1 MTAC May 26, 2011 Washington D.C. Kelly Sigmon Vice-President, Engineering USPS Operations Plan for Flats & Technology Update

2 Agenda  Overview of Flats Strategy Automate piece & bundle distribution of all flat mail Reduce non-value added work Improve existing processes / standardization  Future Flats Technology AFSM 100 enhancements Flats sequencing Flats bundle prep

3 Automating Piece / Bundle Distribution  Sequence all flats for delivery Flats sequencing phase 1 Beyond phase 1  Move flat mail up-the-ladder AFSM 100 efficiencies – non FSS zones Reduce manual processing  Finalize all bundles requiring distribution APPS, APBS & SPBS

4 Sequencing Flats  FSS Phase 1 – deploy 100 machines 37 sites on-line with FSS 85 operational machines  Ready for sequencing 96 machines 43 sites 100 th FSS machine Installed – April 2011 Operational – June 2011

5  Sequencing Operations - Delivery FSS Sequencing Operations Over 28,000 carriers are receiving sequenced flats 960 delivery unit on- line with FSS 1,351 zones on-line

6  CR-RT all flats for non-FSS zones AFSM 100 efficiency Merge classes at destination sorts  Reduce manual flat processing Originating FCM cancellations Periodicals processing policy Eliminate Hot 2C practices Process mail efficiently on automation Move Flats Up-the-Ladder

7  Equipment utilization Facility optimization & equipment consolidations Lean Six Sigma projects to streamline operations & increase productivities  Container density and transportation utilization Sort plan optimization Flat mail on the right network (surface / air) Process Improvements & Standardization

8 Agenda  Continuous Improvement of AFSM 100  Sequence More Flats  Increase Delivery Point capability of current FSS  Deploy new equipment to handle remaining flats volume  Automate Flats Bundle Prep Operations

9 AFSM100 Enhancements  Technology advancements Doubles detection Doubles reduction Flats Forwarding Bring Letter PARS capability to Flats

10 Manual Sequencing Automated Sequencing Reduces cost by 70% Flat Sequencing Costs

Flat Volume Trend FY 2005 –10 Flat volume decline 31% 17 billion fewer flats FY 2005 –10 Flat volume decline 31% 17 billion fewer flats Remaining Flats Sequencing Opportunity FSS Deployment FSS Design & Program Planning Future Flats Expectations Annual Volume (Billion) Saturation FSS Phase 1 Future Target 1.2 pcs per delivery point

Flat Volume Trend 10B additional sequenced flats are worth $1B annual savings for Function 2 Remaining Flats Sequencing Opportunity Future Flats Expectations Annual Volume (Billion) Saturation FSS Phase 1 Future Target ~.8 pcs per delivery point

13 FSS Challenges  Challenge Flat volume has declined 31% since 2005 Delivery points continue to rise  Technology solution Feeder that will feed 2X the speed of the current feeder Doubles delivery points per sort-plan

14 New Sequencing Technology  Desired Attributes / Functionality Significantly Less Floor space Volume Dependent vs. Delivery Point Dependent Lower Cost Demo – August 2011 Location: Lancaster, PA Floor Space Volume Delivery Points Cost

15 Flat Handling Process Today Mailers Bundle DistributionBundle PrepPiece DistributionDelivery

16 Eliminate Non-Value Added Work Mailers Bundle DistributionBundle PrepPiece DistributionDelivery

17 Flats Process Future Mailers Flats Sequencing Delivery Automated Bundle Preparation

18 Flat Prep Technology Eliminating Flats Prep  Evaluating additional solutions to seamlessly integrate mailer and USPS processes  Continuous; output of printers production equipment—input to USPS processing equipment  Concepts and designs are under development

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