MTAC November 2, 2005 Strategic Transformation Plan

2002 TRANSFORMATION Service the best it’s been for all classes CSM high for 16 straight quarters Creativity in products and pricing 6th straight year of TFP increases +5.5M delivery points, 465M fewer workhours $5 billion savings target ahead of plan Employee safety and engagement up

 Decline in First-Class single-piece  2M new delivery points each year  Standard Mail growing, contribution is less  Competition all around  Workforce issues – benefits, flexibility  Turnover  Wildcards BUT...

STRATEGIC TRANSFORMATION PLAN,

 USPS “blueprint”  How we intend to respond to strategic challenges  Updated annually STRATEGIC TRANSFORMATION PLAN,

Stay focused on basics STAKEHOLDERS:  Improve service  Reduce redundancy  Employee development  Better workplace  Add value to core products  Be more convenient, more responsive, easier to use

Generate Revenue Reduce Costs Achieve Results with a Customer-Focused, Performance-Based Culture Improve Service STRATEGIC GOALS Best value Best run Best place to work

Increase Revenue  Cover single-piece FCM decline with growth in other segments of FCM and other products Reduce Costs  $1B out each year with standardization and customer partnerships. Work differently, not just harder Achieve Results with a Customer- Focused, Performance-Based Culture  Accelerate focus on the customer and performance Improve Service  Service is good, but will be even better STRATEGIC GOALS

 Create more customer value with products and services  Customize and simplify pricing  Enhance access and ease of use  Aggressive sales, promotions, and outreach INCREASE REVENUE

 Standardization  Invest in equipment and technology  Customer partnerships  Rationalize facility / transportation networks  Optimize business practices REDUCE COSTS

 Engage employees  Develop and manage talent  Market-based compensation  Make complement more flexible ACHIEVE RESULTS WITH A CUSTOMER-FOCUSED, PERFORMANCE-BASED CULTURE

 Timely end-to-end service for all classes of mail  High quality at all customer access points  Maintain privacy, security, and trust IMPROVE SERVICE

Revenue Costs Service Results Better customer value for the dollar Fewer handlings More mail to intended recipients more quickly Better meet customer needs INTEGRATION Cut UAA by 50 % Improve Address Quality

Revenue Costs Service Add value Risk based verification Track and anticipate delivery Resources aligned with workload Results Barcodes on All Mail INTEGRATION Increase Visibility

1.25% of air transportation to ground 2.95% DPS, reduce carrier office time by one hour 3.Annual commercial price adjustments 4.Simplify processes and product offerings 5.Expand Service measurements Seamless mail acceptance 6.Cut misdelivery complaints by 50% annually 7.Continue safety gains with VPP/ERRP 8.Seamless mail acceptance 9.Differentiate First-Class Mail SELECT TARGETS

 Reduce another $5 billion in tandem with aggressive measures to grow the business  Advances in service, productivity, and employee engagement  Tight focus on core products to ensure universal, affordable services continue COMMITMENTS

 Best value... in the marketplace  Best run... communications and delivery service  Best place... to work