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					                            Mailers’ Technical Advisory Committee
                                       General Session
                               Wednesday, September 24, 1997

        Mr. Chris Rebello called the meeting to order, welcomed the members and reviewed the
two-day meeting agenda. He introduced Arthur Porwick, who welcomed new members Nancy
Fischman and Joseph Ware. He announced that Carole Overkott was moving to a new position
at the Postal Service, and introduced Delores Adona who would assume the duties of program
manager.

         Mr. Porwick recognized Postal Service employees who had supported the MTAC under
the old subsommittee structure. He awarded plaques of appreciation to Susan Hawes, Al Kellert,
Bob Kooken, and Dick Sherrill. Becky Brentlinger and Leo Raymond, absent, would also receive
recognition.

        Mr. Porwick and MTAC member Joyce McGarvy made a special award presentation to
Tom Tully for his long standing excellence in processing and delivery of periodicals, and for his
support in working with the focus groups.

        Finally, Mr. Rebello expressed appreciation to the subcommittee co-chairs. He
introduced Richard Porras, who presented a financial report.

Financial Update

   Mr. Porras began with a brief discussion of corporate financial strategies, noting that they were
implemented to keep our current rates in effect beyond the two years originally contemplated and
to minimize the impact of future rate increases. He noted that we are more customer-focused.
Good management of our costs has allowed us to extend the rate cycle which has stimulated our
volume growth. Accelerating the deployment of automated equipment has improved productivity
and the new “pay-for-performance” incentive compensation system has focused employee
attention on the bottom line.

   Addressing A/P 12 results, which reflect the impact of the UPS strike, Mr. Porras noted that
revenues were up 7.8% over SPLY while expenses were kept under budget. The A/P 12 net
income of $111 million is more than $300 million better than budget. In reviewing volume growth
by class, he pointed out that total volume had increased 5.4% over SPLY. The larger growth in
revenue compared to the growth in volume was related to the UPS strike which brought in heavier
items having a higher revenue per piece.

     On an A/P 12 year-to-date basis, net income is slightly lower than SPLY ($1.4 billion vs. $1.6
billion). Revenues were up about $1.5 billion (3.0%) and while expenses were higher than last
year, they were under budget, partly because of delays in implementing several major programs.

   Mr. Porras reviewed year-to date volume by class, noting that the growth in First-Class (1.5%)
and Priority (13.8%) was anticipated; however, Standard A (7.4%) had exceeded projections
partly because of the strong economy. Total volume growth for the full year is projected to be
about 3.4%.

    Addressing expenses, Mr. Porras explained that since the last rate case costs have been
increasing at a faster rate compared to revenues, which is historically normal. However, in 1997
this trend was reversed and the growth rate of expenses began to decline. Although, historically,
our last two quarters usually reflect a weakening of the bottom line, this year net income is
expected to be much stronger with a projected $1.2 billion net income for the year. He also noted
that this estimate includes a $240 million expense charge for workers’ compensation costs of Post
Office Department employees injured prior to creation of the Postal Service in 1971.
         Turning to the capital program, Mr. Porras said that a $14.3 billion capital budget had
been approved, and the use of those funds would be driven by the goals of creating customer
value, increasing efficiency (76% of cost is labor), and enhancing and expanding the network.
Projects include delivery confirmation, international mail service, point of service and retail market
upgrades.

        In summary, net income will probably be about $1.2 billion on the high side. He noted
record EXFC services, record satisfaction indices, record volume (including a strong contribution
by Standard A), and a positive 1.2% productivity.

        In discussion, Mr. Porras explained that a decrease in international revenues relate
mainly to incoming mail services and terminal dues payments from other countries for services
provided to their postal agencies by USPS.

The Retail Channel

          Pam Gibert, Vice President, Retail, presented information about the retail aspect of the
Postal Service operations. She described the impressive assets that support the retail effort – 7
million customers served by 73,000 retail clerks every business day, 40,000 retail locations –
noting that the goal of each personal contact was a positive experience. Ms. Gibert pointed out
that, for most customers, the local retail unit is the post office. On the business side, over half of
total revenue is touched by retail including $15 billion in sales and most of the postage meter
sales (gradually being converted to a direct telephone transfer).

        Historically, Ms. Gibert explained, the retail aspect of the local post office has been
subordinated to the collection and delivery function, and when difficult choices are faced, the retail
function sometimes suffers. Therefore, it may make sense to separate retail and delivery
functions and make decisions based on the specific needs and finances related to each. Retail.,
for example, needs more parking, convenient hours of operation, visibility and easy access.
Although there is a lot of room for improvement, the Post Office enjoys relatively positive
customer goodwill and support.

         Concerning the market segmentation, there are two major customer groups – about 9
million small businesses and about 100 million consumers. Research shows that these
consumers want friendly, fast and convenient services, plus some additional services such as
packing materials, greeting cards. The small businesses want that plus services focused on small
business needs, such as fax and duplication services. Being sensitive to these needs, the criteria
for performance in the next year will include customer evaluation of services. The qualification of
employees in various skills will begin to reflect customer recommendations, and those skills will
be part of the employee evaluation.

         Ms. Gibert explained that the employment process was being evaluated. Over 97% of
retail employees are full time (compared to 70% of service employees), and they represent more
senior employees, who entered the Postal Service by demonstrating skills related to delivery
processes and not customer service. In their defense, most have not been given training in
people skills and over-the-counter customer service.

         Retail competition, Ms. Gibert said, has increased dramatically. She cited the package
business in which major players have emerged (UPS, Federal Express, etc.) In 1986, there were
750 physical locations of competitors, and today there are 12,650 locations. These competitors
have some advantages – lower cost structure, greater flexibility in making infrastructure changes
and introducing new products and services. They can also partner more easily with other
businesses. There are also weaknesses, such as intense competition between providers, a less
universal customer base.




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        The Postal Service, she said, has several opportunities driven by customer
recommendations in a number of traditional services (stamps, package mailing, money orders)
and some services not yet fully exploited (mailing materials, office supplies, fax/copy/notary,
phone cards, corporate specialty merchandise, and Pack-and-Send). Another opportunity is the
acceptance of credit cards for postal store purchases, which has been slow catching on. Credit
card buyers typically spend more per visit and the convenience is popular, but getting the word out
to customers has been marginal.

          The burgeoning Postal Stores typically result in increased revenues, mainly from the retail
core products. The store adds more sections to the traditional post office, which contained a PO
box section and the lobby/window section. The store adds a well-defined self-service area and,
near the front of the space, a “self-service” product display with a sales clerk to handle sales.
Experience shows that a major group of customers complete their business at the store clerk
location, thereby reducing the window traffic considerably. The merchandise must meet strict
criteria that includes a test that proves the product is allied with the Postal Service business.
Merchandise must be stamp-related and prove contributory to net profit. These products are
exclusively sold in Postal Service outlets, although some stamp images may be licensed to
commercial entities.

         The goal, Ms. Gibert said, is to leverage these assets in retail into a source of profitability,
and to improve the ratio between labor and capital investment. The strategies are to manage retail
as a business responsible for its own bottom line, to control costs, and to grow the business
through the opportunities discussed above. A retail business calendar has been developed and
will become a key component of retail operations. Working with the unions,
Ms. Gibert said that a new qualification criteria for selection will include specific customer service
requirements.

        Finally, Ms. Gibert explained that priorities must complement retail objectives –
cleanliness, upscale furnishings and displays, and improved personal appearance.

Fall Mailing Season Update

         Nick Barranca, Vice President, Operations Support, discussed the fall mailing season,
noting that the UPS strike was successfully managed through advance planning, and that regular
customers were effectively served.

          Concerning the fall operations, he talked about advanced planning, operations plans for
the fall, monitoring and communicating condition during the fall, the customer relations interface,
and the plans for the Christmas rush.

          In advance planning, Mr. Barranca said that an examination of the previous season was
completed, and developed forecasts for the volume and the customers who would be important in
the fall season. Information has been obtained from major customers, and all of the data is fodder
for planning sessions at Headquarters and the area and field offices. Readiness assessments
then occur, looking site-by-site at the experience of the previous years, including identifying
potential problem areas. Finally, adjustments are planned with regard to the infrastructure to
more effectively handle the volume.

         Operations Support believes that an effective plan has been developed, which has been
benchmarked against the 1994 and 1995 seasons, that takes into account some of the problems
that occurred in earlier years – getting resources on line faster, cooperation of MTE, an improved
appointments process (comparing customer information with BMCs to balance demand and
supply), planning for T&E requirements, and gearing up for annex operations.

        Mr. Barranca described a recent planning session which reviewed operations during the
UPS strike and revealed that design of a system-based NMO process was appropriate, staffing



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would have to be more carefully tuned to local needs, and better communications, especially on
the informal level, should be developed.

        Turning to the effect of the UPS strike, Mr. Barranca indicated that there was a benefit
from the strike. Volume in Priority and Standard A increased, about 6,500 temporary (casual
Labor) employees were hired, the airlines were exceptionally helpful, and the carrier force seemed
to understand the importance of responding to the increased volume.

         Mr. Barranca provided a visual chart showing that, during the UPS strike, the sorting
capacity for machinable parcels was never approached, although the NMOs did cause some
dislocations as the strike progressed.

        Mr. Barranca described the internal monitoring procedures that would apply to the fall
mailing season. The key operating statistics from the BMCs, plants and delivery units are
monitored on a daily and weekly basis, focusing on sites with delay problems. Working with John
Wargo’s people in the Business Service Network, there will be a focus on large accounts, an
emphasis on communications with sales partners, and regular customer surveys.

During the Christmas rush, the national operations center will operate on a 24-hour basis, working
with daily analyses of 5-digit for parcels and Priority Mail, AMC operations and BMC parcel
processing. There will be an emphasis on identifying those drivers that cause any delays.

        During discussion, he suggested that customers should communicate concerns with the
appropriate Business Service Network representative. He also suggested that customers provide
as much detail as possible when submitting mailing plans for this period.

         Concluding, after an extended discussion about service problems and solutions, Mr.
Barranca noted that the sheer size of the UPS operation would preclude any entity from absorbing
its service load for an extended period of time without major capital investment and infrastructure
enhancement. He said the Postal Service was proud that it had a short term plan in place, that
the plan worked well beyond its design time period, and that the Postal Service was able to
maintain its service guarantees and turn no one away during the strike period.

Strategic Planning Update

        Robert Reisner, Vice President, Strategic Planning announced that the Postal Service
Five-Year Strategic Plan, mandated in 1993 by Congress, would be submitted within a week. He
explained that the law, created in 1993, responded to Vice-President Gore’s re-inventing
government process. The law required not only a five-year plan, but an annual report on
progress.

         The plan rests on the “Customer Perfect” system that calls for annual goals to enhance
customer service. It also relies on informing customers of proposals and progress and on inviting
comment during the entire process. Therefore, the first draft of the document was published in
June to a positive response from the General Accounting Office. Nonetheless, the plan was
amended to reflect more fully the progress that the USPS has made in its reinvention effort, the
way the Postal Service works with customers, and at the same time the plan candidly discussed
the issues and challenges of the future. This refocused the plan on the mission of the Postal
Service and performance measures related to customer service. MTAC members and other
customers can rely on being included in the process in the future. Mr. Reisner distributed a copy
of the executive summary of the USPS Five-Year Strategic Plan.

        Closing the session, Mr. Rebello announced 1998 meeting dates: March 24-26, June 9-
11, September 15-17 and December 8-10. He added that there is also consideration of folding
some of the MTAC presentations in with the Postal Forum in September. The meeting was
recessed until 9 a.m. the next day.



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                             Mailers’ Technical Advisory Committee
                                        General Session
                                 Thursday, September 25, 1997


        Mr. Porwick reconvened the Committee, noting that the Quick Service Guide and the
Postal Explorer were available at the meeting for member to take home. He introduced Hank
Cleffi who discussed the Tactical Marketing and Sales Development Division.

        Mr. Cleffi explained that the organization was formed about a year ago, under the
leadership of Gail Sonnenberg, and is now fully staffed. He described the various working groups:

        Programs and Planning focuses on lead generation and research on those leads,
supports the writing of proposals and maintains liaison with various Headquarters groups.
Operations and Tactical Marketing Integration provide operational support to the sales specialists
and work with the customers during the solutions and proposal stages. The research center
supports the field with information services and technical support. The finance office tracks new
revenues generated for the first year.

        There are 11 sales teams grouped by products. Package Services focuses on Priority
Mail and DBMC parcels sales and is divided into three geographic areas (Eastern, Central and
Western). There are three Ad Mail teams grouped by industry (about 18 industry groups).
Financial Services Sales has two teams that are geographically based and there are three
nationwide teams - Sales Alliances working with Parcel Consolidators, Mail Order working with
catalogers and New Business working on Electronic Commerce Services.

         Mr. Cleffi described the basic sales process in the TM&SD, beginning with lead
generation which identifies potential customers, analyses service needs, conducts research and
assigns leads to field sales personnel. The lead is qualified by members of the sales team and, if
a more detailed proposal is appropriate, a customer-specific solution is crafted. From the
solution comes a formal proposal for the prospective customer and, hopefully, a closed sale. The
new customer is then transitioned into Customer Relations who begins to manage the account.
TM&SD measures the new revenue for the first year.

        During discussion, Mr. Cleffi confirmed that TM&SD works with new customers and
assists Customer Relations on opportunities within managed National and Premier accounts. He
noted that new sales in fiscal year 1997 were about $150 million on an annualized basis.

Report of Work Groups

        Mr. Joseph Schick discussed the new work groups created from the work of the Blue
Ribbon Committee. Six work groups resulted – defining/publishing service standards and
determining reporting requirements; tracking of trays, containers and vans; data and information
sharing (e.g., data related to rate case decisions); improving acceptance of certification process;
review of capital spending proposals; and pricing flexibility within the current legislative framework.




                                                   5
Work Group Updates:
          Centralized Postage Payment/Direct Link: Mr. Dick Funck reported that the centralized
payment system set up for larger mailers had become a burdensome paper mill for the Postal
Service, and the working group is charged with moving some of that paper into automation and
direct link transactions. The group has met five times, with extensive discussions that have
resulted in a substantial information base about the problem. That being the purpose, the working
group could prepare a report and recommendations and disband, with smaller user groups testing
some of the processes that might contribute to a solution.

         Publication Watch: Ms. Joyce McGarvy noted that the Publication Watch, to monitor
service levels, has been working for several years. The working group has met once to review
history and look at Press, which was to be a replacement for Publication Watch. The group
concluded that a more detailed history was required before meeting again.

         Periodical Service: Mr. Tom Tully reported that the working group has concluded that
the problems related to the deterioration in periodicals service will require a more aggressive effort
than originally envisioned. After five meetings, the working groups have established four sub-
working groups – makeup, processing, acceptance and information systems/data. Membership
on the working group is diverse and well balanced (mailers, publishers, printers, transportation,
software). Site visits are planned to obtain first-hand knowledge of processes. Mr. Tully noted
that making up the mail to reflect the actual processing in the Postal Service may make more
sense than current procedures. Plans are to look at makeup, education and training, third-party
transportation, printing plant compliance, special makeup, movement of barcoded and non-
barcoded mail, processing equipment, and acceptance.

        Address Coding Enhancement: Mr. Peter Moore noted that two working groups,
Eliminating Barriers to 100% Delivery Point Barcoding, and DPBC & Default Code Rules, had
been subsumed into the working group entitled, Address Coding Enhancement. The working
group has met several times, conducted extended discussions and has arrived at a list of about
20 problems to be addressed. Proposed solutions have been developed for each and a report will
be forthcoming at the next meeting.

                [There was an extended discussion relating to the availability of the
recommendations of this working group in particular, and the minutes of the various working
groups in general. The issues discussed included the logistics of providing minutes of every
group to every member, the potential of placing minutes and other information on the developing
MTAC Information System, which led to a brief discussion about priorities related to that
resource, and the observation that, when available, the placing of information on the system will
be the responsibility of the various working groups. In the interim, members could specifically
request information from any working group.]

         Provide One-Time ACS Option: Mr. Peter Moore stated that the working group had
concluded that the technology was not yet available and that the issue should be tabled until a
later date.

        Small Mailer Information: Mr. Peter Moore announced that the Postal Service had
developed a series of brochures to help small mailers. The brochures discuss the economics of
the transition to automation.

        1997 Fall Mailing Season: Mr. Phil Parizino noted the working group had met three
times focusing on the effectiveness of the Business Service Network. He invited Doug Ruth to
make a brief presentation about the BSN. He explained that the BSN’s purpose was to provide a
single point of contact for each major customer, to maintain a customer-related information data
base to enhance response, and to provide positive response for problems referred to the BSN.
He said the business plan for the BSN was completed, that the sites activation (already begun)
should be completed by the end of 1998, after which the system should be fully operational.



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Mr. Parizino said that the working group felt the BSN was off to a good start, but that an effective
follow-up loop should be developed, and there should be a mechanism to encourage customers
to refer problems to the BSN because multiple complaints would underscore more serious
problems, requiring more urgent attention.

        Return of Opened Parcels: Mr. Joe Monastro reported that the working group had met
once with about 20 members present. Discussion related to the need to arrive at a definition of
when a mailed parcel ceases to be considered mail, the need to include Postal Service legal
assistance in the process. He added that there were two proposals on the table, one from the
Postal Service, one from the mailers, and that the terms were at substantial variance.

         Parcel Reclassification Implementation: Mr. Ernie Collins stated that the current parcel
reclassification was a revival of an earlier effort that was tabled two years ago. Issues being
discussed by the current working group focus on Standard B mail including origin BMC rates,
destination SCF rates, parcel dimensions, bar code discounts, delivery confirmation service,
signature service when return service is requested, surcharges for medical and hazardous
materials, and some insurance fees. The working group, he said, will meet again in November,
and a final recommendation should be ready by the first of the year.

          Parcel Bar Code Clarification: Mr. Lloyd Karls reported on this working group,
concerned with delivery confirmation using a bar code process. Recommendations include
adopting the UCC EAM-12 as the industry standard bar code (already used by UPS, FedEx and
other carriers), to include the DUNS number, package ID and product ID in the 20-digit number.
The transition time would be five years, and should include a certification procedure to insure
coding accuracy. The group is also considering the kind of human readable information that
should be added to the label, and periodic sampling for quality control. The objective, Mr. Karls
said, is to develop a bar code that would be acceptable to various industry users as a standard for
the same information.

        Package, Container and Pallet Integrity: Mr. Russ Shores reported that his group,
composed mainly of printers of magazines and catalogs, had met several times formally, and had
made a number of site visits. Although letter shop participation has been minimal, the group is
establishing a separate working group to look at palletization of trays. The working group has
been testing materials used to wrap flat-size mail pallets which end up on BMC pallets. Although
the wrap had been failing at a high rate, tests proved that using stronger wrap did not solve the
problem and the recommendation has been sent to the Postal Service to attempt to deploy sorting
                                            th
equipment at the BMC’s. At an August 15 meeting, the facility visited advised the group of
frequent violations of DMM regulations by major publications of a 20-pound weight limit on
periodicals, which were causing problems with handling equipment. These overweight packages
often break apart requiring manual handling of loose periodicals. Major publishers were
contacted and the problem was ameliorated.

          Information-Based Indicia Program: Mr. Mury Salls reported that his working group
has arrived at over 40 value-added services for an IBIP application, and that at future meetings
the list would be reduced to a top ten. Sub-groups would then consider the technology related to
each application.

        Maximizing Value of Planet Code: Mr. Joe Lubenow commented that the working
group sees the planet code as an underutilized asset, as code containing extra information
content that can be read with the same equipment that handles post net codes. There are
tracking and tracing applications that relate to planet code that are being considered by the
working group.

         Container Tracking: Mr. Joe Lubenow commented that a project to place bar codes on
pallets to trace movement in the system is a subject of this working group. The Postal Service is




                                                  7
now experimenting with radio frequency technology for this type of tracking, which obviates the
need for manually entering any tracking data.

         Form 8125: Mr. Rick Kropski discussed Form 8125, which involves auditing and
reconciling contents of trailers arriving at docks. The Postal Service had heretofore allowed
mailers to customize the form to fit their needs as long as the information was properly entered.
The resulting inconsistency is a problem the working group is resolving. Ms. Cheryl Beller
described the proposed form, concluding that, with a probable Federal Register review
requirement, the form would not be in use until the fall of 1998.

         Drop Ship Appointment System (DSAS) Enhancements: Mr. Kropski noted that this
group was recently formed and needed additional representation. It will examine the DSAS with
an eye to identifying specific changes that would make the system more robust, and provide
better feedback to mailers. In an initial meeting, he said, the group identified twelve issues and
decided to focus on four of them – system abuse, the problem of lockouts, increasing volume of
appointments, and development of a data resource with increased availability to mailers (perhaps
on the Internet). Mr. James Magellan outlined changes that were being implemented for the fall
mailing season. He described a facility announcement screen on which any event which restricts
appointment availability can be described. He added that a reschedule option would make it
easier to cancel an appointment without having to start the process over from the beginning. The
24-hour notice to change an appointment had been reduced to 12 hours, allowing more flexibility
for the mailer. Data will be posted seven days a week, making weekend information more
promptly available. Finally, the Postal Service is analyzing last season’s performance and
developing plans to improve results

         Presort Optimization: Mr. Joe Lubenow reported that the SCF sack for periodicals has
been published in the Federal Register, and on the drawing board is a five-digit scheme for pallets
and carrier route sacks, elimination of mixed pallets, optional overflow trays (which will begin
testing soon), and the end of the mixed ADC package, which is of little benefit to mailers.

        Improving Standard A Catalog Mail Delivery for Time-Sensitive Mailings:
Ms. Elizabeth Morris commented that the working group was discussing the optimum number of
days for a piece of mail to get through the system. Discussion of Postal Service and mailer
customer recommendations have been discussed, and a live test is planned to look at tracking.

       Mail.dat Task Group: Mr. Dan Minnick reported that a user’s handbook was in
development for mail.dat and that new applications for the tool were being developed.

        Direct Link Task Group: Mr. Dan Minnick reported that two phases of beta testing are
complete at ten sites, the third release of software has been released, and roll out of direct
payments through the Direct Link program is scheduled for 1998. He suggested that interested
mailers begin to prepare their own infrastructure for the service since installation will be rapid
when available if the sites are prepared.

        Closing Comments

         Mr. Rebello closed the meeting with a promise to develop policy on disseminating
information from the working groups, and he expressed appreciation to the associations that were
publishing information about MTAC activities in member newsletters. The meeting was adjourned
at noon.




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