1. Flats Strategy Managing Cost and Maximizing Efficiencies Joe Schick Vice President of Postal Affairs

2. | 2 Flats Strategy Group Initiated May 2014 Cooperative effort (USPS and Industry) Focus initially on costs (cost coverage) Development of Flats Strategy Guide (unpublished) Continued focus > Process > Prep > Pricing Long history of industry involvement (MTAC)

3. | 3 Flats Strategy Key components of Flats Strategy > Manage cost > Innovate > Pricing > Balance Marketing opportunities vs. Operational efficiency > Utilize strengths of Mail Service Providers Comail Copalletization Dropship > Lowest combined cost (mailers and USPS)

4. | 4 Flats Strategy Renewed focus on non-FSS process > No Phase II FSS > 70-75% of flats in non-FSS zones > Carrier Route is still king Potpourri (PHI Acquisitions) NSA > Work to reduce bundle handlings 5 digit pallets – same value as FSS Scheme? Develop incentives

5. | 5 Flats Strategy Flats Sequencing System (FSS) > Required prep implemented in January Key issues > Maintain carrier route > Create DFSS entry and discount – does it offset cost? > Required 250 pound minimum FSS Scheme pallet – impact of increase in quantity of lighter weight pallets? FSS HERNDON VA 20171 STD FLATS 5D SCHEME Mailer information here SUNSHINE PRINTERS STRASBURG VA

6. | 6 FSS Scheme Pallets Substantial increase in the number of pallets > Lighter weight (average between 250 – 350 pounds) > USPS estimated 6-7% increase > Industry reality = 15 – 45% increase (depending on total pieces and weight in a mailing) > Increased cost for MSPs (Mailing Service Providers) Handlings Prohibits use of automation (palletizers, wrappers, warehouse, etc.) USPS gathered 3 rd QTR data > Share with mailers > Determine next steps

7. | 7 Focus on Cost Reduce/minimize volume of sacks > 35%+ increase in Standard Mail > Modify prep? > Price incentive/disincentive? Bundle breakage > Increased since FSS prep requirement Comail identified as major contributor Larger bundles replacing carrier route > Joint task teams (facility visits and “lean” discussions) USPS RRD Quad

8. | 8 QUESTIONS???