1. ® Webinar 6 Expanded EXFC Presented by Delores Killette Vice President, Consumer Affairs and David Williams Manager, Processing Operations Friday, November 7, 2008

2. ® Agenda 1. Overview 2.Sample Design and Methodology 3.Pilot Test Results EXFC Expansion

3. ®  Changes to EXFC in FY 2009  Coverage expanded to 891 ZIP Codes* Additional 428 ZIP Codes Represents 99% of Single Piece First Class volume  Reflect Modern Service Standards Includes Four and Five Day Service Standard Impacts Alaska, Honolulu and Caribbean *ZIP Code list located on CKM website under Other Educational Material/Resources/Report Information http://blue.usps.gov/caweb/ckm/ckm_ttms_library.htm EXFC Expansion Overview

4. ®  Changes to EXFC in FY 2009  New kits introduced on October 4 21 kits; 3 flat kits, 2 postcard kits, 16 letter kits  Key Characteristic Changes – Additional Flat kit Stamped percentage 38.2% to 53.3% Metered volume decreased 61.8% to 46.7% Handwritten percentages increased 19% to 23.7% Kit descriptions located on CKM website under Other Educational Material/Resources/Report Information http://blue.usps.gov/caweb/ckm/ckm_ttms_library.htm EXFC Expansion Sample Design and Methodology

5. ®  Increased test mail volume ● Increased overnight volume for PCs with increased coverage and origin-destination ZIP Code pairs ● Additional two and three-five day destinating volume for all PCs EXFC Expansion Sample Design and Methodology Service Standard Destinating Volume Target per PC Current EXFC System Destinating Volume Target per PC Expanded EXFC System Overnight4,785 pieces Two-Day1,500 pieces2,285 pieces Three-to-Five-Day1,500 pieces2,685 pieces

6. ® EXFC Expansion – Area Overview Area # of New ZIP Codes Overnight % Volume Added Two-Day % Volume Three-Five Day % Volume Added Capital Metro1610%13%8% Eastern7625%21%16% Great Lakes3516%12%8% New York Metro1110%6%9% Northeast3220%23%22% Pacific1514%21%12% Southeast4623%24%13% Southwest6326% 13% Western13430%40%19% Nation42820%21%14%

7. ® EXFC Expansion – Pilot Results Description of Column Contents:  EXFC (463): The official FY08 Q4 results for the established 463 ZIP Codes (without any Expansion ZIP Code results)  New ZIP Codes (428): The results for mailpieces that originated and/or destinated in one of the new 428 ZIP Codes  All ZIP Codes (891): The pilot results of mailpieces that originated and destinated in any of the 891 ZIP Codes  Difference: The results of all 891 ZIP Codes minus the results of EXFC 463 Service Standard EXFC Codes (463) New ZIP Codes (428) All ZIP Codes (891) Difference (All 891–EXFC 463) Overnight96.794.096.2- 0.5 Two-Day94.288.993.1- 1.1 Three-Day92.986.491.7-1.2 Pilot Test results located on CKM website http://blue.usps.gov/caweb/ckm/ckm_ttms_report_exfc_pilot_menu.htm Current EXFC versus Pilot Test Performance July 1, 2008 – September 30, 2008

8. ® PC data located at http://blue.usps.gov/caweb/ckm/ckm_ttms_report_exfc_pilot_menu.htm EXFC Expansion – Pilot Results All nine Areas experienced a score decline when measuring all 891 3-digit ZIP Codes  Southwest has largest change (-0.80) Area Overnight Results from Q4 FY 08

9. ® PC data located at http://blue.usps.gov/caweb/ckm/ckm_ttms_report_exfc_pilot_menu.htm EXFC Expansion – Pilot Results All nine Areas experienced a score decline when measuring all 891 3-digit ZIP Codes  Western has the largest potential change (-2.5) Area Two Day Results from Q4 FY08

10. ® PC data located at http://blue.usps.gov/caweb/ckm/ckm_ttms_report_exfc_pilot_menu.htm EXFC Expansion – Pilot Results Three-day Service Standard All nine Areas experienced a score decline when measuring all 891 3-digit ZIP Codes  Western has the largest potential score change (-2.23) Area Three-Day Results from Q4 FY08

11. ® Final Zero Bundle Results  23 verified zero bundles in core EXFC ZIP Codes of 28,263 bundles inducted  23 verified zero bundles in pilot ZIP Codes out of 2,540 bundles inducted EXFC Expansion Results

12. ® Customer Knowledge Management Resources Service Performance scores are located on the CKM website at http://blue.usps.gov/caweb/ckm/ckm_ttms_report_me nu.htm http://blue.usps.gov/caweb/ckm/ckm_ttms_report_me nu.htm For questions on Transit Time Measurement System (TTMS) studies you may contact the TTMS team at ckmfeedback@usps.gov ckmfeedback@usps.gov EXFC Expansion

13. Slide 13 Impact of EXFC Expansion on October Destinating EXFC Performance Data Source: EDW/TTMS November 4, 2008 EXFC Expansion Service Standard Old EXFC ZIPs EXFC Expansion ZIPs GapTotal EXFC Overnight96.02%93.20%2.8295.53% 2-Day93.43%90.07%3.3692.77% 3-5 Day92.04%85.42%6.6291.20%

14. Slide 14 MHTS Service Gap Between Old EXFC and Expansion EXFC – October 2008 Delivery Unit Processing Origin Processing Destination Processing DeliveryTransport to Delivery Unit Transport to Destination Collection MHTS Measure EXFC Expansion Service Standard Old EXFC ZIPs EXFC Expansion ZIPs Gap Total MHTS (Old and Expanded ZIPs) Overnight98.80%98.29%0.5198.69% 2-Day96.04%94.64%1.4095.71% 3-5 Day94.43%89.96%4.4793.78%

15. Slide 15 EXFC Expansion

16. Slide 16 EXFC Expansion

17. Slide 17 EXFC Expansion

18. Slide 18 Composite National O/N EXFC Expansion Impacts EXFC Expansion Destinating New Volume = 17.5% Destinating New Failures = 26.5% Percentage Point Gap = 9.0

19. Slide 19 Composite National 2-Day EXFC Expansion Impacts EXFC Expansion Destinating New Volume = 19.7% Destinating New Failures = 27.1% Percentage Point Gap = 7.4

20. Slide 20 Composite National 3-5Day EXFC Expansion Impacts EXFC Expansion Destinating New Volume = 12.8% Destinating New Failures = 21.2% Percentage Point Gap = 8.4

21. Slide 21 Destinating Overnight MHTS EXFC Expansion Impacts Data Source: MHTS/MIRS October 2008 6 Point Gap EXFC Expansion

22. Slide 22 Destinating 2-Day MHTS EXFC Expansion Impacts Data Source: MHTS/MIRS October 2008 5 Point Gap EXFC Expansion

23. Slide 23 Destinating 3-5 Day MHTS EXFC Expansion Impacts Data Source: MHTS/MIRS October 2008 8 Point Gap EXFC Expansion

24. Slide 24 EXFC Service Impact Pareto Chart - Overnight Letters Last Mile Failure Point Impact = 1.76 Points Data Source: IBM Root Cause Failure Analysis – Final Quarter IV FY 2008 Last Mile Failure Non-Standard Depth of Sort Origin Miscoded/Misread Late Inc. Secondary Processing Non-Standard Origin Processing No Read at Destination Origin Processing Delay Dest. Miscoded/Misread Destination Missent Collection Delay No Read at Origin Origin Missent Received 1st DPS Pass/Not 2nd DPS Looping EXFC Expansion

25. Slide 25 MHTS Service Predictor Delivery Unit Processing Origin Processing Destination Processing DeliveryTransport to Delivery Unit Transport to Destination Collection Collection Factor MHTS Service Last Mile Factor % On- Time EXFC Overnight Letters 0.08 98.80%1.76 96.96% EXFC Expansion

26. Slide 26 Old EXFC Impacts for Letters – October 2008 Data Source: * IBM Root Cause Failure Analysis – Final Quarter IV FY 2008 MHTS service from MIRS – October 2008 EXFC Expansion Service Standard Collection Factor MHTS Service Last Mile Factor * Predicted Service Actual ServiceDifference Overnight 0.0698.80%1.7696.98%96.52%0.46 2 Day 0.0696.04%1.5594.43%94.21%0.22 3-5 Day 0.0594.43%1.2293.16%92.89%0.27

27. Slide 27 EXFC Expansion Impacts for Letters – October 2008 Data Source: * IBM Root Cause Failure Analysis – Final Quarter IV FY 2008 MHTS service from MIRS – October 2008 EXFC Expansion Service Standard Collection Factor MHTS Service Last Mile Factor * Predicted Service Actual ServiceDifference Overnight 0.1898.29%1.7696.35%93.71%2.64 2 Day 0.0794.64%1.5593.02%90.71%2.31 3-5 Day 0.0689.96%1.2288.68%86.02%2.66 Service Standard Collection Factor MHTS Service Estimated Last Mile Factor Predicted Service Actual ServiceDifference Overnight 0.1898.29%3.9494.17%93.71%0.46 2 Day 0.0794.64%3.6490.93%90.71%0.22 3-5 Day 0.0689.96%3.6186.29%86.02%0.27

28. Slide 28 Last Mile Impacts  Get mail in DPS – automate volumes  Connect rejects / rework volumes from DPS  Reduce At Risk volumes - machine and operator quality  Dispatch trucks on time 0400 – 0900  Connect hot case - timely customer service distribution Collection Delivery Unit Processing Origin Processing Destination Processing DeliveryTransport to Delivery Unit Transport to Destination EXFC Expansion

29. Slide 29 EXFC Expansion Expansion EXFC Impacts on Total EXFC Expansion MHTS Failures Data Source: MHTS/MIRS October 1 – 30, 2008

30. Slide 30 What If Overnight Flats were at 96.50% On-Time? October 2008 Mail Shape Old EXFC ZIPs EXFC Expansion ZIPsTotal EXFC Letters96.54%93.80%96.06% Flats89.79%85.75%89.10% Total96.04%93.21%95.55% What If Flats were at 96.5% On Time?96.54%93.99%96.09% Data Source: EDW/TTMS November 5, 2008 EXFC Expansion

31. Slide 31 EXFC Service Impact Pareto Chart – Overnight Flats Data Source: IBM Root Cause Failure Analysis – Final Quarter IV FY 2008 Last Mile Failure Point Impact = 3.22 Last Mile Failure Origin Missent Late Inc. Secondary Processing Non-Standard Origin Processing Origin Miscoded/Misread No Read at Destination Origin Processing Delay Dest. Miscoded/Misread No Read at Origin Destination Missent Collection Delay EXFC Expansion

32. Slide 32 Key Actions  Collection box management process in place  Standardized mail flows in place for all mail  Operating plan and 24 hour clock adherence discipline for all mail  High levels of machine and operator method quality  Service responsive transportation  Timely customer service distribution EXFC Expansion

33. Slide 33 Questions? Service.Webinars@usps.gov Do you have questions about any of the presentations? Do you have suggestions to make them more informative? Do you have ideas for new presentations? WE WANT TO HEAR FROM YOU!

34. Slide 34 Next Week Friday, November 14, 2008 at 11:00 a.m. ET First-Class Mail Measurement and Operational Impacts Presented by – Tom Day Senior Vice President, Intelligent Mail & Address Quality and David Williams Manager, Processing Operations Have a good weekend!