Status of NDC Activations

MTAC Briefing

August 12, 2009

2

Overview of Network Reengineering

Status of Phase 1 Activation

Accelerated Phase 2-4 Schedule

Customer Impacts

Summary

Agenda

3

Transformation of Bulk Mail Centers (BMC) to Network Distribution Centers (NDC)

● Enhanced mail preparation

● Consolidate package distribution

● Combine BMC & Surface Transfer Center (STC) containerization and dispatch plans

● Leverage multiple trailer loading and dispatching techniques

Transformation

BMC NDC

Overview Network Reengineering

4

NDC Responsibilities

11 - Tier 1 NDC ● Distribution of local (turnaround) and destination

Standard Mail, Periodicals, and Package Services

6 - Tier 2 NDC ● Tier 1 responsibilities● Distribution of outgoing Standard Mail, Periodicals,

and Package Services to the network Including, MXD States Outgoing single piece sort

● STC containerization and dispatch operations – outgoing / incoming all classes (except Express)

4 - Tier 3 NDC● Tier 1 and Tier 2 responsibilities● Consolidation points for less than truck load volumes

from Tier 2 sites

5

NDC Tiers 1, 2, and 3

Directional dispatch for 4 NDCs (noted by *)● Reduces backtracking● Improves service

ASFs will be Tier 1 NDC for package processing

Tier 1 Tier 2 Tier 3Springfield New Jersey PittsburghPhiladelphia New Jersey PittsburghNew Jersey New Jersey PittsburghPittsburgh Pittsburgh PittsburghDetroit Pittsburgh PittsburghChicago * Pittsburgh PittsburghCincinnati* Pittsburgh PittsburghSt. Louis* Pittsburgh PittsburghDallas Dallas MemphisWashington DC Greensboro MemphisGreensboro Greensboro MemphisJacksonville Jacksonville MemphisAtlanta Memphis MemphisMemphis Memphis MemphisKansas City Des Moines Des MoinesMinneapolis/St.Paul Des Moines Des MoinesDes Moines Des Moines Des MoinesChicago * Des Moines Des MoinesCincinnati* Des Moines Des MoinesSt. Louis* Des Moines Des MoinesDenver Denver DenverLos Angeles Los Angeles DenverSan Francisco* Los Angeles DenverSeattle Seattle DenverSan Francisco* Seattle Denver

6

Operational Impacts● NDCs operate like P&DCs

● Live loads and unloads at all NDCs

● Operating plan changes required to coincide with

STC containerization & dispatch plan

● NDC sort to ADCs, AADCs and NDCs

Transportation Impacts● Streamline network

● Increase utilization of assets

● Improve transit time

Impacts

7

Separation requirements● Local NDC service area

● Network NDC split(s)

Two splits required for directional dispatch

sites and ASFs

● For Periodicals compliance with L201 & L009 split

Integration of Origin mail preparation● USPS Retail, BMEU and Plant separation enabled

through the use of Retail Distribution Codes

● Establish customer supplier agreements (CSA) to

mirror required make-up during implementation

Mail Preparation

8

CommercialBMEU

Retail PO

Delivery Unit / PO’s

21 x 21Dest. P&DC

OBMC DBMCOrigin P&DC

Today’s Network Flow

9

CommercialBMEU

Retail PO

Delivery Unit / PO’s

Dest. P&DC

Tier 1 NDC

DNDCOrigin P&DC

Local

Local

Network

Tier 2 NDC

Future Network Flow

Tier 3 NDC

(if necessary)

10

Phase 1 Acceleration

Phase I began May 18 in Springfield, Philadelphia & New Jersey

Redesign is yielding anticipated benefits

• Work hours trending as expected Springfield and Philadelphia have declined New Jersey has increased less then expected

• Package Service Performance is up 15% in NJ NDC

• Transportation Utilization is up 15% Successful integration of STC & NDC transportation Eliminated all network transportation from Philadelphia

and Springfield Beginning to eliminate other underutilized

transportationBaseline: 3/28/09 – 4/24/09 (4 week average prior to implementation) Current: 7/25/09 – 7/31/09

71.4%

87.7%81.1%

89.3%

69.6%

85.3%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Springfield Philadelphia New Jersey

Pkg Services Inter Outbound Service Performance

Baseline Current

Origin Package Service Improvement from Phase I

11

Inter-NDC Transportation Utilization from Phase I

Baseline: 3/28/09 – 4/24/09 (4 week average prior to implementation) Current: 7/25/09 – 7/31/09

57.4%

65.1% 65.9%

82.3%

61.9%

76.8%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

Springfield Philadelphia New Jersey

Inter-NDC Outbound Transportation Utilization

Baseline Current

12

Implementation Status

Phase I Completed on July 17● Three weeks early

Accelerated National Implementation to be completed by 11/20● Tier 1 to Tier 2 distribution and transportation

consolidation● Use of Tier 3 for USPS LTL consolidation● Integrate STC trips from Tier 2/3 where possible● Move of MXD States processing to Tier 2 sites

Phase 2 NDC Phase 3 NDC Phase 4 NDC8/10 to 9/4 Seattle 9/14 to 10/9 Detroit 10/19 to 11/20 Jacksonville8/10 to 9/4 Denver 9/14 to 10/9 Pittsburgh 10/19 to 11/20 Dallas8/10 to 9/4 San Francisco 9/14 to 10/9 Washington 10/19 to 11/20 Chicago8/10 to 9/4 Los Angeles 9/14 to 10/9 Greensboro 10/19 to 11/20 St. Louis8/24 to 9/11 Kansas City 9/14 to 10/9 Atlanta 10/19 to 11/20 Cincinnati8/24 to 9/11 Des Moines 9/14 to 10/9 Memphis

9/14 to 10/9 Minn/St. Paul

13

Improved Service

No expansion to the number of entry points

No required changes to FAST or Critical Entry Times (CETs)

Minimal changes to origin induction preparation

Customer Impacts

14

Network Redesign has resulted in cost saving and significant service improvements

Accelerated National Implementation will allow us to capture both the savings and service improvements early in FY 2010

We Need your help – origin separations to move mail on right network as quickly as possible

Summary