® Flats Symposium 2008 Bill Galligan Senior Vice President, Operations USPS National Postal Forum ® National Postal Forum 2008

National Postal Forum ®

® USPS Salary & Benefits: $54 Billion Delivery 43% Mail Processing 22% Support 0.9% Other Functions 9% Customer Service 16% Maintenance 6% Vehicle Services 2.4% Source: 2007 Annual Report

National Postal Forum ®  Incremental Cost Improvements Over the Last 10 Years  Delivery Will Continue to be Largest Cost Center  Continued Delivery Point Growth  Address Infrastructure Burden Managing Delivery Costs

National Postal Forum ® What is Delivery Point Sequencing? Technology Places Mail Pieces into Exact Order of Delivery

National Postal Forum ® Letter Mail Technology (City) – DPS Trend 87% Cased Letters DPS Letters USPS Has Sequenced Letters Since 1993 Resulting in Over $5 Billion Annual Savings

National Postal Forum ® Replicate Letter Mail Success for Flats

National Postal Forum ® Flat Volume Trend

National Postal Forum ® Annual Flat Volume Periodicals 17% First-Class Mail 8% Standard Mail 75% Standard Mail 75% 52 Billion Flats FY 2007 (RPW) 52 Billion Flats FY 2007 (RPW)

National Postal Forum ®  Streamline and Simplify Mail Make-up  Reduce Number of Entry Points  Induct the Mail Where Processed  Bypass Sack / Bundle Distribution  Automate Mail Preparation  Automate Sequencing of Flats for Delivery  Leverage the Use of Data Flats End-to-End Strategy

National Postal Forum ® 1. “The Address” 2. Mail Entry Entry Points Critical Entry Times 3. Mail Prep in FSS Environment Mailer Changes

National Postal Forum ® FSS Benefits  Substitute Technology for Manual Labor  Manage Delivery Growth  Reduction in Future Delivery Vehicles  Reduction in Facility (Delivery Unit) Space Needs  Improve Processing Performance and Service  End-to-End Visibility  Create Lowest-Combined-Cost System