Status of NDC Activations MTAC Briefing August 12, 2009

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

3  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 Overview Network Reengineering

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  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 Impacts

7  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 Mail Preparation

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

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

10 Phase 1 Acceleration  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 Baseline: 3/28/09 – 4/24/09 (4 week average prior to implementation) Current: 7/25/09 – 7/31/09 BaselineCurrent Origin Package Service Improvement from Phase I

11 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 BaselineCurrent

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  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 Customer Impacts

14  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 Summary