Operations Update February 2001

Topics Fall Mailing Season Christmas Holiday Rate Implementation

Standard A Volume Trends

Fall 2000 Standard A Volume Much Higher than Last Year +1.5 Billion more pieces

DSAS Appointments Operating Conditions Communications – BSN’s, Account Managers, & Operations – HQ & Area Managers Operations Fall Monitoring

Observations of Mail Conditions By Inspection Service Requested by the COO Weekly Findings to AVP and MOS, – September through January 2001 Corrective Actions to the COO Focus on sites of Customer Concern

Fall 2000 Standard A Delays in Plants Similar to Last Year Fall Mailing

Flats Processing - AFSM 100 Faster and Higher Throughput OCR / BCR / Keying / Added Bins Real Time Keying of Rejects Focus on Incoming Secondary Deploying Now – 165 operating as of January 2001 – additional 362 deployment begun

Fall 2000 Election Mailings AFSM 100 Focused on Weekend Processing and Inventory levels Communications – Operations, BSNs & Customer Support Teams

Christmas Holidays Priority Mail Processing Centers Emery operated through Christmas Area Operations used contingency plans to offload heavy destinating volumes 10 PMPCs converted to postal facilities on January 7th

Christmas Holiday Logistics Issues Most severe weather in a decade High commercial airlines flight cancellations Significant daily mail backlogs at major air hubs Highway transportation suffered delays and cancellations +200 dedicated network aircraft flights were canceled due to weather in 13 days

Christmas Holiday Christmas Eve and Christmas Day delivery of Express Mail and obvious gifts Dedicated networks moved +92 million pounds in 13 days Cancellation volumes reached all time high – 314 Million on Dec 18th Two Peak Plant & Delivery Day – 4 Billion cards & letters during holiday season

Rate Implementation New Rates implemented January 7th Plant Verified Drop Shipments entered until January 20 Significant increase in Standard A volumes at plants from Jan th

Standard A Delays in Plants Very High following New Rate New Rates Implemented

Rate Implementation Actions to Correct COO directly involved HQ and Area Operations telecons COO and Area VP telecons Area Action Plans implemented Delays dropped dramatically last week

Results: Standard A Delays have been significantly reduced

Summary Fall - Volume Christmas- Weather Rates- Recovered