ing KPIs Measures for each processing step whether articles got scanned as prescribed Measures speed and reliability of processing of Speed Post articles from booking to delivery Supports achieving better D+x and scan performance

| India Post31 Proposed Incentive for good performers and motivate less performing staff through training SOURCE: Mail Network Optimisation Project … to No clear and fully objective performance monitoring Recognition of star performers Opportunity for them to teach/motivate others Find out need for training Train people to help them to also become star performers and training Recognition From …

| India Post General IT Role Overview of some trainings currently being developed by Training division SOURCE: Mail Network Optimisation Project TrainingContent Introductory training for new recruits Train the Trainer Training Basic procedures and operations explanation KPI and quality Training "Basic" Computer Training “Enhanced" Computer Training Speednet Training System administration Training Supervisor Training Customer Service Training Ensure that everybody understands India Post and its procedures not just one's own job Support staff in com- puter-related tasks Help people to become even more successful in their roles – includ- ing awareness of role and soft skills 32

| India Post33 Activities How does the project proceed? SOURCE: Mail Network Optimisation Project Speed Post First class mail  Team has already worked on ground in the 6 metros  Now we are developing a SpeedPost manual for further rollout  8 directors will then lead implementation in the next 15 cities Jun 15Jul 15Aug 15Sep Project team to start working on 1 st class mail Next 15 cities 1 – led by 8 directors (Mail & SpeedPost) Monitoring Top 6 cities 1 Next cities in scope are Noida, Gurgaon, Chandigarh, Pune, Goa, Mysore, Ahmedabad, Howrah, Patna, Nagpur, Bhopal, Trivandrum, Kochi, Lucknow, Vashi (preliminary selection subject to change)

| India Post34 Agenda for today's meeting Background of the Mail Network Optimisation Project 11: :30 11: :15 Explaining the Project details: Strategy, Work plan, Process re- design, expected outcome 12: :00 Suggestions and view points of the staff side on the project and its status Lunch13:00 – 14:00

| India Post35 Any questions, comments or suggestions from your side?

| India Post36 Agenda for today's meeting Background of the Mail Network Optimisation Project 11: :30 11: :15 Explaining the Project details: Strategy, Work plan, Process re- design, expected outcome 12: :00 Suggestions and view points of the staff side on the project and its status Lunch13:00 – 14:00

| India Post37 THANK YOU