MTAC Briefing May 16 2002 Program

MTAC Briefing May 16, 2002

Program • Progression of Task Force • Recommendation Activities • Q & A

Task Force Progression Spring 2001 Fall 2001 Spring 2002 Fall 2002

Mailing Industry Task Force Co-Chairmen JOHN NOLAN MICHAEL CRITELLI Deputy Postmaster General Chairman and Chief Executive Officer

Mailing Industry Task Force Steering Committee Charles Morgan, Company Leader Acxiom Gary M. Mulloy, Chairman & CEO ADVO, Inc. Jonathan Linen, Vice Chairman American Express Nigel Morris, President & COO Capital One Michael Sherman, President Fingerhut Hamilton Davison, President & CEO Paramount Cards Thomas Siebel, Chairman & CEO Siebel Systems, Inc. Dr. Jerry Swartz, Chairman & Chief Scientist Symbol Technologies William L. Davis, Chairman, President & CEO R. R. Donnelley & Sons David Sable, President & CEO Wunderman

California $63 billion Economic Impact Wyoming $372 million New York $65 billion • $900 Billion Industry • 8% of the GDP • Workforce of 9 Million

The Mail Moment

Structure

Seizing Opportunity • 4, 600 Reports Distributed • 20, 000 Hits on Webpage

Broaden Participation

Progress Report • 27 Accomplishments • 41 Planned Actions

Preparation and Entry Optimization William L. Davis, Chief Executive Officer R. R. Donnelley John Rapp, Senior Vice President, Operations United States Postal Service

Preparation and Entry Specific Recommendations • Facilitate preparation standardization • Drive greater system efficiency across classes and sub-classes of mail • Examine mail preparation, containerization, and entry requirements • Implement MTAC’s shape based rate recommendations • Evaluate entire value chain

Preparation and Entry Activities Make Up: Align standard packaging & containerization with USPS processing • Merge flats to carrier route • Implement scheme-based entry • Collect data regarding minimum-piece requirement • Support co-containerization for destination ent

Preparation and Entry Activities Containerization: Introduce optimally designed containers • Develop flat mail containers • Set optimum container minimums • Implement customer prepared three-digit containers only when they add value to USPS processing

Preparation and Entry Activities Acceptance Points: Align mail entry with networks • NIA is long-term solution • Explicitly define drop ship entry points Acceptance Process: Optimize efficiencies between mailers & USPS • Adopt Postal. One! • BOG Approved $54. 1 million in funding for Postal. One! - May 6, 2002

Network Optimization William L. Davis, Chief Executive Officer R. R. Donnelley John Rapp, Senior Vice President Operations United States Postal Service

Network Optimization Specific Recommendations • Optimize the USPS logistics network to reduce total system-wide costs • Focus on presenting mail at the most efficient point in the most efficient manner to realize cost savings • Adopt USPS’ network optimization effort (NIA) as part of Task Force’s vision

Network Optimization Strategic Goal Network Optimization mandates shifting our focus from optimizing the performance of a particular product or lane to optimizing the performance of the entire postal logistics network and value chain.

Network Optimization Network Integration & Alignment (NIA) Objectives • Reduce combined (USPS and Customers’ costs) • Increase operational effectiveness and service responsiveness • Improve consistency and predictability of service

Network Optimization Activities • Test baseline model through summer • Conduct mailer input workshops • Evaluate network alternatives • Explore workshare alternatives • Report on model results and network strategy at Fall NPF

Improve Address Quality Charles Morgan, Company Leader Acxiom Corporation Charles Bravo, Sr. Vice President, Chief Technology Officer United States Postal Service

Address Quality Specific Recommendation • Require more frequent use of move update and address matching software • Provide data on undeliverable mail to mailers

Address Quality Progress to Date Develop Federal Register Notice which recommends: • Require list reprocessing for automation rate mail every 90 days • Require ZIP+4 directory updates monthly • Use Move Update product within 90 days of mailing • Extend Move Update requirements to more classes Federal Register Notice to be released in May

Address Quality Progress to Date National Change Of Address (NCOA) Data Test • Validating accuracy of NCOA • Involves 10 large mailers • Take place April through July • Report results at fall NPF

Address Quality Progress to Date UAA Tracking and Analysis • • Bank One, Prudential First class campaign of 5 million pieces Zip+4 coded, Move Updated Expect 5 -10% return mail rate Findings • Which shouldn’t have been mailed? • Which should have been delivered?

Address Quality Activities • Improve compliance with Address Change Service-prepared mail handling procedures • Support phase II proof-of-concept testing of Address Element Correction process • Redesign and update CASS Form 3553 • Secure USPS support for preprinting ACS codes on envelopes

Intelligent Mail Michael Critelli, Chairman and CEO Pitney Bowes Charles Bravo, Sr. Vice President and Chief Technology Officer Tom Day, Vice President, Engineering United States Postal Service

Intelligent Mail Specific Recommendations • Create a real time web-based service measurement • Develop delivery predictability programs • Upgrade existing recognition technology

Intelligent Mail Activities • Implemented Confirm • Enabled all automated letter & flat sorting equipment to read PLANET Code • Expanded the use of Information-Based Indicia (IBI) • Upgrading camera technology on letter sorting equipment

Intelligent Mail Activities • Begun testing parcel sorting machines equipped to read IBI and Delivery Confirmation codes • Prepared the Confirm rate case • Finalized common postal-and-industry Confirm reports • Evaluating feasibility of adding IBI capability to flat-sorting machines

Intelligent Mail Activities • Complete a high level strategy for “intelligent mail” • Work with USPS to determine contents & symbologies and impact • Promote gathering of samples, perform pilot tests and assist in validation of value • Support USPS deployment of equipment & “intelligent” mail program

Intelligent Mail Activities • Leverage collateral benefits • Promote publishing ISO coding standards • Determine linkage with address quality • Explore ways to make mail more predictable • Investigate means of expanding to personal use • Ensure balance between value & investment

Enhanced Payment Systems and Commercial Credit Options Gary Mulloy, Chairman and CEO ADVO Bob Pedersen, Vice President, Treasurer United States Postal Service

Payment Systems & Credit Options Specific Recommendations • Provide business mailers with flexible payment terms • Modernize and upgrade payment systems • USPS offer one-source access and tracking of all financial transactions • Explore at-home payment options

Payment Systems & Credit Options Activities USPS offer one source of access and tracking of all financial transactions

Payment Systems & Credit Options Postal. One! Industry NEEDS N – National Permit Number E – Establish / Modify Mailing Accounts E – Electronic & Enhanced Payment Flexibility D – Detailed On-Line Reporting S – Simplified Easy to Use Systems

Payment Systems & Credit Options Activities Conduct Proof of Concept Tests: • PIN-based debit card • Expand CAPs availability for BRM • Support the offering of credit terms by intermediaries

Payment Systems & Credit Options Proof of Concept Test PIN-Based Debit Card

Payment Systems & Credit Options Proof of Concept Test Expand CAPS Availability for BRM

Payment Systems & Credit Options Proof of Concept Test Third Party Credit

Pricing Strategy Gary Mulloy, Chairman and CEO ADVO Steve Kearney, Vice President, Pricing and Classification United States Postal Service

Pricing Strategy Specific Recommendation • Adopt competitive pricing strategy • Predictable price increases at or below inflation • Streamline rate making process • Examine customized pricing procedures • Protect Citizen’s access to low cost First-Class Mail

Pricing Strategy Activities • Streamlined rate-setting • Targeted Pricing • Pricing Strategy

Pricing Strategy Activities • Support USPS/PRC conference – Ratemaking Summit - May 28, 2002 • Design & implement targeted pricing initiatives • Evaluate pricing proposals in Transformation Plan

Consumer Gateway Services Dr. Jerry Swartz, Chairman and Chief Scientist Symbol Technologies Nick Barranca, Vice President, Product Development United States Postal Service

Consumer Gateway Services Specific Recommendations • Create a merchandise returns service • Increase convenience by providing 24/7 access • Define consumer’s needs to support the “mail moment” • Pilot a program using “print to Web” links

Consumer Gateway Services Activities Increase convenience of returning merchandise by exploring: • Integration of barcodes on outgoing parcels and return labels • Carrier pick-up program • Flat rate packages

Consumer Gateway Services Activities Expand consumer access 24 by 7, and at additional locations by: • Adding self-service technology / kiosks • Analyzing results of Mail Item Retrieval System pilot • Studying electronic cash at door - debit / credit

Consumer Gateway Services Activities Enable web portal for print-to-web transaction: • Identify provider, either USPS or third party • Study feasibility

Implement Industry Council Michael Critelli, Chairman and CEO Pitney Bowes Inc. David Sable, President and Chief Executive Officer Wunderman New York

Implement Industry Council Specific Recommendations • Foster industry standards • Develop targeted advertising and a marketing program • Provide public policy leadership

Implement Industry Council Activities • Support an industry-wide Transformation Plan effort • Develop and launch an advertising & marketing program • Enhance the coordinated government relations strategy • Establish a CEO level council • Provide standards development leadership

Implement Industry Council Activities • Establish CEO Council as legal entity • Further develop marketing strategies – Participate in special events – Stimulate media coverage • Pursue development of unified standards • Expand participation & acquire funding

Mailing Industry Task Force Product Redesign Strong and Vital Industry Mail Security Transformation Plan

All Available at www. usps. com