®

FSS UpdateFSS Update

Rosa Fulton

Executive Director, FSS

MTAC

May 20, 2010

2FSS Update

Flat Volume Update

Respond to Industry Questions

● Program Status

FSS Redirection – Phase 1B

Agenda

3FSS Update

20

25

30

35

40

45

50

55

60

2001 2002 2003 2004 2005 2006 2007 2008 2009Vol (Bil) 58.2 57.8 51.7 52.4 53.9 53.8 52.4 45.9 39.6

Flat Volume Trend – 2001 Through 2009Flat Volume Trend – 2001 Through 2009RPW

Flat volume decline FY 2009 -13.8%Flat volume decline FY 2009 -13.8%

FY 2005 – FY 2009Flat volume decline 26%

14.3 billion fewer flats annually

FY 2005 – FY 2009Flat volume decline 26%

14.3 billion fewer flats annually

4FSS Update

First Class Periodicals Standard Total Flats

2009 787,424 2,096,118 9,129,878 12,013,420

2010 663,624 1,863,566 7,697,093 10,224,284

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

Pie

ces

(000

)

Class

FY 2010 YTD Flat Volume Compared SPLYQuarter 1 (Oct - December)

-15.7%

-15.7%

-11.1%

-14.9%

Flat Volume Trend – QTR 1, FY 2010Flat Volume Trend – QTR 1, FY 2010RPW

QTR 1, 2010Flat volume decline -14.9%

QTR 1, 2010Flat volume decline -14.9%

5FSS Update

First Class Periodicals Standard Total Flats

2009 1,529,852 4,056,619 15,768,163 21,354,634

2010 1,313,878 3,679,314 14,066,470 19,059,662

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

Volu

me

-Pie

ces (

000)

Class

Flat Volume Comparison - FY 2010 YTD vs. SPLYOctober - March

-14.1%

-9.3%

-10.8%

-10.7%

Flat Volume Trend – FY 2010 YTDFlat Volume Trend – FY 2010 YTDRPW

FY 2010 YTDFlat volume decline -10.7%

FY 2010 YTDFlat volume decline -10.7%

6FSS Update

First Class Periodicals Standard Total Flats

Series1 259,455 681,395 2,382,083 3,322,933

Series2 241,666 659,409 2,368,746 3,269,821

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

Volu

me

-Pie

ces (

000)

Class

Flat Volume ComparisonMarch 2010 Compared to March 2009

-6.9%

-3.2%

-0.6%

-1.6%

Flat Volume March 2010 Compared to SPLYFlat Volume March 2010 Compared to SPLYRPW

7FSS Update

FSS QuestionsFSS Questions

1. What exactly is happening with the machines?

Program Status

Redirection – Revised Deployment

8FSS Update

Sequencing Operations Dulles – 4 FSS

Columbus – 2 FSS

Kansas City – 2 FSS

Phoenix – 3 FSS

South Florida – 1 FSS

FSS OperationsFSS Operations

FSS Site# FSSOn-line

# Delivery Units

On-line

# ZonesOn-line

Dulles P&DC 4 49 85

Columbus FSS Annex 2 24 30

Kansas City P&DC 2 18 44

Phoenix L&DC 3 11 37

South Florida 1 5 15

Totals 12 107 211

9FSS Update

FSS Site Machine # Start of Operations

SOUTH FLORIDA L&DC 1st May 3, 2010

NEW JERSEY NDC 1st July 12, 2010

SOUTH FLORIDA L&DC 2nd July 12, 2010

NEW JERSEY NDC 2nd August 2, 2010

NW BOSTON MA P&DC 1st August 2, 2010

SOUTH FLORIDA L&DC 3rd August 2, 2010

MID-ISLAND NY P&DC 1st August 16, 2010

NW BOSTON MA P&DC 2nd August 23, 2010

NEW JERSEY NDC 3rd August 23, 2010

SOUTH FLORIDA L&DC 4th August 23, 2010

CURSEEN-MORRIS DC P&DC 1st September 7, 2010

MID-ISLAND NY P&DC 2nd September 7, 2010

NW BOSTON MA P&DC 3rd September 13, 2010

NEW JERSEY NDC 4th September 13, 2010

SOUTH FLORIDA L&DC 5th September 13, 2010

CURSEEN-MORRIS DC P&DC 2nd September 27, 2010

MID-ISLAND NY P&DC 3rd September 27, 2010

Operation Start Dates – Next SitesOperation Start Dates – Next Sites

Operational

10FSS Update

Installation & Operations ProgressionInstallation & Operations Progression

October 2010 – 29 FSS operational in 9 locations

April 2011 – all machines installed

June 2011 – all machines operational

11FSS Update

FSS Redirection – New Deployment PlanFSS Redirection – New Deployment Plan

Original deployment plan 100 FSS in 32 sites

Phase 1A - 19 FSS identified for redirection

Deploy fewer FSS in 10 sites

Phase 1B – 5 FSS identified for redirection

Deploy fewer FSS in 5 sites

May 2010 – 47 FSS sites

12FSS Update

Phase 1B Recommended RedirectionsPhase 1B Recommended Redirections

5 additional FSS machines planned for redirection

New FSS sites # FSS

Brooklyn NY P&DC 1

San Francisco P&DC 1

Dallas P&DC 1

Pittsburgh PA L&DC 1

Cleveland OH FSS Annex 1

Total 5

Sites receiving fewer FSS # FSS

Indianapolis IN 1

Denver CO 1

Middlesex-Essex MA 1

Providence RI 1

Sacramento CA 1

Total 5

Total of 47 FSS locations

13FSS Update

FSS QuestionsFSS Questions

2. What is the current ROI and has it affected the old DAR thus they cannot reorder more machines or have other impacts besides money issues?

● Declining volume does impact the savings potential Program expectation of 280,500 pieces per day

● Increasing the number of runs decreases number of pieces that can be processed daily

Lower throughput at lower run volumes / fixed changeover times - closer to 255,000 pieces per day

● Phase 1 technology designed for larger volumes● Technology solutions to gain back efficiencies are in

review● Achieving savings today beyond sequencing flats—

capturing space & redeploying vehicles ● Limited capital funds available for new technology

14FSS Update

FSS QuestionsFSS Questions

3. Is there money allocated for future machines? If so, what does Phase II deployment look like in terms of facilities to be placed at (type of facility in terms of volume) and timeline?

● Phase 1 FSS satisfies only 1/4 1/3 of national flats sequencing opportunity

● Additional savings opportunity exists for expanding beyond Phase 1

● Delivery point sequencing (100%) is a fundamental strategy of the “Delivery of the Future” vision

● Maximum effectiveness / efficiency achieved when sequencing process housed in same facility as upstream bundle and flats sorting operations

15FSS Update

FSS QuestionsFSS Questions

4. What is the future strategy of the USPS in terms of FLAT mail overall, which includes all FLAT machines and deployments?

● Optimize savings potential for Phase 1● Extend flats sequencing beyond Phase 1● Bypass bundle distribution● Automate flat mail preparation● Create critical mass● Improve utilization & efficiencies of AFSM 100s

16FSS Update

FSS Redirection – New Deployment PlanFSS Redirection – New Deployment Plan

Site # Area FSS Location - 47 Sites # FSS Site # Area FSS Location - 47 Sites # FSS

1 CM CHARLOTTE NC L & DC 1 25 NE NW BOSTON MA P&DC 32 CM CURSEEN-MORRIS DC P&DC 2 26 NE PROVIDENCE RI P&DC 23 CM DULLES VA P&DC 4 27 NE SPRINGFIELD MA NDC 44 CM GREENSBORO NC P&DC 1 28 NE STAMFORD CT P&DC 15 CM LINTHICUM MD IMF 1 29 NE WESTCHESTER NY P&DC 16 CM RALEIGH NC P&DC 1 30 PA ANAHEIM CA P&DF 27 CM RICHMOND VA P&DC 3 31 PA HERB PECK ANNEX (LOS ANGELES) 28 EA CLEVELAND FSS ANNEX (new site) 1 32 PA MORENO VALLEY CA DDC 29 EA COLUMBUS OH FSS ANNEX 2 33 PA SACRAMENTO CA P&DC 110 EA PHILADELPHIA PA NDC 1 34 PA SAN DIEGO MLS CA P&DC 211 EA PHILADELPHIA PA P&DC 2 35 PA SAN FRANCISCO CA P&DC (new site) 112 EA PITTSBURGH PA L&DC (new site) 1 36 PA SAN JOSE CA P&DC 413 EA ROCHESTER NY L&DC 2 37 PA VAN NUYS CA FSS ANNEX 314 EA TRENTON NJ P&DC 3 38 SE ATLANTA GA L&DC 215 GL CAROL STREAM IL P&DC 1 39 SE NORTH METRO GA P&DC 216 GL FOX VALLEY IL P&DC 2 40 SE ORLANDO FL L&DC 217 GL INDIANAPOLIS IN MPA 1 41 SE SOUTH FLORIDA L&DC 518 GL PALATINE IL P&DC 4 42 SW DALLAS TX P&DC (new site) 119 GL SE MI METROPLEX P&DC 2 43 SW NORTH HOUSTON TX P&DC 120 GL SOUTH SUBURBAN IL P&DC 2 44 WE DENVER CO P&DC 321 NE BROOKLYN NY P&DC (new site) 1 45 WE KANSAS CITY MO P&DC 222 NE MIDDLESEX-ESSEX MA P&DC 3 46 WE ST PAUL / EAGAN MN P&DC 223 NE MID-ISLAND NY P&DC 4 47 WE WEST VALLEY (PHOENIX) AZ L&DC 3

24 NE NEW JERSEY NDC 4

17FSS Update

FSS Deployment – 100 FSS, 47 FSS SitesFSS Deployment – 100 FSS, 47 FSS Sites

Van Nuys, 3Los Angeles, 2Moreno Valley, 2Anaheim, 2San Diego, 2

Miami, 5

Sacramento, 1

San Jose, 4

Phoenix, 3

Denver, 3

Orlando, 2

Houston, 1

MinnSt Paul, 2

Greensboro, 1Raleigh, 1

Charlotte, 1

SE Mich, 2

Atlanta, 2North Metro, 2

Palatine, 4Fox Valley, 2Carol Stream, 1South Suburban, 2

Indy, 1

Columbus, 2

Kansas City2

Linthicum MD, 1Dulles VA, 4Washington DC, 2

Philadelphia & NDC, 3

Providence, 2

Newark NJ, 4 Trenton NJ , 3

NW Boston, 3Middlesex, 3Springfield, 4

Richmond, 3

Rochester, 2

Brooklyn , 1Mid Island, 4Westchester, 1

Stamford, 1

Dallas, 1

SanFrancisco, 1

Pittsburgh, 1Cleveland, 1

18FSS Update

Conclusion