Service Measurement Reporting Format MTAC November

® Service Measurement & Reporting Format MTAC November 7, 2007

Agenda q Required Service Measurement q EXFC System Overview and Expansion Plan q Hybrid External Measurement Approach Leveraging Internal Data Systems q Periodicals Challenge q Report Format q Wrap-up 2

Required Service Measurement q First Class (Single-Piece and Pre-sort) q Periodicals q Standard q Single-Piece Parcel Post q Library Rate q Media Mail q Bound Printed Matter q Special Services q Single Piece International 3

Fundamental Requirements for Service Measurement: q Valid “Start-the-Clock” q Valid “Stop-the-Clock” q Established Standard for comparison 4

External Performance Measurement Methodology Quality Assurance Statistical Design Test Mail Fabrication Test Mail Induction Test Mail Receipt Data Analysis Reporting USPS Mail Processing Acceptance Outgoing Processing Incoming Processing Delivery 5

Current EXFC Design: q 463 3 -Digit ZIP Code areas tested representing about 74% of total single-piece FC volume q Sample size is approximately 2. 7 million pieces per year q Represents wide variety of characteristics designed to represent total FCM q Panel of approximately 600 senders (droppers) and 13, 000 receivers used q Mail entered in randomly selected collection boxes and mail chutes and received by households and small businesses 6

Expand EXFC to all 3 -Digit ZIP Code Areas q Quarterly Testing in All 3 -Digit ZIP Code Areas q Continued coverage of key characteristics q Continued focus on high quality q Highly responsive receiver panel, currently report 96% of the mail sent to them q Quality processes throughout the measurement system to prevent errors when possible and to identify and remove erroneous data 7

Measurement of the Other Products q Products entered in bulk or received in bulk present unique challenges for measurement q Creating test pieces and emulating the mailing process is not viable because of nature of the product and cost q Requires significant cooperation of mailers to seed pieces into mailings q Requires tracking of single pieces of mail from start to finish q IBM/USPS experience working with measurement of these products includes: q Pre-sorted First-Class Mail in original EXFC design (1990 -1991) and Business Mail Measurement Feasibility Assessment as part of MTAC Workgroup #83 (2004) q Remittance Mail in the NPPC study (1992 -1994) and Remittance Mail System pilot (1998 -1999) q Standard Mail in the EX 3 C study (1993 -1996) and ADVANCE Quality Check System (1999 -2005) q Periodicals in the EX 2 C study (1993 -1996) with limited measurement in AQCS 8

Performance Measurement Strategy q Leveraging internal systems for performance measurement has key advantages q Greater representation of mail characteristics q Allows for richer diagnostics q Provides opportunities for reducing the cost of measurement q External resources optimally support internal measurement by: q Assessing the viability of existing internal systems and developing / validating the business rules to be applied in measurement q Filling in gaps where internal measures are not feasible q Verifying the accuracy of internal measures / providing independent validation q Measuring portions of products’ mail flow volumes not captured in internal systems q Identifying performance issues and areas for improvement 9

Hybrid Measurement Approach q Combine the benefits of external measurement and internal systems to produce externally validated service performance measures q External measurement focuses on validating internal data and on measuring the portion not visible in internal system Acceptance Outgoing Processing Visible with Intelligent Mail Incoming Processing Delivery External Use random sample of live mail with IMBs to calculate service performance results from acceptance to final incoming processing. Use live (non-test) mail received by EXFC receiver panel equipped with barcode reader devices to capture delivery of a sample of mail with IMBs to estimate the delivery adjustment factor for each product and sub-class. 10

Hybrid Measurement Approach Benefits: q Reduces measurement costs (to USPS and mailers) because it does not require fabrication of additional mail or special seeding of mailings q Mailers not required to provide special manifest information for the seeded pieces q Allows for measurement of the end-to-end process from acceptance through delivery, even if mail falls out of automation or is not scanned q Rich source of data necessary for diagnostics to identify service issues Key Dependencies: q Wide-spread adoption of IMB (as planned) q Submission of electronic manifests to describe each mailpiece and the nesting logic q Implementation of acceptance processes, such as FAST and Seamless Acceptance, to start the clock accurately q Final processing scanning processes at delivery units for mail in containers q Data systems to collect and manage the volume of IM data 11

Growth of IMB Usage Background q Approximately 3% of current scans on automation are IMBs q Intelligent Mail Barcode (IMB) Volume showing continued growth q In first year of use, over 1 billion scans of the IMB q 186 medium to large volume customers and data consolidators using IMB 12

Service Measurement Approaches q Use Existing External Measurement Ø First Class (Single-Piece) - EXFC Ø Single Piece International – IMMS q External measurement approach Ø Supplements mail scans from internal Intelligent Mail® system with externally collected data u First Class (Pre-sort) u Periodicals u Standard q Internal End-to-End Measurement Ø Package Services q New Internal Measurement Systems Ø Special Services 13

Measurement Approach at Full Roll Out POSTAL SERVICE MEASUREMENT APPROACH AT FULL ROLLOUT Single-Piece Letters First-Class Mail Periodicals Standard Mail Package Services Single-Piece First-Class International Presort Flats Parcels Letters Flats Parcels EXFC Stop: Delivery Confirmation delivery scan Stop: External reporting EXFC as proxy Stop: Delivery Confirmation delivery scan N/A Stop: External reporting N/A Stop: Delivery Confirmation delivery scan N/A IMMS N/A EXFC N/A N/A Stop: External reporting N/A Stop: Delivery Confirmation delivery scan N/A 14

Special Services q Delivery Confirmation, Signature Confirmation, Certified Mail, Registered Mail, electronic Return Receipt, and COD – measure the time between when delivery information was collected and when it was made available to the customer q CONFIRM and Address Correction – use IMB to measure the time between the time scan information was collected and when it was made available to the customer q Post Office Box Service – will use scanning technology to ensure timely availability of mail by the posted “uptime” 15

Special Services (continued) q Insurance Claims Processing – Measure time between “start-the-clock”; all information available for claims processing and “stop-the-clock” the date the adjudicator pays, denies or closes the claim q Address List Services – will use an external customer survey to measure satisfaction with the timeliness of receipt Single-piece Outbound International q Will utilize International Mail Measurement System (IMMS) 16

Measurement of Periodicals Presents More Challenges q External measurement requires participation of mailers q. The cost per piece (subscription) is significantly higher than most Standard and First-Class Mail q. The nature of typical subscriptions makes adding/dropping seeds to a mailing more cumbersome than for Standard Mail q. Testing may become obvious at delivery if Monitors receive a high volume of periodicals q Measurement via IMB has not yet been piloted q The USPS has asked IBM to assess the feasibility of using data from Red Tag and/or the Del. Trak systems for measurement starting in 2008 q Longer term solution using the hybrid measurement approach employing IMBs for acceptance through final processing and external receivers for last mile offers the most promise for a representative system-wide periodicals performance measure 17

® Report Format

First-Class Mail - Quarterly q Similar reports will be created for Standard Mail and Package Services Ø Standard Mail will include separate measurements for Destination Entered and End-to-End mail Ø Packages Services reports will include a combined measure for Bound Printed Matter, Library Mail, Media Mail and Parcel Post On-Time Performance Mail Variance 19

First-Class Mail - Annual q Similar to Standard Mail, Periodicals, and Package Services 20

Periodicals - Quarterly q Aggregated at the area level due to lower overall volumes and projected adoption rates On-Time Mail Variance Performance 21

® Questions & Answers