Operations Update

February 2001

Topics

Fall Mailing Season

Christmas Holiday

Rate Implementation

5,000

5,500

6,000

6,500

7,000

7,500

8,000

8,500

9,000

10 12 1 3 5 7 9 11 13 2 4 6 8 10 12 1 3 5 7 9 11 13 2 4

Standard A Volume Trends

1997

19981999

2000

Fall 2000 Standard A Volume Much Higher than Last Year

5,500

6,000

6,500

7,000

7,500

8,000

8,500

9,000

AP1 AP2 AP3 AP4 AP5 AP6 AP7 AP8 AP9 AP1 AP1 AP1 AP1

Actual Plan SPLY

Millions

+1.5 Billion more pieces

DSAS Appointments

Operating Conditions

Communications

–BSN’s, Account Managers, & Operations

–HQ & Area Managers Operations

Fall 2000 - Monitoring

Observations of Mail Conditions By Inspection Service

Requested by the COO

Weekly Findings to AVP and MOS,

–September through January 2001

Corrective Actions to the COO

Focus on sites of Customer Concern

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

AP1 3

AP2 3

AP3 3

AP4 3

AP5 3

AP6 3

AP7 3

AP8 3

AP9 3

AP10

3

AP11

3

AP12

3

AP13

3

FY99 FY00 FY01

'(000)

Fall 2000 Standard A Delays in Plants Similar to Last Year

Fall Mailing

Flats Processing - AFSM 100

Faster and Higher Throughput

OCR / BCR / Keying / Added Bins

Real Time Keying of Rejects

Focus on Incoming Secondary

Deploying Now–165 operating as of January 2001–additional 362 deployment begun

Fall 2000

Election Mailings

AFSM 100

Focused on Weekend Processing and Inventory levels

Communications

–Operations, BSNs & Customer Support Teams

Christmas Holidays Priority Mail Processing Centers

Emery operated through Christmas

Area Operations used contingency plans to offload heavy destinating volumes

10 PMPCs converted to postal facilities on January 7th

Christmas Holiday Logistics Issues

Most severe weather in a decade

High commercial airlines flight cancellations

Significant daily mail backlogs at major air hubs

Highway transportation suffered delays and cancellations

+200 dedicated network aircraft flights were canceled due to weather in 13 days

Christmas Holiday

Christmas Eve and Christmas Day delivery of Express Mail and obvious gifts

Dedicated networks moved +92 million pounds in 13 days

Cancellation volumes reached all time high

– 314 Million on Dec 18th

Two Peak Plant & Delivery Day

– 4 Billion cards & letters during holiday season

Rate Implementation

New Rates implemented January 7th

Plant Verified Drop Shipments entered until January 20

Significant increase in Standard A volumes at plants from Jan 5 - 20th

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

AP1 3

AP2 3

AP3 3

AP4 3

AP5 3

AP6 3

AP7 3

AP8 3

AP9 3

AP10 3

AP11 3

AP12 3

AP13 3

FY99 FY00 FY01

'(000)

Standard A Delays in PlantsVery High following New Rate

New Rates Implemented

Rate ImplementationActions to Correct

COO directly involved

HQ and Area Operations telecons

COO and Area VP telecons

Area Action Plans implemented

Delays dropped dramatically last week

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

AP1 3

AP2 3

AP3 3

AP4 3

AP5 3

AP6 3

AP7 3

AP8 3

AP9 3

AP10

3

AP11

3

AP12

3

AP13

3

FY99 FY00 FY01

'(000)

Results: Standard A Delays have been significantly reduced

Summary

Fall - Volume

Christmas - Weather

Rates - Recovered