CORPORATE AUTOMATION PLAN PHASE 2 UPDATE August 17

CORPORATE AUTOMATION PLAN PHASE 2 UPDATE August 17, 2005 MTAC Washington DC

CORPORATE AUTOMATION PLAN PHASE 2 CAP PHASE 2 CONTENTS COMPARED TO ORIGINAL CAP Issued May 2004 2

CORPORATE AUTOMATION PLAN PHASE 2 CAP PHASE 2 CONTENTS COMPARED TO ORIGINAL CAP Original CAP Automate Letter Distribution n Automate Flat Distribution n Automate Parcel Sorting n Automate Bundle Processing n Automate Tray & Container Processing n Longer Term Plans n Delivery Automation n Transportation n Scanning and Tracking n CAP Phase 2 YES YES YES 3

CORPORATE AUTOMATION PLAN PHASE 2 LETTERS n AFCS Improvements – Add OCR Capability – Upgrade Ink Jet Canceller – Doubles Detector 4

CORPORATE AUTOMATION PLAN PHASE 2 LETTERS n DIOSS – OCR Capability – Sprays Barcodes – Transmits Images of Nonreadable Mail Pieces to the RCR 5

CORPORATE AUTOMATION PLAN PHASE 2 LETTERS Postal Automated Redirection System Phase 2 Deployment Should be Completed by Late 2007 282 Plants and 12 Remote Encoding Centers 6

CORPORATE AUTOMATION PLAN PHASE 2 FLATS Postal Automated Redirection System Deployment : TBD 7

CORPORATE AUTOMATION PLAN PHASE 2 FLATS n OPTION 1: Delivery Point Packaging Develop a machine that will sequence both letters and flats in delivery order. n OPTION 2: Flats Sequencing System Develop a machine that will sequence only flats in delivery order. 8

CORPORATE AUTOMATION PLAN PHASE 2 FLATS n OPTION 2: Flats Sequencing System Develop a machine that will sequence only flats in delivery order. 9

CORPORATE AUTOMATION PLAN PHASE 2 FLATS SEQUENCING SYSTEM - TIMELINE STATUS OF R&D EFFORTS 1 Contractor Completion and Decision Point: Event: Phase 1 – Evaluate FSS Design & Simulation Results Phase 2 – Build and Test FSS Prototype Phase 3 – Field Test at Postal Facility Begin Deployment Completed October 2005 April 2006 Calendar Year 2008 10

CORPORATE AUTOMATION PLAN PHASE 2 FLATS SEQUENCING SYSTEM POTENTIAL BENEFITS n Letters and Flats Sorted Separately n DPS Letter Sorting Continues n Flats Sequencing in Delivery Point Order n Reengineer Our Processes for Handling "Residue Volumes" 11

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CORPORATE AUTOMATION PLAN PHASE 2 FLATS SEQUENCING SYSTEM POTENTIAL CHANGES n Drop Ship Entry Points Would Change n CR Presort Eliminated in Automated Zones n 11 -Digit Barcode or ID TAG Required n Detached Address Labels n Increased 5 -Digit Presort Volume n Standardized Label Placement n Rates Reflect Appropriate Savings To Be Determined 13

CORPORATE AUTOMATION PLAN PHASE 2 FLATS AUTOMATED TRAY INDUCTION 14

CORPORATE AUTOMATION PLAN PHASE 2 FLATS AUTOMATED TRAY HANDLING SYSTEM 15

CORPORATE AUTOMATION PLAN PHASE 2 PARCELS AND BUNDLES AUTOMATED PACKAGE PROCESSING SYSTEM 16

CORPORATE AUTOMATION PLAN PHASE 2 PARCELS AND BUNDLES n Automate Bundle Processing n Optional Endorsement Lines n Pressure Sensitive Barcoded Labels n Reduce Sack Usage n Increase Bundle Integrity and Reduce Bundle Breakage 17

CORPORATE AUTOMATION PLAN PHASE 2 PARCELS AND BUNDLES APPS DEPLOYMENT STRATEGY n Align Deployment with Future Network n Network Package and Bundle Processing Role – Sort to Destinating RDCs at Origin RDC – Reduce Network Handlings – Minimize Transportation Requirements n Support Local and Destinating Processing Centers – Sort to 5 -Digit or Scheme at Destination 18

CORPORATE AUTOMATION PLAN PHASE 2 PARTNERSHIP WITH INDUSTRY n Mail Presort Requirements Will Change As Technology Evolves n Industry Participation Is Critical 19

CORPORATE AUTOMATION PLAN PHASE 2 PARTNERSHIP WITH INDUSTRY Work Together to: § Ensure Lowest Combined Processing Costs § Explore Innovative Processing Options § Match Products and Penetration to Automated Equipment § Establish Lead Times For Changes 20

Thank you. 21

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