® Flats Update Rosa Fulton Executive Director, FSS Krista Finazzo Manager, Operational Requirements MTAC – November 2010

® 2  Flat Volume FY 2010 Update  Flat Strategy Activities Update  FSS Update  FSS Optional Mail Prep Agenda

® 3 Flat Volume Trend FY 2005 –10 Flat volume decline 32% 17.1 billion fewer flats annually FY 2005 –10 Flat volume decline 32% 17.1 billion fewer flats annually

® 4 Flat Volume Percent by Class

® 5 Flat Volume 2010 vs FY 2010 Flat volume, 36.8 bil -5.8% decline compared to FY bil fewer flats FY 2010 Flat volume, 36.8 bil -5.8% decline compared to FY bil fewer flats -12.9% -7.9% -4.5%

® 6 All Flats by Month Comparison August – only month volume increased over SPLY by 3.9%

® 7 Periodical by Month Comparison September month with least Periodical volume decline -1.1%

® Flat Strategy Update

® 9 Automate piece & bundle distribution of all flat mail Reduce Non-value added work Improve existing processes / standardization 1.Sequence all flats for delivery FSS zones / delivery units 2.CR-RT all flats for non-FSS zones AFSM 100 Mailer work-share 3.Finalize all bundles requiring distribution APPS, APBS, SPBS 1.Reduce sacks 2.Reduce bundle breakage 3.Bypass bundle distribution 4.Automate flat mail preparation 1.Equipment utilization AFSM 100 APPS 2.APPS 100% finalization 3.Align flat distribution processes 4.Reduce handlings unit/container density 5.Align “redirect” processes Current Activities  FSS phase 1 deploy 100 machines  Upgrading 186 SPBS to APBS  Reduce manual processing  Ensure automated processing of Periodicals o Eliminate Hot 2-C practices  Align PER CETs w/automated processing  Co-mailing  Co-palletization  Recognition improvement programs Current Activities  Bundle integrity / reduce bundle breakage  Optimum bundle sizes to reduce handlings & bypass bundle distribution  FSS optional mail preparation  Origin entry containerization & separation requirements Current Activities  Facility optimization  Equipment consolidations  Transportation optimization  LSS projects to streamline operations & increase productivities  Sort plan optimization  Eliminate PER & STD flats on air transportation

® FSS Update MTAC – November 2010 Rosa Fulton Executive Director, FSS

® 11 FSS Deployment Plan 100 FSS / 47 Sites # FSS Color Key

® 12  Sequencing flats 23 operational machines 9 sites  Ready for sequencing 52 machines 22 sites  Installations in progress 4 machines 4 sites FSS Deployment / Operations 100 th FSS machine Installed – April 2011 Operational – June 2011

® 13  Sequencing Operations FSS Sequencing Operations Site# FSS 1. Dulles4 2. Columbus2 3. Kansas City2 4. Phoenix3 5. South Florida4 6. New Jersey NDC3 7. Mid Island2 8. NW Boston2 9. Curseen Morris1 Over 7,000 carriers receiving sequenced flats in 210 delivery units

® 14 FSS Live Operations – Next Sites Deployment & Activation ongoing By the end of December operational FSS sites 28 FSS machines on-line 1/3 of FSS phase 1 machines on-line by end of January

® FSS Optional Mail Prep MTAC – November 2010 Krista Finazzo Manager, Operational Requirements

® 16 FSS Optional Mail Preparation  FSS Optional Mail Preparation  Effective January 2, 2011  Mailers provided opportunity to align flat mail preparation (bundles & pallets) with FSS sort-schemes & processing strategy  Objective  Get flats to the front of FSS—bypass upstream bundle distribution  FSS flats available earlier in the end-to-end flat distribution process

® 17 FSS Optional Mail Preparation 1. FSS sort-scheme bundle  Combines all 5-digit flat mailpieces for a sort-scheme into the bundle 2. FSS pallets  FSS scheme pallet  FSS facility pallet

® 18 Pallet DescriptionBundle Make-upMail Flow (1 st handling) Stand Alone Mail Prep (SAMP) Bypasses all bundle distribution and ready for flat mail prep & FSS processing APPS / SPBS Moves to the front of the queue for bundle distribution. FSS sort- scheme bundles are sorted into containers that match FSS sort schemes maximizing the flats available for the early sequencing runs on FSS APPS / SPBS Bundles are sorted into containers that match FSS sort schemes, AFSM 100 sort schemes and CR- RT containers for non-FSS zones 5-digit flats sequencing systems (FSS) scheme pallet FSS Facility Pallet SCF pallet Bundles prepared for a single FSS sort scheme as shown in L006 Bundles prepared for a single FSS sort-scheme as shown in L006 Automation compatible bundles CR-RT, 5-D and SCF as shown in L005 FSS Optional Mail Preparation

® 19 Summary  Mailers FSS optional flat preparation effective January 2, 2011  Planning & synchronization in progress

® 20