National Postal Forum April 12, 2010 National Postal Forum ®

Introductions Presenters: Joe Schick, Director Postal Affairs Quad Graphics Krista Finazzo, Manager Operational Requirements & Integration US Postal Service 2

Agenda  Background  What led to proposed optional prep  Develop, evaluate, test and results  Description of bundle and pallet prep  Next steps – target timeline  Summary  Questions & Answers  What more with flats… an update on Deflection 3

Background – Industry Collaboration  Mailer Technical Advisory Committees have engaged in many efforts with flats over the past decade:  Flat Mail Prep Optimization  Changes to sortation rules  Alternatives on presort levels  AFSM 100 Auto Induction  Tested Automation Compatible Trays (ACT)  Developed “Auto-Ready” pallet concept 4

5 Current Flats Environment Automated Flats Sorting Machine (AFSM 100) Automated Tray Handling Systems (ATHS) Automatic Induction (AI) Automated Package Processing System (APPS) Flat Bundle Sorting Upgraded Flats Sorting Machine (UFSM 1000) Auto Flats Feeder Manual Keying

Background – Industry Collaboration  More recently through MTAC and IDEAlliance initiatives, teams explored:  Flat Mail Prep and Entry in an FSS Environment  Tested concepts on bundle preparation  Tested various container preparations  Modeled FSS schemes  Explored bundle securing parameters  Developed foundation for Automated Flats Preparation (AFP) 6

What led to Optional FSS Flats Prep? “Identify areas of impact to the USPS and customers associated with preparation and entry of flats in an FSS environment including the lowest combined cost model.” Joint USPS/Industry Charter: 7

Past - Present - Future TODAY TOMORROW

Flats Sequencing System

What led to Optional FSS Flats Prep?  FSS program impacts:  Flats preparation  How mail is presented and scheduled for entry  Collaborative process – mail owner to USPS  Worked with various industry groups to develop various preparation concepts for the entire supply chain process – from design idea to delivery  Mail owners, service providers, consolidators and technical experts  Desired result: Least impact to industry while capturing greater efficiency for postal operations 10

Evaluated Concepts  Used industry data to test and model concepts for different components of flats mail preparation:  Bundle preparation  Containerization  Presort parameters  Destination entry 11

Modeling Exercise  What would FSS pallets look like today?  Volume and thickness of flats has changed since earlier modeling of bundles and pallets in 2007  Pallet prep same as 5-digit/5-digit schemes today  Test Plan included real “address lists” for destinating Dulles FSS site  Using specific ZIP Codes processed on FSS  Using real mailpiece characteristics and volumes 12

 Test plan included:  Bundle and pallet counts  Current presort rules for comparison  ‘Artificial’ Labeling List data to identify FSS schemes  Presort software that used label list to make up bundles and pallets  Specified bundle heights for each presort processing  Testing process was to:  Run presort for all Dulles VA 3-digits (201, , 226 and 227)  Roll up data for non-FSS 5-digits using today’s rules  Prepare individual FSS sort plan pallets (e.g. 1 to 4 5-digit ZIP Codes per Dulles sort plans)  Prepare an all FSS ZIP Codes pallet based on site FSS Presort Test Plan 13

 FSS schemes:  FSS sort plans mirror 5-digit and 5-digit scheme sort plans  During test, Dulles had 49 FSS sort plans  19 sort plans with 1, 5-digit ZIP Code  20 sort plans with 2, 5-digit ZIP Codes  8 sort plans with 3, 5-digit ZIP Codes  2 sort plans with 4, 5-digit ZIP Codes  Test results:  Periodicals had few FSS sort plan pallets  Pallet counts remained same, or less for PER and STD mailings  FSS scheme pallet (all sort plans at a site) has potential Presort Test Plan Results 14

Test Concepts and Model Results  Discovered pure FSS sort plan pallet can flow directly to the bundle prep operation and bypass APPS processing  Determined potential pallet levels:  Pure FSS (single sort plan scheme)  Pure FSS (multiple sort plan schemes)  Combined FSS and non-FSS 15

Optional FSS Pallet Preparation  FSS Single Sort Plan Scheme Pallet  Containing one or more ZIP Codes sorted on FSS at the same time  Equivalent to 5-digit/5-digit scheme pallet Pallet sent directly to FSS preparation area for loading Automation Compatible Trays 16

Optional FSS Pallet Preparation  FSS Multiple Sort Plan Schemes Pallet  Contains mail for all FSS sort plans processed at the facility  Equivalent to an SCF pallet  May require separate FSS and non-FSS pallets at the facility Pallet sent to an APPS for bundle distribution Pallets can “go to the head of the line” for APPS processing 17

Optional FSS Pallet Preparation  Combined FSS bundles and non-FSS bundles on the same pallet  No separation of mail by automation machine type (FSS, AFSM 100, etc)  Equivalent to a 3-digit or SCF pallet Pallet sent to an APPS for bundle distribution 18

FSS Bundle & Pallet Parameters  Defined and developed parameters:  Bundle  Optimal bundle height of 3”, 4”, 6”  Replaces CR piece minimum for packaging purposes  Container  Content determined by FSS scheme & destination  FSS ZIP Codes  Presort  Driven by FSS Label List and sort plan contents  Entry  Destination entry, at minimum, should not change from today and may contract with optimized network 20

Optional FSS Bundle Preparation  Combine all 5-digit flat mailpieces for a sort scheme into the bundle  Carrier route and 5-digit  Create bundles of uniform height: e.g. 3”, 4”, or 6”  Place on appropriate pallet level 21

FSS Flat Mail Prep – Next Steps  New MTAC workgroup #134  Workgroup: “Implement Optional FSS Presort Parameters”  Align under the “Optimization of Preparation & Entry” focus area  Engage software vendors and production manufacturers  Charter of new workgroup:  Develop and implement presort parameters to support defined (optional) FSS prep  Identify timing of software updates as relates to FSS deployment  Communicate timing & FSS Label List  Target timeline to complete: May

Next Steps – Summary  Develop presort software parameters  Publish presort business rules for software vendors to code  Implement Optional FSS prep  Communicate FSS label list schemes  Leverage alternatives to increase bundle and pallet scheme density (e.g. comail, copal)  Continue development efforts to automate bundle preparation 23

24 Resources Check out these links…

 What’s required to earn a certificate?  Attend any five workshops of the Optimizing Preparation & Entry or Flats Track for Periodicals, Catalogs and Printers  How do I get my certificate?  Register for your certificate on the National Postal Forum Website   Answer the three true/false questions for each of the five sessions you attended  Certificates will be mailed upon certification 25 Certificate Program

True or False: 1. At this time, FSS flat mail preparation is optional? 2. Carrier route and 5-digit flat mailpieces, for FSS ZIP Codes, can be combined into the same bundle? 3. A separation (bundles and pallets) between FSS & non-FSS ZIP Codes will be required in all FSS locations? 26 Certificate Program TRUE FALSE TRUE

 For additional information and an opportunity to discuss specific issues in a smaller setting, be sure to attend the Peer-to-Peer Roundtable discussions – located in the Delta Ballroom  When – Tuesday, April 13 th  Time – 7:30 am to 9:00 am  Pre-registration required – space is limited  Register in advance or at main NPF Information Booth Peer-to-Peer Roundtable MEET WITH OTHERS IN THE SAME BUSINESS, EXCHANGE IDEAS ON TOPICS OF COMMON INTEREST, AND BUILD A NETWORK!

DEFLECTION… What’s the deal with Droop? 28

Deflection – Why is it important?  Deflection, also known as “droop” or “flimsiness” is a critical attribute of flat mailpieces.  When a mailpiece is too flimsy, it:  Cannot survive rigors of high-speed automation sorting equipment  Leads to jams and mailpiece damage  Is more difficult to handle in delivery operations 29

History of Deflection Standards  Deflection standards in effect since early 1990’s  Maximum allowed droop was initially 1-3/4” or 2-3/8”  Dependent on mailpiece thickness  In 2007, deflection increased to 4” for pieces longer than 10”  Mailings were mostly carrier route bundles  Typically volume bypassed flats processing so impact of increased deflection not initially apparent  Shift to more automation revealed processing problems  Significant increase in mailpiece damage and machine jams  Increased difficulty in handling  Federal Register to revise standards in December

Revised Deflection Standard  Delayed implementation, originally set for May 2009  Now, revised standards go into effect June 07, 2010  See Domestic Mail Manual (DMM)  Flats must be flexible and meet maximum deflection  Maximum deflection for automation flat-size mailpieces that are:  10 inches or longer –Must not droop more than 3 inches vertically at either end  Less than 10 inches –Must not droop more than 2 inches less than ½ the length vertically at either end 31

32 1. Place mailpiece on a flat, straight-edge surface with length perpendicular to edge of surface and extend mailpiece 5 inches off edge of surface. Test square- shaped bound flats by placing the bound edge parallel to the edge. 2. Place a flat 12-inch ruler (or other similar flat object 12 inches or longer) on top of mailpiece with length parallel to edge of surface and as close to edge as possible so the 5-pound weight does not extend past the edge. 3. Place a certified 5-pound weight on center of the ruler to hold the mailpiece in place. 4. Determine the vertical deflection in inches. Deflection Test Method

Design Alternatives 33  Increase paper basis (cover) weight  Adjust or set minimum page count  Alter binding method  Insert half sheet or bind-in card  Insert bound-in stiffener along stitched spine  Quarter-fold larger or tabloid style flats  Other options???

Deflection - Summary  Revised standards effective June 07, 2010  Price consequences deferred until Oct 03, 2010  Begin to evaluate mailpieces now  Apply test method  Consult with local USPS BME Manager or Mailpiece Design Analyst for assistance prior to mailing, or if a mailing fails deflection test  Explore alternatives to reduce risk 34