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

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

Annual Flats Volume Periodicals 17% First-Class Mail 8% Standard Mail 75% Standard Mail 75% FY Billion Flats FY Billion Flats FY Billion Flats FY Billion Flats Percent Change -3.3% Class Breakdown Unchanged

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

Post Rate Case Flat Volume Comparison

YTD - FY 2008 SPLY Comparison

Cased Flats FY 08 vs. SPLY Comparison

Flats by Product Class: RPW (Qtr Qtr ) Seasonal variation from yearly average

Flats by Product Class: RPW (Qtr Qtr ) FSS Candidate Volume

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

Phase 1 FSS Deployment Sites AreaDistricts # FSS Plants / Facility NYM Northern NJ Long Island NY Central NJ NJ BMC Mid Island NY P & DC Trenton NJ P & DC NE Boston Massachusetts Connecticut SE New England Northwest Boston P & DC Middlesex Essex P & DC Springfield BMC Providence RI P & DC EAColumbus3Former Columbus P & DC SE South Florida Atlanta Central Florida New Miami Facility Project Atlanta BMC Orlando P & DC WE Colorado / Wyoming Arizona Mid America Denver P & DC New West Valley (Phoenix) Facility Project Kansas City P & DC

Phase 1 FSS Deployment Sites AreaDistricts # FSS Plants / Facility PA Los Angeles Sacramento Bay-Valley/San Francisco Sierra Coastal Santa Ana San Diego Herb Peck Annex Sacramento P & DC San Jose P & DC Van Nuys Main Office Anaheim P & DC New Aliso Viejo Facility Project New Perris DPC Facility Project CM Greensboro Northern VA Richmond Capital Raleigh P & DC Greensboro P & DC Dulles P & DC New Richmond Facility Project Curseen-Morris P & DC GL Greater Indiana Northern IL Central IL Southeast MI Indianapolis MPA Palatine P & DC Carol Stream P & DC Fox Valley P & DC South Suburban P & DC New Royal Oak Facility Project

Dulles VA P & DC Pre-production Operation Update

Dulles Pre-production Status  Install Complete Oct 2007 ●Integration/ Machine TestingNov 2007 ●Live Mail Ramp-upDec 2007 ●Second Zone AddedJan 2008 ●Field Pre-Test/TestFeb/Mar 2008 ●Full Machine Ramp UpMay 2008

18 Dulles FSS Installed & Sequencing Flats

19 Dulles FSS Installed & Sequencing Flats

Dulles Live Mail Ramp-up

21 Dulles Stand Alone Mail Prep (SAMP)

22 Dulles AFSM 100 Dolly Induction

Dulles Live Mail Ramp-up  Reston VA, Zones and Started December 4 th ●December Low Flat Volumes ●Runs Have Exceeded 40K ●Taking DPS Flats to the Street  Fairfax VA, Zones Started Jan 22 nd ●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 and ●Fairfax  March and Beyond ●Burke ●Culpepper ●McLean ●Alexandria Belleview ●Alexandria Engleside ●Falls Church and ●Sterling 20164

25 Mailing Industry Concerns 1. Address Location / Address Construction 2. Mail Entry Entry Points Critical Entry Times 3. 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 Parallel or perpendicular to top edge Cannot be upside down in relation to top edge John Doe 123 Main St Anywhere, USA John Doe 123 Main St Anywhere, USA Can face left or right John Doe 123 Main St Anywhere, USA Can be left or right justified, or centered. Basic Standards 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

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

Field Integration Strategy / Planning Field Implementation Infrastructure Field Implementation Infrastructure Road Map Communication Training Readiness Support Tracking Readiness Support Tracking  Area Leadership  Area FSS Program Manager  Area FSS Team  District Leadership  District FSS Coordinator  District FSS Team  Facility Activation / Construction POAC (where warranted)  Microsoft Project Plans “District Implementation”  Space Readiness: Construction, Equip Migration, Install Plans  Guidelines: Policies Integrated Logistic Support Plan Methods Guide Vendor Training FSS Certification Standardization Lean Principles Delivery Readiness  Executive Level Communication & Briefings  Site Level Tactical Communication General Business Knowledge Change Management Functional Impacts Technical Impacts  Communication Tools Training Stand-up Talks Posters Websites DVDs / Videos  Area & District Project Manager Training – Grow Project Leaders  Dulles On-site Functional Training  Vendor Developed Training & (administered at local level)  USPS Developed Training (administered at local level)  District Readiness Assessments Processing Delivery Maintenance Space  Readiness Reviews (Headquarters, and/or Areas)  Standardization / Certifications  Leave Behind Plant Resource s: Maint. Support  Capture Savings

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

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