Southern Area

Operational Window ChangeEffective January 5, 2015

August 21, 2014

THE NETWORK OF THE FUTURE

Volume Decline

Source: RPW, FY2007 – FY2013

2007 2008 2009 2010 2011 2012 2013 2014 (est)

0

5

10

15

20

25

30

35

40

45Single Piece - First Class LettersPi

eces

(mill

ions

)

16.4% decline since AMP packages developed

3

Overnight: Properly prepared Presort mail entered by applicable CET

2-day: Maximum 6 hour drive time (including STC time) between originating facility and SCF facility (Every remaining plant except for DDC’s will be an ADC)

3-5 day: Everything else

https://www.federalregister.gov/articles/2014/08/01/2014-18223/designation-of-implementation-date-revised-service-standards-for-market-dominant-mail-products

New FCM Business Rules

4

*FY2013 ODIS Average Daily Volume and FY2013Q4 First Class Mail Service Standards

  % 1-Day % 2-Day % 3-Day % 4-Day % 5-Day

Average Days to Delivery

Current* 30.51% 25.14% 44.03% 0.31% 0.00% 2.14

Future 20.05% 35.60% 44.03% 0.31% 0.00% 2.25

Preserves ~ 66% of overnight volume

Expected Volume Distribution

5

Phase II Consolidations

82 mail processing sites in 2015

Facility Type TotalAnnexes 2Customer Service Facilities 16DDC's 1P&DC/P&DF's 63Total 82

6

Southern Area Phase II Consolidations

14 Mail Processing sites in 2015

7

SOUTHERN AREAREMAINING CONSOLIDATIONS

Losing Site Gaining Site Scheduled Implementation DateAbilene TX CSMPC Austin TX P&DC (768) 4/18/2015Abilene TX CSMPC Midland TX P&DF (769, 795, 796) 4/18/2015Augusta GA P&DF Columbia SC P&DC (298) 7/25/2015Augusta GA P&DF Macon GA P&DC (308, 309) 7/25/2015Beaumont TX P&DF (Destinating) North Houston TX P&DC 4/18/2015Corpus Christi TX P&DC San Antonio TX P&DC 4/15/2015Gainesville FL P&DF (SCF Primary Flats) Jacksonville FL P&DC 1/10/2015Grenada MS CSMPC (Dest) Jackson MS P&DC 7/25/2015Gulfport MS P&DF Mobile AL P&DC 7/25/2015Hattiesburg MS CSMPC (Dest) Mobile AL P&DC 4/18/2015Houston TX P&DC North Houston TX P&DC 4/18/2015Huntsville AL P&DF (Destinating) Birmingham AL P&DC 4/18/2015Manasota FL P&DC (337)) Tampa FL P&DC 7/25/2015Manasota FL P&DC (338) Tampa FL P&DC 7/25/2015Manasota FL P&DC (342)* Fort Myers FL P&DC 7/25/2015Mid Florida FL P&DC (Destinating) Orlando FL P&DC 1/10/2015New Orleans LA P&DC* Baton Rouge LA P&DC 7/25/2015Tulsa OK P&DC Oklahoma City OK P&DC 7/25/2015

*The Southern Area has requested new AMP Studies to consolidate Baton Rouge into New Orleans

and Fort Myers into Manasota

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20160

200

400

600

800673

623 614 599

528487

461417

320 319

Decrease in Processing Locations Through 2016

Plant Consolidation

239

At start of FY – Includes STC’s, NDC’s, ISC’s, DDC’s, Rec Sites

8

OPERATIONAL WINDOW SHIFTS

10

24:00

06:00

12:00

18:00

08:00

OutgoingOperations(5:00 PM –12:30 AM)

ContinuousDPS/Secondary Operations(12:00 PM – 6:00 AM)(SA-12:00PM-4:00 AM)

Incoming Primary Operations(8:00 AM – 12:00PM)(SA-4:00AM-12:00PM)

BMEU(8:00 AM – 7:00 PM)

Remittance/Caller ServiceProcessing(8:00 AM -6:00 AM)

National Concept of 24-Hour Plant Operations Operational Window Change

Priority Mail – No Change

0800 1200 1600 24002000 0400 0800

Current Processing

Originating(1700-0115)

Destinating(0800-0400)

Future Processing

Originating(1700-0115)

Destinating(0800-0400)

11

Originating FCM Letters/Flats – Current vs Future

0800 1200 1600 24002000 0400 0800

Current Processing

Cancellation (1700-2200)

Outgoing Primary (1730-2300)

Future Processing

Cancellation (1700-0050)

Outgoing Primary (1730-0100)

Outgoing Secondary (1800-2400)

Outgoing Secondary (1800-0130)

Expansion of outgoing operating windows only for those sites consolidating originating mail

12

Key Principles

There is an overnight delivery standard for commercial mail entered by the CET

There is an overnight delivery performance for both commercial mail and single piece first class mail

Anticipate that 66% of current overnight delivery performance will remain under Phase 2 Network Rationalization (Commercial entered by CET and 1/3 of Blue Box Mail)

13

Transportation Changes due to CET Changes

CET for 2 Day and 3 Day Destinating Volumes is changing from 1600 to 0800

$124 million is being budgeted for additional air transportation

Realignment of surface network (some 3 day destinating trips may arrive up to 9:30 am on Day 2)

Revaluation of STC & CDF/Pref network

Evaluate Fedex Contract impact

14

Commercial Mail CET’s

Two Critical Entry Times for Commercial Mail 8:00am

Mail tendered by 8:00am destined for that plant’s local delivery area requiring a primary sortation, will have an overnight delivery standard

Noon Mailers who enter presorted mail, properly

prepared, and containerized by L012 Labeling List (DPS Sort Program Zip Grouping), and entered by CET of noon, will have an overnight first class service standard for mail destinating to the local plants service area

15

Destinating Letters – Current vs Future

0400 0800 1200 20001600 2400 0400

Current Processing

Incoming Primary (0800-2000)

DPS Processing(2200-0600)

Future Processing

Incoming Primary

(0400-1200)

DPS Processing(1200-0400)

Remittance/Caller Service (0800-0600)

Remittance/Caller Service (0800-0600)

16

Incoming Primary (Standard)(1600-0400)