Status of NDC Activations MTAC Briefing

1. Status of NDC ActivationsMTAC Briefing August 12, 2009

2. Agenda • Overview of Network Reengineering • Status of Phase 1 Activation • Accelerated Phase 2-4 Schedule • Customer Impacts • Summary

3. Overview Network Reengineering • Transformation of Bulk Mail Centers (BMC) to Network Distribution Centers (NDC) • Enhanced mail preparation • Consolidate package distribution • Combine BMC & Surface Transfer Center (STC) containerization and dispatch plans • Leverage multiple trailer loading and dispatching techniques Transformation BMC NDC

4. NDC Responsibilities • 11 - Tier 1 NDC • Distribution of local (turnaround) and destination Standard Mail, Periodicals, and Package Services • 6 - Tier 2 NDC • Tier 1 responsibilities • Distribution of outgoing Standard Mail, Periodicals, and Package Services to the network • Including, MXD States Outgoing single piece sort • STC containerization and dispatch operations – outgoing / incoming all classes (except Express) • 4 - Tier 3 NDC • Tier 1 and Tier 2 responsibilities • Consolidation points for less than truck load volumes from Tier 2 sites

5. NDC Tiers 1, 2, and 3 • Directional dispatch for 4 NDCs (noted by *) • Reduces backtracking • Improves service • ASFs will be Tier 1 NDC for package processing

6. Impacts • Operational Impacts • NDCs operate like P&DCs • Live loads and unloads at all NDCs • Operating plan changes required to coincide with STC containerization & dispatch plan • NDC sort to ADCs, AADCs and NDCs • Transportation Impacts • Streamline network • Increase utilization of assets • Improve transit time

7. Mail Preparation • Separation requirements • Local NDC service area • Network NDC split(s) • Two splits required for directional dispatch sites and ASFs • For Periodicals compliance with L201 & L009 split • Integration of Origin mail preparation • USPS Retail, BMEU and Plant separation enabled through the use of Retail Distribution Codes • Establish customer supplier agreements (CSA) to mirror required make-up during implementation

8. Today’s Network Flow Retail PO Origin P&DC OBMC DBMC Dest. P&DC Delivery Unit / PO’s 21 x 21 Commercial BMEU

9. Future Network Flow Tier 1 NDC Local Retail PO Origin P&DC DNDC Dest. P&DC Delivery Unit / PO’s Network Commercial BMEU Tier 2 NDC Local Tier 3 NDC (if necessary)

10. Baseline Current Baseline: 3/28/09 – 4/24/09 (4 week average prior to implementation) Current: 7/25/09 – 7/31/09 Phase 1 Acceleration Origin Package Service Improvement from Phase I • Phase I began May 18 in Springfield, Philadelphia & New Jersey • Redesign is yielding anticipated benefits • Work hours trending as expected • Springfield and Philadelphia have declined • New Jersey has increased less then expected • Package Service Performance is up 15% in NJ NDC • Transportation Utilization is up 15% • Successful integration of STC & NDC transportation • Eliminated all network transportation from Philadelphia and Springfield • Beginning to eliminate other underutilized transportation

11. Baseline Current Inter-NDC Transportation Utilization from Phase I Baseline: 3/28/09 – 4/24/09 (4 week average prior to implementation) Current: 7/25/09 – 7/31/09

12. Implementation Status • Phase I Completed on July 17 • Three weeks early • Accelerated National Implementation to be completed by 11/20 • Tier 1 to Tier 2 distribution and transportation consolidation • Use of Tier 3 for USPS LTL consolidation • Integrate STC trips from Tier 2/3 where possible • Move of MXD States processing to Tier 2 sites

13. Customer Impacts • Improved Service • No expansion to the number of entry points • No required changes to FAST or Critical Entry Times (CETs) • Minimal changes to origin induction preparation

14. Summary • Network Redesign has resulted in cost saving and significant service improvements • Accelerated National Implementation will allow us to capture both the savings and service improvements early in FY 2010 • We Need your help –origin separations to move mail on right network as quickly as possible