1 MTAC WG #175 Update for Northeast Area Focus Group May 4 th,

2 ® Work Group Mission Statement: This workgroup will identify an approach to automate First-Class Mail container preparation from being based on CSAs to using software driven by labeling lists and the DMM. Desired Results:  Define set of software, labeling lists, and business rules to automate First-Class container preparation  Develop a plan to automate the ability to control the numbers of separations based on the capabilities of an individual mailers’ facility  Define a plan for pilot testing and establish a schedule for industry migration Expected Date of Completion: May 2016 CSA Mission

3 WG #175 Status Update  Current Status - Business Rule Pilot Expansion  Continuous Mailers: Completed  Large Mailers: Completed  Medium Mailers: Final Phase of Analysis  Small Mailers: In Progress

4 Hartford DST Before - After Hartford DST Separations BeforeHartford DST Separations After Proposed Future State: Applied business rules to design future state Volume driven direct separations and alignment with USPS transportation network Meet the Mailer Requirement of 23 Letter Separations Collaborated with Area stakeholder to vet feasibility Received agreement from Hartford Plant Manager  Reduction in working volume to 01Z: from ~2600 to 633 trays per day

5 Concept Proposal Palletization Rules escalate based on the mailer’s volume in a job. The objective of each tier is to build full pallets that can be transported into the network as far as possible before being worked. Co-palletization Opportunities were evaluated separately. Current DMM Minimal Usage Today Required Origin SCF (no minimum) Mixed ADC Air (no minimum) SCF AADC/ADC Origin Mixed ADC Surface – O-SCF Origin Mixed ADC Surface – O-STC Optional 5-digit Proposed Palletization Rules Tier 0: (If total volume in job below a threshold) 1.Mixed Surface (CET 2000) 2.Mixed Air (CET 2000) Tier I (All): 3 Required Separations. 1.Mixed Air (CET 2000) Same as Tier I 2.Origin SCF (CET 0800); 72 feet minimum 3.Mixed Surface Tier II: Based on volume and negotiated # of container separations 1.5-digit ZIP (CET 1200); 72 feet minimum [finer depth of sort for Origin SCF (#2)] 2.Destination SCF (CET 2400); 72 feet minimum 3.Destination STC (CET 2400); 72 feet minimum 4.Optional Origin STC (CET 2400); 72 feet minimum Tier III: Mailers with TMS/SWYB

6 Analysis Parameters  Single Site Analysis  Based on separations mailer is willing to do  Trays/pallet max per mailer  Data Analysis source: PostalOne!  Used existing tray level data from eDoc submissions to determine new palletization and new separations  Analysis includes non-Copalletization and Copalletization

7 Results: Few jobs required additional separations as compared to eDoc separations. Only high volume jobs required additional separations under the Tier II rules WG #175 Pilot Expansion Results Analysis based on mailer maximum pallet height (trays/pallet)

8 Pallet Volume and Co-palletization Results: All sites would prepare a few more pallets per day (Average of 5 greater pallets created under Proposed Business Rules). If mailers invest in co-palletization the number of pallets generated can be reduced compared to Proposed Business Rules & Today’s Palletization. WG #175 Pilot Expansion Results Analysis based on mailer maximum pallet height (trays/pallet)

9 Pallet Destination Results for following Proposed Business Rules: Mailers can build a significant number of destination pallets (5D, D-SCF,D- STC) minimizing handling by moving pallets further into the network before working the mail WG #175 Pilot Expansion Results Analysis based on mailer maximum pallet height (trays/pallet)

10 Results for following Proposed Business Rules w/ Copalletization: Investing in copalletization significantly reduces the # of pallets created across all mailing sites while maximizing the number of destination pallets built. Pallet Destination WG #175 Pilot Expansion Results Analysis based on mailer maximum pallet height (trays/pallet)

11 Proposed Business Rules (1/2) Tier 0 Jobs: 2 Required Separations – Mixed Air/Mixed Surface 1.Determine each tray’s transportation mode. Generate a Mixed Air separation and a Mixed Surface separation. There is no minimum volume requirement for these separations. (CET: 2000) 2.Mixed-Surface/Mixed Air tray minimum separation. For each job if there is not enough volume to make 36 2’ tray pallets labeled to both Mixed-Surface & Mixed-Air, then all Mixed-Surface volume within that job will be labeled as Mixed-Air. Tier I Jobs: 3 Required Separations – Origin SCF/Mixed Surface/Mixed Air 1.Build the same Mixed Air separation as defined by Tier 0. (CET: 2000) 2.If there are more than 36 2’ trays (72 linear ft) in the same job* that are local turn-around mail (i.e destined for the same SCF area as the entry SCF), create a separation just for Origin SCF volume. (CET: 0800) 3.All remaining trays not destined for the origin SCF and not air should be palletized as Mixed Surface. (CET: 2000) 4.Mixed-Surface/Mixed Air tray minimum separation. For each job if there is not enough volume to make 36 2’ tray pallets labeled to both Mixed-Surface & Mixed-Air, then all Mixed-Surface volume within that job will be labeled as Mixed-Air.

12 Proposed Business Rules (2/2) Tier II: Based on volume and negotiated # of container separations 1.Build the same Mixed Air separation as defined by Tier 0. (CET: 2000) 2.Build the same Origin SCF separation as defined under Tier I. (CET: 0800) Additional separations are prioritized as follows: 5D, Destination SCF, Destination STC, Origin STC, Origin SCF. 3.If there are more than 36 2’ trays in the same job* going to the same 5D zip, then those trays should be palletized for the 5D zip. (CET: 1200) 4.If there are more than 36 2’ trays remaining in the same job* going to the same Destination SCF, then those trays should be palletized for the D-SCF. (CET: 2400) 5.If there are more than 36 2’ trays remaining in the same job* destined for the same D-STC area, then those trays should be palletized and labeled to their Destination STC. (CET: 2400) 6.Optional Separation for remaining Mixed Surface volume: For trays not separated for mixed air, a D-SCF or a D- STC, use the Service Standards file to determine if the tray is committed for 2 days or 3 days. Trays with a 2 day commitment should be palletized as mixed surface volume (CET: 2000). Trays committed for 3 or more days, can be separated (still as mixed volume) and labeled to the Origin STC. If a mailer elects to make the optional Mixed Surface separation for Origin STC volume, that separation should only be made in cases where jobs have enough volume to make a 36 2’ tray pallet to both the Origin STC and Origin SCF with mixed surface volume. If only a partial mixed surface pallet (<72’ of trays) will remain for either the Origin STC and Origin SCF, all mixed surface volume should be palletized together for the Origin SCF. ** (CET: 2400) 7.Mixed-Surface/Mixed Air tray minimum separation. For each job if there is not enough volume to make 36 2’ tray pallets labeled to both Mixed-Surface & Mixed-Air, then all Mixed-Surface volume within that job will be labeled as Mixed-Air. *Applies per job if the mailer does not co-palletize **Induction Point Option: All pallets will be inducted into the Origin SCF, except Mixed Surface O-STC pallets have the option to be inducted in the Origin STC or the Origin SCF Tier III: Same business rules as Tier II but with additional Air Separations [Requires TMS]

13 Overall Results Number of Pallets MailerSite Tray Max/ Pallet Today's Palletization Proposed Business Rules Average additional pallets/ day Proposed Business Rules (Mixed- Surface/Mixed-Air minimum) Average additional pallets/day Proposed Business Rules w/ Co- palletization Telecom 1 Georgia Site Telecom 1 California Site <11879 Insurance 1Ohio Site 48N/A 1666N/A545 Insurance 1 Colorado Site 48N/A 843N/A258 MSP 1Iowa Site Bank 1 Minnesota Site <1388 Bank 1 North Carolina Site TBA Bank 1 Arizona Site TBA

14 Next Steps  Complete analysis on small mailers  Analysis on USPS transportation cost vs. tray handling cost  Finalize work group recommendations to MTAC Executive Leadership  Scope change  Workgroup needed to establish technical requirements  Expected Work group date: End of May