Comprehensive Statement 2001

Transcription

1 Comprehesive Statemet 2001

2 Uited States Postal Service 2001 Comprehesive Statemet o Postal Operatios Table of Cotets Chapter I Chapter II Chapter III Compliace with Statutory Policies A. Fudametal Service to the People (39 U.S.C. 101(a))... 1 B. Service to Small or Rural Commuities (39 U.S.C. 101(b))...9 C. Employee Compesatio ad Career Advacemet (39 U.S.C. 101(c))... 9 D. Postal Cost Apportiomet ad Postal Ratemakig Developmets (39 U.S.C. 101(d)) E. Trasportatio Policies (39 U.S.C. 101(e),(f)) F. Postal Facilities, Equipmet ad Employee Workig Coditios (39 U.S.C. 101(g)) Postal Operatios A. Public Perceptios, Customer Outreach ad Mailer Liaiso B. Core Busiess C. Expedited Package Services D. Iteratioal Mail E. Mail Volume ad Service Performace F. Mail Distributio G. Delivery Uit Operatios H. Stamp Services...51 I. Licesig Program J. Sales...53 K. Retail Programs: Buildig the Core...54 L. Pricig ad Classificatio M. Marketig Techology ad Chael Maagemet N. Iteret-Based Iitiatives O. Techology P. Operatios Plaig Fiacial Highlights A. Fiacial Summary B. Productivity C. Federal Govermet Appropriatios D. Breast Cacer Research Semipostal Stamp Chapter IV Prelimiary 2003 Aual Performace Pla...75 Chapter V 2001 Performace Report A. Itroductio B. Year i Review...81 C. Plaig Process D. Three-Voice Structure ad Performace Goals E. Voice of the Customer...86 F. Voice of the Employee...88 G. Voice of the Busiess...89 H. Evaluatio of 2001 Performace ad Chages to Goals ad Subgoals i the 2002 Pla...90 All refereces to 2001 or the year refer to the govermet fiscal year edig September 30, 2001.

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4 Chapter I Compliace with Statutory Policies A. Fudametal Service to the People (39 U.S.C. 101 (a)) 1. Geeral It was a year of challege ad a year of chage. A softeig ecoomy resulted i a slowig demad for postal services. At the same time, our uiversal service resposibility saw the Postal Service expad its delivery etwork to accommodate some 1.7 millio ew residetial ad busiess addresses. I light of a extremely challegig fiacial situatio, Postal Service maagemet ad the Board of Goverors acted quickly ad decisively to cotrol costs while maitaiig service excellece. This icluded a temporary hold o more tha 800 capital facility projects atiowide. At Headquarters, we istituted a hirig freeze ad reduced programs. Career employmet throughout the system was reduced by 11,600. Ad this was o top of the previous year s reductio of 10,300 positios. USPS Total Factor Productivity for the year grew by 1.3 percet, double the plaed icrease. That gai traslated ito savigs of $900 millio. Through it all, the me ad wome of the Postal Service delivered. For the secod straight year, customer satisfactio measuremets showed that 92 percet of households surveyed rated their level of satisfactio with the Postal Service as good, very good, or excellet. Ad idepedetly measured delivery scores remaied at record levels, showig that 94 percet of local First-Class Mail was delivered o time. Service remaied foremost i the Goverors mids with their selectio of Joh E. Potter as the 72d Postmaster Geeral of the Uited States. This brought a reewed focus o operatioal performace ad core products ad services. Potter, oly the sixth career employee to lead the world s largest postal system, established specific strategies to support cotiued orgaizatioal success. By developig people, maagig costs, improvig service, growig reveue, ad realizig reform, the Postal Service ca succeed log ito the ew cetury. A restructurig of Headquarters ad field operatios by the ew Postmaster Geeral reduced admiistrative fuctios ad better aliged resources with tasks. This icluded a combied Marketig ad Sales fuctio, which brought the developmet, maagemet, ad sales of products ad services ito a sigle, streamlied orgaizatio better able to serve our customers. Lookig forward, maagemet bega work o a comprehesive Trasformatio Pla to give the Postal Service eeded flexibility to fiace itself ad meet the challeges of expadig competitio ad techological chage. Workig with all stakeholders, maagemet created ad circulated a discussio documet to assist i the developmet of a comprehesive pla for submissio to Cogress ad the Admiistratio. The three-phase pla explores chages withi our existig legislative framework, moderate legislative chage i areas such as pricig, ad log-term trasformative efforts that would defie ad support the role of the Postal Service i a ew cetury. The Postal Service s role as provider of a fudametal service to the people of the Uited States was dramatically uderlied followig the September 11 terrorist attacks o New York ad Washigto. The sight of our letter carriers i every eighborhood i the atio icludig the affected cities brought a welcome sese of reassurace ad ormalcy to those we serve. Withi weeks of the attacks, however, the Postal Service itself became a ew groud zero. I a uprecedeted use of the mails for bioterrorism, leaders of Cogress ad the ews media were targeted with letters cotamiated with deadly athrax. Tragically, these crimial acts resulted i death ad serious illess of iocet Americas. Two Postal Service employees were amog the five Americas killed; others were made critically ill. I the ucertaity that followed, the U.S. mail was disrupted ad Americas leared agai the criticality of daily, uiversal mail service to our atio. The Postal Service, workig with federal, state, ad local public health ad law eforcemet officials, worked tirelessly to protect the safety of the America people, the safety of our employees, ad the safety of the mail. A program of educatio, ivestigatio, itervetio, ad prevetio otable for the ivolvemet of the mailig commuity as well as Postal Service uios ad maagemet associatios was quickly developed ad put i place. This helped us to address the threat to daily, uiversal mail service, oe of the most importat uifyig elemets of a farflug, diverse, ad free atio. The Postal Service recogizes its resposibility i cotiuig to provide this fudametal service. Neither sow, or rai, or heat, or gloom of Chapter 1 Compliace with Statutory Policies 2001 Comprehesive Statemet o Postal Operatios 1

5 ight, or the wids of chage, or a atio challeged will stay us from the swift completio of our appoited rouds. Ever. 2. Board of Goverors As the goverig body of the U.S. Postal Service, the 11-member Board of Goverors has resposibilities comparable to a board of directors of a publicly held corporatio. The Board is composed of ie Goverors appoited by the Presidet of the Uited States with advice ad coset of the Seate. The other two members of the Board are the Postmaster Geeral ad the Deputy Postmaster Geeral. The Goverors appoit the Postmaster Geeral, who serves at their pleasure without a specific term of office. The Goverors, together with the Postmaster Geeral, appoit the Deputy Postmaster Geeral (39 U.S.C. 202). The Board meets o a regular basis ad at the aual meetig i Jauary the chairma is elected by the Goverors from amog all members of the Board. The vice chairma is elected by the full Board. The Board directs the exercise of the power of the Postal Service. It establishes policies, basic objectives, ad log-rage goals for the Postal Service i accordace with Title 39 of the U.S. Code. Except for those powers specifically vested i the Goverors, the Board may delegate the authority vested i it by statute to the Postmaster Geeral uder such terms, coditios, ad limitatios, icludig the power of redelegatio, as it deems desirable (39 U.S.C. 402). The Goverors are authorized to establish reasoable ad equitable classes of mail ad reasoable ad equitable rates of postage ad fees for postal service (39 U.S.C. 3621). A specific power reserved by statute for the Goverors aloe is to approve, allow uder protest, reject or, by uaimous writte decisio, modify recommeded decisios of the Postal Rate Commissio o postal rate ad mail classificatio chages (39 U.S.C. 3625). The Board held regular mothly meetigs durig 2001 for a total of 24 days. Nie of the regular meetigs were held i Washigto, DC, ad the other three i cities across the coutry. I additio, the Board held six special meetigs. The Board had three stadig committees: Audit ad Fiace, Capital Projects ad Strategic Plaig. The committees held regularly scheduled meetigs durig the year to cosider matters withi their areas of resposibility ad refer items to the full Board for cosideratio. I October 2000, the Board approved two capital projects: expasio of the Processig ad Distributio Facility i Champaig, IL, ad additioal fudig for a ew Sprigdale Statio i Stamford, CT. They also approved a resolutio to borrow moey as well as their meetig schedule for I November 2000, the Board approved a resolutio for Approval of Iteratioal Postage Rates, Special Service Fees, ad Miscellaeous Charges. The Board approved capital fudig for the Iformatio Techology Ehaced Security Capability ad approved the FY 2001 Itegrated Fiacial Pla. I December 2000, the Goverors, i separate votes, approved the Recommeded Decisios of the Postal Rate Commissio o Postage Rate ad Fee Chages ad o Selected Mail Classificatio Matters, Docket No. R2000-1, uder protest. The Board approved a resolutio settig Jauary 7, 2001, as the effective date for the ew classificatio ad fees. The Board approved the FY 2000 Audited Fiacial Statemets ad the EVA Variable Pay Program for FY The Board approved three capital projects: restoratio of the parkig area at the Milwaukee, WI, Processig ad Distributio Ceter; the mail processig aex i Idiaapolis, IN; ad additioal fudig for automated flats feeder ad OCR capability for Flat Sortig Machie 1000s. I Jauary 2001, the Board approved a resolutio supportig the trasportatio ad drop box agreemets with Federal Express. The Board approved a resolutio o capital fudig ad the FY 2000 Aual Report. The Board approved four capital projects: Itegrated Data Systems Upgrade, Time ad Attedace Collectio System, Stadard Accoutig for Retail Systems, ad Postal Field Computig Ifrastructure. The Goverors elected Robert F. Rider as Chairma of the Board ad the Board elected S. David Fiema as Vice Chairma for I February, the Board approved a resolutio to borrow moey ad capital fudig for a ew Mar Vista Statio i Los Ageles, CA. I March, the Goverors approved the Decisio rejectig the Further Opiio ad Recommeded Decisio of the Postal Rate Commissio o Postage Rate ad Fee Chages, Docket No , ad requested recosideratio. The Board approved filig of a Priority Mail Niche Classificatio ad capital fudig for upgrades at Comprehesive Statemet o Postal Operatios Chapter 1 Compliace with Statutory Policies

6 the Processig ad Distributio Ceter i Seattle, WA. I April, the Board approved a resolutio clarifyig the role of the Strategic Plaig Committee. The Board also approved the FY 2000 Comprehesive Statemet o Postal Operatios ad a resolutio to borrow moey. I May, the Goverors uaimously approved the decisio to modify the postal rates ad fees recommeded by the Postal Rate Commissio. The Board approved a resolutio settig July 1, 2001, as the effective date for the ew classificatio ad fees. The Board approved a resolutio revisig the Audit ad Fiace Committee charter, the FY 2002 appropriatio request, ad a resolutio to borrow moey. The Board approved capital fudig for ehacemets to the letter recogitio program. I Jue, the Goverors approved the Postal Rate Commissio s Recommeded Decisio o Experimetal Presorted Priority Mail Rate Categories, Docket No. MC The Board approved July 15, 2001, as the effective date of the ew classificatio ad rates. The Board approved capital fudig for the Surface Air Support System ad for advace site acquisitio for the Processig ad Distributio Ceter i Teterboro, NJ. I July, the Board approved Pay for Performace goals for FY 2002 ad Board meetig dates for caledar year The Board approved a motio to seek acceleratio for the reimbursemet for forgoe. The Board approved capital fudig for the West Bethesda Brach i Bethesda, MD, ad for admiistrative space at the North Ly Street facility i Arligto, VA. I August, the Board held a oe-day closed sessio to review fiacial ad pricig iformatio for filig a omibus rate case with the Postal Rate Commissio. I September, the Board approved filig a rate case with the Postal Rate Commissio, extesio of the experimetal ride-alog case, ad filig a experimetal case for delivery cofirmatio. The Board approved the FY 2002 operatig budget for the Office of Ispector Geeral. The Goverors approved the Postal Rate Commissio FY 2002 operatig budget. The Board approved the FY 2002 operatig budget ad capital ivestmet pla for the Postal Service, ad a resolutio to borrow moey. The Board approved fudig for lease reewals for the Priority Mail Processig Ceter Network. Postmaster Geeral William J. Hederso retired from the Postal Service o May 31, The Goverors appoited Joh E. Potter as Postmaster Geeral effective Jue 1, Strategic Plaig The Office of Strategic Plaig supports the Postmaster Geeral, the Executive Committee, ad the Board of Goverors i the developmet ad implemetatio of the Five-Year Strategic Pla ad the Aual Performace Pla, as required by the Govermet Performace ad Results Act of The Office of Strategic Plaig also assists seior maagemet i addressig log-term strategic issues, ad supports headquarters departmets i the developmet of fuctioal plas. a. The Five-Year Strategic Pla, FY The Govermet Performace ad Results Act (GPRA) required agecies to develop a Five- Year Strategic Pla, begiig i 1997, with updates at least oce every three years. The Postal Service published the first updated Five-Year Strategic Pla i September The Strategic Pla was used as the basis for a idepedet evaluatio of the Postal Service coducted by George Washigto Uiversity ad Govermet Executive magazie. This evaluatio is part of a multi-year study of the performace of 27 govermet agecies ad their adherece to GPRA priciples. The Federal Performace Report: Gradig Govermet, was published i April 2001 ad icluded the Postal Service ad several other agecies. The study team stated that The Postal Service is oe of the better ru agecies i govermet. The Postal Service received top ratigs o maagig for results. The key factors listed by the study team were: Clearly stated missio, liked to performace plas Sophisticated busiess forecastig Balaced scorecard with itegrated plaig Outcome-focused measures Reliable data Strog workforce plaig Iformatio Techology plaig itegrated with missio ad strategies Budget, spedig, ad asset plaig liked to strategic ad performace goals The FY Strategic Pla focused o three major strategic challeges resultig from a icreasigly ucertai ecoomic eviromet. These challeges were: 1. The icreasigly difficult task of maitaiig postal prices at competitive levels as postal Chapter 1 Compliace with Statutory Policies 2001 Comprehesive Statemet o Postal Operatios 3

7 workload (mail volume ad delivery poits) ad associated costs icrease, while the Postal Service is restricted from makig major structural chages associated with the uiversal service obligatio (such as closig post offices because of uprofitability); 2. The limitatios o the Postal Service that reduce its ability to geerate ew reveue i a icreasigly dyamic ad competitive market; ad 3. A eed to become more flexible, iovative, ad resposive to customer eeds while improvig labor maagemet relatios ad employee commitmet to results-orieted performace. The Strategic Pla stated that the Postal Service would cotiue to focus o improvig service performace, customer ad employee satisfactio, ad productivity, but that icremetal improvemets would ot meet the eeds of the public or postal customers. Sigificat chage required adjustmets to the regulatory ad legislative framework established more tha thirty years earlier by the Postal Reorgaizatio Act of The Board of Goverors the requested Cogress to cosider chages i the Act. The Geeral Accoutig Office agreed that the curret framework required trasformatio, ad placed this issue o the govermet s High Risk list. b. The Trasformatio Pla As a result of this review ad subsequet cogressioal oversight hearigs, the Postal Service was tasked with developig a comprehesive trasformatio pla that would address these issues ad outlie alterative strategies. A crossfuctioal Office of Trasformatio Plaig was established withi the Strategic Plaig Departmet, ad the Postal Service published Outlie for Discussio: Cocepts for Postal Trasformatio o September 30, This documet was iteded to serve as backgroud for a extesive program of outreach to postal stakeholders. A comprehesive Trasformatio Pla, represetig a itegrated discussio of optios o the major issues facig the Postal Service, was origially scheduled to be published o December 31, Cogress exteded the deadlie to March 31, c. Stakeholder Outreach The Postal Service ad several of its key stakeholders have bee ivolved for several years i discussios about legislative reform. The Postal Service Five-Year Strategic Pla, FY , icorporated additioal specific commets about may of the issues facig the postal commuity, ad the Postal Service formed a task force with the mailig idustry to discuss short-term opportuities for chage. A request for commets o the policy questios related to trasformatio raised by Cogress ad the Geeral Accoutig Office was published i a Federal Register otice, posted o the Postal Service website, ad was mailed to major mailers, suppliers, the mailig idustry, ad postal uios ad associatios. The Postal Service held a umber of meetigs with stakeholders ad coducted surveys ad focus groups to gather extesive data o the subject of postal trasformatio. These results will be icorporated ito the Trasformatio Pla. d. Aual Performace Plaig The aual plaig cycle (see Table 1.1) begis with a assessmet of the postal busiess eviromet. The prelimiary assessmet, circulated to the executive committee i Jue 2001, idicated that the U.S. ecoomy was ot expected to grow as fast i FY 2002 ad 2003 as i the recet past. However, these prelimiary forecasts, comparable to the best govermet ad private sector forecasts, did ot predict the dramatic declie of the U.S. ecoomy. The Busiess Eviromet Assessmet (BEA) did suggest that direct competitio ad techological substitutio for traditioal postal services would cotiue to icrease ad would adversely affect mail volumes ad reveues. The BEA oted the eed for icreased trasportatio flexibility ad idepedece from scheduled airlies as mail service suffered from problems i that idustry. The disruptios to the atioal air trasportatio system as a result of September 11 ad subsequet actios were exceptioal, but the Postal Service had already begu makig alterative arragemets most otably the arragemets with Federal Express ad the strategy to replace air service with groud service wherever possible. These actios miimized the disruptios to mail service. The BEA also oted that America cosumers idicated that security ad safety were icreasig cocers ot just for mail, but as part of their overall eeds ot completely satisfied i the ecoomy ad society. Ufortuately, those fears were justified by the terrorist attacks o the Uited States, icludig the use of athrax i the mail. The FY 2002 Aual Performace Pla, published i October 2001, did ot iclude the impact of the dramatic reductio i ecoomic growth or Comprehesive Statemet o Postal Operatios Chapter 1 Compliace with Statutory Policies

8 the disruptios caused by the respose to terrorist attacks. The full impact has ot yet bee assessed, ad the Postal Service has advised Cogress of the levels of assistace to cover the costs of terrorism ad related issues. Chapter 5 of the Comprehesive Statemet o Postal Operatios, 2001 provides a report of postal performace durig FY 2001, as required by the Govermet Performace ad Results Act. Chapter 4 provides the prelimiary performace targets for FY 2003, as the Postal Service begis the plaig cycle for that year. Followig the acceptace of the Itegrated Fiacial Pla by the Board of Goverors, the fial targets will be published i the Aual Performace Pla i September The plaig documets ad associated iformatio are distributed to iteral ad exteral audieces i a umber of formats ad are available o the Strategic Directios website of the Strategic Plaig Office. e. Strategic Aalysis The Strategic Plaig Office, usually i partership with other fuctioal departmets, participates i a umber of cofereces ad coducts several studies focused o log-term chages that will affect the Postal Service. I FY 2001, Strategic Plaig sposored the followig: Postal Service Household Diary Study Treds Future of Global Mail 2010 Market Scearios Assessmet of Uiversal Service Research ad Treds Cosumer Decisio-Makig i the 21st Cetury Treds i Household Peetratio ad Use of Iteret (Mail Diversio Studies) Case Studies i Orgaizatioal Trasformatio Customer Value Aalysis ad Brad Equity Measuremet Balaced Scorecard ad Performace Measuremet These studies supported the plaig process, customer outreach programs, the Trasformatio Team ad other maagemet iitiatives. 4. Quality Cosistet with the FY 2000 decisio to phase out a separate Quality fuctio, the Headquarters Quality departmet was officially elimiated at the ed of 2001 with the creatio of the ew Performace ad Field Operatios Support group. Performace ad Field Operatios Support assumes permaet resposibility for most activities formerly performed by the Breakthrough Productivity Iitiative; cotiued developmet ad implemetatio of the Stadardizatio effort begu by the Quality Core Applicatios group; ad the support fuctios of the process review, deploymet, requiremets, ad short-term plaig activities previously performed by the Operatios Process Support group. Three primary Quality iitiatives from 2001 will be carried forward for further developmet ad fial implemetatio i FY 2002 by the Field Operatio Support fuctios. Specifically, these are the Automated Flat Sortig Machie (AFSM 100) stadardizatio, the stadardized "shape-based separatio" of priority mails, ad the project maagemet of the "Bold Actios" project trackig system. Other ew stadardizatio efforts plaed TABLE 1.1. ANNUAL MANAGEMENT PLANNING CYCLE Oct Nov Dec Ja Feb Mar Apr May Ju Jul Aug Sept Establish Set Prelimiary Targets for Next Year Set Fial Targets for Next Year Deploy Implemet Review Negotiate Requiremets (Develop Budgets) for Next Year Implemet Prior Year s Programs ad Budgets Assess Previous Year s Performace Moitor Curret Performace ad Adjust Programs, Budgets, ad, where ecessary, targets GPRA ad related Documets BEA AR PAPP ad APR i CSPO Busiess Eviromet Assessmet (BEA); Aual Report (AR), icludes the audited fiacial statemets of the USPS, ad other relevat data, i respose to the Chief Fiacial Officers Act, ad related legislatio; Prelimiary Performace Pla (PAPP); Aual Performace Report (APR); Comprehesive Statemet o Postal Operatios (CSPO); Aual Performace Pla (APP); Five-Year Strategic Pla (updated at least every three years; the most recet update was September 2000, for the period FY ); Comprehesive Trasformatio Pla (CTP) is a special report respodig to cogressioal oversight ad Geeral Accoutig Office (GAO) cocer. CTP APP 5 Year Strategic Pla Chapter 1 Compliace with Statutory Policies 2001 Comprehesive Statemet o Postal Operatios 5

9 for FY 2002 iclude customer service operatios, improved mail coditio reportig ad idicators, ad cotiued ehacemets to the operatios performace achievemet ad assessmet systems. 5. Diversity a. Geeral The Postal Service is facig iteral ad exteral busiess obstacles that provide both challeges ad opportuity for improved fiacial performace. The busiess of the Postal Service is built upo a diverse customer base. It is good busiess for our workforce ad supplier base to reflect this same diversity. Iterally, we must cotiue to work toward the most iclusive workplace possible, oe that builds upo our diverse talets ad does ot tolerate discrimiatio ad sexual harassmet. The related exteral issues are retetio of taleted employees, meetig legal ad regulatory equal employmet opportuity madates, ehacig our corporate image as a resposible corporate citize of the diverse commuities we serve, ad promotig busiess ad commuity parterships. To meet these challeges, Diversity Developmet is focused o four corporate strategies: fosterig broader participatio i our employee developmet programs, stregtheig maagemet accoutability, ehacig messagig about the value ad beefits of diversity, ad broadeig our commuity outreach efforts. These will esure that the Postal Service remais a great place to work, a place where everyoe's participatio is welcomed ad o oe is subjected to discrimiatio or sexual harassmet. It will also be a place where employees have access to programs that help them advace as far as their talets ad desires will take them. Diversity Developmet s iitiatives iclude special emphasis programs that ecourage employees to appreciate each other s differeces ad exclude o oe from orgaizatioal advacemet because of those differeces. We are workig to esure that both persoel selectio ad developmet participatio are iclusive. We are takig steps to maximize the retur o our ivestmet i orgaizatio partership i multicultural commuities. Diversity Developmet is actively ivolved with esurig that the successio plaig process is iclusive. We will cotiue efforts to help build a diverse supplier base by welcomig participatio of small, miority, ad wome-owed busiesses. Realizig that suppliers also are our customers, our key objectives are to geerate reveue from these sources ad to icrease customer service ad satisfactio. b. Natioal Diversity Recogitio Program The Postal Service Natioal Awards Program for Diversity Achievemet recogizes idividuals ad teams that demostrate exemplary efforts to ecourage ad promote diversity withi the orgaizatio. I 2001, there were more tha 2,800 omiatios. Categories for award cosideratio were Idividual, Team, Leadership, ad the Dot Sharpe Lifetime Achievemet Award. Ad the vice presidet's category recogizes employees, both idividually ad collectively, who helped to advace the visio of diversity withi the Postal Service. Recogizig ad valuig diversity cotiues to be a busiess requiremet ad is the key to attaiig strategic orgaizatioal goals. Recogizig postal employees for their diversity efforts will help esure that the Postal Service remais a iclusive ad diverse orgaizatio. c. Employmet of Idividuals with Disabilities The Postal Service uses regular competitive procedures i selectig idividuals with disabilities for employmet. Idividuals with severe disabilities receive ocompetitive employmet cosideratio through referrals from idividual state departmets of vocatioal rehabilitatio or the U.S. Departmet of Veteras Affairs. I 2001, the Postal Service's career workforce icluded 47,937 employees with reported disabilities ad 7,329 employees with targeted disabilities. The Postal Service was recogized by Careers ad the Disabled magazie for a outstadig employee award. The award ackowledged the Postal Service as a great place to work for people who are disabled. Each year, the Postal Service submits a Affirmative Employmet Pla ad a Accomplishmet Report for Idividuals with Disabilities to the Equal Employmet Opportuity Commissio. The Affirmative Employmet Pla is dissemiated to Postal Service field istallatios. Each istallatio head is resposible for its implemetatio. d. Veteras Employmet The Postal Service is oe of the largest employers of veteras ad disabled veteras i the atio. At the ed of 2001, the Postal Service employed approximately 235,985 vet Comprehesive Statemet o Postal Operatios Chapter 1 Compliace with Statutory Policies

10 eras, icludig 77,521 who are disabled because of ijuries received i the uiformed services. Of that umber, 19,183 have disabilities of 30 percet or more. The Postal Service prepares a aual Accomplishmet Report ad Pla Certificatio for disabled veteras for submissio to the Office of Persoel Maagemet. e. Affirmative Employmet Programs The Affirmative Employmet Program (AEP) uit provides atioal guidace o the affirmative actio ad employmet program of the Postal Service. Durig 2001, the followig iitiatives were take to improve the iclusiveess ad retetio of the postal workforce: Streamlied the Affirmative Employmet Aual Accomplishmet Report process. With the cocurrece of the Equal Employmet Opportuity Commissio (EEOC), the umber of required reports for the AEP reportig process was reduced from 372 to 98. To facilitate barrier aalysis, the AEP uit developed ehaced statistical data graphic displays to supplemet the workforce demographics required by the EEOC for AEP report submissio. These reports cotai a summary of the steps take to address barriers ad graphics to display progress. Completed ad submitted AEP Aual Accomplishmet Reports. These reports addressed the prevetio of sexual harassmet, discrimiatio complaits, recruitmet ad hirig, employee developmet, promotios, separatios, retetio, program evaluatio, ad employee group represetatio. Published ad distributed the Affirmative Employmet Plas ad Accomplishmet Report for idividuals with disabilities to postal maagemet ad the EEOC. Published ad distributed the Affirmative Employmet Pla ad Accomplishmet Report for disabled veteras to postal maagemet ad the Office of Persoel Maagemet. Ehaced ad revised the Affirmative Employmet Quarterly Trackig Report used to moitor affirmative employmet activities atiowide. Published ad updated the Equal Employmet Opportuity ad Affirmative Employmet policy statemet of the Postmaster Geeral. A ew o-site AEP evaluatio process was implemeted as a iteral auditig procedure to measure, assess, ad verify progress toward achievig a discrimiatio-free workplace. A o-site evaluatio team reviewed diversity achievemets i performace clusters with the greatest challeges. The completed reports icluded best practices ad recommedatios. The Diversity Reportig System (DVRS) provides detailed statistical reports o the postal workforce. These reports iclude workforce profiles by grade level groupigs, hirig, promotios, separatios, developmet activities, ad treds. Statistical iformatio from DVRS is provided o request to the Geeral Accoutig Office, the EEOC, Cogress, ad other exteral ad iteral customers. The Postal Service also admiisters the Natioal Hispaic Program, the Wome s Program, ad the Special Emphasis Program. These programs focus attetio o the special eeds, obstacles, ad cocers of all groups where they are uderrepreseted i postal employmet. Major accomplishmets for these programs are described below. 1. Natioal Hispaic Program The Natioal Hispaic Program (NHP) Executive/Maagerial Developmet Process, through its field etwork, cotiued to address the orgaizatio, its goals, ad uderrepresetatio of Hispaics i the Postal Service. The NHP also sposored or atteded recruitmet ad commuity outreach activities. Hispaic Program specialists cotiue to participate i recruitmet drives, testig preparedess semiars, Form 991 preparatio, ad Advaced Leadership Program recruitmet. I its efforts to respod to the corporate goals, the NHP sposored umerous atioal evets ivolvig the Natioal Coucil of La Raza, the U.S. Hispaic Chamber of Commerce, Hispaic Data (the electroic job-postig website), the Hispaic Natioal Bar Associatio, the Natioal Orgaizatio for Mexica America Rights, the Natioal Hispaic Leadership Istitute, the Trasporte Itegrado y Masivo Hispaic Yearbook, the League of Uited Lati America Citizes, ad the Hispaic Busiess Expo of Cetral Florida. These outreach activities have helped to establish the Postal Service as a bechmark amog our Chapter 1 Compliace with Statutory Policies 2001 Comprehesive Statemet o Postal Operatios 7

11 atio's busiesses i addressig the eeds of the Hispaic commuity. 2. Wome s Program The Postal Service cotiued its commitmet to improve the status of wome i the workforce. Through structured programs ad positive actios, these efforts helped to idetify ad remove barriers ad iclude wome at every level i the orgaizatio. Major accomplishmets desiged to address the uderrepresetatio of wome i the Postal Service iclude: Revised ad published the Wome s Program policy statemet. Sposored the Family Fiacial Plaig Expo, to assist me ad wome i their persoal fiacial plaig. Updated the Wome s Program website with iformatio o recruitmet ad career developmet ad to hyperliks to atioal wome s orgaizatios. More wome are beig prepared for maagemet positios. Durig FY 2001, 40.1 percet of graduates of the Associate Supervisor Program were wome, as were 44.6 percet of Advaced Leadership Program graduates. The Natioal Wome s Program will cotiue its awareess campaig usig postal media ad the websites of wome s orgaizatios. The program assists wome with career developmet ad facilitates etworkig ad support. It provides sposorship to the Advaced Leadership Program ad executive educatio programs at various uiversities. The Wome s Program will cotiue to aalyze studies that focus o work ad family life ad address issues such as recruitmet, retetio, metorig, ad successio plaig. 3. Special Emphasis Program The Special Emphasis Program focused o recruitmet, retetio, ad promotioal opportuities for Africa Americas, America Idias ad Alaska Natives, Asia Americas ad Pacific Isladers, people with Disabilities, veteras, ad white males. White females ad Hispaics are addressed by the Wome s Program ad the Natioal Hispaic Program, respectively. Some of the major accomplishmets of the Special Emphasis Program were: I cojuctio with Executive Order 13126, the Special Emphasis Program developed a multi-year pla to address the White House Iitiative o Asia Americas ad Pacific Isladers as a result of the Iterim Report to the Presidet ad the Natio, released o Jauary 17. Diversity Developmet was featured i Fortue magazie for its atioal miority supplier diversity iitiatives ad best practices. Collaborated with the Natioal Cogress of America Idias Youth Coucil to promote the availability of postal products, services, supplier, ad career opportuities. Revised Publicatio 354, Africa Americas o Stamps. Program partered with exteral atioal special emphasis orgaizatios to establish a commo goal to idetify multicultural opportuities for icreasig access to postal products, services, supplies, ad career opportuities. The Postal Service received oe of oly two agecy awards ad recogitio from the Federal Asia Pacific America Coucil for its commitmet to the Asia Commuity. f. Natioal Sexual Harassmet Prevetio Betwee fiscal years 1999 ad 2001 diversity Developmet made a substatial commitmet i the area of comprehesive sexual harassmet awareess ad prevetio traiig. Craft ad EAS employees received oe ad two hours of traiig, respectively. Durig fiscal year 2001 the Postal service coducted service talks ad offered sexual harassmet facilitator traiig i several locatios. These facilitators assist by deliverig traiig at the local level. I additio, the Office of the Geeral Cousel cotiued to offer iteractive web traiig for supervisors ad maagers o prevetig sexual harassmet activity. Postal attoreys, Diversity Developmet staff, ad specially traied facilitators provided briefigs, upo request, for groups of employees. The Postal service cotiued to educate through commuicatig its zero-tolerace policy. I February, the postal Service revised pertiet sectios the Employee ad Labor Relatios Maual, specifically sectio 670, which addresses sexual harassmet. I April, the chief operatio officer released a letter reaffirmig the commitmet of postal leadership o the zero tolerace policy ad posters were distributed to 34,000 facil Comprehesive Statemet o Postal Operatios Chapter 1 Compliace with Statutory Policies

12 ities atiowide, which provided employees with additioal iformatio. Seior postal leadership further reiterated this commitmet ad featured Tough message: Sexual Harassmet Could Get You Fired i a employee commuicatio. The Natioal Associatio of Supervisors prited a article etitled Supervisors Must Prevet sexual Harassmet i USPS i the postal Supervisor. Last, the Postal service revised Publicatio 552, ad Maager s Guide to Uderstadig Sexual Harassmet ad Publicatio 553, employee s guide to Uderstadig Sexual harassmet. B. Service to Small or Rural Commuities (39 U.S.C. 101(b)) Effective March 16, 1998, the Uited States Postal Service imposed a moratorium o maagemet iitiated post office closigs ad cosolidatios. Uder this moratorium, post offices will ot be closed uless o reasoable alterative is available. Some closigs (ad suspesios) may be ecessary or appropriate if postmasters retire suddely or catastrophic evets such as flood, fire, or earthquake occur. The Postal Service alog with represetatives of the Natioal League of Postmasters, cotiues to review all recet ad proposed post office closigs ad emergecy suspesios to help determie appropriate courses of actio. Durig 2001, the Postal Service closed or cosolidated two post offices, seve commuity post offices, ad oe classified statio. These post offices were i the process of beig closed before issuace of the moratorium ad thus were allowed to cotiue through the closig process. C. Employee Compesatio ad Career Advacemet (39 U.S.C. 101 (c)) 1. Collective Bargaiig Negotiatios with postal uios cover a full rage of topics ivolvig wages, beefits, ad coditios of employmet. The terms of the ew 2000 Natioal Agreemet betwee the Postal Service ad the America Postal Workers Uio, AFL-CIO (APWU), were determied pursuat to a award issued by a iterest arbitratio pael chaired by eutral arbitrator Stephe Goldberg o December 18, The three-year cotract, coverig approximately 337,000 employees represeted by the APWU, is for the period from November 21, 2000, through November 20, Arbitrator Goldberg, who rejected the APWU demad for wage parity with city letter carriers, awarded three geeral wage icreases of 1.2 percet effective November 18, 2000; 1.8 percet effective November 17, 2001; ad 1.4 percet effective November 16, The award cotiues the curret cost-of-livig adjustmet (COLA) formula ad paymet schedule for career employees, except that i lieu of COLA paymets for the first year of the cotract, eligible career employees were to receive a oe-time lump sum cash paymet of $499. Arbitrator Goldberg awarded selective oe-pay-level upgrades for six maiteace ad motor vehicle positios. The positios of Mail Processor ad Seior Mail Processor also received a oe-pay-level upgrade. A iterest arbitratio award was issued o February 3, 2002, which sets the terms of a ew four-year collective bargaiig agreemet coverig approximately 118,000 rural letter carrier employees represeted by the Natioal Rural Letter Carriers Associatio (NRLCA). The agreemet is for the period from November 21, 2000, through November 20, 2004, ad provides geeral wage icreases of 1.2 percet effective November 18, 2000; 1.8 percet effective November 17, 2001; 1.4 percet effective November 16, 2002; ad 1.2 percet effective November 15, The NRLCA ad the Postal Service also could exted the labor agreemet for a fifth year if the parties reach a settlemet o the ecoomic provisios, based o the comparable year i either the APWU or Natioal Associatio of Letter Carriers (NALC) atioal agreemets. I additio to the geeral wage icreases, the iterest arbitratio pael chaired by eutral arbitrator Joh Calhou Wells provided for the cotiuatio of the curret COLA formula except that i lieu of COLA paymets for the first year of the agreemet eligible career employees will receive a oe-time lump sum cash paymet of $499. Arbitrator Wells also awarded two pay adjustmets, oe of which is, i effect, the equivalet of a oe-pay-level upgrade. The other is a $300 wage icrease. Those two pay adjustmets are beig fuded by major productivity chages i rural carrier stadards. The stadards ivolve flat ad letter mail casig rates, Chapter 1 Compliace with Statutory Policies 2001 Comprehesive Statemet o Postal Operatios 9

13 the strappig out of mail, ad the defiitio of letter size mail. Also of ote, the Postal Service secured a atioal mail cout begiig February 28, 2002, ad edig March 13, Negotiatios betwee the Postal Service ad NALC bega i August 2001 for a successor to the collective bargaiig agreemet that was to expire o November 20, Productive discussios took place throughout the fall ad the parties reached agreemet to exted the discussios past cotract expiratio ad ito The motivatig factors to exted the discussios were the September 11 terrorist attacks ad the athrax threats, which had cosumed much of the attetio of the egotiators. The agreemet will cover approximately 239,000 employees represeted by the NALC. Negotiatios with the Natioal Postal Mail Hadlers Uio, AFL-CIO (NPMHU), which represets approximately 60,000 mail hadlers for a successor to the collective bargaiig agreemet that expired o November 20, 2000, reached impasse. It is aticipated the parties will resume discussios aimed at resolutio of the dispute either through further discussios or by utilizatio of the dispute resolutio procedures of the Postal Reorgaizatio Act. The Postal Service reached agreemet with the Iteratioal Associatio of Machiists ad Aerospace Workers, AFL-CIO (IAM), i February 2001 o the terms of a four-year agreemet coverig tool ad die shop workers at the Mail Equipmet Shops i Washigto, DC. The agreemet expires o Jauary 30, Collective bargaiig agreemets betwee the Postal Service ad certai smaller bargaiig uits Natioal Postal Professioal Nurses, Iformatio Systems/Accoutig Service Ceters (APWU), ad Operatig Services/Egieerig, Facility Services (APWU) expired with the parties havig failed to reach agreemet o the terms of successor agreemets. Discussios betwee the parties have cotiued i a effort to resolve the specific disputes. While collective bargaiig sessios with the NALC i the fall of 2001 addressed a wide variety of work rules ad issues, the parties cocetrated o rewritig Article 15 of the Grievace- Arbitratio Procedure to reflect the ew dispute resolutio process, the first major restructurig of the grievace-arbitratio procedure i more tha twety years. Durig 2001, the Postal Service ad the NALC completed the joit atiowide implemetatio of the ew dispute resolutio procedure i accordace with the September 2000 Memoradum of Uderstadig Re: Dispute Resolutio Process Implemetatio. Implemetatio, which icluded traiig 230 maagemet ad uio represetatives, was completed i September Streamliig the old grievace-arbitratio procedure, the ew process reduces the umber of steps before arbitratio from three to two. I additio, the process ecourages the resolutio of disputes at the lowest possible level of the orgaizatio. I September 2001 the parties published the third editio of the USPS-NALC Joit Cotract Admiistratio Maual, which was distributed to every city delivery uit i the system. First egotiated ad published i 1998 ad updated each year thereafter, this cotract guide has bee widely used i the field, ad it has bee crucial to the parties goals of reducig the icidece of workplace disputes. The Postal Service ad the NPMHU have completed the secod full year of their test procedure, which elimiates the third step of the grievace procedure at selected sites. Despite a sigificat icrease i the umber of grievaces appealed to Step 2, the umber of cases resolved at Step 2 remais steady. The parties cotiue to evaluate other chages that ca be made to improve the effectiveess of the grievace process. The parties have made sigificat progress i completig the Cotract Iterpretatio Maual. With oly a few articles left to fialize, it is expected that the maual will be released to field persoel i The Postal Service ad the NPMHU hosted their fourth aual Quality of Work Life Coferece. This atioal evet, which showcases local iitiatives developed joitly by labor ad maagemet, has icreased the visibility of the Quality of Work Life process ad created a greater awareess amog maagers ad craft employees of the beefits that the process ca brig to the workplace. I the area of Labor Relatios Systems, the redesig of the Grievace ad Arbitratio Trackig System (GATS 2.0) was fully implemeted. With all field offices ow required to iput grievaces at the Step 2 level of the process, GATS 2.0 offers aid to maagemet i idetifyig ad aalyzig workplace disputes earlier i the grievace process. I additio, GATS 2.0 cotiues to facilitate chages i the grievace/arbitratio schedulig process as agreed to by the major uios, resultig from Comprehesive Statemet o Postal Operatios Chapter 1 Compliace with Statutory Policies

14 egotiatios. Additioal ehacemets to the system are uder way to further icrease maagemet s use of GATS 2.0 as a labor relatios tool. 2. Cosultatio with Maagemet Associatios I accordace with Title 39, U.S. Code, Sectio 1004, cosultatios were coducted i 2001 with the Natioal Associatio of Postal Supervisors, the Natioal Associatio of Postmasters of the Uited States, ad the Natioal League of Postmasters of the Uited States. These sessios provided a opportuity for the maagemet associatios to participate directly i the plaig ad developmet of programs ad policies related to pay policies that impact some 80,000 postmasters, supervisors, ad other maagerial persoel through Pay cosultatios commece i February 2002, with cotiued emphasis o accoutability through the Merit Pay for performace program. The priciple of market-based pay will be a fudametal cocept uderlyig these cosultatios, esurig that supervisory ad maagerial pay i the Postal Service is comparable to that maitaied i the private sector, as required by the Postal Reorgaizatio Act. As i the past, each of the maagemet associatios will cotiue to provide represetatives to participate o Headquarters ad field teams tasked with formulatig ad testig procedures for ew programs. 3. Persoel a. Postal Career Executive Service There were 1,002 idividuals i the Postal Career Executive Service (PCES) raks at the close of Of this total, 838 idividuals held PCES-I positios. The remaider (other tha officers) served i Executive ad Admiistrative (EAS) positios. There were 45 PCES-II officer positios i the Postal Service at the ed of the fiscal year. The makeup of the PCES officers ad executives is represetative of the Postal Service s diverse workforce. b. Successio Plaig Successio plaig is the deliberate ad systematic effort by the Postal Service to esure leadership cotiuity ad build talet from withi the orgaizatio. The objectives are to idetify idividuals who ca move ito executive positios, to develop people for corporate eeds, ad to foster diversity amog the leadership raks. Idividuals are idetified as potetial successors based o their leadership skills, fuctioal ad maagemet expertise, ad performace results. Successio plaig has bee desiged to place the right people i the right jobs. After completig the seveth full year of successio plaig, fewer tha 1 percet of executive vacacies were filled by outside hires, 20 percet were filled by promotios of EAS employees to PCES, ad the remaiig 79 percet were filled from withi the executive raks. Durig 2001, the Postal Service also piloted EAS Leadership Developmet, a process desiged to build a cadre of well-prepared idividuals with leadership ad fuctioal skills to assume key field maagemet positios. c. Equal Employmet Opportuity The Office of Equal Employmet Opportuity (EEO) ad the REDRESS (Resolve Employmet Disputes, Reach Equitable Solutios Swiftly) program ejoyed its first full year as a itegrated orgaizatio. A reewed effort by EEO professioals at the district level has focused attetio o dispute resolutio at the early stage of the coflict. For the third cosecutive year, the umber of EEO pre-complait couseligs i the Postal Service decreased. This cotiued reductio i precomplait couseligs is attributable i large measure to the Postal Service s EEO mediatio program, REDRESS. REDRESS ad traditioal EEO couselig are both offered as alteratives to idividuals seekig precomplait couselig. The mediators i REDRESS are o-postal cotractors who are eutral ad practice a form of mediatio that is built o the trasformative model. Through empowermet ad recogitio, the parties to the mediatio are ecouraged to liste ad respod to oe aother s views effectively ad with better uderstadig of their differeces. I 2000, the participatio rate i REDRESS for those seekig precomplait couselig was early 73 percet. I 2001, the participatio rate rose to 76 percet atioally. Successful resolutio of disputes that go through mediatio is early twice the rate of resolutio of disputes that remai i the traditioal couselig process. As a cotiuatio of the Postal Service s commitmet to the resolutio of workplace coflict, REDRESS was implemeted i the U.S. Postal Ispectio Service durig 2001 ad is ow available to Ispectio Service employees who seek precomplait couselig through the Office of EEO. Chapter 1 Compliace with Statutory Policies 2001 Comprehesive Statemet o Postal Operatios 11

15 Additioally, the ogoig implemetatio of REDRESS II is uder way. REDRESS II brigs trasformative mediatio to the formal complait process through the hearig stage. This program is beig implemeted across the coutry through cooperatio with the Office of the Geeral Cousel. Iitial idicatios show that REDRESS II is a highly successful tool i resolvig formal EEO complaits. The success of the etire REDRESS program is ecouragig. It will cotiue to be emphasized as a meas of brigig employees ad maagers face to face to lear to deal with coflict ad misuderstadig i the workplace. d. Combied Federal Campaig The Postal Service jois other federal agecies i the Combied Federal Campaig (CFC) drive each fall. I 2001, postal employees atiowide pledged a total of $39,505, i payroll deductios to the charities of their choice. The average gift was $190. e. Ijury Compesatio I 2001, the Postal Service had a icrease i workers compesatio cash outlays of approximately $56 millio (8.8%) over 2000, for a total cash payout of $694.1 millio. Total paid compesatio claims icreased by 856 (3.2%), ad total medical claims icreased by 5,433 (4.5%). The Postal Service cost cotrol strategy was agai directed through the cotiued efforts to maage disability cases. Approaches iclude Nurse Case Maager services, which assist ijury compesatio staff with medical maagemet strategies to help employees with work-related ijuries or illesses move ito safe, positive, ad productive assigmets. The Postal Service also bega pilot agreemet with First Health Corporatio, the atio s largest preferred provider orgaizatio, to help reduce workers compesatio medical costs. The pilot is ow operatioal i four Office of Workers Compesatio Programs district offices, ad it will expad atiowide durig The Postal Ispectio Service cotiued its efforts to ivestigate fraud associated with postal employees compesatio claims. As a proactive measure to idetify ad elimiate fraudulet claims earlier i the process, Postal Ispectors efforts i the past fiscal year emphasized cotiuatio-of-pay (COP) ivestigatios. This resulted i $93.8 millio i log-term cost avoidace ad $5.5 millio i COP savigs, totalig $99.3 millio i savigs. As a result of Postal Ispectors work, there was a 30 percet icrease i COP cost savigs from 2000 ad a 24 percet icrease overall i idetificatio of employees defraudig the workers compesatio system. Specifically, Ispectors idetified 403 idividuals as defraudig the workers compesatio program ad 40 employees were arrested. 4. Compesatio ad Beefits a. Pay Comparability 1. Bargaiig Uit Employees Pay ad Beefits The average pay ad beefits for career bargaiig uit employees (excludig corporate-wide expeses) is $54,481 per work year. I a attempt to achieve compesatio rates comparable to those i private idustry, egotiatios betwee the Postal Service ad its uios for the various bargaiig uits that have reached egotiated settlemets cotiue to apply the priciple of moderate restrait set forth i past iterest arbitratio awards. 2. No-bargaiig Uit Employees Pay ad Beefits Pay for supervisors, postmasters, ad other obargaiig staff employees geerally meets or exceeds private sector levels. It also provides a adequate ad reasoable differetial betwee first-lie supervisors ad bargaiig uit clerks ad carriers. I FY 2001, of the Pay for Performace Program (formerly the EVA Variable Pay Program) for EAS employees aliged this pay practice with PCES executives ad corporate success measures as established uder the CustomerPerfect! process. This pay package provided maagemet the framework to drive the ecessary behavioral chages that make the Postal Service competitive i the marketplace. 3. Executive Pay ad Beefits Due to the limit imposed o Executive Schedule I salaries by the Postal Reorgaizatio Act, pay ad beefits for Postal Service officers ad some key executives do ot meet private sector comparability stadards. Durig 2001, the average salary for Postal Service officers was $141,593. The average executive salary was $105,494. The Postal Service cotiued to focus o corporate objectives through the 2001 Pay for Performace Program, which recogizes the sigificat role that postal executives ad EAS employees play i achievig corporate success. The Pay for Performace Program awards payouts for achievig breakthrough performace Comprehesive Statemet o Postal Operatios Chapter 1 Compliace with Statutory Policies

16 Furthermore, by usig the same performace measures for officers, executives, ad EAS employees, participats become stakeholders i the success of the Postal Service. To focus o cotiuous improvemets ad log-term results, the 2001 paymets cosisted of a percetage of prior year s reserve accout ad the curret year s eared credit. I 2001, award payouts averaged $2,270 for exempt obargaiig EAS employees, $876 for oexempt obargaiig employees, ad $8,858 for executives. While the program was desiged to recogize team performace, provisios were made to exclude idividual employees who did ot cotribute to the performace of the orgaizatio. 4. Merit Pay Performace Evaluatio I 2001, the Postal Service cotiued to emphasize the importace of the Merit Performace Evaluatio process. This process evaluates ad rewards the performace of professioal ad maagerial persoel. The process employs idices ad measuremets tied to the work uit s missio whe establishig employee objectives for the year. These idices ad measuremets are used to assess a the employee s success i meetig these mutually agreed-upo objectives. As with last year s program, the Merit Performace Evaluatio process cotiues to be closely aliged with the CustomerPerfect! philosophy. It provides a mechaism to lik employee cotributio to corporate goals. I 2001, a idividual Merit Performace Evaluatio process coverig executives was cotiued. Its primary purpose is to promote idividual accoutability to support both corporate goals ad certai critical idicators that cotribute to the success of the Postal Service. Oe critical idicator emphasizes diversity ad requires executives to develop idividual goals that promote diversity, while takig ito accout the specific activities idetified i their orgaizatioal affirmative actio pla whe settig specific targets for success. Like the performace evaluatios for professioal ad maagerial employees, the executive evaluatios also lik cotributios to the overall achievemet of corporate goals. b. Leave Programs Postal Service employees are provided both sick ad aual leave at the same rate as other federal sector employees. However, postal employees have a higher aual leave carryover limit tha their federal sector couterparts. Postal employees used a average of 8.4 days of sick leave per employee durig Eared aual leave may be doated to other career or trasitioal Postal Service employees who have exhausted their ow leave ad have a serious health problem. Uder the Family ad Medical Leave Act, eligible employees may take up to 12 weeks off from work for covered coditios. Postal Service employees may use aual leave, sick leave, or leave without pay for covered coditios i accordace with applicable collective bargaiig agreemets ad curret leave policies. Postal Service career obargaiig uit employees ad some bargaiig uit employees ca participate i a leave exchage program through which a portio of aual leave that would otherwise be eared i the followig leave year ca be exchaged for cash. The Postal Service allows the use of 80 hours of accrued sick leave for depedet care uder a policy available to all career employees. c. Health Isurace Health care cotributios totaled $3.2 billio, or 6.3 percet of the Postal Service's total pay ad beefits durig The Postal Service cotiued to pay most of the premium cost of employee health beefit coverage. Career employees are automatically erolled to pay their share of health beefit premium cotributios with pre-tax payroll deductios. Uder the Omibus Budget Recociliatio Act of 1990, the Postal Service is required to fud the auitats share of the Federal Employee Health Beefit premiums. The cost of fudig the health care beefits for postal auitats ad their survivors was $858 millio. d. Life Isurace The Federal Employees Group Life Isurace program provides life isurace coverage for Postal Service employees. The Postal Service assumes the full cost of basic life isurace for eligible employees. Durig 2001, Postal Service costs for employee life isurace were $198.6 millio ad the cost of fudig life isurace for postal auitats ad their survivors was $7.6 millio. Chapter 1 Compliace with Statutory Policies 2001 Comprehesive Statemet o Postal Operatios 13

17 e. Retiremet Systems Postal Service career employees, like federal career employees, are covered by oe of three retiremet systems admiistered by the U.S. Office of Persoel Maagemet. At the ed of 2001, there were 774,657 career employees covered by a federal retiremet program. Of this total, 514,870 employees (66.4 percet) were covered by the Federal Employees Retiremet System (FERS); 248,347 employees (32.1 percet) were covered by the Civil Service Retiremet System (CSRS); 11,440 employees (1.5 percet) were covered by CSRS Offset. CSRS is a defied beefit retiremet system. Auity beefits are based o a employee s highthree average salary ad years of service. CSRS Offset is similar to CSRS but requires Social Security cotributios. Upo Social Security eligibility, the CSRS auity is reduced (offset) by ay Social Security beefit resultig from periods of CSRS Offset service, to produce a beefit equivalet to what would have bee received uder CSRS. FERS is a retiremet system with both defied beefit ad defied cotributio compoets. Uder FERS, employees receive retiremet beefits from a federal retiremet auity, Social Security, ad the Thrift Savigs Pla. The FERS auity beefit, while also based o a employee s high-three average salary ad years of service, produces a smaller beefit tha CSRS does. The Postal Service ad career employees make retiremet cotributios to the Civil Service Retiremet ad Disability Fud. For 2001, CSRS employees cotributed 7.0 percet of basic pay to the Fud. FERS ad CSRS Offset employees cotributed 0.8 percet of basic pay to the Fud ad 6.2 percet of gross pay to Social Security. f. Thrift Savigs Pla All career employees may participate i the Thrift Savigs Pla (TSP), which is admiistered by the Federal Retiremet Thrift Ivestmet Board. The rules for TSP participatio differ depedig o the employee s retiremet system. For FERS employees, the Postal Service cotributes oe percet of basic pay to TSP, fully matches employee cotributios up to 3 percet of basic pay, ad matches oe-half of employee cotributios from 3 to 5 percet of basic pay. I 2001, FERS employees could cotribute up to 11 percet of basic pay to TSP o a tax-deferred basis, subject to IRS maximum limits. The Postal Service does ot match CSRS or CSRS Offset employee cotributios to the TSP. I 2001, CSRS employees cotributios were limited to 6 percet of basic pay. At the ed of 2001, 417,511 FERS employees ad 147,019 CSRS ad CSRS Offset employees participated i TSP. g. Flexible Spedig Accouts Employees cotiue to take advatage of Flexible Spedig Accouts (FSAs) to pay for certai health care ad depedet care expeses with cotributios made through pretax payroll deductios. FSAs were first offered i 1992 to certai obargaiig uit employees ad ow iclude all employees. I 2001, 55,273 employees were erolled i health care FSAs (a 4.1 percet icrease from 2000), with a average cotributio of $1,393. I 2001, 5,743 employees were erolled i depedet care FSAs (a 3.6 percet decrease from 2000), with a average cotributio of $2,691. The projected 2001 savigs for the Postal Service resultig from the FSA program is approximately $2.7 millio (et of admiistrative expeses). Employees experiece tax savigs as well, which vary accordig to the idividual s cotributio amouts ad margial tax rates. 5. Employee Developmet Employee Developmet has two mai areas of resposibility: Product Developmet ad Evaluatio, which desigs, develops, ad evaluates curricula; ad Delivery, which operates at the William F. Bolger Ceter for Leadership Developmet, Potomac, MD ad at the Natioal Ceter for Employee Developmet, Norma, OK. Both ceters are self-cotaied campuses with classrooms, coferece facilities, housig, diig ad related services. There are 85 Postal Employee Developmet Ceters throughout the atio that support operatioal eeds by providig local traiig assistace to employees. While traditioal classrooms, o-the-job istructio, ad correspodece courses are still prevalet, delivery platforms icreasigly iclude satellite etworks, videotape, computer-based iteractive programs, web-based istructio, ad combiatios of these. a. Maagemet Traiig With the cotiuatio of the Associate Supervisor Program (ASP), Career Maagemet Program (CMP), ad Advaced Leadership Program (ALP), the traiig ad developmet eeds of supervisors ad maagers at all levels of the orgaizatio are beig met Comprehesive Statemet o Postal Operatios Chapter 1 Compliace with Statutory Policies

18 The 16-week ASP for first-lie supervisors cotiues to be a atioal success. All 85 districts have participated i the program, which has graduated 10,390. I 2001, approximately 125 classes were coducted. The CMP was itroduced i the sprig of CMP addresses the eeds of supervisors ad maagers i the EAS level rage. I 2001, more tha 40 offerigs were completed for 1,015 EAS employees. There are three etry poits or tracks represetig iitial ad advaced supervisory skills ad maagemet developmet. Participats complete a assessmet based o the leadership competecy model to determie their appropriate etry poit ito the program. Curretly the program cosists of oe week of classroom istructio for each track. I additio, fuctioal/techical traiig is available for delivery ad mail processig supervisors. Several other fuctios have fuctioal/techical curricula already i place for supervisors. The ALP cotiued to make sigificat progress i preparig high-potetial maagers for the challegig leadership roles of the future. By the ed of the year, a total of 48 classes with approximately 42 studets per class had etered the program. Several program desig improvemets were made. Amog them were a ew ALP video describig the Executive Competecy model; a updated erollmet guide ad website; a ew eveig speaker series called Executive Chat; ad the additio of two postal vice presidets as regularly appearig ALP faculty. This year itroduced the first of a plaed series of semiars for ALP graduates: the ALP Strategic Directio Semiar Series, the result of a partership betwee Employee Developmet ad Strategic Plaig. Each semiar focuses o oe poit of the Postmaster Geeral s star, the five success strategies. The first semiar focused o pursuig legislative reform. ALP was reviewed by the America Coucil o Educatio ad was rated as carryig 12 udergraduate college credits. As a result, ALP studets pursuig college degrees will ow be able to apply their ALP experiece toward college degree requiremets. The Processig ad Distributio Maagemet program focuses o the core operatioal aspects of the plat maager positio. The course has bee structured to touch all fuctioal areas, ad to provide referece materials ad tools to the plat maager cadidate. The course is a combiatio of classroom lecture, real world examples, ad the applicatio of learig through projects ad O-the-Job Istructio (OJI). The course material provides a overview of basic mail processig operatios, performace expectatios, ad support fuctios that directly support plat performace. The participat receives a macro view of facility operatios ad plaig, expads kowledge of support fuctios, ad develops a strategic pla for chage. The week of OJI ivolves visitig a desigated traier plat maager. It allows the participat to visit a Processig ad Distributio Ceter, a Bulk Mail Ceter, ad a Airport Mail Ceter. Idividuals idetified o Performace Cluster successio plas for the positios of Maager, Processig ad Distributio Facility, EAS-23; Maager, Processig ad Distributio Ceter, EAS-25; ad Maager, Processig ad Distributio Ceter PCES-1 (small) are eligible to atted. Six classes were held i 2001, with 119 participats. I a cotiuig partership with PBS, The Busiess ad Techology Network, postal employees received traiig o a umber of topics affectig them ad their workplace. Programs aired via the Postal Satellite Traiig Network covered safety, diversity, customer service, ad maagemet issues. Most programs could be taped for viewig at aother locatio or time, savig travel time ad expeses over traditioal semiar traiig veues. Safety programs, were see by more tha 50,000 postal employees atiowide. Safety for Postal Leadership was rolled out to a audiece of more tha 35,000 postal leaders. This 16-hour course provides a opportuity for supervisors, maagers, ad craft leaders to study together. It uderscores the critical role of leaders i promotig safety i postal operatios. This course is ow a itegral part of ASP ad lays a critical foudatio for members of Joit Labor Maagemet Safety ad Health Committees ad Facility Safety Coordiators i smaller facilities without full-time safety professioals. Facility Safety Coordiator (FSC) Traiig is a self-directed, self-paced course, available i both paper ad web-based formats. FSC traiig covers thirty-eight critical safety topics i three areas: leadership, techical, ad admiistrative tasks. The target audiece is ay EAS employee with facility safety coordiatio resposibility. Chapter 1 Compliace with Statutory Policies 2001 Comprehesive Statemet o Postal Operatios 15

19 b. Techical ad Craft Educatio The Natioal Ceter for Employee Developmet (NCED) achieved the goal of capturig its program reveues ad joural voucher trasfers from Postal customers greater tha expeses icurred i first year to receive zero dollars from the Postal Service i its program budget. Aggressive seat maagemet, a curriculum wideed beyod traditioal techical courses, ad reveue geeratio efforts cotributed to this success i the Ceter's madate to become self-fudig ad idepedet from the postal headquarters budget by FY I FY 2001, NCED's traditioal headquarters' program fudig was moved to field offices, ad NCED received a admiistrative budget of $18.4 millio ad a $0 program budget. The Ceter bega chargig postal cliets ad stepped up efforts to attract o-postal coferece ad traiig cliets. Through itesive reveue efforts ad cost cotrol, NCED held admiistrative budget costs below its allocatio, covered FY 2001 program expeses with reveues, ad eded the year with a $1.34 millio surplus i the program budget. NCED supported a $39 millio traiig ad coferecig operatio, with a headquarters budget cost of oly $17 millio. NCED provided critical support to core busiess ad employee developmet. The Ceter delivered automatio ad motor vehicle maiteace ad operatios courses, as well as evirometal compliace ad automatio maagemet programs. It cotiued to offer more tha a doze techical ad admiistrative courses for postal supervisors, ad programs such as elevator maiteace ad atural-gas vehicles for opostal cliets. Staff coducted 280 courses, i 2,770 class offerigs, for 37,900 postal employees. Efforts cotiued to cultivate other educatioal parterships with o-postal busiess groups. The Oklahoma Ceter trasmitted more tha 3,475 hours of Postal Satellite Traiig Network (PSTN) programmig. NCED origiated more tha 1,330 broadcast hours of course ad techical iformatio ad it trasmitted aother 2,135 broadcast hours origiated elsewhere, icludig the Busiess ad Maagemet Chael, the Ceter for Leadership Developmet, USPS-TV, ad Southeast Area District programs. Usig both PSTN ad PATN (Postal Audio Teletraiig Network), NCED delivered 23 distace-learig courses to 12,320 employees i their home offices, for 128,980 total distace-learig traiig hours. The Ceter also implemeted ad ehaced the ew web-based Automated Erollmet System, improvig user iterface ad accoutig capabilities supportig reveue geeratio. 1. Major NCED Accomplishmets Durig 2001, NCED listed its major accomplishmets as follows: Supported atioal Breakthrough Performace Iitiative processes by providig field courses for Automated Facer Caceller System ad Delivery Bar Code Sorter feeder aligmets ad system optimizatio. Courses o Automatio Systems Maagemet, Maagig Automatio for Postal Supervisors, ad BPI for the Carrier Sequece Bar Code Sorter cotributed to improved field automatio operatios, efficiecy, cross-fuctioal teamwork, ad uit productivity. Bega developmet of CISCO, Microsoft, ad Oracle iformatio techology courses for postal ad exteral cliets. By year-ed, NCED had delivered five offerigs of Maitaiig CISCO Network Devices for postal groups, earig $92,000 i reveue. Customized Widows NT istructio captured aother $78,000. NCED is expadig its IT educatio capability ad customer base i FY Plaed courses iclude etwork security ad itrusio detectio, computer foresics, ORACLE database, Widows 2000 certificatio, advaced etwork ad routig, ad Widows NT 4.0. Provided ie deploymet course offerigs for 114 employees o the ew MERLIN (Mailig Evaluatio Readability Lookup Istrumet) system. MERLIN aalyzes presorted mail to esure that the mailer has eared a claimed discout. Course offerigs supportig deploymet will cotiue ito March Completed developmet of the Remote Iput Output Subsystem course. Delivered 27 offerigs for 200 techicias who maitai local-area ad wide-area-etwork remote ad host systems. Developed ad delivered a ew Vehicle Maiteace Facility (VMF) Maagemet Traiig course to support vehicle maiteace operatios. Delivered ie offerigs for more tha 100 supervisors. Coducted five offerigs of a ew Periodicals course for postal busiess-mail ad mailigrequiremets clerks. It covers admiistratio ad verificatio of periodicals, helpig to Comprehesive Statemet o Postal Operatios Chapter 1 Compliace with Statutory Policies

20 esure proper reveue collectio o mailigs comig i through Busiess Mail Etry Uits. About 125 studets completed the course i FY Developmet has also begu o a Periodicals course for busiess mailers. Istalled two Automated Flat Sorter Machie 100s to assume mail processig equipmet mechaic traiig from the vedor. NCED educated 312 studets i eight moths by deliverig simultaeous classes o two shifts. Movig the program to NCED saved field offices about $1,000 per studet i travel ad lodgig costs. The Postal Service also avoided the costs of fudig the vedor-delivered course. Provided field-based itroductory courses for postal automatio systems. Also delivered 252 offerigs of 22 distace-learig courses to 11,000 studets i their home offices. Supported ogoig Time ad Attedace Collectio System (TACS) deploymet. Creative schedulig reduced the eed for istructors from four to three. Coducted about 30 evirometal health ad safety programs o postal compliace with atioal rules ad regulatios. Courses icluded hazard commuicatios, waste reductio ad recyclig, refrigerat educatio ad certificatio, asbestos maagemet, ad toxic substace cotrol. Served as a active participat i the Itegrated Logistic Support Pla process, cotributig to the efficiet ad cost-effective support of more tha 20 ew ad evolvig atioal equipmet systems. Supported systems iclude Automated Flat Sorter Machie 100 Phase II, Delivery Bar Code Sorter Expaded Capability, Delivery Bar Code Sorter Iput/Output Subsystem, Direct Coect, Postal Automated Redirectio System, Cetral Plat Operatig Cotrol System, Flat Budle Collator, Automatic Tray Sleever, Automated Airlie Assigmet, Automated Sca Where You Bad, Automated Parcel Processig System, PC104 Modificatio to Small Parcel ad Budle System, Ehaced Plat Wirig, Iformatio-Based Idicia Program, Wide Field of View, MLOCR/MPBCS Replacemet, Uiversal Flat Sortig Machie 1000, Automated Flat Feeder/Optical Character Reader, Sigulate Sca ad Iductio Uit, Package Bar Code Sorter Priter Replacemet, Plaet Code for Flats, ad Robotic Cotaierizatio System. 2. Reveue Geeratio Ceter staff captured more tha $4 millio i total reveues from exteral busiess alog with $18 millio i joural voucher trasfers from postal customers for traiig ad other efforts to help offset NCED operatig expeses. Total housig room ights rose slightly to 206,270, of which 30,370 were coferees. Traiig reveues of $16.4 millio came from core techical programs for postal cliets. Postal courses o busiess mail, safety, The Occupatioal Safety ad Health Orgaizatio (OSHA), ad maagemet drew aother $2.5 millio. Courses for o-postal cliets covered elevator maiteace, atural-gas vehicles, buildig systems, ad computer etworks. Coferece services garered $1.6 millio from room ights plus sale of meetig space. Evets raged from small baquets, to meetigs ad retreats, to large cofereces for 600. Major o-postal cliets icluded Phillips Petroleum, North America Retail Dealers Associatio, Soic Corporatio, Departmet of Health ad Huma Services, Bureau of Idia Affairs, College Boards, ad the America Red Cross. The Uiversity of Oklahoma football team held plaig retreats the ight before each home football game, ad cotiues to do so this seaso. Numerous postal traiig ad coferece groups icluded sales, egieerig, ad a atioal maiteace maagers coferece. Sice NCED opeed coferece facilities to the public, it has experieced a steady icrease i commuity meetig busiess. c. William F. Bolger Ceter for Leadership Developmet The Bolger Ceter cotiues to strive toward becomig self-reliat. I 2001, the Ceter geerated $4.3 millio i cash reveue from exteral busiess alog with $9 millio i Joural Voucher Trasfers from postal customers. Phase III of the Ceter s master costructio pla is providig a campus eviromet that has bee eriched by the reroutig of roadways, allowig for a more collegiate look ad adequate parkig for all guests. I additio, it remedied several Americas with Chapter 1 Compliace with Statutory Policies 2001 Comprehesive Statemet o Postal Operatios 17

21 Disabilities Act (ADA) ad safety issues that required actio. The Bolger Ceter was desigated as the Cotiuity of Operatios Pla site for headquarters critical fuctios i the evet of a emergecy affectig operatios at headquarters. The program was tested o September 11, 2001, ad a comprehesive pla has bee writte to esure that the Ceter ca provide the Postal Service with the capability to cotiue performig its essetial fuctios i the evet of a emergecy or disaster situatio. The opeig of a Postmark America store was popular with Ceter customers, with reveue exceedig forecasts by 80 percet durig the first 10 moths of the year. A total of forty-five Advaced Leadership Program groups have completed the first phase of the program. Thirty-eight of these groups have completed Phase II. Some 1,882 participats have erolled i the program to date. Also, 201 ALP participats submitted certificate of completio forms with official trascripts, sigalig their completio of all program requiremets for the ext program graduatio, held o March 4, The Ceter hosted several first-time iitiatives durig the past year. The first i a series of Strategic Directio Semiars was held o July 31, 2001, for ALP participats ad iterested PCES maagers. The semiar was sposored by Huma Resources ad Strategic Plaig, ad provided the opportuity to hear from key figures withi ad outside the Postal Service o issues of strategic importace to the busiess. Two traiig sessios for Evet Plaig ad Coordiatio were held for headquarters ad Mid-Atlatic budget coordiators ad meetig plaers. Also, a Processig ad Distributio Maagemet class was added to the course offerigs at the Ceter. It focuses o the core operatioal aspects of the plat maager positio. Sice its kick-off at the Ceter, 121 participats have successfully completed the course. The Media Uit produced 41 PSTN broadcasts, which amouted to more tha 70 hours of broadcastig. Thirty videos were produced, which eared several Telly ad Videographer Awards i recogitio of their excellece. These videos icluded Ethics Survivor, E-Travel, ad ALP Your Pathway to the Future. The Media Uit also produced several Resource Maagemet Updates for Employee Resource Maagemet, which helped to iform employees about the successful implemetatio of this program atiowide. After the September 11 icidets, the Media Uit assisted Public Affairs ad Commuicatios with productio of videos detailig the activities of the Cotiuity of Operatios Group at Bolger. Durig the athrax emergecy, the Media Uit produced a PSTN broadcast o proper cleaig procedures for mail processig equipmet ad a video describig the proper use of respirators ad gloves for all postal employees. These productios assisted seior postal maagemet i their missio of keepig postal employees iformed at a very crucial time i the Postal Service. 6. Selectio, Evaluatio, ad Recogitio a. Selectio, Evaluatio, ad Recogitio (SER) is resposible for the followig: Establishig guidig priciples for recruitmet ad hirig of a qualified workforce. Desigig ad deliverig effective, efficiet, ad fair assessmet systems. Providig guidace o orgaizatioal selectio, placemet, ad evaluatio methods. Parterig with iteral customers to achieve operatioal success. The followig iitiatives were udertake: Reegieered the hirig process, usig iteractive voice respose techology ad the Iteret by itroducig Postal Applicatios ad Schedulig System. Desiged a approach for implemetig the Associate Supervisor Program (ASP) i remote locatios. Developed ehacemets to the recruitmet selectio ad placemet processes for ASP graduates. Desiged a web-based maiteace selectio system tool. Admiistered the Voice of the Employee (VOE) survey. 1. Postal Applicatios ad Schedulig System I Jauary, SER aouced the deploymet of a atioal iteractive voice respose (IVR) system to automate etrace examiatio applicatio methods. This replaced labor-itesive maual activities. The ew system streamlies ad stadardizes the test applicatio process at a substatial cost savigs, protects sesitive applicatio iformatio, reduces cycle time betwee applicatio ad exam, ad provides a atioal web-based schedulig compoet with a automated fulfillmet process for mailig applicat schedulig packages. I 2000, SER s field offices used approximately 60,000 work hours hadlig these cards for battery exam opeigs aloe. The average cost to process applicatios Comprehesive Statemet o Postal Operatios Chapter 1 Compliace with Statutory Policies

22 previously was $3.26 per applicat. The average per call cost for the IVR usage i 2001 was 56 cets. This, combied with the 43 cets for the pritig ad mailig of the applicatio package, brigs the cost per applicat to 99 cets, for a average savigs of $2.27 per applicat. Less tha oe year after atioal implemetatio of the IVR, the system was ehaced to iclude the followig: (1) a web applicatio process accessible through the Postal Service's website at usps.com/employmet, (2) the added capability for offices to aouce casual/temporary employmet opportuities, ad (3) the iclusio of additioal etry-level exams o the system. I 2001, more tha 843,147 applicats applied for postal examiatios or for casual/temporary employmet through either the IVR or the web, savig more tha $1.9 millio over the maual process. 2. Associate Supervisor Program Review ad Revisios Ogoig efforts to update ad revise curret programs icluded a complete review of ASP. Revised materials were dissemiated atioally. I additio, the results of a comprehesive survey of all ASP participats ad their maagers were aalyzed with plas to address the survey fidigs. To attract qualified first-lie supervisors, SER developed a recruitmet toolkit, which is specifically desiged to assist Huma Resources professioals i their recruitmet ad pre-employmet efforts. Before its iceptio, may facilities were faced with high umbers of supervisory vacacies, decreased umbers of applicats for supervisory positios, ad icreased umbers of supervisors movig to other fuctioal areas. Based o the recommedatios of a fuctioal work team, which icluded represetatio from the Natioal Associatio of Postal Supervisors, agreemet was reached to make chages that ivolved the placemet of EAS-15 associate supervisors ito EAS-16 iitial-level supervisor positios after a period ot to exceed 18 moths. Aother cocer that surfaced was the eed for cosistecy i the selectio methods allowed whe fillig iitial-level supervisor positios. As a result, a implemetatio pla has bee developed to suset the iitial-level supervisor selectio method. This pla will be implemeted i early Attractig the Right Applicats for the Right Jobs To educate the public about our etry-level positios ad examiatio process, a orietatio guide was developed that provides all the ecessary iformatio for makig a iformed decisio about postal employmet ad required examiatios. This guide explores certai aspects of the examiatio process, a first step for employmet cosideratio. It highlights key aspects about the etrace examiatio (timig, scorig, etc.). It also provides details about the hirig process. 4. Recruitig for Specialized Skills I Jue 2001, SER iitiated a atioal recruitmet effort for specialized skills, especially for the postal maiteace ad automotive mechaic careers, begiig with its participatio i the aual SkillsUSA-VICA ad Techspo Coferece. More tha 13,000 of the world s most competitive techical studets atteded this coferece, presetig the Postal Service with a uique opportuity to set a model for recruitig highly skilled workers for hard-to-fill positios. Coferece participats leared about techical postal careers ad beefits ad applied for ope examiatio aoucemets. They were also tested osite ad offered tours of the Kasas City Packagig ad Distributio Ceter ad Vehicle Maiteace Facility. Of those applicats tested osite, 79 percet qualified, demostratig a veue for future recruitmet efforts. 5. Givig Special Cosideratio to Temporary Employees for Career Positios SER deployed ew policies to further the cosideratio of postmaster relief/leave replacemet (PMR/LR) employees for career positios through competitive examiatios ad direct applicatio for vacacies. The Commissio o a Safe ad Secure Workplace reported that a umber of maagers are frustrated that they caot give special cosideratio to casual, temporary, substitute, ad relief employees for career positios whe the o-career employees have already bee screeed ad traied ad are kow to be good workers. The ew policies for PMR/LR employees act o the recommedatio of the commissio to provide special cosideratio to temporary employees by allowig PMR/LRs to get examiatio ratigs for placemet o local hirig registers for career jobs other tha postmaster ad reducig the miimum service required to apply for postmaster jobs. I additio to examiatio opportuities, the ew policies provide for a shorter period of time (from three years to oe year) that PMR/LRs must serve before they ca apply for permaet postmaster positios. The policies further expaded PMR/LRs ability to apply from oly i the office i which they worked to career postmaster vacacies withi the commutig area. 6. Maagig Trasitio Chapter 1 Compliace with Statutory Policies 2001 Comprehesive Statemet o Postal Operatios 19

23 I Jauary 2001, the Postal Service made a trasitio of the Priority Mail Processig Ceter (PMPC) etwork from cotract to postal. SER was tasked to support this trasitio to develop ad deploy a employmet strategy that would allow 10 PMPC sites to effectively ad efficietly trasitio up to 6,000 cotract employees to postal employees while maitaiig Priority Mail service durig trasitio. SER provided iovative tools ad processes to address the issues of recruitmet, quick hirig ad retetio. The area teams hired more tha 6,000 employees i a record time of 60 days from the date of the official aoucemet to the trasitio to a postal-ru operatio. All te sites were able to maitai operatios through the trasitio ad to meet or exceed the staffig eeds to support the PMPC operatios. 7. VOE Survey SER has developed ad implemeted employee opiio surveys, called Voice of the Employee (VOE) surveys for the last 10 years. The surveys sample oe-fourth of career employees each quarter. Each survey elicits opiios o a wide variety of work-related issues ad provides a mechaism to moitor the orgaizatio. Results from the surveys are provided o the WebEIS, ad local maagers are give tools to guide use of the survey results. Startig i FY2000, a idex formed from six of the survey questios has bee used as the primary measuremet of the VOE uder the Postal Service Pay for Performace Program. The atioal VOE survey results for FY2001 show a idex umber of 58.1, a improvemet over the baselie FY2000 idex of The overall respose rate for 2001 was 55 percet versus a 47 percet rate i FY The results reflect improved scores i the areas of employee recogitio, supervisory treatmet of employees, ad ability to commuicate with employees. Survey data ad employee suggestios will help the Postal Service to achieve cotiuous orgaizatioal improvemet. 7. Workplace Eviromet Improvemet (WEI) The Office of WEI was created i September 1998 to reflect maagemet s commitmet to improvig the postal work eviromet ad brigig focus to people issues i the Postal Service. Recetly the work of EAP ad WEI were combied uder oe maager. The fuctio icludes the Employee Assistace Program, violece prevetio ad crisis maagemet activities, the idetificatio ad propagatio of idicators, ad measures ad iitiatives for workplace eviromet improvemet. Key compoets of WEI for 2001 ad 2002 cotiue to be: Coordiatio ad implemetatio of recommedatios from the report by the Idepedet Commissio o a Safe ad Secure Workplace. Developmet of the role of the Employee Workplace Itervetio Aalyst positio to play a more strategic ad cosultative role i field WEI efforts to provide orgaizatioal developmet activities. Itegratio, assessmet, ad commuicatio of employee feedback ad other workplace eviromet iformatio. Support for replicatio of a broad array of workplace improvemet iitiatives ad practices. Commuicatio of progress i improvig workplace eviromet. Specific areas i which these compoets are carried out are: a. Employee Assistace Program The Postal Service EAP provides free, volutary, cofidetial, i-perso couselig services to employees ad family members from master s-level couselors housed i or ear local postal facilities. Couselors are available 24 hours a day, seve days a week, i coveiet locatios to assist employees ad family members with a variety of difficulties that affect their lives ad their work, icludig emotioal, fiacial, legal, chemical depedecy, marital, ad family problems. The EAP provides cosultatio to maagers ad supervisors regardig ot oly idividual workers, but also the work settig withi which they fuctio. The EAP itervees whe appropriate through prevetive efforts, such as maager coachig ad educatioal semiars o commuicatio ad stress maagemet. EAP also provides ameliorative efforts that iclude coflict resolutio sessios ad orgaizatioal itervetios ad restorative actios, such as debriefigs after a critical icidet (e.g., suicide, domestic violece at work, armed robbery, accidetal death). I 2001, 42,285 employees ad their family members received couselig from the EAP. 48 percet of employees reported some type of work problem that impacted their work performace. EAP staff respoded to more tha 556 critical icidets ad provided assistace to more tha 9,511 employees after these icidets Comprehesive Statemet o Postal Operatios Chapter 1 Compliace with Statutory Policies

24 Health ad welless semiars o topics ragig from stress maagemet to elder care to substace abuse were provided to 57,425 employees. b. Violece Prevetio ad Crisis Maagemet The Workplace Eviromet Advisory Committee, icludig represetatives of employee uios, maagemet associatios, labor relatios, ad huma resources, was created shortly after the iceptio of this office i late 1998 with the maager of WEI as chair. This group, workig closely with the Ispectio Service ad WEI, uses a stadardized protocol for the idetificatio ad resolutio of potetial troubled worksites. These are postal sites that may be susceptible to threateig or other udesirable behavior as a result of idividual or systemic problems. I additio, WEI assists the field i esurig that local threat assessmet ad crisis maagemet teams are i place ad that desired traiig is provided. Fially, WEI staff are ivolved, o a ogoig basis, i commuicatio with ad respose to potetial threats ad crisis icidets throughout the Postal Service to esure prompt respose, swift resolutio, ad maximum safety of postal employees. WEI played a key role i the dissemiatio of the report of the idepedet Commissio o a Safe ad Secure Workplace, also kow as the Califao Commissio, because it was chaired by Joseph A. Califao, Jr. The commissio coducted a comprehesive review ad aalysis of violece i the Postal Service over a two-year period ad released it fidigs i August The Commissio foud that while postal employees are ot more likely to be victims of violece at work, they are more fearful tha other employees about violece i the workplace. O the other had, postal employees are less agry, aggressive, hostile, depressed, ad stressed tha those i the atioal workplace. The Commissio recogized the Postal Service s strog efforts i developig a comprehesive array of programs to reduce workplace violece, but made recommedatios for the followig improvemets: Cotiue ad step up violece prevetio programs already i place ad address uderlyig sources of frictio. Scree job applicats more carefully. Defie zero tolerace for violece policy. Cotiue violece awareess traiig for employees, with uios playig a greater role. Esure that warig sigals of violece are heeded ad employees kow how to report threats ad violece. Establish commuicatio systems such as cell phoes or beepers for carriers o delivery routes, especially i high crime ad remote areas. Allay employee cocers about cofidetiality of the EAP. Ecourage joit local uio/maagemet oversight. Trai maagers ad uio officials to better hadle employee termiatios. Icrease traiig of supervisors ad maagers i iterpersoal skills. Stregthe icetives to focus maagers o the workplace eviromet, i additio to customer satisfactio ad fiacial performace. Also, accordig to the Commissio, the Postal Service, uios, ad maagemet associatios should overhaul dispute resolutio processes ad agree o a system of fiacial performace icetives for craft employees. Fially, the Commissio recommeded that Cogress should cosider revampig compesatio systems for postal maagers ad employees to elimiate or at least raise the pay ceilig to attract the best maagers ad effectively reward good performace of all postal workers. WEI cotiues to lead the efforts to implemet the recommedatios. Commuicatio regardig chages is ogoig. c. Itegratio of Employee Feedback ad Workplace Eviromet WEI plays a pivotal role i icreasig the effectiveess with which data from the VOE survey ad other workplace eviromet iformatio are used. The Board of Goverors approved a compesable idicator usig six survey questios for the 2000 survey. This idex will be retaied as a compesable idicator for WEI provides techical assistace to the field i iterpretig ad respodig to these data. It also facilitates sharig of iformatio about field ad best practices that impact positively o the work eviromet. WEI staff serve as iteral cosultats o WEI efforts throughout the coutry, with a emphasis o icreasig the efficiecy ad effectiveess of these activities, particularly with regard to the use of outside cosultats. Also, WEI is propagatig iformatio throughout the Postal Service regardig iteral ad exteral resources for Chapter 1 Compliace with Statutory Policies 2001 Comprehesive Statemet o Postal Operatios 21

25 addressig workplace eviromet issues, icludig local ad atioal Postal Service iitiatives ad outside sources, which have bee show to improve workplace relatioships ad climate. Fially, WEI will cotiue to deliver atioal messagig i 2002, to esure that the busiess case for improvig the workplace is recogized ad accepted. d. Depedet Care Pursuat to a Memoradum of Uderstadig (MOU) egotiated with the APWU, AFL-CIO for the Natioal Agreemet, the Postal Service ad the APWU joitly selected a vedor to provide a depedet care resource ad referral service to maagemet ad APWU employees. The service allows employees to get assistace i locatig depedet ad elder care resources as well as a variety of optios to help balace work ad home life. The MOU remais i place through September D. Postal Cost Apportiomet ad Postal Ratemakig Developmets (39 U.S.C. 101 (d)) 1. Omibus Rate Case: Docket No. R O September 24, 2001, the Postal Service filed a request with the Postal Rate Commissio for a recommeded decisio o chages i rates ad fees. The proposed overall percetage chage was 8.7 percet ad icluded a 3-cet (or 8.8 percet) icrease from the curret 34-cet basic First-Class Mail rate. The proposed icrease was desiged to provide a additioal $4.3 billio i aual reveue, based o a test period of FY The filig also icluded umerous classificatio chages that would be resposive to customer eeds ad the chagig eviromet. For example, the Postal Service proposed that Delivery Cofirmatio service be expaded to First-Class Mail parcels, ad that delivery iformatio be available for certified First-Class Mail letters ad flats; it proposed a ew drop ship discout ad a ew pallet discout for Periodicals mailers; it proposed a icetive for customers to eter large, heavy parcels at the destiatio Sectioal Ceter Facility; ad it proposed icludig Delivery Cofirmatio as a Parcel Select feature. Also, the Postal Service proposed cotiuig the restructurig of post office box groupig ad fees that was begu i the previous omibus case to better reflect the local cost of providig the service. O October 25, 2001, Chairma Omas of the Postal Rate Commissio suggested that the participats pursue settlemet discussios with the goal of termiatig the case before the ed of the te-moth litigatio schedule typically experieced i omibus rate cases. Commissioer Omas proposed settlemet i light of recet evets, icludig the September 11 terrorist attacks ad the athrax mailigs, that had precipitated a greater eed for reveues tha had bee reflected i the Postal Service s filig. A early termiatio of the case would allow the Postal Service to implemet rate ad fee chages earlier, ad would result i greater overall reveues. The Postal Service ad the other participats udertook extesive settlemet egotiatios ivolvig two geeral settlemet cofereces ad umerous discussios i smaller groups. Evetually, the participats reached a settlemet agreemet that would permit most of the Postal Service s origial proposals to be implemeted as early as Jue 30, The agreemet also icorporated several relatively mior chages i the proposed rates ad fees. A total of 56 out of 62 parties i the case siged the agreemet. Oly oe party, the America Postal Workers Uio, opposed it, challegig the proposed discouts for First-Class Mail presort ad automatio letters. The Commissio scheduled hearigs to cosider APWU s opposig testimoy. Whe the hearigs are completed, the Commissio must evaluate the settlemet agreemet ad submit a recommeded decisio to the Postal Service s Goverors. 2. Omibus Rate Case: Docket No. R As a result of Docket No. R2000-1, filed with the Postal Rate Commissio i Jauary 2000, the prices the Postal Service charges for products ad services offered to the public icreased a average of 6.3 percet. These icreases were implemeted i two stages. I the first stage, rates ad fees icreased a average of 4.6 percet o Jauary 7, 2001, whe the Postal Service implemeted the Postal Rate Commissio s recommedatios uder protest. A additioal average 1.6 percet rate icrease was implemeted o July 1, 2001, as a result of the Postal Service Goverors determiatio that the rates recommeded by the Commissio would ot provide eough reveue to Comprehesive Statemet o Postal Operatios Chapter 1 Compliace with Statutory Policies

26 maitai the fiacial itegrity of the Postal Service. The Commissio issued its first Docket No. R Recommeded Decisio i November 2000, te moths after the Postal Service filed its request. The Goverors determied that the rates ad fees that the Commissio recommeded would have resulted i a reveue shortfall of approximately $1 billio. After cosiderig their statutory optios, the Goverors decided to allow the Commissio s recommedatios to take effect uder protest ad to retur the case to the Commissio for recosideratio. Although i its secod Recommeded Decisio the Commissio agreed with the Goverors o several techical poits, it recommeded limited chages that did ot correct the projected reveue shortfall. The Goverors respoded by rejectig it ad remadig the case to the Commissio for aother roud of recosideratio. Whe the Commissio s third Recommeded Decisio did ot address the issues raised by the Goverors ad correct the projected reveue shortfall, the Goverors i May 2001 chose to modify the decisio. Uder the Postal Reorgaizatio Act, the Goverors must esure that postal reveues are sufficiet to cover total estimated costs. If the Commissio recommeds rates that are isufficiet, the Goverors have a limited ability to chage or modify those rates to correct the reveue imbalace. Ay decisio to modify a Commissio-recommeded decisio must be uaimous, with all Goverors votig i favor of the modified rates. The Docket No. R case was oly the secod time that the Goverors have foud it ecessary to modify a Commissio-recommeded decisio i a omibus rate case. The Postal Service implemeted the modified rates o July 1, Two petitios to review the Goverors modificatio decisio were filed i the U.S. Court of Appeals, but both petitios were withdraw shortly after filig, leavig the modificatio uchalleged i the courts. 3. Ride-Alog Experimet Extesio Case: Docket No. MC O September 28, 2001, the Postal Service filed a request with the Postal Rate Commissio to exted the expiratio date of the ogoig experimetal Periodicals Ride-Alog classificatio, which had bee established i Docket No. MC The Ride-Alog experimet permits a eclosure icluded i periodicals mailigs to pay a flat, per-piece rate of te cets. This is more affordable for mailers tha the prior requiremet to pay the Stadard Mail rate for the piece. It is also simpler for the Postal Service to admiister. The Postal Service requested the extesio, pedig the issuace of a Postal Rate Commissio recommedatio o the permaet classificatio ad rate chages for Ride-Alog proposed i the omibus rate case, Docket No. R The experimetal classificatio would have expired o February 20, 2002, uless the Postal Rate Commissio recommeded the requested extesio. The participats i the proceedig egotiated a settlemet agreemet based o the Postal Service s proposal. O Jauary 11, 2002, the Commissio issued its Recommeded Decisio, essetially adoptig the uopposed Stipulatio ad Agreemet to exted the experimet. 4. Experimetal Suspesio of Fee for Maual Delivery Cofirmatio Case: Dockets No. R ad MC O September 20, 2001, the Postal Service requested a Commissio-recommeded decisio o a experimetal mail classificatio proposal that would allow the Postal Service to offer Delivery Cofirmatio service without fee to retail Priority Mail customers from December 1 through 16, The proposal had three objectives. First, the proposed experimet was expected to give postal customers a icetive to mail packages before the busiest week of the holiday mailig seaso, with a possible associated reductio i the Postal Service s resource eeds durig the peak period. Secod, it would itroduce the retail Delivery Cofirmatio service to customers who otherwise would ot be aware of it. Third, the experimet was expected to provide valuable experiece with more flexible pricig approaches. The Postal Rate Commissio established a expedited schedule for cosideratio of the proposal, with the goal of issuig a recommeded decisio i mid-november. O November 5, 2001, the Postal Service withdrew its request. It explaied that, i light of the eed to face the challeges posed by the recet world evets, icludig use of the mail for bioterrorist acts, the most prudet course would be to focus its widow service ad retail operatios o the provisio of existig domestic services durig the upcomig holiday peak mailig seaso. The Commissio closed this docket o November 6, Chapter 1 Compliace with Statutory Policies 2001 Comprehesive Statemet o Postal Operatios 23

27 5. Experimetal Presorted Priority Mail Rate Case: Docket No. MC O March 7, 2001, the Postal Service requested the Postal Rate Commissio to issue a recommeded decisio o a proposed experimetal Priority Mail presort classificatio. The Postal Service proposed a three-year experimet to determie the effect o Priority Mail costs, volumes, ad reveues resultig from ew Priority Mail worksharig discouts. The experimet would offer discouts to a limited umber of customers for sortatio to the ADC, 3-digit or 5-digit level. Followig egotiatios amog the participats i the proceedig, o May 17, 2001, the Postal Service asked the Commissio to base its recommedatio o a agreemet settlig all the issues i the case. This Stipulatio ad Agreemet limited the term of the experimet to approximately two years. O May 25, 2001, the Postal Rate Commissio issued a decisio recommedig the implemetatio of this experimet, based o the terms of the Stipulatio ad Agreemet. The Goverors of the Postal Service approved, ad the Postal Service implemeted the Priority Mail experimetal presort discouts o July 15, First-Class Mail Service Stadards Complait Case: Docket No. C O May 19, 2001, a complait was filed with the Postal Rate Commissio, pursuat to 39 U.S.C. 3662, allegig that i 2000 ad 2001 the Postal Service implemeted chages i two- ad three-day service stadards for First-Class Mail o a atiowide or substatially atiowide basis, without first requestig a Commissio advisory opiio, pursuat to 39 U.S.C The complait also alleged that the First-Class Mail service resultig from these service stadard chages did ot comply with various policies uder the Postal Reorgaizatio Act. While the Postal Service admitted that service stadard chages occurred durig 2000 ad 2001, it did ot cosider that a request for a advisory opiio was required. Rather, it coteded that the service stadard chages were part of a more extesive realigmet pla previously submitted for Commissio review i Docket No. N89-1. The Postal Service also did ot cosider that the service resultig from the chages was icosistet with ay policies of the Act. The complait proceedig is pedig before the Commissio. 7. Priority Mail Rates Complait Case: Docket No. C O Jauary 12, 2001, a complait was filed with the Postal Rate Commissio, pursuat to 39 U.S.C. 3662, allegig that the oe- ad two-poud Priority Mail rates implemeted o Jauary 7, 2001, as a result of Docket No. R2000-1, did ot coform to the policies of the Postal Reorgaizatio Act. The complait argued that, by rejectig a Commissio-recommeded chage i the Priority Mail flat-rate evelope classificatio i Docket No. R2000-1, while at the same time implemetig the Priority Mail rates the Commissio had recommeded, the Postal Service Goverors had implemeted oe-poud ad two-poud Priority Mail rates that were ot supported by the evidetiary record of the case. The Postal Service moved to dismiss the complait o a variety of statutory ad jurisdictioal grouds, ad because the complait was substatively without merit. O April 27, 2001, the Postal Rate Commissio declied to istitute proceedigs ad dismissed the complait. 8. Suday ad Holiday Collectios Complait Case: Docket No. C O October 27, 2000, a complait was filed with the Postal Rate Commissio, pursuat to 39 U.S.C. 3662, allegig that chages i Suday ad holiday mail service implemeted by the Postal Service i previous years had resulted i a atiowide or substatially atiowide chage i service for which the Postal Service should have requested a advisory opiio from the Postal Rate Commissio uder 39 U.S.C The Postal Service moved to dismiss the complait o the grouds that it did ot allege a belief that the Postal Service was failig to provide services i coformace with the polices of the Act. The Postal Rate Commissio dismissed the portio of the complait relatig to the termiatio of outgoig mail service o Sudays i 1988, but it declied to dismiss the portio of the complait relatig to chages i holiday mail service. The complaiat has yet to complete presetatio of his direct case, ad the case is still pedig. 9. PosteCS Complait Case: Docket No. C99-1 I October 1998, Uited Parcel Service (UPS) filed a complait with the Postal Rate Commissio, pursuat to 39 U.S.C. 3662, cocerig the Postal Service s provisio of PosteCS, a wholly electroic, Iteret-based documet service desiged to sup Comprehesive Statemet o Postal Operatios Chapter 1 Compliace with Statutory Policies

28 port secure electroic commuicatios. The fudametal basis for the complait was the allegatio that the Postal Service is offerig PosteCS to the public without havig first submitted to the Commissio a request for a recommeded decisio o classificatio provisios ad rates associated with this service. The complait further alleged that provisio of PosteCS at o charge o a itroductory basis is cotrary to the pricig stadard of the Postal Reorgaizatio Act. Fially, the complait alleged that the service costituted a atiowide chage i service for which a advisory opiio must be requested uder that Act, pursuat to 39 U.S.C The Postal Service moved to dismiss the complait. I its motio to dismiss, the Postal Service maitaied that the Commissio does ot have subject matter jurisdictio to etertai the questio of whether PosteCS is a postal service. Eve if the Commissio had jurisdictio to cosider the complait, the Postal Service asserted that PosteCS is plaily ot a postal service for purposes of the Commissio s jurisdictio, accordig to the defiitios of that term put forth by the courts, the Commissio, ad the Goverors of the Postal Service. O May 3, 1999, the Commissio issued a order deyig the Postal Service s motio to dismiss ad orderig further proceedigs o the questio of whether PosteCS is a postal service for purposes of the Commissio s rate ad classificatio jurisdictio. Throughout 2000 ad 2001, the Commissio addressed disputes related to discovery. O November 9, 2001, the Presidig Officer issued a rulig gratig a motio by UPS to susped proceedigs i the complait case, pedig the coclusio of the omibus rate case, Docket No. R E. Trasportatio Policies (39 U.S.C. 101 (e),(f)) 1. Geeral The Postal Service spet $5.1 billio for the cotractual trasportatio of mail i This represets a 7.4 percet icrease i the trasportatio expeses as reported i However, i FY2001, the Priority Mail Processig Ceter (PMPC) cotract was cacelled ad, as a result, costs totalig $275 millio i 2001 that previously were classified as other expeses uder the PMPC cotract are reported as trasportatio expese i FY2001. Whe the 2001 trasportatio expese is adjusted to a basis comparable to 2000, the icrease is oly 1.5 percet. 2. Domestic Trasportatio a. Air Trasportatio Air trasportatio costs i 2001 totaled $1.9 billio. These costs iclude the use of commercial airlies (passeger ad freight) ad dedicated etworks. The Postal Service cotracted with 55 commercial airlies to move more tha 2.94 billio pouds of domestic mail last year. Twelve of the commercial airlies hadled 75 percet of the total volume. Sice September the Postal Service has ot bee able to trasport certai mail o commercial airlies due to FAA restrictios. This resulted i dramatically lower volumes flow o commercial airlies ad will cotiue to do so as log as the restrictios are i place. To supplemet the movemet of mail by air, the Postal Service operated dedicated etworks for most of the year. These dedicated etworks gave way to a trasportatio agreemet with FedEx i August, 2000 that improves air operatios. This ew alliace replaced all of the existig air etworks ad most of the poit-topoit aircraft. The alliace addressed trasportatio requiremets for sigificat portios of Express Mail, Priority Mail, ad First-Class Mail. The evets of September 11 had a profoud impact o the eed for dedicated air service. The iability to trasport certai mail resulted i the eed to expad the FedEx alliace ad also required some additioal dedicated air taxi service to offshore locatios such as Hawaii, Alaska, ad Puerto Rico. b. Rail Trasportatio Postal Service expeses for all rail trasportatio were $239 millio for This represets a 13.5 percet decrease from The Postal Service held cotracts with eight railroads that perform service o approximately 2,100 rail segmets. Cotracts with oe major rail supplier were ot reewed i September 2001 because of their request for double digit price icreases. I 2001 the Postal Service paid Amtrak $90 millio for rail trasportatio service. The Chapter 1 Compliace with Statutory Policies 2001 Comprehesive Statemet o Postal Operatios 25

29 Amtrak trasportatio etwork provides service for the majority of Periodical Mail. c. Highway Trasportatio The Postal Service expeded approximately $2.3 billio for highway mail trasportatio i 2001, a 8.1 percet icrease over This icrease was drive by the reclassificatio of expeses from services to trasportatio for the PMPC ad the realigmet of two- ad three-day service. The two- ad three-day service realigmet resulted i mail beig diverted from the air to service-resposive surface trasportatio. d. Hub ad Spoke Program The hub ad spoke program was expaded by four facilities i The hub ad spoke program is crucial to the two- ad three-day service realigmet ad cotiues to support dedicated air trasportatio. e. Domestic Water Trasportatio I 2001, the cost of trasportig mail to domestic offshore destiatios was $29 millio, a 3 percet decrease over Iteratioal Trasportatio a. Iteratioal Air Trasportatio The Postal Service cotiues to alig its air trasportatio strategy to provide uiversal service that satisfies the global delivery requiremets of America busiesses ad cosumers. I 2001, the Postal Service spet $182 millio for iteratioal air trasportatio to provide global delivery service to more tha 188 foreig postal admiistratios. U.S.-flag suppliers were paid $143.2 millio, ad foreig-flag suppliers received $38.8 millio. The use of foreig-flag suppliers, particularly for airmail service, expads the Postal Service s ability to reach destiatios where U.S.-flag suppliers do ot provide the required service. I additio, the cost of military mail, reimbursed by the Departmet of Defese, was $122.7 millio. b. Iteratioal Surface Trasportatio I 2001, the cost of iteratioal surface trasportatio by ocea was $6.6 millio. Ocea suppliers are awarded o the basis of a best value, comparative aalysis of proposals. c. Termial Dues ad Trasit Charges Uder the acts of the Uiversal Postal Uio (UPU) each postal admiistratio which receives mail from aother admiistratio has the right to collect from the sedig admiistratio a paymet for the costs icurred i processig ad deliverig mail received from that admiistratio, those charges are called termial dues. Additioally, the UPU provides for trasit charges for mail which is exchaged betwee admiistratios through a third coutry. Trasit charges are paid by the sedig coutry to the itermediary coutry for forwardig mail to the destiatio. Durig FY 2001 the Postal Service paid $477.2 millio for these fees ad i FY 2000 $425.8 millio was paid. 4. Postal Owed Trasportatio TABLE 1.1 POSTAL SERVICE VEHICLE INVENTORY FY 01 Vehicle Type Ivetory 1/4-To 3,378 1/2-To 172,768 1-To 1,307 2-ad 2 1/2-To 7,253 Cargo Vas 2,424 Tractors 1,819 Spotters 405 Trailers 5,146 Service 5,068 Admiistrative 5,453 Law Eforcemet 2,871 Mobile Post Office 218 Miscellaeous 135 Total Owed 208,318 Leased Vehicles 7,212 Grad Total 215,530 Postal Service Vehicle Operatig Treds 2000 Number of vehicles 208,318 Miles traveled (millios) 1,151 Miles per gallo 9.5 Cost per vehicle $ 4,132 Cost per mile $ Mail Trasport Equipmet (MTE) The Mail Trasport Equipmet (MTE) cotract service provides a itegrated etwork (i.e., distributio, logistics/etwork maagemet, ad iformatio services supportig trackig ad tracig) for the Postal Service s mail hadlig equipmet. Five operatioal suppliers maage 22 MTE service cotract sites broke out by city clusters of ormally three pairs. These city clusters are located throughout the Uited States. Moreover, the etwork is operated through a Operatig Systems Itegratio ad Maagemet cotract. Six firms fixed-priced cotracts were competitively Comprehesive Statemet o Postal Operatios Chapter 1 Compliace with Statutory Policies

30 awarded amog five suppliers o September 19, The cotracts are curretly fuded for $1.7 billio, with a 5-year basic cotract period ad oe 5-year optio period. Durig FY 2001, the MTE service cotracts processed ad repaired more tha 1,185,000,000 uits valued at $227.2 millio, at a average uit price of $17.86 cets. The idepedet ad exterally admiistered Customer Satisfactio Measuremet system cosistetly shows high marks, from both premier ad atioal accouts, for the availability of serviceable MTE. F. Postal Facilities, Equipmet ad Employee Workig Coditios (39 U.S.C. 101 (g)) 1. Safety ad Health The Postal Service cotiued to ehace the safety ad health program, through ispectios, program evaluatios, targeted accidet reductio efforts, ad parterships with federal regulators. The Postal Service implemeted a ew safety ispectio process to esure ispectio of every facility o a timely basis. To support this effort, atioal mailigs of ispectio checklists were accomplished ad facility safety coordiators were itroduced to a ew traiig program ad a series of Ifopaks detailig techical ad admiistrative iformatio. Both safety professioals ad lie maagemet were supported by the upgraded Safety Toolkit, a computer program to assist with ispectio reportig ad abatemet. The Postal Service also cotiued to upgrade the Safety Toolkit Resource Page, a comprehesive source of refereces, guidace, ad other iformatio o employee safety ad health. Iteral safety ad health program evaluatios were accomplished, to provide a leadig idicator of safety performace. Improvemets i program scores were oted across the board. Program guides were upgraded, ad a ew small facility guide was issued. The program guide cotiues to be based o OSHA guidace ad best idustry practices. The Postal Service also cotiues to parter with OSHA o employee safety ad health. Two facilities (Buffalo, NY, ad Pittsburgh, PA) achieved Star status uder the OSHA Volutary Protectio Program. This is the highest ratig uder the prestigious OSHA program. The Postal Service also cotiued to pursue strategic parterships with OSHA o several issues, as well as timely ivestigatio of employee complaits ad respose to citatios. Maagemet was tasked with developig actio plas to focus o critical causes of accidets: slips, trips, ad falls; materials hadlig; motor vehicle accidets; ad employee history of repeat accidets. This is a ogoig, sustaiable effort to target these causes ad reduce ijuries ad illesses. To support this effort, a Accidet Reductio Ceter was created o the Toolkit Resource Page, which cotais actio plas, best practices, ad accidet data ad aalysis. Employee commuicatio was a pricipal safety ad health goal this year. The Postal Service bega sedig out a series of special commuicatios programs usig videos, posters, ad safety talks, as well as other iteral commuicatios vehicles. The purpose was to remid all employees why workig safely is importat to them, to those they love, ad to the Postal Service. 2. Evirometal Programs The Postal Service awarded four atioal evirometal service cotracts that reduced costs, icreased efficiecy, ad assured stadardized delivery of services ecessary to support evirometal compliace activities. These four cotracts replaced more tha 270 existig cotracts ad will save the Postal Service $30 millio over the ext four years. Services covered uder these cotracts iclude plaig, program developmet, testig, samplig, aalysis, compliace reviews, traiig, studies, ad surveys o evirometal issues. The cotracts provide a mechaism for Postal Service persoel to obtai top quality services ecessary to support evirometal compliace activities ad programs while reducig costs, elimiatig duplicatio of effort, ad takig advatage of iovatios ad icreased efficiecies by the cotractors. These cotracts also eabled the Postal Service to reduce its field evirometal complemet of evirometal staff by 30 percet ad sigificatly cut expeditures last year. Stakeholders cotiued to receive all ecessary support, however, due to a busiess-drive realigmet of evirometal field support services, improved techology solutios, ad strategically drive budgetig. Chapter 1 Compliace with Statutory Policies 2001 Comprehesive Statemet o Postal Operatios 27

31 I 2001, the Postal Service wo seve White House Closig the Circle awards the most ever received by the Postal Service. These awards are the federal govermet s top award for evirometal leadership ad iovatio. Oe of these iitiatives Total Resource Maagemet also wo the Postal Service s top project maagemet award. I May 2001, the Postal Service received the first of 500 electric delivery vehicles that will be deployed i Califoria, New York, ad the Washigto, DC, metropolita area. The ew electric postal vehicle has o tailpipe because it creates o fumes. It has a battery pack istead of a fuel tak, which meas o foreig oil ad o trips to the gas statio. It tracks better through the sow because it's heavier tha the gas-powered versio ad has better wheel aligmet. Ad the postal carriers who have tested the prototypes makig curbside deliveries i Califoria say they also like oe other feature of the quiet electric vehicle the dogs do't hear it. Ogoig efforts iclude deploymet of the 500 electric-powered delivery vehicles bega i February ad will be completed i April Letter Carriers i souther Califoria, White Plais, NY, ad Washigto, DC, are usig these zero-emissios vehicles successfully. 3. Facilities a. Real Estate Ivetory TABLE 1.2 POSTAL SERVICE REAL ESTATE INVENTORY Total owed facilities 8,203 Total owed iterior square feet 218,741,826 Total owed lad i square feet 890,468,826 Total leased facilities 26,594 Total leased iterior square feet 103,179,262 Total GSA/other govermet facilities 451 Total GSA/other govermet iterior square feet 4,446,759 Aual ret paid to lessors $818.9 millio b. Realty Asset Maagemet Realty Asset Maagemet is the part of Facilities that provides iteral expertise to idetify, aalyze, ad maximize the retur o uderutilized ad surplus real property assets cotrolled by the Postal Service. This orgaizatio geerates icome from real estate assets by maximizig postal property value through its highest ad best use, leasig or subleasig excess postal space to govermet ad public teats, ad sellig surplus real property. Durig 2001, reveues totalig $86.7 millio were geerated by Realty Asset Maagemet from the followig sources: c. Facilities Workload TABLE 1.3 REALTY ASSET MANAGEMENT Leasig to private teats Leasig to govermet teats Sales of excess property Ret from developmetal property 4. Purchasig ad Materials $10.2 millio $29.6 millio $22.7 millio $24.2 millio TABLE 1.4 FACILITIES PROJECTS Projects Projects Completed Ogoig Durig as of Ed 2001 of 2001 New costructio, major reovatios, ad expasio projects Buildig purchases New lease costructio Other lease actios (alterative quarters, ew leases, ad lease reewals) 6,064 1,597 Expese repair ad alteratio projects 9,496 3,605 Captial repair ad alteratio projects 8,983 1,974 a. Itroductio I 2001, the Postal Service made more tha 38.7 thousad cotractual actios (cotract awards ad modificatios) worth more tha $13.8 billio. While this dollar total is oe of the largest i Postal Service history, it icludes the award of a $6.3 billio cotract to Federal Express for mail trasportatio services, the largest cotract ever awarded by the Postal Service. Geerally, 2001 saw a decrease i Postal Service purchase actios due to the overall fiscal state of the Postal Service. I this busiess eviromet, Purchasig ad Materials took effective steps to maximize purchasig leverage ad to simplify processes throughout the orgaizatio. Results from these efforts have prove very positive, i areas such as supply chai maagemet, fuel programs, ad materials maagemet Comprehesive Statemet o Postal Operatios Chapter 1 Compliace with Statutory Policies

32 related iitiatives, ad will cotiue to pay divideds for years to come. b. Supply Chai Maagemet Purchasig ad Materials has idetified the supply chai maagemet philosophy ad attedat busiess practices as cetral to its efforts to further the busiess ad competitive objectives of the Postal Service. Durig 2001, Purchasig ad Materials dramatically expaded its applicatio of these busiess practices throughout Postal Service purchasig ad materials maagemet, ad the results have bee impressive. Over the past several years, supply chai maagemet has become oe of the most importat aspects of successful cotemporary busiesses; a few years ago, it became a major teet of the Postal Service s Breakthrough Productivity Iitiative. I geeral terms, supply chai maagemet is the aalysis of the purchase process ad the supply stream, from the supplier s supplier to the customer s use ad disposal, i order to icrease customer satisfactio ad decrease overall cost. Effective supply chai maagemet ivolves a umber of busiess practices, icludig close iteractio amog ed users, buyers, ad suppliers, log-term cotracts, ad ogoig aalysis ad improvemet of operatig ad admiistrative processes. A Supply Chai Maagemet Core Team has bee i place for the past several years, usig process maagemet data aalysis ad other busiess practices to help implemet supply chai maagemet throughout Postal Service purchasig ad material maagemet. More tha 90 supply chai Ceters of Excellece (COEs) (a icrease of 30 over last fiscal year) have bee established throughout Purchasig ad Materials ad are usig supply chai maagemet busiess practices to beefit the Postal Service. The COEs are cetered aroud cross-fuctioal teams, represetig both purchasig ad iteral customers, ad each is commodity-focused, ivestigatig how customer satisfactio ca be improved ad savigs realized. As a result, strategic parterships have bee developed with, amog others, suppliers providig office products, packagig for expedited mailigs, mail trasport equipmet, ad cellular phoes ad services. These parterships offer quick delivery, ad ofte cost savigs, through electroic commerce. The Postal Service also receives discouts ad rebates depedig o the amout of busiess doe with a particular supplier. Due to the wide variety of goods ad services purchased by the Postal Service, such parterships will grow, as will the customer service ad fiacial beefits received. Durig 2001, several sigificat ew parterships were formed. A gai-sharig cotract was awarded to SBC Global Services, Ic., for voice etwork services at more tha 37,000 Postal Service facilities. As part of the cotract, SBC has guarateed $15 millio i savigs, ad i August the compay provided the Postal Service with the first rebate check, i the amout of $5 millio. Parterships were formed with two custodial product suppliers to provide all of the Postal Service s eeds for this commodity. The busiess advatages iclude lower prices through cosolidatio of requiremets ad volume purchasig, ehaced quality, ad ed-user satisfactio. Goodyear Tire ad Rubber Co. was awarded a log-term cotract ad is ow the exclusive supplier of ew tires for the Postal Service s 200,000-plus fleet of trucks, vas, ad delivery vehicles. Durig the term of the cotract, the Postal Service expects to save at least te percet per year. A added aspect of this cotract is that Postal Service employees will receive sigificat persoal savigs i tire purchases ad automotive services from participatig Goodyear dealers. These commodity-based cotracts are illustrative of how the Postal Service is usig supply chai maagemet busiess techiques to reduce costs ad deliver quality. Cross-fuctioal purchase teams defie requiremets, aalyze demad data, use process maagemet tools to devise optimum busiess approaches, ad work with suppliers to reach mutually beeficial agreemets. Although i the past several years supply chai maagemet has led to some substatial achievemets, FY2001 raised the bar cost reductios had bee predicted to be $100 millio ad istead they reached $157 millio. Some of this amout cotributed directly to the Postal Service s bottom lie, ad the remaider was reivested. Oe commodity receivig particular attetio was trasportatio fuel, which aually costs the Postal Service more tha $700 millio. A Fuel Maagemet Program has bee established, based o a pilot test that bega i The program provides lower cost fuel to suppliers who trasport ad deliver mail o behalf of the Postal Service (historically, these suppliers purchased the fuel o the ope market). Two cotracts have bee awarded to suppliers for approximately 95 millio Chapter 1 Compliace with Statutory Policies 2001 Comprehesive Statemet o Postal Operatios 29

33 gallos of fuel atiowide, ad savigs have bee estimated at about $0.12 per gallo. Additioally, savigs are beig realized atiowide through the use of a fuel card that ca also be used for vehicle maiteace services. Iovative busiess practices have bee ad cotiue to be used to further supply chai maagemet. Reverse auctioig, a Iteret-based busiess practice, was first used durig FY2000 for selected commodities. Reverse auctioig allows potetial suppliers to adjust their proposed price o-lie as they react to the proposed prices of their competitors. The results for the Postal Service are lower prices, better egotiatig positio, shorter purchasig cycles, ad improved productivity. Durig 2001, reverse auctios were held for several commodities. I oe case, a reverse auctio for corrugated boxes geerated savigs of $2.5 millio. The adoptio of supply chai maagemet by Purchasig ad Materials has obviously led to some real successes. However, more ca be achieved. Purchasig ad Materials seior maagemet bega a complete review of orgaizatioal structure, effectiveess, ad huma resources ad skill sets. Durig FY 2003, a ew structure will be i place, ad it will maximize the use of commodity teams, supply chai maagemet busiess practices, ad techology to esure that Postal Service purchasig ad materials maagemet cotiue at the forefrot of both the public ad the private sectors. c. Process Simplificatio For some time, small purchases have bee made locally by Postal Service employees via credit card. This allows users to purchase day-to-day operatioal eeds quickly ad efficietly. The ew emphasis o supply chai maagemet ad large cosolidated cotracts for may of these commo items has somewhat reduced the eed for these buys (while also icreasig Postal Service purchasig power), but providig local offices with the meas to get what they eed whe they eed it remais importat. Durig 2001, the umber of credit cards i use remaied approximately the same as it was i FY 2000, ad the total dollar amout of such purchases shrak by approximately oe-sixth, mostly due to the Postal Service s fiacial positio ad budget tighteig. New policies ad tools have also bee itroduced to simplify the purchasig process. I FY 2000, several years worth of effort led to a complete redesig of the cotractual documetatio used for Postal Service solicitatios ad cotracts. With the issuace of the ew policies i Jauary 2002, Postal Service solicitatios will cosist of three basic solicitatio provisios, ad cotracts will cosist of two basic clauses. Cotractig officers ad purchase teams will add to or modify these basic terms ad coditios based o the item beig purchased or the cotract type beig used, ad the result will be cotracts that have far more i commo with commercial terms ad coditios tha those geerally used i govermet cotracts. Amog the ew tools brigig greater efficiecy to Postal Service purchasig is a web-based applicatio, ebuy, which liks Postal Service employees, purchasig ad materials maagemet professioals, web-based catalogs, ad suppliers. EBuy provides a paperless requisitioig, purchasig, ad paymet system, while esurig adequate oversight. The beefits are sigificat. Trasactio ad other admiistrative costs have bee reduced, prices for most available commodities have falle, ad large ivetories are o loger required. At the same time, lead times are reduced, ad purchasig professioals are freed from cocetratig o trasactios ad ow ca cocetrate o strategic sourcig. Aother ew tool we are itroducig is the electroic Govermetwide Poit of Etry (GPE), which has replaced the Commerce Busiess Daily as the meas of publicizig purchase opportuities. The GPE is accessed via the Iteret. d. Materials The materials orgaizatio of Purchasig ad Materials is resposible for maagig thousads of lie items required for daily Postal Service operatios, providig purchasig ad materials support to the areas through te Purchasig ad Materials Service Ceters (PMSCs), ad operatig of oe Material Distributio Ceter. The Materials catalogig fuctio maitais more tha 25,000 stocked items ad more tha 6,000 direct supplier items. Gross sales for the Materials wholesale operatios were $356 millio i parts, supplies, prited materials ad equipmet. Issues from wholesale ivetories amouted to $156 millio, while electroic commerce-based direct sales from 90 suppliers rose to $200 millio, a 25 percet icrease over last year. At the same time, the Label Pritig Ceter produced more tha 2 billio mail processig labels, ad the Mail Equipmet Shops produced more tha 1.6 mil Comprehesive Statemet o Postal Operatios Chapter 1 Compliace with Statutory Policies

34 lio sacks ad pouches, 4.4 millio keys, ad 330,000 locks. Cotiuig our process maagemet efforts with iteral Postal Service parters, Materials worked with Retail to save a additioal $11 millio o the distributio of merchadise to all postal stores ad outlets ad $412,000 i packaged stamps. Aother partership was established with the Cosumer Advocate, uder which a test for the o-lie sales of uclaimed property from the Mail Recovery Ceters (MRCs) was begu. Usig a sigle MRC as a pilot test, more tha 36,000 items were sold, ad this geerated approximately $1.4 millio i et reveue. I its prelimiary fidigs, the Cosumer Advocate s orgaizatio stated that this figure was three times that of past returs, ad this test will be exteded ito FY Parterships with other Postal Service orgaizatios yielded similar successes. Workig with the Maiteace Maagemet orgaizatio, Materials improved order ad delivery cycle times from 14 days to 10 days. This will decrease field ivetory ivestmets by more tha $2 millio aually. I partership with Delivery Cofirmatio, we developed ad obtaied fudig, ad iitiated equipmet acquisitio for cosolidatig atioal delivery cofirmatio label productio ito the Label Prit Ceter. This is projected to save $1.8 millio by the fourth quarter of FY Ad, workig with Retail s POS ONE (Poit-of-Service Oe) program, Materials was able to istitute a program that idetified $3 millio i uderused equipmet ad redeployed it i lieu of ew purchases. Materials Distributio orgaizatio also bega usig the Freight Traffic Maagemet System (FTMS) a web-based software system that calculates expected freight charges ad allows a user to select the best value carrier. The system is used by materials distributio ad materials maagemet specialists at the areas ad districts; it calculates expected freight charges ad allows a user to select the best value carrier. Materials also worked with Fleet Maagemet, the Ispectio Service, Fiace, the Geeral Services Admiistratio, ad four vehicle maufacturers to purchase 1,083 o-mail vehicles. The purchase esures timely deliveries ad prompt paymets, ad it resulted i overall cost avoidace of $2 millio. Last i this area, Materials evaluated more tha 42 major acquisitios for trasportatio opportuities ad obtaied a average 10 percet savigs. To reduce operatig costs ad improve customer service, Materials reviewed distributio requiremets ad support structure. This led to the closig of the South River, NJ Materials Distributio Ceter. The closig resulted from a volume declie i supply ad equipmet operatios ad a accelerated use of direct vedor deliveries. Operatioal savigs of $2 millio will be realized from the closig, as will a additioal $2 millio oce the facility is leased to commercial operatios. Additioal savigs were obtaied by reducig wholesale ivetories from $148.5 millio to $138.6 millio through icreased use of direct vedor deliveries ad implemetatio of phased deliveries uder the automated warehouse repleishmet iitiative. The Recovery of Assets ad Materials (RAM) iitiative, begu i 1998, cotiues to reap successes. RAM maages field surplus ad excess equipmet. I 2001, equipmet reallocatios ad cost avoidace i lieu of ew purchases were more tha $78 millio, a 80 percet improvemet over FY e. Professioal Developmet I order to further itegrate commercial best practices ito Postal Service purchasig, we are chagig our traiig to focus more o the private sector. However, while i the process of phasig out most of our i-house curriculum, we cotiue to coduct select purchasig ad materials courses. Durig 2001, more tha 500 purchasig ad materials employees atteded 23 courses. All of the courses receive college credit recommedatios from the America Coucil o Educatio. As oted, Purchasig ad Materials is trasitioig to full implemetatio ad maagemet of a itegrated supply chai, ad we are trasitioig to the use of commercially available supply maagemet courses. I 2001, 448 Purchasig ad Materials professioals systemwide atteded 18 offerigs of the two-day Istitute for Supply Maagemet semiar, "Purchasig ad Materials: Creatig a Seamless Process." Purchasig ad Materials professioals will atted more such courses i FY 2002 ad beyod. I terms of educatio ad professioal attaimets, as of Jauary 2001, more tha 60 percet of Purchasig ad Materials professioal ad admiistrative staff attaied at least a bachelor s degree or higher, ad more tha 38 percet had attaied a professioal certificatio i either the purchasig or materials maagemet disciplie. Chapter 1 Compliace with Statutory Policies 2001 Comprehesive Statemet o Postal Operatios 31

35 Uder the Office of Govermet Ethics (OGE) guidelies, the Postal Service must provide desigated employees with aual ethics update traiig. I 2001, web-based ethics traiig was developed ad provided to more tha 350 Purchasig ad Materials employees, thereby meetig the OGE aual traiig requiremet. f. Major Purchases The cotract awarded to Federal Express for hadlig ad trasportatio of expedited mail, worth $6.3 billio, is the largest cotract ever awarded by the Postal Service. Performace bega i August 2000, ad is scheduled to cotiue for seve years. More tha 61 millio pouds of mail per year will move uder the cotract. The Postal Service also etered ito a retail agreemet with Federal Express for the placemet of its collectio boxes at desigated Postal Service facilities. A idefiite delivery cotract with Uited Airlies for the trasportatio of First-Class Mail amouted to $427.9 millio, ad a similar cotract awarded to Delta Airlies amouted to $390.4 millio. I the Supplies ad Services area, sigificat cotractual actios icluded the exercise of a optio cotaied i a existig cotract with Ford Motor Compay callig for the delivery of more tha 11,000 carrier vehicles ad priced at more tha $235.1 millio. Aother cotract modificatio, this oe with Lockheed Marti ad for Recogitio Improvemet Program II, was executed i September ad valued at $152 millio. Also of iterest is a two-year cotract for the aggregated atural gas requiremets of 125 Postal Service facilities i the Easter, New York Metro, ad Capital Metro Operatios areas. The cotract, which was awarded to a Native-America-owed, Tulsa, OK, compay, stabilizes ad reduces atural gas prices for these facilities. I the Desig ad Costructio commodity area, a $35.5 millio cotract was awarded for major reovatios to the Seattle Processig ad Distributio Ceter (PDC). The reovatios iclude a complete roof replacemet, security improvemets ad structural ad seismic upgrades. A $9.1 millio cotract was awarded i November for a expasio at the Champaig, IL, PDC. The work, which was completed 90 days ahead of schedule, icluded the costructio of a 88,000-foot additio to the existig workplace. g. Supplier Diversity The Postal Service s Supplier Diversity program is a fudametal elemet i its corporate strategy to remai competitive ad profitable i the marketplace. The Postal Service s record is a good oe, ad because its busiess ad fiacial challeges are more similar to those of the private sector tha to those of govermet agecies, the Postal Service has adopted more of a privatesector approach to supplier diversity. That approach is based o stregtheig the supplier base by reachig out to idetify strog suppliers ad providig them with opportuities to compete for Postal Service cotracts. The Postal Service periodically bechmarks itself agaist both the public ad private sectors, ad historically, the results have prove substatial. These efforts cotiued durig For example, the Postal Service participated i a supplier diversity survey of Coferece Board firms. The survey foud that the Postal Service was a leader i the use of small ad woma-owed firms, ad "above average" with miority-owed firms. While direct comparisos are extremely difficult, give the wide differeces amog the data available for compariso, this leadership positio was recofirmed from a secod source. I the secod aual DIV2000.com survey of 100,000 small, miority, ad woma-owed suppliers, the Postal Service raked sixth amog public sector etities i promotig "multicultural busiess opportuities." While this rakig reflects both effort ad success, it is a drop from the Postal Service s umber two rakig last year. However, overall program results aturally were affected by the geeral decrease i cotract opportuities durig 2001, ad the statistical spike resultig from the cotract awarded to Federal Express. Earlier i the year, the Postal Service was the oly public sector etity chose to participate, with a umber of Fortue 100 firms, i the developmet of a Public Broadcastig Service series o the importace of supplier diversity. The program is ow beig aired i several markets, ad the Postal Service uses it as part of its ogoig supplier diversity traiig. The Postal Service also has developed a Computer-Based Traiig course addressig postal-specific supplier diversity issues. The course will be broadly distributed ad used durig 2002, ad appears so promisig that at least oe local chapter of the Natioal Miority Supplier Diversity Coucil has requested use of the course Comprehesive Statemet o Postal Operatios Chapter 1 Compliace with Statutory Policies

36 The Postal Service cotiues to maitai close relatioships with a umber of atioal associatios ad their affiliates that support supplier developmet ad diversity throughout the coutry. Durig 2001, the Service sposored or actively participated i a estimated 100 fairs ad evets focused o supplier diversity across the atio. The Postal Service website, USPS.com, cotais a variety of material desiged to provide iformatio o how to do busiess with the Postal Service, coects to buyers ad key cotact poits, ad delivers iformatio o cotract opportuities as they arise. Policy chages regardig subcotracts with small, miority, ad woma-owed busiesses itroduced i 1999 cotiue to gai attetio. Some 440 firms submitted subcotractig reports i 2001, up markedly from the 310 that reported last year. However, despite the icrease i firms reportig, subcotract dollars with small, miority ad woma-owed busiesses for 2001 were sigificatly lower tha last year. Outside of the subcotractig area, more tha $3.8 billio (represetig more tha 69 percet of cotractual actios) wet to small busiesses. Nearly $314 millio (represetig 8.8 percet of cotractual actios) wet to miority busiesses, ad more tha $569 millio (represetig 12.3 percet of cotractual actios) wet to woma-owed busiesses. Last, the Postal Service committed more tha $58.3 millio to suppliers that employ blid ad severely hadicapped people uder the Javits, Wager, O'Day statutes. Chapter 1 Compliace with Statutory Policies 2000 Comprehesive Statemet o Postal Operatios 33

37 Comprehesive Statemet o Postal Operatios Chapter 1 Compliace with Statutory Policies

38 Chapter II Postal Operatios A. Public Perceptios, Customer Outreach ad Mailer Liaiso 1. Customer Feedback Aalysis The Postal Service uses a variety of methods to commuicate with customers about our services, products, policies ad persoel. The aggregated data from these sources allow us to formally itegrate the voice of the idividual cosumer ito our busiess practices ad provide feedback to operatios where we ca take actio, respod ad improve. I 2001, the umber of customer cotacts through traditioal methods of commuicatios (i.e., letters, phoe calls, customer walk-is) decreased. The umber of customer iquiries via Iteret, a alterative customer commuicatio vehicle, icreased 40 percet. The Postal Service logged 254,200 customer cotacts durig 2001, a approximate 5 percet decrease. Of these, 3 percet were complimets, 2 percet were geeral iformatio requests ad 95 percet were service issues. The volume of Iteret iquiries skyrocketed, reachig 159,804 s 68,779 over last year. The icrease i customer cotacts occurred i all te Postal Service areas. 2. Customer Outreach ad Mailer Liaiso a. Natioal Postal Forum (NPF) Natioal Postal Forums were held i Orlado, FL, ad Dever, CO, with over 10,000 busiess customers ad exhibitors attedig. Busiess mailers atteded the Forum for iformatio o mailig idustry issues, treds ad opportuities; to lear about cuttig-edge techology; to participate i iformatio-packed busiess ad educatioal sessios; to have access to Postal Service decisio-makers; ad for etworkig opportuities. Today s Forums provide professioals with ogoig traiig i a rapidly chagig idustry, ad the opportuity to build o the busiess partership betwee the Postal Service ad its customers, to etwork with idustry peers, ad to talk directly with postal officials. Iovatio i the Mail was the Forum s theme i Geeral Sessios provided attedees with isight ito the visio, plas ad priorities of mailig idustry leaders. The Postmaster Geeral outlied the Postal Service s objectives ad priorities for the future. The Deputy Postmaster Geeral ad Pitey Bowes Chief Executive Officer reported o the fidigs of the Mailig Idustry Task Force, which they cochaired. The report focused o three major themes: uifyig the idustry; makig the mail chael more competitive; ad respodig to customer eeds. The Postmaster Geeral ad the Chief Executive Office of Federal Express discussed implicatios of their ew alliace. Ad the Chairma of the Board of Deutsche Post World Net shared his perspective o implicatios of postal deregulatio. Attedees received iformatio about techology available to improve the value of the mail through umerous sessios, workshops ad exhibits. Postal executives, alog with idustry leaders, led discussio groups that addressed remittace mailers, periodicals mailers, package mailers, ad advertisig mailers service issues. Postal officers hosted several Busiess Builder Strategy Sessios at each Forum. The sessios featured Postal Service programs ad iitiatives ad customers who have beefited from them. Forum attedees also were offered sessios o address maagemet, how to keep costs ad rates low, ad avoidig fraud scams. Mail security was particularly emphasized at the Dever Forum. I all, the Forum s traiig ad educatio program offered customers approximately 100 busiess sessios ad workshops at each Forum. These traiig ad educatio programs were desiged aroud customers busiess processes ad categorized as follows: Gettig ad Keepig Your Customers, Maagig Mail Preparatio ad Acceptace, Distributio ad Fulfillmet, Mail Ceter Operatios, ad Postal Rates ad Policy. As part of the Postal Service commitmet to cotiuig educatio, a Mail Ceter Professioal Certificate Program was offered to those who atted required sessios i specific mail preparatio ad mailig operatios areas. Applicats for this program, who atteded the required sessios, received a Mail Ceter Professioal Certificate. To date, approximately 800 idividuals have participated i this program. Complemetig the Forum s educatioal program was the exhibit floor, which featured approximately 290 compaies at each Forum. The exhibits displayed the latest i mailig supplies, services, mail automatio equipmet, software, ad computer hardware. b. Cosumer Advisory Coucils Cosumer Advisory Coucils (CACs) offer a uique opportuity for the Postal Service to maitai cotact with residetial customers atiowide. Chapter 2 Postal Operatios 2001 Comprehesive Statemet o Postal Operatios 35

39 CACs operate at the Post Office level ad are made up of a corss-sectio of commuity ad local postal officials. The Cosumer Advocate provides fuctioal guidace ad support to our CACs. Based o the results of a 1999 bechmarkig study, the Cosumer Advocate idetified lograge strategies for tyig local coucil activities to the Postal Service's corporate objectives, esurig that the voice of the cosumer is heard at the corporate level. c. Postal Customer Coucil Postal Customer Coucils (PCCs) are grassroots orgaizatios comprised of busiesses that use the mail. They provide etworkig ad educatioal opportuities to help busiesses effectively ad efficietly commuicate ad ehace their relatioship with customers ad idetify prospective customers through the mail. They also provide the Postal Service the opportuity to ehace its workig relatioship with local busiesses ad to better idetify their eeds. I 2001, may PCCs became more active i seekig the participatio of small ad medium-sized busiesses as members sice they deped o mail ow more tha ever to ehace their busiess strategy. Durig the year, the 250 local PCCs held over 1,500 total customer meetigs. Keepig Posted, the atioal PCC ewsletter is featured as a isert i our mothly Memo-to- Mailers ad ow reaches well over 150,000 customer addressees; virtually all of whom are members of PCCs. The ewsletter commuicates the plas ad successes of each PCC thus servig as a best practices maual for other PCCs. Complemetig the ewsletter is the PCCs ow website at The website helps busiesses fid the locatio of their closest PCC ad eables vetera PCC members to locate iformative presetatio material for their local meetigs. Providig guidace ad assistace to the PCCs is the Postmaster Geeral s PCC Advisory Committee. This select group of idustry leaders ad postal executives/maagers has may years of experiece i the leadership of PCCs. They have provided uique ad iovative methods to support PCCs eeds ad to recogize their accomplishmets. Amog the committee s iovative ideas is the Meetig i a Box series, which provides videotaped material to the PCCs for their local meetigs. I additio, this group selects the coveted PCC Leadership Awards. These awards represet the highest hoor give by the Postal Service to PCCs ad their members. I 2001 the awards were preseted at the Natioal Postal Forum i Orlado, FL. Awards were give to the most creative ad iovative PCCs i the categories of Best PCC Newsletter, Best PCC Evet, Best PCC Co-Chair team, ad Best Membership Campaig. This year the advisory committee lauched the first-ever PCC Leadership Coferece, held i October at the Natioal Postal Forum i Dever, CO. This half-day evet focused o ehacig the leadership skills of the PCC co-chairs ad idividuals aspirig to PCC leadership. The coferece icluded motivatioal talks by several Postal Service seior officers ad best practices presetatios by members of the Natioal PCC Advisory Committee. The coferece was atteded by postal ad idustry co-chairs from aroud the coutry. Based o their feedback it was judged a complete success ad aother leadership coferece is plaed for April, Recogizig the capability of the PCC etwork to commuicate importat iformatio to customers, the Chief Operatig Officer Pat Doahoe ad Chief Postal Ispector Ke Weaver called the PCCs to actio i October ad November to hold meetigs ad address mail security issues i light of the bio-terrorist attacks o America s Postal Service. These meetigs icluded the local postal ispector, district maager, postmaster ad a postal medical represetative. The sessios ot oly focused o athrax ad geeral safety best practices, but also reivigorated customer cofidece i the safety of mail. Customers said they were pleased with the iformatio they received. Additioally, may PCCs are icludig mailroom security articles i their ewsletters ad o their websites to reach a broader audiece. The PCC etwork is helpig us effectively ad efficietly commuicate with our customers. d. Mailers Techical Advisory Committee (MTAC) The resulted i sigificat accomplishmet ad progress for oe of the mailig idustries ad Postal Service s premier resources the Mailers Techical Advisory Committee commoly referred to as MTAC. Never before has the preparatio, processig ad delivery of mail bee chagig so rapidly ad this eviromet has offered may importat opportuities for makig a positive impact. MTAC s purpose is to share techical iformatio, advice ad recommedatios o matters cocerig mail related products Comprehesive Statemet o Postal Operatios Chapter 2 Postal Operatios

40 ad services to ehace customer value for mutual beefit of all ivolved. MTAC membership cosists of associatios represetative of all segmets of the mailig idustry. MTAC has a 25-year track record of fidig meaigful solutios to the challeges facig both the Postal Service ad its customers. This past year was o exceptio. Work groups brought together dedicated ad hard workig Postal Service ad idustry specialists who determied how best to move forward i such areas as PostalOe!, Uit Load Trackig, Maximizig the Value of Plaet Code, ad Presort Optimizatio, just to ame a few. The MTAC leadership also determied this year that a umber of work groups actually completed their missio or are close to it. These iclude groups such as Boud Prited Matter, Future Flats Strategies, Preparatio of Trays o Pallets, Drop Ship Appoitmet System, ad Mail.dat, also just to ame a few. Much was accomplished i each of these areas which has ehaced the progress ad/or implemetatio for each of these programs. Other key iitiatives such as MERLIN (Mailig Evaluatio Readability ad Lookup Istrumet) ad Product Redesig, although ot specific MTAC work groups themselves, have bee provided this year with sigificat developmetal support by the MTAC membership. Durig the challeges of late 2001, MTAC played a importat role i maitaiig the cofidece of key stakeholders i the safety ad effectiveess of mail. Members heard from seior Postal Service maagemet at MTAC meetigs about what was beig doe to educate employees ad customers about bio-terrorism i the mail ad how service had bee rapidly restored after the attacks. Expert medical cosultats to the Postal Service were made available to MTAC members to discuss the risks related to cotractig athrax i the mail ad the effective Postal Service respose to the discovery of athrax. MTAC developed a electroic rapid commuicatios etwork through which real time iformatio was dissemiated o a regular basis after the September 11 terrorism ad the October athrax attacks to provide guidace ad to keep mailers iformed ad focused o facts rather tha fears. e. Mid-Market The Mid-Market is a customer segmetdrive opportuity to grow Postal Service reveues from the efforts of smaller commercial mailers to acquire ad retai customers. Oe of the key strategies to activate this reveue opportuity is to work with the idustry of direct mail service providers third party itermediaries to establish ad build relatioships with the oe millio Mid-Market customers that the Postal Service caot reach with persoal cotacts. This year the Postal Service egaged i several pilots to test strategies for reachig this market. At the core was a iitiative with the Mailig ad Fulfillmet Service Associatio to parter o several pilots icludig semiars targeted to several specific audieces such as marketig executives, ad Hispaic busiesses. I March, as part of the Natioal Postal Forum i Orlado, we pioeered a iovative semiar for direct mail service providers about how to grow busiess i the Mid-Market. I October, we tested a mii-coferece strategy with service providers i Dever. Trackig systems established to moitor results suggest that this evet will geerate almost two millio ew pieces of ad mail volume which traslates to about $400,000 i ew postage from this oe small market aloe. We aticipate rollig out the marketig model established i this test ito several additioal markets this year. Aother sigificat iitiative was the developmet of a ew data aalysis tool, the Opportuity Idex, which uses quatitative criteria to rak the growth potetial of prospective customers ito four quadrats. This process will eable the developmet of specific sellig strategies ad the aligmet of sellig teams accordig to customer growth potetial. The Idex is beig tested i two Califoria sales ceters. Additioally, we bega to develop performace metrics to track volume, reveue ad customer satisfactio i the Mid-Market. Also we completed focus group research amog Mid- Market mailers to develop requiremets for ehacemets to product ad pricig features. f. Mail Recovery Ceters The Postal Service operates three Mail Recovery Ceters (MRCs) i Sa Fracisco, CA; St. Paul, MN; ad Atlata, GA. These facilities are resposible for the fial dispositio of udeliverable ad o-returable mail. Durig 2001, they processed approximately 1.7 millio parcels ad 118 millio letters. To better serve customers, the Postal Service uses MRCs as diagostic tools to pipoit specific problem areas that affect mail volumes received at our facilities. By commuicatig these problems to our mailers, they are able to Chapter 2 Postal Operatios 2001 Comprehesive Statemet o Postal Operatios 37

41 improve their mail preparatio ad/or packagig. We work closely with mailer orgaizatios to determie ways we ca work together to provide better service ad reduce operatig costs. A direct result of this process was the Expaded Retur Program, whereby udeliverable mail items foud i compay-idetifiable packagig are retured i bulk, as postage due to the 35 participatig compaies. Approximately 445,000 pieces were retured through this program durig Additioally, the Mail Recovery Ceters realized a substatial decrease i cycle times ad processig work hours through Process Maagemet efforts. The Mail Recovery Program also has iitiated various iteral fuctioal parterships with Operatios, Delivery Programs, Retail ad the Ispectio Service, to improve orgaizatio efficiecy. These will be ogoig iitiatives i FY g. Corporate Cotact Maagemet Corporate Cotact Maagemet provides postal customers easy toll-free access to a broad rage of products ad services through 800.ASK.USPS. CCM also hadles Domestic Express ad Priority Mail trackig ad tracig calls o ad Diero Seguro or Moey Movers calls o 800.ENVIOMX. The overall goal of CCM is to improve customer service ad operatig efficiecy, decrease geeral iformatio calls to post offices ad icrease reveue through establishmet of a effective atioal cotact-hadlig ifrastructure. Presetly, the CCM etwork, icludig two ceters - located i Dever, CO ad Kasas City, KS respod to 64 millio phoe iquiries from across the atio regardig geeral iformatio, mailig rates, hours ad locatios of local postal facilities ad service opportuities Call ceter resposibilities were trasferred to the Vice Presidet ad Cosumer Advocate s office i The Cosumer Affairs office ehaced the program with automated voice recogitio techology that aswers customer requests for ZIP Codes ad post office hours ad locatios. The Cosumer Advocate has outlied a strategic visio for the program that streamlies ad cosolidates eterprise cotact ceter customer care ad leverages CCM ifrastructure to support persoalized product ad service trasactios whether by phoe, or Web. B. Core Busiess The Postal Service has a fudametal requiremet to provide products ad services that meet the eeds of its differet busiess ad cosumer customers. The Postal Service cotiues to improve its moitorig of the busiess eviromet through market research, customer satisfactio/loyalty measuremets ad Customer Value Aalysis for specific products ad customer segmets. The Postal Service coducted a broad umber of studies i 2001 i areas such as billig ad paymets, package services, advertisig, ad product pricig. These studies were desiged to provide actioable iformatio to decisio-makers i support of the developmet ad implemetatio of marketig ad service programs. 1. First-Class Mail Effective ad efficiet service is the foudatio of our flagship product, First-Class Mail. This year, high service performace was achieved as measured by the Exteral First-Class Measuremet system (EXFC). Our cotiued focus o trasactios mail (bills, statemets ad paymets) has positioed the Postal Service to cotiue to be the primary eabler for busiesses ad cosumers to coduct fiacial trasactios. Cotiued refiemet of the Natioal Firm Holdout program, redesig of Busiess Reply Mail (BRIM) service, ad cotiued attetio to two ad three-day service performace have all supported improved service i this critical part of the First-Class Mail base. O October 1, 2001, we successfully lauched the ew productio system for Cofirm the mail trackig system for letters ad flats. The improved system cotais the followig attributes: Near real-time data access. Start-the-clock data to verify place ad date of mail iductio. Service performace measuremet tools that eable the Postal Service to improve performace. Expaded PLANET Code fuctioality for icreasig the amout of data assiged withi the codes to meet mailers busiess eeds. User-friedly web site. Dedicated customer support. Cofirm iformatio allows mailers to make better busiess decisios by kowig where mail is i the mail stream ad whe it is about to be delivered. Cofirm also serves as a performace measuremet system ad diagostic tool for Postal Service Operatios to idetify ad correct opera Comprehesive Statemet o Postal Operatios Chapter 2 Postal Operatios

42 tioal deficiecies. Deploymet of hardware ad software to eable all bar code sorters i the field to read ad trasmit PLANET Code data is essetially complete for both letter ad flat sorters. I 2002, we will cotiue to improve sca rates for flat mail by istallig automated feeder systems o FSM 1000 machies. I 2001, Cofirm was the wier of the World Mail Iovatio award, which was preseted i Lodo. Product Developmet bega testig several ew First-Class Mail applicatio ehacemets, icludig MicroPaymet ad Fried-To-Fried Mail i MicroPaymet cocept uses stamps as a form of currecy. MicroPaymet reply cards, either busiess reply or courtesy reply, offer customers the optio of usig stamps as paymet for low price poit purchases valued betwee $1 ad $ Advertisig Mail, Stadard Mail Stadard Mail is the primary class of mail for deliverig advertisig cotet to the mailbox. It is a valuable medium for the distributio of iformatio about products ad services (catalogs ad direct mail), orgaizatios (fudraisig), ad idividuals (campaig materials). It ca target the right audiece, it ca deliver persoalized messagig, it allows for testig of differet creative ad mailpiece elemets as well as the etire advertisig campaig, ad it delivers these beefits withi the framework of the security ad privacy of the U.S. Postal Service. These attributes positio Stadard Mail as a cost effective ad efficiet advertisig medium. To better serve our customers, Product Developmet has refied the already successful website to better fit the corporate look ad feel of The improved website lauched this sprig ad cotiues to offer o-lie help to busiesses iterested i addig to their customer base ad/or better meetig the eeds of their existig customers. New for this year is the additio of five Authorized Affiliate Merchats that ca help the ew mailer with ay or all of their mailig eeds. Product Developmet coducted more tha forty direct mail semiars that provided the small busiess ower with all the tools ecessary to begi usig the mail to advertise their product or service. These semiars are provided i cojuctio with the local district offices ad members of the mailig commuity. Workig closely with the Sales team, ew ad improved materials were developed to support local ad atioal sales persoel i their pursuit of ew customers. These materials were developed with a corporate look ad message so that all core products are preseted with uiformity. Product Developmet is workig closely with may other fuctioal areas i the orgaizatio i to provide a itegrated offer that will meet all the emergig eeds of the small busiess ad midmarket customer segmets. Workig with Operatios, idustry associatios, ad the direct mail ad mail order idustries, icreased attetio to service, improvemets i delivery predictability ad better coordiatio with the mailig commuity at large was achieved. 3. Periodicals Mail The Postal Service is the primary deliverer of subscriptio publicatios i the Uited States. Workig closely with the periodicals idustry, the Postal Service has idetified opportuities for cost reductio, service improvemet ad busiess growth. Over the past year, Product Developmet has worked with cross fuctioal groups o such efforts as future flats strategies, package itegrity, service measuremet ad mail irregularity feedback. Core Busiess also collaborated o several process efficiecies, icludig customer ad operatios traiig packages, ad stadard operatig procedures for our processig plats ad airmail facilities. We have established a electroic commuicatios vehicle that liks publishers ad priters with Postal Service delivery uits, sufficiet to idetify ad resolve subscriber delivery ad service issues. I combiatio with Area marketig ad operatios fuctios, quarterly Periodicals Focus Group meetigs are coducted with idustry represetatives to educate, iform ad collaborate o issues desiged to facilitate customer service ad periodicals busiess growth. Attedees of the Natioal Periodicals Focus Group Coferece describe the evet as the best idustry-focused meetig ever. Product Developmet looks forward to cotiuig our busiess buildig iitiatives through a periodicals Web page ad opportuities to icrease subscriptio marketig for publishers. 4. Special Services Special Services add value to mail services i three primary ways; 1) they provide safe choices o how to sed moey with postal moey orders, 2) they provide alterative ways ad places to receive mail through the Post Office Box service, ad 3) Chapter 2 Postal Operatios 2001 Comprehesive Statemet o Postal Operatios 39

43 they customize First-Class Mail, Expedited ad Package services with a variety of accoutable mail special services. Customers may cofirm receipt ad delivery of their mail, obtai sigatures, isure mail cotets, officially register mail security ad have the Postal Service perform Collect o Delivery (COD) services. Product Developmet iitiated electroic ehacemets for Certified Mail ad Retur Receipts. Market research was coducted to assess customer iterest i electroically ehaced Certified Mail ad Retur Receipt Services. Customers overwhelmigly favor electroic ehacemets that will allow them to access delivery status of their Certified Mail o the Iteret or receive a Retur Receipt with delivery iformatio ad a image of the recipiet s sigature retured to their address. These ew service ehacemets were icluded i the R rate case filig. Developmet work was iitiated with a lauch plaed for /fall of The first cost-based Post Office Box fee structure was implemeted alog with the R rate case. The fee structure for Post Office Boxes is ow based o oe of six fee levels that best match the cost of the PO Box space for a give post office. Further refiemets of this fee structure have bee proposed for the R rate filig. This will make it possible for PO box fees i a umber of locatios to cover their costs which will create more fair ad reasoable box fees over time ad improve the cotributio to istitutioal costs. Special Services messagig i retail locatios cotiued to improve, makig it easier for customers to see meu boards with services ad prices for specific special services. C. Expedited/Package Services I 2001, Expedited/Package Services served as the focal poit for all Postal Service package iitiatives. As with all other Postal Service products ad services, Expedited/Package Services aimed to provide cosumers a reliable, affordable, ad depedable delivery product.. We sought to positio the Postal Service as oe of the top providers i the package delivery market by emphasizig customer value with its service to everyoe, everywhere, every day. We also provided a variety of solutios to meet the busiess eeds of idividuals, ad small ad large busiesses by cocetratig o a few strategic goals customer ease-of-use, cosistet service, ad price advatage. Growig the Postal Service s package busiess etails meetig the followig objectives: Image Icreased customer ease-of-use ad cotiual positive advertisig to ehace ad establish the Postal Service s positio i the package busiess. Service Cosistet, reliable service ad cotiuous improvemets i overight, 2/3-day ad groud parcel services. Price Esurig price advatage as a key strategy to maitaiig the competitive edge for postal package products. 1. Package Products Prior to the evets surroudig September 11, Express Mail saw modest growth i cocert with the etire overight package service idustry. Sice that date, the overall idustry has see a flatteig i the overight market. Customers cotiue to view Express Mail as a reasoably priced alterative i the overight market. Priority Mail maitaied its positio as leader i 2-3 day service. However, as a result of the rate icrease ad aggressive competitio, Priority Mail bega losig market share. Throughout 2001, Expedited/Package Services worked with fuctioal areas throughout the Postal Service to develop strategies to ehace the growth ad developmet of Package Services. The Postal Service s Package Services meu also icludes Parcel Post, Parcel Select, Media Mail, Boud Prited Matter ad Library Mail. These services cotiue to provide valuable optios i the groud parcel category. Parcel Select has emerged as a growig force i the package delivery market, quickly becomig a key part of may compaies service strategies. The umber of service providers for Parcel Select has grow rapidly, givig shippers a strog etwork of atioal ad regioal parcel cosolidators ad expeditors to work with. Parcel Select represets a real value alterative for package shippers who ca save o their parcel shippig costs ad choose a level of service which best meets their shippig eeds. The cocept behid Parcel Select origiates from a term that parcel shippers have kow for years zoe skippig Comprehesive Statemet o Postal Operatios Chapter 2 Postal Operatios

44 Through this cocept, parcel shippers who ca provide their ow trasportatio are able to brig their parcels directly to a postal facility. Sice distace ad trasportatio are major cost factors i postage rates, the Postal Service is able to reduce its costs ad pass those savigs o to the shipper as postage discouts. The closer the mail is dropped to its fial destiatio, the greater the savigs. Overall, Parcel Select is a ecoomical way to leverage the Postal Service s greatest stregth, its atiowide six-day a week eighborhood delivery etwork. 2. Global Express Guarateed Global Express Guarateed, our iteratioal expedited shippig service, is a outgrowth of the Postal Service s strategic alliace with DHL Worldwide Express. This premier guarateed iteratioal service is ow a permaet shippig service, as desigated by the U.S. Postal Service Board of Goverors i August Global Express Guarateed service is available to over 200 coutries ad territories worldwide ad is available for purchase at approximately 20,000 Post Offices across the U.S. Service ehacemets to Global Express Guarateed i 2001 iclude preparatio ad paymet of shipmets olie, olie discouts, ad coveiet paymet of postage. 3. Cofirmatio of Delivery Services Delivery Cofirmatio service sca performace scores remai strog. As a result, the scaer equipmet ifrastructure meets other orgaizatioal eeds. The lauch of the Cofirm Program i October 2001 is a prime example. Sigature Cofirmatio service was lauched o February 4, This service gives customers the ability to see if their mail piece has bee delivered. If customers require additioal proof of delivery, they ca request a copy of the recipiet s sigature (provided by fax or mail). Potetial ew features uder cosideratio for 2002 could attract more customers to our cofirmatio services. These iclude bulk delivery record dowloads for electroic optio customers. The USPS Shippig Ceter site at is a big hit. Lauched i late May, 2001, this site is the third most visited site o A special feature offered at this site is a olie shippig label which provides customers the ability to prit Priority Mail labels with o fee electroic optio Delivery Cofirmatio service. Thus far, labels are beig geerated at over 20,000 per week. A PC Postage (electroic postage) feature will be added i Package Services Promotios We reewed Postal Service sposorship of ad commitmet to the Help Stamp Out Huger food drive coducted aually by thousads of members of the Natioal Associatio of Letter Carriers (NALC). We also reewed Expedited/Package Services sposorship of the Heisma Trophy. Ballots for Heisma Trophy votig are mailed to ad from the atio s sportswriters via Priority Mail. The Heisma ad Priority Mail are liked because they both represet the very best i their field. 3 Direct Marketig Campaigs Expedited/Package Service s worked with the Postal Service Sales orgaizatio to itegrate its four commercial direct mailigs with both the Leads Geeratio ad Sales Regio acquisitio teams. Additioally, 450,000 direct mail pieces were set to Small Busiess Customers advertisig Global Express Guarateed, the Postal Service s premium guarateed two-day iteratioal service. Global Express Guarateed is delivered iteratioally by DHL as a postal alliace parter. The aticipated service improvemet resultig from the Postal Service s ladmark agreemet with FedEx, which provided for domestic air trasportatio for USPS expedited products, was the corerstoe of a full-fledged direct marketig campaig. The elemets of the campaig desiged by the Postal Service s direct advertisig Agecy, Foote, Coe ad Beldig (FCB), icluded a direct mail postcard, ad baers. The postcards offered recipiets a chace to wi a USPS Pro Cyclig Team bike i a effort to drive traffic to the USPS Web site. The direct mail portio of the Network Alliace sweepstakes was targeted to all small- ad mid-sized busiesses to icrease awareess of the Postal Service s etwork ehacemets ad stimulate iterest, specifically all 21,396,218 ames i the Postal Service Busiess Customer Database. (Florida ames were excluded from the mailig due to Florida sweepstakes law.) To help equip the Sales force with the tools ecessary to attai their goal of icreasig reveue, Expedited/Package Services helped develop the Sellig Itegrated Package Solutios Chapter 2 Postal Operatios 2001 Comprehesive Statemet o Postal Operatios 41

45 traiig program. Aother ehacemet to the Sellig team is "The Oe Book" produced by the Sales team. "The Oe Book" was writte for CEO's to see how postal products ad services ca help them achieve their busiess goals. It offers umerous packagig solutios ad provides testimoials by otable customers such as Lad's Ed ad Lillia Vero. 6. Sales ad Service I The Fall Holiday Mailig Seaso To reiforce sales force traiig ad to icrease reveue durig the Holiday 2000 mailig seaso, Expedited/Package Services ad Sales aired the PSTN broadcast, Sales ad Service i the Fall Holiday Mailig Seaso. This live program, broadcast i September 2000, cotaied a call-i questio ad aswer segmet, to help esure viewers' uderstadig of the material preseted. D. Iteratioal Mail Iteratioal Busiess achieved modest reveue growth durig 2001 while at the same time reducig admiistrative overhead ad related expeses. Postage reveue icreased by 1.8%. Correspodig outboud iteratioal mail volume, however, declied by 1.5%. Major focus was directed at both product ad market developmet for package services, ifrastructure improvemets through electroic data iterchage with customers, suppliers, ad foreig postal admiistratios; ad progress i formig amog like-mided coutries to emphasize service performace as a major iitiative. 1. Volume ad Reveue Durig a period of ecoomic slowdow i the atioal ecoomy, total iteratioal reveue grew by 4.5% or more tha double the rate of growth of domestic mail. Reveue for 2001 was $1.731 billio, up $74.1 millio over the prior year. Mail volume was 1.08 billio pieces, dow 16.9 millio pieces from Reveue ad volume performace was mixed across all iteratioal product offerigs. Iteratioal Priority Airmail ad Air Parcel Post showed the most dramatic stregth with reveue gais of 35.5% ad 20.1%, respectively, o correspodig volume icreases of 38.2% ad 20.6%. Surface Parcel Post also posted reveue icreases of 16.9% o a 4.4% icrease i volume. Surface ad Air Letter-post traffic both declied with respect to reveue, pieces ad weight. Of the $74.1 millio et icrease i reveue, $2.3 millio was derived from iteratioal mail fees, $25.5 millio from outboud postage reveue, ad $46.3 from foreig postal admiistratios to cover the cost of hadlig ad delivery of foreig origi mail i the Uited States. 2. Product/Rate Restructurig O Jauary 7, 2001, ew restructured iteratioal product lies ad prices were itroduced to make it easier to do busiess with the Postal Service. Cotet-based rate distictios were elimiated for retail customers ad our product lies were reorgaized accordig to delivery speed. Pricig aomalies that have cofused customers ad employees were elimiated; our prices ow clearly reflect differeces i delivery speed ad reliability. The rates most iteratioal mailers pay were simplified. Twelve differet rates for documets weighig 1 ouce or less were replaced by two rates: 60 cets for North America ad 80 cets for the rest of the world. Other chages were made to the iteratioal rates to esure appropriate levels of cost coverage. Categories of mail that have cosistetly lost moey or that caot be offered at reasoable prices give the level of service were elimiated. Iteratioal rates have always bee orgaized by groups of coutries to reflect differeces i trasportatio ad foreig delivery costs. These coutry groupigs were updated to reflect sigificat chages i foreig delivery charges set by the Uiversal Postal Uio. 3. New Rate Discouts I 2001, the Postal Service itroduced a ew discout program for its Global Express Mail service. The portfolio of postage reductio opportuities is coordiated to help customers keep their distributio expeditures i lie with the service requiremets they eed. The first level is a 5 percet discout for all mailers who use the Express Mail Corporate Accout (EMCA). I additio to the EMCA 5 percet discout, if a mailer commits to sedig at least 600 items or $12,000 i postage aually, they ca receive larger discouts uder the Global Package Discout program through a Iteratioal Customized Mail Agreemet Comprehesive Statemet o Postal Operatios Chapter 2 Postal Operatios

46 4. Maagemet/Cost Reductios Admiistratio ad overhead costs were reduced at the Headquarters level for Iteratioal Busiess. Program budgets, capital budgets expese, ad admiistrative costs were dramatically cut. This was accomplished through the elimiatio of redudat ad low priority activities. Executive ad staff reductios cotributed to lower admiistrative costs. Iteratioal Call Ceter operatios have bee made more efficiet through the ehacemet of the existig iteractive Voice recogitio (IVR) system. Telecommuicatio costs were reduced. All work processes have bee reviewed ad defied. Ieffective ad atiquated practices have bee replaced by more moder cost effective practices. We have saved additioal dollars by movig some maual work to a iteret-based system. We aticipate cotiued savigs by cosolidatig the iteratioal operatio with the domestic operatio. This cosolidatio will allow sharig of the existig ifrastructure ad aget fuctios. 5. Improvig Service for Iteratioal Express Mail ad Air Parcels The Postal Service cotiues a multi-year process of improvig the reliability ad features of its expedited ad package service offerigs. I 2000 Global Express Guarateed was established. This offerig ow provides premium guarateed service at a premium price. To complemet this service, ad to clarify related optios for customers, Iteratioal Busiess has take steps to trasform its existig Global Express Mail ad Global Air Parcel services ito a cosistet ad reliable meu of compaio optios that are predicated o days to delivery ad geographic service area. These services have bee desiged to offer reliable two-day, fourday ad six-day service optios to the major cities i Europe, ad correspodig three-day, five-day ad seve-day service optios to major cities i Asia. The absece of day certai delivery will permit these services to be value-priced uder Global Express Guarateed. To lauch these service-related distictios, the Postal Service took two importat steps durig fiscal year First, ew pay-for-performace agreemets were egotiated with those foreig postal admiistratios with whom service ad traffic warrated improvemet. These ew agreemets, which establish pealties for failure to sca, track, ad deliver items o time, codify the basis for service improvemet. Secod, the cocept of a ew delivery approach to provide of Global Express Mail ad Global Air Parcels to cotietal Europe, with emphasis o levels of service, was fully developed. This cocept has culmiated i a agreemet that replaces umerous separate bilateral arragemets with Europea posts, ad offers the advatage of stadardizig scaig ad delivery procedures that are uiform. 6. State Departmet Coordiatio The Uiversal Postal Uio (UPU) High Level Group completed its work i July 2001 ad reached agreemet o recommedatios to allow wider participatio by the private sector i A ew Cosultative Committee will serve as the forum for the private sector. Private sector members of this ew committee will also have observer status i other UPU bodies, icludig the UPU Cogress, the Coucil of Admiistratio ad the Postal Operatios Coucil. While the ext Cogress of the UPU i 2004 will be resposible for formally approvig these proposals, both the Coucil of Admiistratio ad the Postal Operatios Coucil have agreed to implemet them o a iterim basis begiig i This developmet provides a opportuity for a substatial improvemet i dialogue, uderstadig ad cooperatio amog the diverse public ad private sector stakeholders i the iteratioal delivery services area. The Postal Service has cotiued to work i cooperatio with the U.S. Departmet of State, which has primary resposibility to formulate, coordiate ad oversee policy with respect to U.S. represetatio i the UPU. The Departmet of State leads a cosultatio process o postal policy issues with all stakeholders, icludig the Postal Service, other govermet agecies, customers ad private providers of delivery services. This resposibility was grated to the Departmet of State though legislatio that Cogress passed i October The Departmet of State s role is to esure that the Postal Service ot eter ito ay agreemet that provides a udue or ureasoable preferece to the Postal Service, a private provider of postal services or ay other perso. I additio, the Postal Service, Departmet of State ad Postal Rate Commissio agreed to sposor a joit study of the provisios of Article 43 of the Covetio of the UPU ad their impact o key stakeholders. The results of Chapter 2 Postal Operatios 2001 Comprehesive Statemet o Postal Operatios 43

47 this study, carried out by a idepedet cosultat, shall cotribute to formulatio of U.S. policy o the fees postal admiistratios pay for the delivery of iteratioal letter mail. The Postal Service shall also cotiue its efforts through the UPU to implemet a more cost based termial dues system for idustrialized coutries with a lik to service quality i This system, adopted at the UPU Cogress i Beijig i 1999, provides a trasitio to more cost-based termial dues system for all coutries. The Postal Service also participated o the U.S. delegatio to the UPU High Level Group, which was created by the Beijig Cogress i 1999 to address issues of UPU reform ad wider participatio by key stakeholders i postal issues. This delegatio was led by the Departmet of State ad icluded represetatives from other govermet agecies ad the private sector. E. Mail Volume ad Service Performace 1. Mail Volume As show i Table 2.1, mail volume fell slightly i I fact, volume fell for every class of mail except First-Class Mail, largely due to ecoomic slowdow ad the effect of rate icreases. Total mail volume fell by 420 millio pieces, or 0.2 percet. TABLE 2.1 HISTORICAL AND PROJECTED MAIL VOLUME BY FISCAL YEAR* (billios of pieces) Projected 2002 Projected 2003 First-Class Mail Priority Mail Express Mail Periodical Mail Stadard Mail Package Services Iteratioal Other Total Mail *The slowig of the ecoomy coupled with the impact of the evets of September 11 ad the subsequet use of the mail as a vehicle for bio-terrorism will result i costs ad egative busiess impacts, the magitude of which are ukow at this time. Due to the rage of ucertaity relatig to the fiacial impact of these evets, this submissio reflects assumptios icluded i Postal Service rate case docket umber R2001-1, filed o September 24, 2001, ad reflectig pre-september 11th estimates. Sigificat actios have bee take sice September 11th to address the potetial fiacial damage. These iclude a $1.3 billio reductio i expese plas, egotiatio of a proposed settlemet of the Postal Service's rate filig with a view to accelerated rate implemetatio, ad passage of legislatio authorizig appropriatios for certai fiacial losses directly associated with terrorist attacks ad the screeig ad security of mail. For 2002, the Pla projects growth of about 1.2 percet. Sice it is ow clear that this growth will ot occur, the Postal Service ad its stakeholders have take steps ot cotemplated i our FY 2002 pla to esure the Postal Service s cotiued fiacial viability. Flexible pricig, a essetial elemet of Postal Reform, would allow the Postal Service to accommodate uaticipated icreases i costs ad to icrease mail volumes by offerig a variety of pricig icetives to customers. I slow mailig periods, customers could be offered lower rates whereas premium rates could fairly be charged for mailig durig high volume mailig periods whe service is more costly. Such pricig flexibility is commoplace busiess practice i competitive markets. It is also practiced by govermet eterprises such as public trasit systems. Reveue grew about 2 percet i 2001, largely because of R price icreases, which were implemeted i Jauary ad July. The price icreases offset losses i volume ad decreasig weight per piece. Priority Mail volume fell over 8.5 percet, but reveue actually grew slightly as a result of a 15 percet rate icrease. Across almost all classes of mail, average weight per piece was dow i This tred is most proouced i Periodicals, Express Mail ad Parcel Post. All of theses classes declied well over 5% i weight per piece sice the rate chage i Jauary I the case of Periodicals Mail the weight declie is largely due to the ecoomic slowdow ad cosequet weakess i the advertisig market. Actios by our competitors to secure some of the volume i the wake of the rate icrease also affected these classes. At the same time, differeces i growth rates betwee classes of mail are chagig the mail mix. More ad more mailers are takig advatage of presort ad dropship rate icetives, which affect our reveue ad workload. Withi First-Class, sigle-piece letters, which geerate more reveue, fell close to 3 percet, while the less expesive workshared letters grew almost 6%. I the 2002 plaig cycle, we had expected volume to grow a little over 1 percet, as idicated by Table 2.1. We aticipated a declie i First Class volume, but projected growth i Stadard Mail ad a recovery i Priority Mail. However, the oset of recessio, the evets of September 11, 2001, ad the athrax icidets i the followig moths, have redered these Comprehesive Statemet o Postal Operatios Chapter 2 Postal Operatios

48 plas ad projectios obsolete. Actual mail volume declied 5.5 percet i the first quarter of 2002, ad through the ed of December reveues were already more tha $1 billio below pla. Maagemet has respoded to this setback by orderig a $1.3 billio reductio i FY 2002 expese plas to mitigate the impact of lost reveues. At the same time, to protect the Postal Service s fiacial viability, most members of the mailig commuity represeted i the rate case process have agreed to early implemetatio of ew postage rates. Accelerated rate implemetatio will ifuse reveue eeded to preserve the Postal Service s fiacial health ad will forestall rate icreases greater tha the 8.7 percet average icrease that the Postal Service had proposed. 2. Service Performace Measuremet First-Class Mail service performace results are measured through the Trasit Time Measuremet System (TTMS), which measures service performace from the time mail is etered ito the system at a iductio poit util the time it is received i the home or small busiess. TTMS is idepedetly admiistered by PricewaterhouseCoopers uder a cotract with the Vice Presidet ad Cosumer Advocate. TTMS' mai goal is to measure service performace from the customer's poit of view. The iformatio gathered determies the effectiveess of system performace i satisfyig customer requiremets. The Exteral First-Class (EXFC) system is a exteral measuremet system of collectio box to mailbox delivery performace. EXFC cotiuously tests a pael of 463 ZIP Code areas selected o the basis of geographic ad volume desity from which 90 percet of First-Class volume origiates ad 80 percet destiates. EXFC is ot a system wide measuremet of all First-Class Mail performace. The EXFC measuremet system has bee i existece sice The idepedet EXFC system showed a average atioal overight performace of 94 percet for Natioal service performace for two ad three-day service commitmet areas averaged 85 ad 81 percet respectively. Measurig customer satisfactio is a everevolvig process. The Customer Satisfactio Measuremet (CSM) for the Postal Service is focused o improvig customer satisfactio. CSM is composed of three distict compoets: oe that measures residetial satisfactio CSM-R, oe that measures busiess customer satisfactio CSM-B ad oe that measures evet-based customer satisfactio CSM-EVB. The CSM survey process supports the goal of the Voice of the Customer uder CustomerPerfect!. Customer satisfactio is measured idepedetly by The Gallup Orgaizatio through a cotract with the Vice Presidet ad Cosumer Advocate. The CSM-R results (See Table 2.2) showed that 92 percet of the atio's households rated Postal Service Overall Performace as "excellet," "very good," or "good" for the last quarter of the fiscal year. TABLE 2.2 CUSTOMER SATISFACTION RATINGS BUSINESS AND RESIDENTIAL PERFORMANCE IN 2001 PERCENT RATED EXCELLENT / VERY GOOD / GOOD PERFORMANCE BY QUARTER 1ST 2ND 3RD 4TH Natioal Accouts Premier Accouts Busiess Accouts Residetial Accouts A redesiged CSM Residetial survey was implemeted i 2001 to better reflect cosumers' expectatios of delivery products ad services ad to better measure postal corporate strategies. The survey was desiged to provide more actioable data to field postal maagers. For the CSM-B, Natioal accouts reported a overall performace ratig of 91 percet for the last quarter of the fiscal year. These busiess customers have bee idetified as the Postal Service's largest customers. Approximately 250 accouts are desigated as Natioal Accouts. The Premier accouts reported a overall performace ratig of 90 percet for the last quarter of the fiscal year. These are the secod largest group of busiess customers. There are approximately 12,000 Premier accouts. Busiess accouts reported a overall satisfactio ratig of 88 percet for the last quarter of the fiscal year. Busiess accouts are all other busiess customers ot idetified as Natioal or Premier Accout compaies or sites. F. Mail Distributio 1. Automatio Activities The Postal Service cotiues to focus o automatig mail distributio operatios to improve efficiecy ad reduce costs. The foudatio of this effort is based o barcode techology, which icludes geeratig barcoded mail, processig barcoded mail i automated operatios ad adjustig the workforce as eces- Chapter 2 Postal Operatios 2001 Comprehesive Statemet o Postal Operatios 45

49 sary to capture savigs. a. Letter Mail Automatio I 2001, customers geerated over 90 billio barcoded letters, represetig about 61 percet of total letters. The Postal Service geerated barcodes for aother 42 billio - about 29 percet of all letters. Of the barcodes we geerated ad applied to letters, Multilie Optical Character Readers (MLOCRs) ad the Remote Bar Codig System (RBCS) accouted for about 19 billio. Other operatios accouted for the remaider. 1. New Equipmet ad Software This year, the Postal Service cotiued its campaig to improve automated processig of letter mail through deploymet of additioal hardware ad software. New automatio equipmet is allowig postal operatios to keep pace with the icreasig volume of letter mail ad the growth of our delivery etwork. (See Table 2.3) TABLE 2.3 NEW CONTRACTS WERE AWARDED FOR: Assorted Flat Sortig Machie (AFSM)100s 382 Collectio ad Delivery Vehicles 24,00 CSBCS Stacker Modules 353 Delivery Bar Code Sorter Expaded Capability Kits 108 Mail Etry Verificatio Systems 200 Parcel Sigulators/Readers 42 Recogitio Improvemet - Typed & Prited Addresses 1,088 Small Parcel ad Budle Sorter Cotrol Systems 192 TOTAL 4,741 The deploymet icluded 334 Delivery Bar Code Sorters, 198 Iput/Output Sub-System Kits, ad 246 Output Sub-System Kits. This equipmet allows mail that was beig processed maually to eter the automated mail stream, thereby reducig work hour requiremets. Sice 2000, the Postal Service has worked to icrease the physical limits of mail that ca be processed o automatio equipmet, thus icreasig the amout of automated mail ad reducig the amout of maual mail. Curretly, about 8 percet of letter mail is processed maually. Yet, it accouts for oe-half of the total letter mail processig labor costs. Letters ca be processed usig automatio equipmet at oeteth the cost of maual processig. I support of this effort, six prototype Delivery Bar Code Sorter Expaded Capability (DBCS-EC) machies have bee deployed at three major processig plats. A cotract for 25 Delivery Bar Code Sorters with Expaded Capability ad 81 Expaded Capability kits was awarded i These EC kits, whe added to our existig DBCS machies, allow them to process a wider rage of mail tha is curretly possible. The DBCS-EC machies will be capable of hadlig flimsy mailpieces as well as thick ad heavy items. Letter mail recogitio rates cotiued to rise i 2001 as we deployed additioal hardware ad software upgrades for our existig Multilie Optical Character Reader (MLOCR), Delivery Bar Code Sorter Iput Output Subsystems (DIOSS) ad Remoter Computer Readers (RCRs). The RCR 2000 program resulted i a 75 percet hadwritte address ecode rate. The Recogitio Improvemet Program (RIP) is projected to yield a approximately 88 percet overall system ecode rate by Durig 2001, we tested ad deployed improvemets to 346 mail processig ceters uder this program. RIP is a icetivebased program where the vedor is paid based o icremetal performace improvemets (pay for performace). We performed a competitive test for a replacemet camera system/barcode reader for our deployed barcode sorters. A Wide-Field-Of-View (WFOV) camera system will replace the curret Wide Area Bar Code Reader (WABCR) o the DBCS, DIOSS, ad CSBCS machies. This camera system will read the Iformatio Based Idicia (PC Postage) i additio to the POSTNET ad PLANET barcodes read by the WABCR. The WFOV camera system demostrated a sigificat improvemet over the WABCR i readig POSTNET ad PLANET barcodes durig the competitive test. A purchase is plaed for 2002, with atioal deploymet begiig i Remote Ecodig Ceters Whe all electroic meas of resolvig address iformatio have bee exhausted, the mailpiece image is set to a Remote Ecodig Ceter (REC) where operators use video display termials ad keyboards to process the address iformatio. Providig partial RCR results with the image ofte allows the operator to process the address with miimal keystrokes. The results of RBCS activities are barcodes set electroically to a barcode sorter. There, the barcode is applied to the mailpiece, keepig it i the automated mail stream. Betwee September 1999 ad the ed of 2001, reduced keyig requiremets due to recogitio rate improvemets allowed us to close 30 of Comprehesive Statemet o Postal Operatios Chapter 2 Postal Operatios

50 the origial 55 RECs. More closures are expected i While we are lookig ito other cosolidatio optios that could result i the closure of additioal RECs, we expect images from other product lies to be processed at RECs. The AFSM 100, PARS, ad APPS programs, which are discussed i the ext sectio, will icrease the REC workload. 3. Process Improvemets a. Sortig Techology Over 9,000 barcode sorters have bee retrofitted with a Idetificatio Code Sort (ICS) upgrade kit. The ICS System eables mailpieces with ureadable POSTNET barcodes to be sorted usig the uique mailpiece idetificatio tag ad the piece's associated ZIP Code. The ICS System elimiates the eed to re-label ad reprocess these mailpieces, savig two additioal passes through the barcode sorters as well as associated labor ad label material costs. The ICS system ow coects all of our existig barcode sorters, icludig Delivery Bar Code Sorters, Carrier Sequece Bar Code Sorters, ad Mail Processig Bar Code Sorters. Approximately 1,700 ICS computers are liked together via three ICS Electroic Post Office Servers to provide ID Tag/ZIP data to all letter mail barcode sorters across the coutry. We completed deploymet of 438 Maual Modificatio kits for our MLOCRs durig This ehacemet allows the MLOCRs to process a wider rage of mail, icludig thick mailpieces that previously had to be sorted maually. This modificatio has improved the machie's performace by reducig the jam rate, which is resultig i higher throughputs ad reduced mail damage. Durig 2001, the Postal Service deployed 101 CSBCS Stacker Modificatio Kits. This 21- or 25-stacker additio provides the CSBCS with the capability of sortig to a greater umber of delivery poits eve though the volume of mail i the route (or combiatio of routes) may ot have chaged. Bi overflows, maual processig requiremets, processig costs, ad delays i gettig mail to the carrier are beig reduced. Deploymet of 252 additioal kits will be completed i b. Udeliverable- As-Addressed Mail Developmet of the Postal Automated Redirectio System (PARS) cotiued durig This system will hadle Udeliverable-As- Addressed (UAA) letter mail more efficietly tha today s process. The UAA mail will be itercepted earlier i the sortig process, resultig i a reductio i total hadligs ad processig costs. The system will otify mailers of patros address chages electroically for mailers that subscribe to this service or hard copy for mailers that do ot. Both services geerate reveue for the Postal Service. The system will also automate processig of Chage-of-Address forms. Durig 2001, a field demostratio of the system s capabilities was coducted at the Dulles, VA, P&DC. A PARS pilot is curretly beig coducted at the Dulles P&DC where valuable techological ad operatioal iformatio is beig leared. c. Advaced Facer Caceler Upgrade Fudig was approved i 2001 to modify selected AFCSs to process mail without phosphorescece i the stamp, idicia, or meter mark. This will avoid the curret maual operatio required to face ad cacel such mail. At least oe AFCS at each of the 286 major mail processig facilities, for a total of 358 machies of the 1,086 deployed, will receive this Video Facig Modificatio. Deploymet is scheduled to begi i d. Flat Mail Automatio Over 50 billio pieces aually fall ito the flat mail category. I 2001, customers geerated barcodes for almost 40 percet of them. Postal computer forwardig system activities also geerated a small percetage of barcodes as part of the forwardig process. A importat additio to our automatio processig capability has bee the Automated Flat Sortig Machie (AFSM) 100. The ehaced features of this machie have eabled us to expad the beefits of automatio to the flat mail stream. These features iclude three automatic feedig statios yieldig a potetial throughput of over 17,000 pieces per hour, OCR readig with o-lie video ecodig (i.e., real-time keyig) of OCR rejects, ad a tray take-away system with adaptability to robotic hadlig systems. This ehaced processig is providig additioal flat sortig capacity. Deploymet of 175 AFSM 100s was completed i A secod phase, deploymet of 362 machies, which will primarily replace our older ad less capable FSM 881s, bega i Jauary 2001 ad is scheduled to be completed i Phase 2 hardware ad software ehacemets have Chapter 2 Postal Operatios 2001 Comprehesive Statemet o Postal Operatios 47

51 icreased the read rate ad potetial throughput of the machie to over 20,000 pieces per hour. Durig 2001, we coducted a competitive test of automatic feeders ad optical character readers for the Flat Sortig Machie (FSM) The FSM 1000 ca process mail, such as ewspapers ad poly-wrapped material, that caot be hadled by our primary flat sorters, the FSM 881 ad AFSM 100. The feeder ad OCR modificatios will provide higher machie throughputs ad lower staffig requiremets. We expect to award a cotract i early 2002 to ehace all FSM 1000s, with deploymet begiig late i I 2001, the Postal Service completed deploymet of PLANET/CONFIRM capability o all flat sorters. This program addresses the eeds of may customers, particularly atioal mailers who wat to improve their busiess processes or refie customer data. PLANET/CONFIRM provides mailers with iformatio regardig origi or destiatio cofirmatio, address correctio, forwardig, ad trackig. Evaluatio of Idetificatio (ID) tag methods for flats applicatio was completed i ID taggig will exted Idetificatio Code Sortig (ICS) methods used i letter mail to flats. Curretly, a flat-mail ZIP that has bee resolved by video keyig is available oly for the curret sortig operatio. By addig a ID tag, the piece ca be matched to its ZIP durig subsequet distributios, also. This will greatly reduce maual keyig. A umber of iitiatives were started i 2001 to develop sortig systems for Delivery Poit Sequecig (DPS) of flat mail. DPS processig will sort flat mail to delivery sequece for the carrier, reducig office time ad icreasig street time. A two-moth test to observe effects ad gai isight ito flats DPS issues was completed i Aapolis, MD, ad a developmet strategy has bee formulated. e. Parcel Automatio The icrease i barcoded packages is drivig efforts to improve processig efficiecy, icludig package sigulatio. Durig 2001, we deployed 7 parcel Sigulate ad Sca Iductio Uits (SSIU) to 7 Bulk Mail Ceters (BMCs). These machies reduce the labor required to process parcels. By program ed i 2003, a total of 38 SSIUs will be deployed to 19 BMCs. Durig 2001, we deployed seve ew Small Parcel ad Budle Sorter (SPBS) Feed Systems, brigig the total umber i use to 271. Each system supports oe SPBS, reducig allied labor required to feed mail oto the SPBS. We cotiued the developmet of a extgeeratio sorter that takes advatage of the latest techology to distribute small parcels ad budles. This ew equipmet, kow as the Automated Package Processig System (APPS), will automate the existig package processig etwork by providig automatic package sigulatio ad address readig through a Optical Character Reader/Bar Code Reader/Video Codig System (OCR/BCR/VCS). The APPS icludes automated cotaier uloadig to support the high throughput requiremets. The system will be compatible with the Postal Service's Iformatio Platform ad will support i-route trackig of Delivery Cofirmatio codes. The competitive test was iterrupted by the tragic evets of September 11th ad is plaed for completio i I 2001, we bega the istallatio of uiversal sortig techology i a ew 220,000 square-foot expasio of the Los Ageles Bulk Mail Ceter. The state-of-the-art sortig system is desiged to hadle four separate postal products o a commo backboe. Like the APPS, this system utilizes camera-based recogitio techology with OCR/BCR/VCS capability for optimum efficiecy. Full-scale activatio of the system is expected to take place i f. Busiess Mail Acceptace The Postal Service has automated the laboritesive process of evaluatig bulk mailig eligibility for work-sharig discouts. The Mailig Evaluatio Readability ad Lookup INstrumet (MERLIN) verifies early all mail preparatio requiremets for both letters ad flats. It produces all reports ecessary for mailig acceptace ad provides images of preparatio problems for the mailer to support process improvemet. Deploymet of the first 200 MERLIN uits bega i A additioal 1,003 uits were purchased i 2001 ad will be deployed as a cotiuatio of the first phase effort. Completio is expected i the fall of Material Hadlig Material Hadlig cotiues to be a sigificat target of opportuity for techology ivestmets to reduce operatig costs ad improve productivity ad efficiecy. The primary objective will be to pursue appropriate material hadlig solutios that produce quatifiable beefits, Comprehesive Statemet o Postal Operatios Chapter 2 Postal Operatios

52 meetig our miimal corporate ivestmet criteria, while providig capturable savigs. I 2001, the Postal Service completed deployig ad commissioig the Uiversal Trasport System (UTS). This system will serve as a test bed for material hadlig techology developmet ad applicatios to complemet its ability to automate the movemet of letter ad flat trays. These trays of mail are trasported, based o operatioal eed, to each separate area i the plat where mail is processed ad the from the last processig operatio to dispatch. Featurig state-of-the-art material hadlig techologies ad iformatio systems, this equipmet will eable the Postal Service to cotai work hour growth while providig improved work ad iformatio flow withi our processig plats. Research ad developmet of complemetary techologies for receipt ad dispatchig operatios that itegrate with the UTS will be doe to determie appropriate techologies ad applicatios to help the Postal Service reduce allied material hadlig costs ad improve productivity. The Postal Service has completed deploymet of ew rectagular array robots ad Automatic Airlie Assigmet systems. Additioal material hadlig techologies that have bee uiversally deployed i 2001 iclude equipmet that will automatically sleeve (providig the coverig) for differet types of letter mail trays. Whe mail is ready for dispatch from the facility, trays of mail must have sleeves ad strappig applied to secure the mail durig trasport, ad we ca ow automate this process. I additio to improvemets i the hadlig of our uit-loads, developmet is ogoig for automatig some of the hadlig processes that cotiue to be largely maual operatios. The Postal Service is researchig the hadlig of flat mail, such as magazies ad periodicals, with huma assist techology to reduce costs ad improve the ergoomics ad safety of these repetitive processes. Research ad developmet are uderway to produce flat tub liddig techology so that this techology ca go i-lie with may of our deployed dispatch systems. Developmet has also cotiued i the areas of usleevers ad ulidders. This equipmet will remove the shippig strap from the tray that holds the sleeve/lid i place. The mail tray will the be held i positio with robotic arms while a separate mechaical device removes the tray from the sleeve or the lid from the tub. These pieces of equipmet will automate those curret maual tasks required to prepare ad preset both letter ad flat mail trays for their various dowstream processig operatios as well as for dispatch. This will provide for a more automated ad cotrolled processig eviromet. Beyod the developmet of ew techology applicatios, efforts to support field iitiatives for breakthrough productivity ad cost reductio of allied material hadlig labor are supported by the field fixed mechaizatio activity. I this veue, techology such as the low cost tray sorter ad modificatios to deployed systems are uder cosideratio to support operatig requiremets. a. Automated Seamless Dispatch System The Automated Seamless Dispatch System automates, streamlies, ad orgaizes mail dispatch operatios. The program itegrates three primary material hadlig compoets the Automatic Tray Sleevig (ATS) system, the Automatic Airlie Assigmet (AAA) system ad the Robotics Cotaierizatio System (RCS) for the cotiuous flow of mail trays through dispatch. The ATS automatically sleeves all sizes of fiberboard or plastic letter trays used i Postal operatios. Deploymet of 123 systems bega i 2001 ad will be completed i The AAA system automatically assigs sleeved ad strapped letter mail trays ad flats tubs to airlie flights. Deploymet of 220 systems bega i 2000 ad will be completed early i A related material hadlig device, the Semi-Automatic Sca Where You Bad (SASWYB), provides a semi-automated meas to sca the distributio label, weigh the item, geerate a Dispatch ad Routig label to be attached by the operator, ad discharge the mailpiece. Deploymet of 125 systems is uderway ad will be completed i The RCS automatically sorts ad loads letter trays ad flat tubs ito mail cotaiers or oto pallets for dispatch. Deploymet of 100 systems has bee completed. These systems are critical ew compoets that support dispatch operatios ad will be itegrated with UTS ad other systems to provide iformatio-rich, automated material hadlig operatios. b. Mail Cartridge System ad Direct Coect System The Postal Service cotiued developmet of the Mail Cartridge System (MCS) ad the Direct Coect System (DCS), which are the results of prior research efforts associated with the Itegrated Buffer System. The MCS automates the feedig Chapter 2 Postal Operatios 2001 Comprehesive Statemet o Postal Operatios 49

53 ad sweepig of Delivery Bar Code Sorters ad will recirculate local mail for two-pass sortig. By replacig the DBCS sort pockets with lightweight barcoded cartridges, it allows robotic sweep-side equipmet to remove full cartridges ad sort them oto racks accordig to their destiatio. MCS will elimiate work hours associated with feedig ad sweepig the DBCS ad reduce sweepig errors. A pre-productio MCS was successfully tested i 2001 ad adapted to process icomig secodary mail usig oly oe operator. It will cotiue to be ru i this mode util July Due to productio cost estimates that exceed potetial savigs, there are o plas to pursue a productio phase. The DCS automatically trasports mail from a Advaced Facer Caceler System (AFCS) ad feeds it ito a DBCS. A prototype system has bee successfully tested i Ft. Myers, FL. Due to the curret USPS fiacial coditio, a productio program is o hold. 5. Support Systems for Mail Processig Curret cost savigs iitiatives focus o maitaiig critical systems ad replacig obsolete oes. a. Trasportatio Iformatio Maagemet Evaluatio System The Trasportatio Iformatio Maagemet Evaluatio System (TIMES) is a data collectio system desiged to track highway cotractor performace as well as measure the utilizatio of the truck trasportatio etwork. TIMES is curretly operatioal i over approximately 482 P&DCs, AMCs, ad Airport Mail Facilities ad at the Hub-ad Spoke Program sites (HASPs). Future plas for TIMES iclude system ehacemets that will provide greater visibility of actual cotet by mail class that is trasported o the truck trasportatio etwork. b. Dedicated Air Trackig The Postal Service Air Operatios group cotrols the cosistecy of the movemet of mail o postal dedicated aircraft through several air etworks icludig the Daytime Dedicated Network (DNET) ad the Christmas Dedicated Networks (CNET). The Dedicated Air trackig System (DAT) provides the Postal Service with the iformatio ad tools to moitor air ad truck operatios withi these dedicated air etworks, to supervise air cargo cotractors ivolved i movig the mail, ad to supply accurate ad timely reports to postal maagemet. DATS allows users to track ad maage mail from either a hub or Poit-To- Poit (PTP) etwork perspective. DATS provides real-time operatioal data that allows users ad maagers to maage the trasportatio of expedited mail, ad to review the curret day s operatios. The iformatio ad automated tools provided by DATS assist users i esurig that service stadards are achieved, dedicated aircraft are effectively utilized, ad operatioal alerts are dealt with o a timely basis. DATS is capable of maagig dedicated postal air etworks 24 hours a day, 52 weeks a year, providig a wealth of timely operatioal iformatio to all levels of postal maagemet. It represets the latest i computer techology ad provides the Postal Service with a solid foudatio for further improvemets i the maagemet of its dedicated air etworks. c. Surface Air Maagemet System The Surface Air Maagemet System (SAM) was fully deployed i 2001, replacig the Air Cotract Data Collectio System as our ew mail assigmet egie. SAMS provides the ability to assig mail to idexed surface ad air routes, ad to allocate capacity by mail classes, ad track maifests o-lie. The system also provides a idividual routig assigmet, with uique serial idetificatio for each item preseted for dispatch. The routig assigmet ad serial umber are bar code prited o a self-adhesive dispatch & routig tag, which is applied to the item beig dispatched. The dispatch & routig tags are scaed providig 'visibility' for sacks, trays, ad large parcels as they are haded-off to trasportatio suppliers util delivery back to the Postal Service at destiatio. This data is used for iteral quality ad performace moitorig ad cotractor compliace measures. d. Surface Air Support System The Surface Air Support System (SASS) was deployed i 2001 to itegrate sca data received from trasportatio suppliers with existig trasportatio systems, to esure service performace accoutability ad accurate paymet verificatio. With SASS, we have created a cetral 'visibility' database to receive assigmet data from SAMS ad sca data from our ow facilities ad from our trasportatio suppliers. SASS also provides a iterface ad reports used to share visibility data with exteral trasportatio suppliers ad other Comprehesive Statemet o Postal Operatios Chapter 2 Postal Operatios

54 Postal Service logistics systems. This scaig data provides both service ad security beefits, givig the Postal Service better data regardig service performace for trasportatio suppliers, as well as, iformatio regardig mail trasported o a specific flight, truck, trai. G. Delivery Uit Operatios 1. Delivery Poit Sequecig Today, over 9,700 zoes receive their mail i Delivery Poit Sequece (DPS) order. These 9,700 zoes accout for over 83 percet of all city carrier routes ad 65 percet of our rural routes, with each route averagig approximately 1,400 DPS letter pieces daily. At the ed of 2001, the umber of city delivery poits was approximately 83.7 millio, rural deliveries totaled approximately 29.7 millio, Post Office box deliveries were 19.7 millio, ad highway cotract routes served 1.9 millio deliveries for a total of millio delivery poits. 2. Delivery Operatios Iformatio System Delivery Operatios Support System (DOIS) replaces the Decisio Support Iformatio System, the Route Examiatio System ad the Projected Office ad Street Time applicatio. DOIS was desiged to provide actioable data to the Delivery Uit Supervisors, assistig them i maagig office activities, plaig of street activities, ad maagig the route ispectio ad adjustmet activities. Used properly, the actioable data provided by DOIS will assist the Delivery Uit Supervisor i makig soud busiess decisios related to carrier operatios. The Board of Goverors approved a pla to deploy the DOIS busiess solutio i August of 2000, with deploymet to the first three Areas begiig i the Sprig of Natiowide deploymet will be completed by March Deploymet of DOIS to districts withi the Wester, Mid-Atlatic ad Capital Metro areas was completed durig The plaig for the Phase 2 areas (Easter, Midwest ad Southeast) was started. I excess of 1,400 uits have bee activated usig the DOIS busiess solutio. H. Stamp Services 1. Stamp Program The Postal Service produced a wide variety of commemorative ad defiitive stamps. The stamps that were issued bega as proposals from the public that were researched, reviewed ad recommeded by the Citizes Stamp Advisory Committee (CSAC.) CSAC aually receives, through the Office of Stamp Services, approximately 50,000 proposals for subjects to be cosidered o stamps. The stamps issued i 2001 recogize a variety of great people ad their achievemets i the America experiece, ostalgic ad cultural America icos, sigificat evets ad the atural beauty ad wildlife of the Uited States. The 2001 commemorative stamp ad statioery program cosisted of 23 stamp issues, four stamped cards ad oe evelope. The seveth issuace i the Legeds of Hollywood series, Lucille Ball, pleased a large umber of America households, where eve today, she appears o rerus of I Love Lucy. Legedary Baseball Stadiums preseted a picture of aother time ad some bygoe places where Americas ejoyed their favorite pastime. The legedary Looey Tues series came to its ed with Porky Pig utterig the famous phrase That s All Folks! ad a etire geeratio of Peauts lovers celebrated the issuace of a Soopy stamp depictig him atop his doghouse, portrayig the Red Baro. The art of illustratio was hoored with a collectio of 20 stamps etitled America Illustrators, which proved to be oe of the most popular stamps of the year. Illustrators such as Norma Rockwell, N.C. Wyeth, Frederick Remigto ad Maxfield Parrish had their talets recogized o the popular pae of stamps. Diabetes was the subject of the latest i our social awareess stamps. Two ew subjects i our expaded Holiday Celebratios series were added with the issuace stamps for Thaksgivig ad the Islamic celebratio of Eid. Famous persoages such as Roy Wilkis, the civil rights activist, Erico Fermi, the Nobel Prize-wiig physicist, ad Leoard Berstei, the famed composer ad coductor, were amog may other excitig ad importat issues durig the year. The evets of September 11 brought great sadess but with it came a greater appreciatio for our atio. The Postal Service was proud to take part i the tribute to the Heroes ad afford Americas aother way to share i their patriotism with the dedicatio of the Uited We Stad stamp, which was desiged ad produced i record time. We successfully respoded to the Semipostal Authorizatio Act of The Act authorized the Postal Service to establish a 10-year program to sell semipostal stamps. The Postal Service respoded i Chapter 2 Postal Operatios 2001 Comprehesive Statemet o Postal Operatios 51

55 February, 2001 by publishig its proposed rule for public commet i the Federal Register. After commets were cosidered, the Postal Service published its fial rule ad solicitatio for proposals for semipostal stamps i the Federal Register. Although semipostals are commo i other foreig postal admiistratios, this was the first time the Postal Service was give the authority to create a semipostal program. The respose was overwhelmig i terms of iquiries ad amout of public participatio. CSAC Members reviewed 35 qualified proposals icludig the proposals for executive agecies that would admiister fuds raised for 33 differet humaitaria ad social awareess causes submitted i accordace with the rules ad regulatios established for the semipostal program. The 2002 stamp program was successfully completed earlier tha previous years. The accelerated schedule affords earlier developmet of stamp ad retail products ad earlier release of desigs to the media, field offices, ad the public. 2. Productio Activities Sigificat productio reductios were realized which resulted i measurable savigs i the stamp productio budget. For the rate implemetatio that took place i Jauary 2001, stamp productio was able to reduce the umber of rate chage trasitioal stamps by approximately eight billio stamps with a resultat reductio i costs of $26 millio. Additioal savigs have bee realized by competitively biddig may of the commemorative stamp issues amog the private supplier base. A overall cost reductio of 34 cets per thousad was attaied, with a resultat overall cost reductio that resulted i a savigs of $15 millio from pricig based o FY (FY 2000 uit costs were $3.17/1,000 stamps: FY 2001 uit costs were $2.83/1,000 stamps. We successfully met all stamp productio ad distributio commitmets for both the commemorative ad defiitive stamp programs. 3. Stamp Fulfillmet Services (SFS) Activities Stamp Fulfillmet Services fulfilled 1.5 millio customer orders, totalig $105.9 millio i reveue. 30 percet of this busiess was via the Iteret. The remaiig 70 percet is attributed to USA Philatelic catalog sales. SFS also processed 213,000 persoalized evelope orders for $78.4 millio i reveue. Total reveue flow at SFS for stamp sales, evelopes, cosigmets, LibertyCash ad product sales was $757 millio i I. Licesig Program I Jauary, 2000, the Office of Brad Maagemet, which oversees Licesig for the Postal Service, made a decisive step towards implemetig a broad scale licesig program by competitively selectig Equity Maagemet Icorporated (EMI) as the exclusive worldwide licesig agecy for the Postal Service. Over the past year, the Postal Service has bee workig with EMI to icrease royalty reveue to a level cosistet with the Postal Service s itellectual property potetial. I FY 2000, the category distributio for licesed products was comprised primarily of collectible items. I fact, collectibles accouted for 79 percet of all licesed merchadise with far smaller percetages costitutig apparel/accessories (17 percet), statioery/gifts (2 percet), home products (1 percet), ad other/miscellaeous merchadise (1 percet). The program busiess pla calls for marked diversificatio of category distributio i a effort to make a fudametal shift i the Postal Service licesig busiess. Durig 2001 the Postal Service executed 30 ew cotracts with licesees. Thirtee of these were publishig/oe-time use deals, ad 17 were loger term licesig cotracts for merchadise sold i retail veues. The cotiued effect of these iitiatives is to maximize Postal Service trademark equities ad ehace the Postal Service brad with high quality products, while pursuig reveue growth. These ew sales strategies will ot impact royalties for at least 18 moths, producig hard umbers durig FY I order to emphasize the stadards by which potetial licesees are measured, EMI reviewed early 400 products i 2001, some of which were multiple products from oe vedor, but oly 30 ew deals were siged. EMI icorporates strict product review guidelies. This meas that oly the highest quality products are put ito the marketplace. Each product that is reviewed pursuat to a active trademark licese agreemet udergoes a rigorous trademark review process to esure proper trademark usage ad the appropriate trademark laguage Comprehesive Statemet o Postal Operatios Chapter 2 Postal Operatios

56 Orgaizatios wishig to sell products bearig the Postal Service s copyrighted images or marks must obtai a licese from the Postal service. Furthermore, i cojuctio with the Postal Service Law Departmet, Licesig has bee protectig Postal Service itellectual property i assets represeted by websites such as ad postoffice.com. J. Sales 1. Sales The sales orgaizatio is resposible for the developmet, implemetatio ad evaluatio of all commercial sales ad accout maagemet plas, programs, ad policies atiowide, icludig customer service ad satisfactio activities. Their work geerates the bulk of the Postal Service s aual commercial reveue. Through the Natioal Accouts program, Sales provides direct support to 232 of the Postal Service s largest commercial mailig customers. Over 14,000 other large mailers classified as Premier Accouts are served by Accout Maagers housed across the atio. a. Busiess Service Network For the past several years the Sales orgaizatio has also provided customer assistace through the Busiess Service Network, a atiowide etwork of service cotacts that provides Natioal ad Premier customers (established accouts) a local poit-of-cotact for resolvig local cocers. Headquarters oversight ad maagemet of the BSN Network is shiftig i 2002 to the ewly formed Service ad Market Developmet group uder Marketig, for better focusig of customer service activities. The etwork, however, will cotiue to be strategically housed at major postal operatioal poits aroud the coutry. b. Evet Marketig Sales leads are geerated through several aveues, but the Evet Marketig program has bee our most effective lead geeratio resource. This program provides a Postal presece at covetios ad idustry evets, educatig potetial ew customers, ad pairig those customers iterested i learig more, with postal sales represetatives i their home locatios that ca help. Durig 2001 the Evet Marketig Program targeted 30 evets for participatio represetig the Catalog ad Direct Marketig, Fiacial Services, Iteret/e-Commerce, Retail, Travel ad Hospitality, Etertaimet, Sports, Automotive, Multi-Level Marketig, ad Health/Food idustries. From these evets, 1,170 leads were geerated worth $684 millio i potetial reveue. c. Pro Cyclig Sposorship The Postal Service also cotiued the wiig sposorship of its top-raked cyclig team, led by Lace Armstrog, the three-time wier of the Tour de Frace. This sposorship has four primary objectives: Geerate reveue by makig sales to compaies ad idividuals affiliated with cyclig; Ehace the Postal Service brad through activities that positively impact customer perceptio of the Postal Service; Reap the public relatios value of sposorship through a variety of activities focused o customers ad employees; ad Leverage retail sales o-site at domestic cyclig evets, o the team s Iteret site ad at Postmark America. Sales has leveraged the busiess relatioships developed through the cyclig sposorship, closig more tha $18 millio i ew sales i the past three years. Beyod the reveue geerated, the Postal Service beefits from the tremedous public relatios value of Lace Armstrog s victories i the 1999, 2000, ad 2001 Tours de Frace. d. Sales Force Traiig Sales force traiig received focused attetio durig 2001 to help esure the Postal Service s success i a icreasigly competitive busiess eviromet. A multimedia approach was developed to deliver cost effective traiig to sales persoel atiowide. This bleded learig approach icorporated classroom traiig, maager coachig, video coferecig, website traiig ad iformatio, ad traiig via the Postal Service Traiig Network a satellite TV etwork that provides iteractive capability. Of particular iterest was a course called Sellig to Very Importat Top Officers. This traiig, a model of bleded traiig solutios, showed 800 studets how to reach the real decisio-makers whe cotactig potetial ew customers, ad coached them o how to esure that mutual iterests were satisfied. Chapter 2 Postal Operatios 2001 Comprehesive Statemet o Postal Operatios 53

57 K. Retail Programs: Buildig the Core Each day, over seve millio Americas visit our post offices ad cotract postal uits. The vast majority of these customers perform the very basic fuctios of buyig stamps, mailig packages, ad collectig mail from their post office boxes. May more obtai stamps or other postal products by mail, olie, through our vedig equipmet, ad through supermarkets ad other authorized agets. The primary role of the Retail fuctio is to make it easy for them to do busiess with us, while makig the trasactios icreasigly productive ad profitable for the Postal Service. 1. Marketig Caledar Although the Postal Service has a straightforward product lie, may of our customers are ot familiar with some of our basic services, or how to best use them. Addressig this eed for basic product iformatio is cetral to retail marketig activities. A pricipal tool i this effort is the Retail Marketig Caledar, a tightly maaged 18-moth schedule of plaed promotios, activities, ad evets that help to guide our customers ad employees through major mailig seasos. The caledar also helps to support ogoig promotios for products such as Express ad Priority Mail by presetig basic iformatio at a time customers are most likely to buy ad use the services. Although the Postal Service has achieved success with its product iformatio programs, util recetly, our efforts have bee focused largely o cosumers. I the past, small busiess customers who represet the lio s share of retail reveues have largely bee igored. I 2000, we bega several efforts to use our established relatioships withi the small busiess commuity to assist small busiesses with their mailig eeds ad geerate ew reveue. These iclude buildig a respose ifrastructure that esures customer follow-up ad a o-goig relatioship with the customer. We also expect to grow volume ad market share withi this segmet through the use of solutio-based promotios that target the small busiess customer. Roughly 89 percet of all retail reveue ad 96 percet of all retail operatig expese accrue from the Postal Service's classified post office ad cotract uit full-service optios. They are augmeted by Stamps By Mail, over 30,000 reveue- geeratig vedig machies, ad stamp sales at thousads of commercial retail outlets ad ATMs. 2. Retail Sales Retail is the way most Americas buy ad use mail. This provides local access for the core product applicatios of correspodece ad trasactio mailig, domestic ad iteratioal package shippig, ad special services, icludig delivery through more tha 18 millio post office boxes. Major customer segmets are small busiesses ad cosumers (customers usig the mail for persoal, rather tha busiess reasos). It is estimated that cosumers ad small firms geerate Postal Service retail reveue of $7.4 billio ad $8.7 billio, respectively (meters, permits, ad corporate accouts ot icluded). 3. Retail: New Solutios, New Parters The Postal Service faces a ever-chagig marketplace. New services ad busiess arragemets are ecessary to expad our customer base ad meet the growig eeds of our customers. We cotiue to expad programs such as Ready Post, which are pre-packaged shippig products desiged to make shipmet preparatio easier, ad Diero Seguro, a electroic moey trasfer service to Mexico, to capture icremetal reveue. We are also examiig a Hold for Pick Up cocept that would eable shippers the ability to desigate specific post offices where packages would be held for customer pick up. A major market for hold services, for example, are large commercial customers who routiely make urget shipmets for early pick up by employees i remote locatios. I additio to the developmet of ew solutios for our customers, creatig agreemets with busiess parters ad other commercial carriers that help to capture the profit potetial of our retail etwork will help us to create sustaiable et reveue for our orgaizatio. For example, the drop box agreemet siged with FedEx ot oly provides the Postal Service with a sigificat amout of ew reveue but it also leverages our retail etwork. We pla to expad customer choice the itroductio of credit card paymet for Express Mail corporate accouts will provide customers with ease of use alteratives for their package shipmets. We pla to test this service i four Comprehesive Statemet o Postal Operatios Chapter 2 Postal Operatios

58 district markets. Acceptig credit card paymets for olie shippig ad frequet shippers usig Express ad Priority mail is also beig cosidered. 4. Retail Operatios: Reachig the Customer Today s society demads the coveiece of oe-stop shoppig solutios. I respose, the Postal Service is makig strides to develop coveiet alteratives to post offices that assist the customer with their mailig eeds. Istead of requirig customers to come to us, the Postal Service will istead serve them where they live ad work. This meas movig from a more or less oe-dimesioal brick ad mortar strategy to oe that itegrates our physical brach etwork ito a flexible set of customer cotact optios (o the web, through letter carriers, through parterships, ad so o). Cotract Postal Uits ad other commercial agets ad parters allow the Postal Service to reach customers at times whe post offices are deemed icoveiet or are closed. Typical locatios for these uits are shoppig ceters, local malls, ad other locatios that customers may frequet. Exteded eveig, weeked, ad holiday hours of these facilities provide postal customers with the utmost coveiece. Similar to CPUs, ew services are beig developed to implemet basic mailig services, First-Class ad Priority Mail uder 20 lbs., ito additioal retail store locatios. This will ot oly give postal customers more access chaels to postal services, but it will provide them with those services at actual post office prices. The developmet of mappig ad fuctioal aalysis tools has sigificatly aided i fidig optimum locatios for the alterative access chaels listed above. Mappig allows the Postal Service to aalyze specific areas of the coutry, ad make customer-focused determiatios for the placemet of CPU s ad other ew services. 5. Poit-of-Service Oe The visio of POS ONE is to provide customers, retail associates, ad Postal Service maagemet with the most effective retail sales, service, reportig, ad decisio support fuctioality that coveys value to our customers ad eables a service orietatio for our employees. POS ONE is replacig curret itegrated retail termials with state-of-the-art hardware ad software, alog with support services ad traiig. POS ONE is a relatioship builder ad eables improved busiess isight ad decisio makig. Through POS ONE, postal customers will receive improved ad timely iformatio about available services ad have immediate access to optios ad costs to make quick, iformed decisios. Retail associates will receive cosistet iformatio o a daily basis to keep them up-to-date o corporate directio, promotios, ad ew product ad service offerigs, as well as keep them abreast of immediate chages i policies. Additioally, supervisors ad maagers will use the data to improve their uits day-to-day performace. By the ed of December 2001, POS ONE was deployed to over 9,400 retail sites, capturig detailed trasactio iformatio for over 70 percet of Postal Service walk-i reveue. 6. Retail Workforce Strategies Comprehesive chages were itroduced i 2000 to support a strategic shift i the way retail employees perceive their role i providig excellet customer service. Programs ad tools implemeted icluded ew positio descriptios ad qualificatio stadards, ew job titles, a highly customer-focused traiig program, ad ewly desiged uiforms. The mometum created by these chages cotiued i fiscal year 2001 with the implemetatio of additioal tools ad support. With the activatio of the Retail Data Mart, reports ad iformatio critical to makig optimal busiess decisios at the uit level are ow available i POS Oe post offices. This level of iformatio was previously iaccessible. Traiig for approximately 20,000 frot-lie supervisors was developed that focuses ot oly o skills required to use the Retail Data Mart, but also o best practices ad actios required based o performace measured i a few key reports. I order to quickly deliver this traiig at the lowest cost, distace learig techology was used. This course will represet the first broad applicatio of this traiig format for a sigificat umber of field employees. Aother first is the capability built to lik idividual traiig evaluatio to performace o-the-job that is measured i terms of busiess results such as icreased special service retail reveue ad efficiet staffig of retail operatios. Chapter 2 Postal Operatios 2001 Comprehesive Statemet o Postal Operatios 55

59 The Retail Coach etwork also expaded i A retail coach is a retail associate who has additioal duties ad resposibilities i helpig ew associates o the job as well as fellow associates o ew procedures. Retail coaches are set iformatio directly i a timely way to esure that importat iformatio is dissemiated to all associates, thus esurig excellet service to customers. 7. Self Service Durig 2001, the Self Service office cotiued to focus o improvig performace, icreasig access poits for cosumer stamp purchases, ad geeratig reveue. Cotiued emphasis was also placed o icreasig cosumer awareess of alterative locatios for stamp purchases. Additioal iformatio is provided below: Approximately 7 percet of retail reveue is geerated from self-service vedig. Durig 2001, the Postal Service focused o reducig the costs per reveue dollar i vedig (decreased 2 cets), improvig customer satisfactio (icreased by 3 percetage poits), ad reducig the umber of out-of-date machies (decreased by 20 percet). a. Provide New Services The Postal Service cotiued the pilot test of the Automated Postal Ceter (APC). The APC is a self-service kiosk that eables cosumers to weigh, rate, prit postage (usig the iformatio-based idicia techology), ad mail packages. It also offers the ability to purchase sheetlets of stamps ad to obtai geeral mailig iformatio. The APC has the capacity to provide approximately 80 percet of the commoly requested postal trasactios i a self-service eviromet. This use of ew techology further leverages our plas to reduce costs ad improve customer satisfactio. b. Stamps o Cosigmet Approximately 8 percet of retail reveue is geerated from the Stamps o Cosigmet program. This program is desiged to offer cosumers easy access to purchase stamps. These alterative locatios iclude grocery, drug, ad coveiece stores as well as ATMs i various bak braches. The umber of alterative locatios provided by this program was approximately 40,000 i Postage Techology Iitiatives Buildig o the security architecture put i place i the 1990s to correct reveue leakage from misuse of postage meters, Postage Techology Maagemet (PTM) itegrates techology advacemets further for the purposes of cost savigs, cost avoidace, reveue geeratio ad mail security. PTM s three-prog strategy to improve security of postage evidecig through the itroductio of advaced techology required movig the idustry to more secure meterig devices, couterfeit coutermeasures desiged ito the idicia ad a comprehesive etwork of iformatio systems for audit ad cotrol ad reductio of maual processig. I additio to icreased reveue protectio, a outgrowth of the orgaizatio s deliberate activities to migrate the postage meterig idustry to more secure techology cotiues to provide opportuity for itroductio of ew applicatios for secure postage evidecig techology. a. Secure Meterig Systems The goal i this area is to move the idustry to safer, more secure postage evidecig systems to safeguard agaist reveue loss due to tamperig ad misuse. With the itroductio of PC Postage TM products as a ew product category for postage over the Iteret, PTM raised baselie security expectatios with the requiremet of a tamper-resistat Postal Security Device (PSD) as the postage vault. A PSD icorporates computer chip techology that is programmed to shut dow i the evet that it is tampered with. The migratio of meterig techology from least secure to most secure follows the progressio from maually set meters, to Computerized Meter Resettig System (CMRS) letter press meters, digital meters, digital Iformatio Based Idicia (IBI) meters, to PC Postage products. I additio, migratio of maual set to remote set meters moved ito Phase II. The migratio to remote set meters meas more secure meter techology as well as cost avoidace associated with maually settig meters. The migratio of maually set electroic meters bega i February 2000 with the stop placemet of ay ew maually set meters, ad the actual withdrawal bega i Jue PTM reported a 43 percet reductio i the maual reset meter populatio i ,000 maually set meters were withdraw from service ad 95,000 digital meters were istalled ito service. Two ew postage meter models were itroduced that combied the safest techology itroduced for PC Postage, i.e., the PSD ad IBI. Of the populatio of 95,000 ew digital meters, 12,000 of these were the two ewest ad safest models Comprehesive Statemet o Postal Operatios Chapter 2 Postal Operatios

60 b. Advaced Secure Postage Evidecig: the Iformatio Based Idicia The Iformatio Based Idicia (IBI) is part of the PTM security architecture ad the objective to secure postage agaist couterfeit attack. The goal is to icorporate techology ito the postage mark that makes it harder to couterfeit, that makes couterfeitig easier to detect, ad that offers value beyod postage. Ulike traditioal postage meter idicia, each IBI is uique. IBI icorporates digital pritig of idicia that icludes huma readable ad machie readable (barcode) data cotaiig, amog other iformatio, certai security critical data elemets. The IBI also icorporates cryptographic services which digitally sig each idicium makig it possible to verify its autheticity. I additio, because it coveys digital data o the mail piece ad has the capacity to ecode additioal iformatio, the IBI ca provide beefit beyod reveue security i two areas, icludig value-added services to customers ad valuable data cotributio to the Iformatio Platform. I the IBI has bee icorporated ito two ew meter models, ad Postal Service o-lie products for secure postage evidecig. Further, movig ito 2002, the IBI is recogized as a promisig techology platform for extedig itelligece i mail. c. Cetralized Data Maagemet PTM cotiues the ehacemet of its cetralized databases to track ad maage products, customers ad reveue associated with postage meter use. The goal is to move decetralized data ad data processig to cetralized data maagemet to improve audit ad cotrol capability, trasitio as may maual processes to automated processig i order to achieve work hour savigs, ad improve customer service. May of the iitiatives udertake to move to electroic trasfer of fuds ot oly serves to improve Postal Service data maagemet ad savigs, but also provide improvemets for customers because they elimiate ay delay i use of their postage fuds that may have bee caused by maual processes. The primary database systems iclude the Cetralized Meter Licesig System, the Meter Accoutig ad Trackig System, ad Computerized Meter Resettig System (CMRS). These systems are used to provide the data ecessary to coduct full loop audit ad review procedures as part of the all-ecompassig security architecture for postage evidecig products. Four particular accomplishmets i 2001 iclude; 1) Secure CMRS Fuds Trasfer which itroduced automated trasfer of fuds betwee CMRS meters resultig i approximately 9108 work hours elimiated by this task, 2) Maual Migratio Process allowig trasfer of fuds from maually set meters to CMRS meters ad savig approximately 2609 work hours elimiated by this task, 3) Electroic Chage of Accoutable Post Office elimiatig the eed to brig a meter ito a post office for withdrawal ad reistall, resultig i elimiatio of 630 work hours, ad 4) New Meter Examiatio Schedule elimiatig the eed for certai meter examiatios ad potetially elimiatig 392,000 work hours. Further, withdrawig 59,000 maually set meters would elimiate maual settigs required for 118,000 work hours. L. Pricig ad Classificatio Key amog the accomplishmets of Pricig ad Classificatio last year were the developmet of the rate ad classificatio proposals i Omibus Rate Cases Docket No. R ad Docket No. R2001-1, alog with the implemetatio of the resultig rates. This icludes importat roles i the Goverors rate modificatio i Docket No. R ad the settlemet efforts i Docket No. R Pricig ad Classificatio also is resposible for developig the experimetal ad classificatio proposals durig the period, icludig the Periodicals Ride-Alog ad Priority Mail presort experimetal cases. 1. Omibus Rate Case R Departmetal efforts were importat durig the close of Docket No. R First, with the help of Pricig ad Classificatio, the Goverors were able to poit out several techical errors i the Postal Rate Commissio s iitial Recommeded Decisio. This ultimately led to more proper calculatios i several areas i subsequet Recommeded Decisios, icludig those ivolvig Stadard oprofit mail ad Boud Prited Matter. I additio, the departmet was heavily ivolved i the effort to develop modificatio rates that comported with the record evidece i Docket No. R ad met the reveue eeds of the Postal Service. A comprehesive pla was developed ad utilized to support the implemetatio of the ew Chapter 2 Postal Operatios 2001 Comprehesive Statemet o Postal Operatios 57

61 rates ad fees. The pla focused o commuicatios, cross-fuctioal teamwork, ad traiig to esure customer ad postal readiess of the ew rates, fees, ad classificatio chages. The pla icluded the ivolvemet of postal ad customer implemetatio readiess teams (IRTs) ad a implemetatio advisory board (IAB) comprised of 15 postal members ragig from postmasters i rural commuities to a district maager. The IRTs ad IAB helped to idetify iteral ad exteral impacts ad provided solutios that would esure all parties were prepared for the Jauary 7, 2001, ad the July 1, 2001, Docket No. R Omibus Rate Case ad the modificatio effective dates. Implemetatio ad commuicatio were accomplished through the extesive use of iterally developed postal ad customer implemetatio packages, kits, posters, Postal Service Televisio Network (PSTN) broadcasts, cofereces, postal publicatios, ad Web techology. I additio, the departmet provided traiig for ad coordiated efforts of the Techical Speakers Bureau. These speakers made presetatios at more tha 200 iteral ad exteral evets, icludig Postal Customer Coucil meetigs ad the Natioal Postal Forums. 2. Omibus Rate Case R I Docket No. R2001, Pricig ad Classificatio was resposible for the developmet of rates that met the reveue eeds of the Postal Service, while fosterig product improvemets ad icetives for customers to reduce postal hadlig costs. Some of these improvemets ad ehacemets are described i Sectio D, Postal Cost Apportiomet ad Postal Ratemakig Developmets. Oe measure of the success of the proposals is that those rates served as the foudatio for the rate case settlemet discussios. With very few chages, a diverse group of rate case participats agreed that these rates were reasoable ad appropriate for the extraordiary times facig the Postal Service. 3. Realigmet of Rate ad Classificatio Service Ceters Effective September 8, 2001, the five Rates ad Classificatio Service Ceters (RCSCs) cosolidated ito three service ceters, ad a ew No-Profit Service Ceter (NSC) was established. The realigmet provides a efficiet ad effective structure that beefits both the Postal Service ad its customers. The rates ad classificatio work maaged by the RCSCs icludes matters cocerig rate eligibility, mail preparatio, mail classificatio decisios ad exceptio requests. The NSC is resposible for processig applicatios for oprofit eligibility related to Noprofit Stadard Mail, Additioal Etry ad Reetry for Periodicals, ad SOA/Paderig. The Norther Virgiia RCSC closed. Customers formerly supported by that office (the Alleghey, Capital Metro, ad Mid-Atlatic Areas) are ow supported by the New York RCSC. The Memphis RCSC closed. Customers formerly supported by that office (the Southeast ad Southwest Areas) are ow supported by the Chicago RCSC. The New York, Chicago, ad Sa Fracisco RCSCs hadle iteral ad exteral customer support for rates ad classificatio issues ad report to the vice presidet, Pricig ad Classificatio. M. Marketig Techology ad Chael Maagemet Throughout 2001, Marketig Techology ad Chael Maagemet stayed the course of its commitmet to improvig the way the Postal Service does busiess with its customers, ad to the developmet ad implemetatio of ew ad iovative uses of techology i meetig the busiess mailer commuity s eeds. O this frot, Marketig Techology ad Chael Maagemet realized two critically sigificat accomplishmets i the Busiess Mail Acceptace area. Automated verificatio, made possible with MERLIN (Mailig Evaluatio, Readability Lookup INstrumet), eables Acceptace Uits to more effectively accept ad verify discouted mailigs. MERLIN is a automated system that simultaeously verifies presort mailigs makeup, barcode readability, tray label accuracy, meter idetificatio, piece couts ad mailpiece characteristics. Durig 2001, MERLIN bega Phase I deploymet of 200 machies, 70 of which were deployed throughout the Southeast ad Southwest Areas. The completio of MERLIN s Phase I deploymet is scheduled for March Fudig for Phase II, approved October 2001, icludes the commitmet of a additioal 1,003 machies to be deployed begiig March 2002 throughout the rest of the Areas Comprehesive Statemet o Postal Operatios Chapter 2 Postal Operatios

62 Fudig was approved i 2001 for e-vs, electroic Maifest Verificatio of parcels to validate postage. Usig e-vs, barcodes placed o each parcel by the mailer give exact mailpiece characteristics ad details. The iformatio captured by the barcode is the set to our Sa Mateo Processig & Distributio Ceter via electroic maifest file ad electroically compared to its mail couterpart which is verified by a Postal Service scaer ad scale. A 30-day samplig of the two is the electroically recociled to validate postage. With e-vs, mailers ca bypass the Busiess Mail Etry Uit/DMU, savig time without sacrificig accuracy. We made tremedous progress with the Trasportatio Maagemet capability of PostalOe! Desiged to itegrate customer ad Postal Service busiess processes, PostalOe! uses iformatio techology ad supply chai maagemet techiques to alig processes ad systems to reduce costs ad improve service to customers. Through PostalOe!, mailig acceptace occurs at the customer s plat usig electroic trasportatio assigmet of mail ad the use of a Fully Automated Sca-Where-You-Bad system or desktop versio. Trasportatio Maagemet results i substatial savigs from diversio of scheduled air trasportatio of mail ito the surface trasportatio etwork. Curretly, 48 systems have bee istalled with a additioal 35 systems idetified for deploymet durig FY Yet, our commitmet to improvig services through techology ca oly be esured by the commitmet made to the traiig provided to BMEU employees. I 2001, for the third year i a row, BMEU employees reached their Proficiecy Idex Improvemet Goals, scorig 10 percet higher tha i the previous year. The Busiess Mail Academy, located i Norma, Oklahoma provides a 10-day extesive traiig course i the rules, regulatios, ad courtesy skills of busiess mail acceptace. Durig the year, 645 ew BMEU employees successfully completed this traiig. N. The Iteret: Secure, Coveiet, Reliable Choices The Iteret has become a maistay i both America society ad i the America ecoomy. The Postal Service has historically used techology to ehace its core products ad services ad the Iteret has prove to be a valuable tool. The Postal Service is usig the Iteret to commuicate with its customers more efficietly ad effectively, ad to offer them optios o how to access the products ad services they wat ad eed from their Postal Service more easily, coveietly, ad securely to coduct the busiess of their lives. 1. Our Web Presece: The Postal Service s olie presece has attracted approximately 7 millio visitors every moth makig it oe of the most heavily trafficked federal web sites. Customers ca look up ZIP Codes, track ad cofirm delivery, buy stamps ad postage-related products, calculate rates, pay bills, sed moey, dowload forms, chage their addresses, ad electroically retrieve importat iformatio. The Postal Service is developig iovative ways to meet customer eeds. Oe example is NetPost Mailig Olie which is a electroic-topaper mail preparatio ad delivery service targeted at idividuals ad small busiesses. Mailig Olie combies the power ad flexibility of desktop publishig with the coveiet accessibility of the Iteret ad the speed of electroically distributed pritig ad mailig. This hybrid mail service allows what you create toight o your computer to be o its way to the recipiet s mailbox as soo as the ext day. The Postal Service will strive to erich our olie presece ad cotiue to improve the performace ad usability of our web site, as well as ehace the products ad services offered olie. Our goal is to meet the eeds of the America public ad to provide the same level of security ad privacy we have offered for over 225 years to the electroic eviromet. Just recetly the Postal Service has begu to Get Ivolved by parterig with Youth Service America to ecourage voluteers atiowide to give their time to some worthwhile groups. Get Ivolved America! is featured o the Postal Service s web site ad by simply typig i your ZIP Code, customers get a list of groups i their eighborhoods i eed of voluteers. It s our way of helpig idividuals i commuities across the coutry give back ad get ivolved to make this a better place for everyoe. Chapter 2 Postal Operatios 2001 Comprehesive Statemet o Postal Operatios 59

63 2. Secure Electroic Services: Deliverig the reach ad authority of the Uited States Postal Service to customers i the e-commerce world. The Postal Service has lauched ew services that leverage today's techology to electrically trasmit importat commuicatios ad still provide the same level of cofidece ad security our customers expect from hard copy mail. PosteCS is a Web-based file-delivery service that lets users sed electroic files that are too large for most commercial systems. PosteCS otifies a recipiet where to pick up a documet at a secure olie locatio. The service allows seders to protect the files with passwords ad provides a retur receipt that lets the seder kow that the recipiet has received the file. Commercial ad govermet customers use the service. PosteCS gives seders more cotrol over their documets ed-to-ed security, cofidetiality ad itegrity. I a joit veture model, the Postal Service has partered with firms, icludig IBM Corp. ad AT&T, to esure the success of its NetPost.Certified service, the equivalet of certified . The service eables public-sector persoel to securely trasmit sesitive iformatio i digital form to govermet agecies. Both the seder ad receiver of NetPost.Certified messages receive electroic certificates certifyig that their file has bee received ad has ot bee tampered with. The service is beig used i 46 post offices atiowide by employees from the Social Security Admiistratio ad the Ceters for Medicare ad Medicaid Services. It is also beig piloted by the FBI. The Postal Service also is talkig with the states of Texas, North Dakota, Marylad ad others iterested i adoptig it. The Postal Service s Electroic Postmark (EPM) digitally time stamps ad sigs electroic files ad detects ay subsequet tamperig of the postmarked documet or trasactio. The EPM is itegrated ito PosteCS, ebillpay, Netpost.Certified ad other commercial secure electroic services that eable the Postal Service to provide customers the same level of cofidece they value today i the postmarkig of hard copy mail. I September 2000, the Postal Service atioally lauched its hybrid mail service, NetPost Mailig Olie. This service allows customers to prepare electroic commuicatios o their persoal computers ad electroically trasmit them via the Iteret to the Postal Service alog with their mailig lists. Oce received, the commuicatio is routed to a etwork of priters, prited, iserted evelopes ad etered ito the mail stream at a local Post Office. This service is available to customers aytime, aywhere ad saves them both time i preparatio ad speed i delivery. 3. Olie Paymet Services: Extedig Traditioal Value i Today's Marketplace Durig 2001, the Postal Service cotiued its effort to explore ew ad better ways to exted ad ehace the Postal Service's traditioal products by leveragig today's quickly evolvig techology. I August, we expaded Olie Paymet Services, available through usps.com. Our customers ca ow ot oly pay all of their bills olie through USPS ebillpay, but also have the ability to sed ad receive perso-toperso paymets usig USPS Sed Moey!, ad trasfer fuds directly betwee bak accouts. The USPS Electroic Postmark (EPM) verificatio, which provides cosumers with a official time ad date stamp ad a idicatio of tamperig, was also itegrated ito all Olie Paymet Services trasactios. The EPM is a uique feature ot offered by ay competitor, ad it embodies the extra trust brought by the Postal Service. Pay@Delivery was also itegrated ito Olie Paymet Services. Pay@Delivery allows customers to purchase olie auctio items ad have the service hold their paymet util the delivery of the item is cofirmed through the scaig of a Delivery Cofirmatio barcode o a Priority Mail package. 4. Brigig Choices to Our Customers The Postal Service has leveraged ew techology ad iovatios for may, may years to provide faster, better more secure service to our customers. Traditioally, we have doe this through cotractual arragemets ad we will cotiue this methodology as appropriate. However, we rely heavily o strategic alliaces ad parterships to help us deliver more choices ad services to our customers. This type of arragemet improves speed-to-market ad leverages best techologies ad core competecies of other compaies to meet the eeds of our customers Comprehesive Statemet o Postal Operatios Chapter 2 Postal Operatios

64 O. Techology Throughout 2001, the Postal Service expaded its strategic use of iovative techology products ad services to solve busiess eeds. To support the core missio, the USPS focused o systems that reder the delivery process trasparet, streamlie iteral processes, ad create ew busiess opportuities. We also fortified the foudatio of our techology eviromet, the ifrastructure. By focusig o key, eablig mechaisms, we leveraged our vast ifrastructure to provide a solid iformatio platform for future eeds. 1. Strategic Techology Iitiatives The Postal Service supports its core operatios by desigig ad deployig systems that provide customers iformatio ad services they demad, applicatios that automate maual processes, ad iitiatives that esure a secure techology eviromet. I 2001, the Postal Service focused o iitiatives that address customer demad. Origially deployed i 2000, the Postal Service upgraded the Cofirm system. As oe of the primary projects desiged to ehace USPS s relatioship with its customers by providig them with detailed iformatio about the status of their mail, the Cofirm system already allows participatig mailers to see whe idividual mail pieces are scaed by postal equipmet or employees. This capability will be exteded so that customers will be able to see delivery iformatio for both mail that they sed ad receive. I additio to focusig o ew busiess opportuities, the Postal Service focused o streamliig iteral processes that reduce costs. I 2001, The Postal Service successfully deployed the Surface-Air Support System ad the Surface-Air Support System. A critical system i the Postal Service s strategic partership with Federal Express, SAMS assigs surface ad air trasportatio ad supports the paymet of the air carriers. SASS is the correspodig reportig mechaism. Together, these systems help the Postal Service reduce trasportatio costs ad optimize the trasportatio services ecessary to support operatios. I order to streamlie the iteral process of resource timekeepig, the Postal Service desiged ad deployed the Time ad Attedace Collectio System (TACS). TACS replaces five disparate time-keepig systems, ad will provide supervisors with accurate, real-time labor data. This siglesource system reduces data etry ad aalysis time, eablig maagers to make more iformed decisios more quickly. Other examples of automated processes iclude etravel, a travel voucher system, ad ebuy, a supply order ad paymet system. With exteral-facig systems such as the EPM ad the may iteral system highlighted above, the Postal Service is extedig the public s trust from our secure ad reliable delivery of paper mail to our secure ad reliable electroic trasmissio of data. By ivestig i the security of iformatio techology, the Postal Service protects the 1.3 millio messages that are processed daily ad the 8 millio visitors to the usps.com Web site each moth. The Postal Service outlied its approach to ehacig security i its Iformatio Security Five-year Strategic Pla. To realize that strategic visio, the Postal Service established a Iformatio Security Executive Coucil to provide leadership ad directio across the eterprise. We also established a Computer Icidet Respose Team to rapidly idetify, aalyze, cotai, ad respod to security threats. I additio to updatig our plas ad testig our ifrastructure, we developed a eterprise-wide awareess ad traiig program. 2. Iformatio Techology Ifrastructure The Postal Service techology eviromet is huge, complex ad amog the five largest i the world. The Postal Service s recet efforts focus o leveragig this vast ifrastructure for future eeds by updatig its outdated compoets, egotiatig cotracts that save reduce costs, ad protectig the ifrastructure with cotigecy plas. Oe major iitiative that addresses the agig ifrastructure is the Advaced Computig Eviromet (ACE), which replaces existig workstatios ad trasitios existig applicatios to a web-based eviromet. While the implemetatio of ACE will be phased i over the ext two years, the Postal Service Chapter 2 Postal Operatios 2001 Comprehesive Statemet o Postal Operatios 61

65 successfully implemeted a pilot of ACE to 500 users. This ew eviromet reduces the Postal Service s expeses because it requires fewer resources to support it. Correspodig efforts iclude a updated system ad cosolidated help desks. The Postal Service focused o its goal to better maage costs by reducig eterprisewide software ad telecommuicatio costs via cotract egotiatios. Specifically, we focused o egotiatig log-term agreemets, while reducig the admiistrative expeses affiliated with the process of reegotiatio. These ew cotracts that will geerate millios of dollars i savigs over the ext five years. The Postal Service implemeted a strategic disaster recovery process to test ad recover critical system to meet busiess requiremets ad security objectives. 3. Iformatio Techology Accessibility As a amedmet to the Rehabilitatio Act of 1973, Sectio 508 requires federal agecies to procure ad maitai electroic ad iformatio techology that is accessible to persos with disabilities. The Postal Service formed a group to create specific guidelies for the Postal Service, which update policies ad procedures. This team successfully brought the Postal Service ito compliace with Sectio 508 by the Jue 21, 2001, deadlie. Durig 2001, the dedicated team provided educatioal services, reviewed early oe thousad Postal Service Web sites, modified hudreds of systems, ad idetified over oe thousad uregistered sites withi the Postal Service web eviromet. While the 508 Program Team has focused primarily o the Web to this poit, their attetio is tured ow toward other aspects of the Postal Service, icludig documets pertaiig to the huma resources departmet, the purchasig departmet, the legal departmet, ad the Cosumer Advocate s Office. Sectio 508 will cotiue to guide how the Postal Service provides uiversal access to iformatio. P. Operatios Plaig 1. Staffig ad Schedulig Our future success as a orgaizatio will be sigificatly iflueced by our ability to use work hours efficietly ad to maitai stability i our staffig relative to workload. I a joit effort with Huma Resources, the Itegrated Resource Maagemet (IRM) program was successfully implemeted i 133 sites coverig 370,000 employees. This success builds o the 19 pilot sites implemeted i FY A major compoet of the IRM iitiative is Resources Maagemet (RM), a automated system used to assist supervisors ad maagers i plats ad post offices to record, track ad maage the leave admiistratio process. Durig fiscal 2001, sites implemetig RM have achieved a reductio of more tha 960,000 hours of sick leave ad correspodig reductios i leave without pay ad overtime, savig early $73 millio i direct costs. Plas are uderway to covert RM to erms, a Web-based applicatio, ad expad the reach of the system atiowide. Thus far, over 500 users have bee traied to use RM. A secod sigificat compoet of the IRM iitiative is the Coachig for Performace ad Accoutability (CFPA) traiig. Through this traiig, supervisors lear to sit with each of their employees ad explai what is expected of them, ot oly i terms of attedace, but everyday work performace, as well. As part of this process, the rewards for success ad cosequeces for failure are also discussed. So far, i the sites that have implemeted the CFPA traiig, productivity is higher tha i o-irm sites, ad processig costs are lower. A outgrowth of the RM effort is a more itese focus o esurig uiformity ad cosistecy i staffig at the plat ad post office level, ad i maitaiig flexibility to adjust staffig as workloads shift. May curret staffig authorizatios are outgrowths of orgaizatios that o loger exist ad do ot accurately reflect the work performed. Where this occurs, ew staffig guidelies will be developed or existig guidelies revised. These staffig criteria reviews will follow a three step process. First, to determie the role ad rage of resposibilities to be carried out withi various jobs ad orgaizatios. This is accomplished by aalyzig the work cotet of fuctioal area maagers alog with objective decisios regardig how this work fits ito the overall missio of the Postal Service. Secod, the factors that determie workload, ad methods to lik duties to specific factors that predict workload, are idetified. Fially, a method for measurig the workload ad likig the process of allocatig positios atiowide Comprehesive Statemet o Postal Operatios Chapter 2 Postal Operatios

66 without icreasig overall staffig uless justified form a workload stadpoit is developed ad implemeted. Labor Relatios staff, as well as kowledgeable represetatives from Area ad field offices will perform these aalyses. Couplig a icreased emphasis o attedace with a systematic approach to staffig should provide the basis for more effective work hour use, ad ultimately, reduced costs. 2. Address Maagemet The success of our automatio program is depedet upo our ability to esure that each mailpiece has a correct bar code. Our address maagemet services provide that capability by maitaiig curret data o each delivery poit served by the Postal Service ad by regularly providig that data to Postal Service facilities ad customers. a. Forwardig The Postal Service uses the Computerized Forwardig System (CFS) to forward mail to the 17 percet of the atio s populatio that moves each year. Over 3 billio pieces of forwarded mail ad early 44 millio chage-of-address cards were processed i CFS sites are located i 220 postal facilities atiowide. Each CFS site presetly cosists of a cetralized computer, mechaized termials for processig letters, flat forwardig termials for flats ad magazies, ad omechaized termials for processig chageof-address cards ad o-machiable mail. The CFS database provides the data for all address correctio activities. b. 100 Percet Database Quality Address Maagemet is makig progress toward the goal of 100 percet Address Maagemet Systems (AMS) database quality by pursuig a aggressive policy of ogoig quality reviews ad by developig ad implemetatig techological ad procedural improvemets to esure better commuicatio betwee Delivery ad field AMS sites. These steps have resulted i improvemets to AMS database quality. AMS ow provides more timely delivery poit addressig iformatio for use i all automated mail processig, bar codig ad sortig operatios. It also is the source of all address iformatio products required by the commercial idustry to prepare automatio compatible mailigs. I 2000, the Postal Service iitiated the Natioal AMS Street Review Program, movig resposibility for AMS data quality measuremets from the Areas to Headquarters ad esurig that the measuremets are applied evely across the atio. I 2001, the atioal team reviewed 2,120 idividual carrier routes. c. Address Quality Improvemet Improvig address quality (ACE) reduces the amout of udeliverable-as-addressed mail ad improves the effectiveess of automated mail-processig operatios. The Postal Service makes available to mailers, products ad services that assist them i attaiig ad maitaiig 100 percet deliverable address lists. Mailers who utilize the resources detailed below are able to produce more deliverable mailpieces ad gai access to worksharig discouts. 1. Address Elemet Correctio The Address Elemet Correctio service was desiged to correct addresses that could ot be matched to the Postal Service s atioal ZIP+4 file usig Codig Accuracy Support System (CASS) certified address-matchig software. AEC corrects deficiet addresses ad idetifies those that do ot exist. Already, millios of addresses i mailers' files have bee examied ad corrected, leadig to improved customer satisfactio. AEC uses a variety of computer logic resolutio processes to correct as may addresses as possible. Ad, it produces a diagostic report about the mailer's list maagemet practices. Curret electroic success rates average 35 to 50 percet of the previously umatched addresses. More tha 19 millio addresses were processed i 2001 with 6 millio addresses corrected. 2. Barcode Certificatio To esure the accuracy of bar codes applied by mailers, the Postal Service evaluates the ability of customers' hardware ad software to produce properly costructed bar codes that meet Postal Service automatio requiremets. I 2001, eight priters were certified as producig bar codes that meet the required physical characteristics. 3. Codig Accuracy Support System Codig Accuracy Support System improves the accuracy of the carrier route, five-digit ZIP, ZIP+4 ad delivery poit codes that appear o mailpieces. The program is a quality cotrol measure that esures that software vedors provide Chapter 2 Postal Operatios 2001 Comprehesive Statemet o Postal Operatios 63

67 accurate, updated iformatio ad software to customers who purchase this iformatio to process their mailig lists. CASS is available to all mailers, service bureaus ad software vedors who wat to evaluate their address-matchig software ad improve the quality of their ZIP+4, carrier route. ad five-digit codig accuracy. The Postal Service's Natioal Customer Support Ceter (NCSC) grades this process ad the results are retured to mailers to provide useful diagostics for correctig deficiecies. CASS eables the Postal Service to evaluate the accuracy of address-matchig software programs i three areas: (a) ZIP+4 delivery poit codig, (b) carrier route codig ad (c) five-digit codig. CASS allows vedors/mailers the opportuity to test their address-matchig software packages ad, after achievig a miimum percetage of accuracy, be certified by the Postal Service. 4. Correct Address Notificatio Respodig to requests from the mailig idustry ad the eed for cosumers to use complete ad correct addresses, the Postal Service developed a system of customer address otificatio. The otificatio effort seeks to ifluece the public to use all the elemets of a complete ad correct address. Notificatio mailpieces were delivered to approximately 201,000 customers. 5. Customer Notificatio Letter The Customer Notificatio Letter is a otificatio to postal customers who have submitted chage-of-address (COA) orders (PS Form 3575). The otificatios iclude details of the COA order, providig customers a opportuity to verify the COA iformatio o file with the Postal Service. Customers are istructed to cotact the Post Office servig their old address if ay of the COA iformatio is ot correct. The telephoe umbers for both the old ad ew Post Offices are provided. The otificatios also iclude a questio ad aswer sectio advisig customers what to do if they are ot receivig mail at their ew address. There is also iformatio o how customers may otify others of their ew address, ad a remider to register or reregister to vote. I 2001, approximately 35 millio customer otificatios were mailed. 6. Delivery Sequece File The Delivery Sequece File is a comprehesive licesed address data system that expads the level of iformatio beyod the ZIP+4 code. The system cotais a complete address register with carrier delivery sequece iformatio. Mailers who match their address records to DSF ca validate the existece of the address ad idetify deficiet elemets. Cosistet with other address quality systems, DSF stadardizes the addresses submitted by mailers to esure automatio compatibility. Mailers i 2001 matched more tha 75 billio addresses, a 200 percet icrease from Locatable Address Coversio System The Locatable Address Coversio System (LACS) process eables busiess mailers to electroically update their rural-style addresses with ew, locatable city-style addresses i areas that are experiecig 911 emergecy respose address coversios. There are curretly 5 millio coverted addresses i the LACS file. Improved address quality icreases mailer access to work-sharig discouts ad improves deliverability. The Postal Service licesed 13 firms to assist mailers i updatig their address records or to perform the matchig service for busiess mailers. 8. Move Validatio Letter I April 1996, the Postal Service implemeted a process to circumvet the fraudulet submissio of COA orders. The solutio, a Move Validatio Letter (MVL), is a otificatio that is mailed to postal customers at their old address alertig them that a request has bee made to forward mail from the old address. If a potetially fraudulet situatio exists, the customer is istructed to cotact their local Post Office for assistace. The telephoe umber of the local Post Office is provided. These otificatios are geerated for COAs etered ito the Computerized Forwardig System (CFS) database o a daily basis. They are mailed withi 24 hours of receipt by the Natioal Customer Support Ceter (NCSC) i Memphis, TN. I 2001, more tha 34 millio otificatios were mailed. 9. Multilie Accuracy Support System The Multilie Accuracy Support System (MASS) is a extesio of the CASS, which is a process desiged i cooperatio with the mailig idustry to improve the accuracy of postal codes that appear o mail. Whereas CASS focuses o the processig of addresses stored electroically i computer data files, MASS tests the quality of address matchig occurrig o MLOCR equipmet ad direct-view ecodig statios. These systems have to lift a address image directly from a mailpiece to accomplish processig. MASS allows vedors/mailers the opportuity to test Comprehesive Statemet o Postal Operatios Chapter 2 Postal Operatios

68 their machies ad, after achievig a miimum percetage of accuracy, be certified by the Postal Service. 10. Presort Accuracy, Validatio Evaluatio The Presort Accuracy, Validatio Evaluatio (PAVE) program is a process desiged i cooperatio with the mailig idustry to evaluate presort software ad determie its accuracy i sortig address files accordig to Domestic Mail Maual (DMM) stadards. PAVE is available oly to software ad hardware developers - compaies that develop presort software or maufacture presortig equipmet for resale or iteral use. Participatio i the program is purely volutary. Although this program evaluates ad validates presort products maufactured by the developers, PAVE does ot guaratee acceptace of mail prepared usig PAVE-certified hardware ad/or software; however, it does provide atioal approval of computer-geerated facsimiles of Postal Service postage statemets, stadardized documetatio ad other presort documetatio. 11. Rapid Iformatio Bulleti Board System Rapid Iformatio Bulleti Board System (RIBBS) was itroduced to provide members of the mailig idustry with rapid access to postal iformatio. The iformatio i RIBBS icludes Customer Support Ruligs, Federal Register otices, weather ad atural disaster coditio reports, DMM labelig lists, certified vedor iformatio, office locator services, reports ad data for ADVANCE participats ad miutes of the Mailers' Techical Advisory Committee meetigs. 12. Delivery Cofirmatio Certificatio Delivery Cofirmatio, a recetly implemeted program for Priority Mail ad Stadard Mail, provides a method for customers to verify the delivery status of packages. Customers choosig the electroic file optio are required to participate i a certificatio process to esure the accuracy ad quality of customer-geerated data that is etered ito the Delivery Cofirmatio System. The Postal Service certifies the customer's ability to accurately format ad populate mailpiece iformatio i the required fields of the Delivery Cofirmatio electroic file ad to accurately trasmit that file to the Postal Service's host computer. Bar coded labels, used to capture delivery data, are physically examied ad scaed for readability ad compliace with the Delivery Cofirmatio requiremets. I 2001, 842 customers successfully completed electroic file ad bar coded label certificatio. 13. Electroic Address Sequecig Cetralized electroic address sequecig service elimiates field work hours i the hadlig of maual address sequece cards ad improves the cosistecy of the service provided. With average processig times of seve days, the electroic service assists walk sequece mailers i updatig their address lists i a much more efficiet ad time savig fashio millio addresses were validated ad sequeced, with a estimated 18,000 work hours saved, i a two ad oe half moth period. d. The Mover s Guide The Mover's Guide is a all-i-oe guide to movig, desiged to improve customer satisfactio ad reduce costs. The booklet provides Postal Service chage-of-address forms, mail-forwardig iformatio, movig-related commercial advertisig, advertiser discout coupos ad tips o movig. Cosumer reactio cotiues to be positive. Customers are provided with a greater uderstadig of the activities associated with forwardig mail. The Mover's Guide, a result of a strategic alliace with a private compay, is desiged, prited ad produced at o cost to the Postal Service or its customers. A strategic alliace with the compay to cotiue the distributio of both the Eglish ad Spaish versios of The Mover's Guide has bee exteded to year e. MoversNet Website A ehaced versio of the MoversNet Website, MoversGuide.com, was lauched September The ehaced versio offers a additioal customer choice to file a chage-ofaddress, allowig chage-of-address orders to be accepted electroically via the Iteret, with valid idetity validatio. This ehaced chage-ofaddress method does ot chage or affect ay of the other curretly acceptable chage-of-address methods. I additio to the ability to submit chage-of-address orders electroically over the Iteret, the ehaced web-site also offers customers a variety of value-added move-related products ad services, such as settig up utility hookups ad cable coectios, establishig logdistace service, orderig packig supplies, ad other move-related products ad services. Chapter 2 Postal Operatios 2001 Comprehesive Statemet o Postal Operatios 65

69 f. The Welcome Kit The Welcome Kit is a ew value-added program for customers who have recetly moved. It is desiged to reduce Postal Service costs ad improve service. The Welcome Kit cotais the followig: the customer's address chage Cofirmatio Notificatio Letter; local phoe umbers ad addresses for the customer's ew area; a Settlig-I Guide, with helpful iformatio ad advice o gettig settled; savigs o products ad services customers typically eed after movig; ad iformatio o how customers ca otify the Bureau of Motor Vehicles, the IRS ad voter registratio offices of their ew address. g. Move Update Implemetatio The Move Update requiremet of Classificatio Reform, which became effective July 1, 1997, was established to reduce the estimated$1.9 billio aual expese ad egative service stadard impacts that udeliverable-asaddressed mail creates. The requiremet specifies that addresses used to obtai all First-Class presorted ad automatio discout rates must be updated for move activity withi 180 days (six moths) prior to the date of mailig by a Postal Service-approved method. Address Maagemet has direct resposibility for all approved methods with the exceptio of the maual address correctio process, which is mailpiece edorsemet based. The Address Maagemet methods iclude the followig: 1. Natioal Chage-of-Address The Natioal Chage-of-Address process provides busiess mailers with chage-of-address iformatio for customers o their mailig lists prior to mailig, thus esurig that subsequet commuicatios are directed to the curret address. This process reduces the amout of udeliverable mail ad promotes the use of automatio-compatible address formats by esurig that all addresses submitted are stadardized with complete ad accurate iformatio, icludig ZIP+4 codes. More tha 8.5 billio address correctios were provided to busiess mailers through the NCOA service durig 2001, a icrease of 52 percet from Address Chage Service The Address Chage Service (ACS) offers mailers automated address-correctio service followig the issuace of their mailigs. Address correctio otificatios are geerated from chageof-address orders (PS Form 3575) submitted to the Postal Service by customers who move. This chage-of-address data is maitaied i the CFS database. I order to participate i ACS, mailers are required to modify the address label or address block of each mailpiece for which a electroic ACS otificatio is requested. They are also required to utilize a ACS compatible acillary service edorsemet. ACS electroic otificatios are provided at a fee of 20 cets per otificatio. However, participatio i ACS does ot elimiate the provisio of maual address correctio otificatios (hardcopies), which are provided at the maual address correctio fee of 60 cets each. By rapidly updatig their address lists, mailers improve the deliverability of their mail. I 2001, the umber of correctios processed through ACS was 191 millio. 3. FASTforwardSM I 1997, Address Maagemet deployed to the mailig idustry, uder Postal Service licese, cuttig-edge techology that provides a effective meas for mailers to update addresses o mailpieces processed o MLOCRs. This techology, kow as FASTforward, will direct mailpieces to the customer's ew mailig address whe a chage-of-address order has bee filed with the Postal Service. FASTforward provides a fast, accurate, safe ad secure method for users of MLOCRs to apply ew address iformatio ad the correct bar code for the ew address as the mailpieces are beig processed. I 2001, more tha 3.3 billio mailpieces were processed ad over 41 millio correctios provided, a icrease of 6 percet over Cocurret with the MLOCR effort, Address Maagemet also provides a secod versio of FASTforward techology for Mailig List Correctio (MLC). This versio of FASTforward provides correctio to computerized address files whe a chage-ofaddress is idetified for a customer's address record. I 2001, more tha 18.9 billio address records were processed ad over 318 millio correctios were provided to busiess mailers usig FASTforward for MLC, represetig a 45 percet icrease over Alterate Qualificatio Method A Postal Service stad-aloe testig process, based o FASTforward techology, allows mailers to demostrate that they have their ow process i place to update address chages o mailig lists with 99 percet accuracy. If the Postal Service verifies this, the mailers' lists are the qualified for a period of 12 moths Comprehesive Statemet o Postal Operatios Chapter 2 Postal Operatios

70 h. Electroic Publicatio Watch System (epubwatch) The Electroic Publicatio Watch System, commoly referred to as epubwatch, is a webbased periodicals complait trackig ad resolutio system which allows a registered publisher to eter a subscriber's postal related complait, request a electroic publicatio watch, or request the assistace of a Periodical Service Improvemet team member through the completio of a Systemic Complait Resolutio form. epubwatch was desiged to replace the existig paper-based Publicatio Watch system i those delivery offices which have a delivery uit computer. Developmet ad testig of the Publisher's web page, the Delivery Uit's Data Etry web page, ad the epubwatch Reports web page have bee completed. All the ecessary hardware has bee purchased ad istalled to support a webbased system. Natioal deploymet is expected to begi i February i. The Collectio Box Maagemet System The Collectio Box Maagemet System (CBMS) provides a moitorig tool for delivery uit maagemet to esure adherece to our collectio box schedules ad policies. The system cosists of a data collectio device that scas a bar code located iside a collectio box to collect time, locatio ad date iformatio. The iformatio collected by the scaer is the placed i a data trasfer device at the delivery uit for dowloadig ito the Delivery Uit Computer. The data is the loaded ito the CBMS software program, which allows maagemet to quickly ascertai the status of each collectio. A small percetage of delivery uits still utilize the wad/butto techology to maage collectios. j. ADVANCE Notificatio ad Trackig System (ADVANCE) The ADVANCE Notificatio ad Trackig System, commoly referred to as ADVANCE, is desiged as a maual delivery cofirmatio system to meet the time-sesitive mailig eeds of Stadard ad Periodical mailers. ADVANCE tracks the delivery performace of qualified Stadard mailigs ad Periodical mailigs i over 7,000 delivery uits ad i over 11,000 five-digit ZIP Codes. I fiscal year 2001, over 4.5 billio mail pieces were tracked usig ADVANCE. Chapter 2 Postal Operatios 2000 Comprehesive Statemet o Postal Operatios 67

71 Comprehesive Statemet o Postal Operatios Chapter 2 Postal Operatios

72 Chapter III Fiacial Highlights The Postal Service has sought to avoid redudacy i our 2001 Aual Report ad this 2001 Comprehesive Statemet. I this chapter, we preset Fiacial Highlights i a codesed format. We focus discussio ad aalysis o: Postal Service fiacial results for 2001; aspects of our fiacial maagemet o which Cogress has requested that we report; busiess programs o which we are required to report, such as the Breast Cacer Research Semipostal program; ad topics of particular iterest to Cogress, such as Appropriatios. We provide more detailed aalysis of the fiacial results of our operatios for 2001 i the 2001 Aual Report of the Uited States Postal Service. A. Fiacial Summary TABLE 3.1 REVENUE (i millios) Chage %Chage First-Class Mail $35,876 $35,516 $ % Stadard Mail 15,705 15, % Priority Mail 4,916 4, % Special Services 2,341 2, % Periodicals 2,205 2, % Package Services 1,994 1, % Iteratioal 1,732 1, % Express Mail % Other $65,767 $64,476 $1, % TABLE 3.2 VOLUME BY CLASS OF MAIL (i millios) Chage %Chage First-Class Mail 103, , /1% Stadard Mail 89,938 90,057 (119) -0.1% Periodicals 10,077 10,365 (288) -2.8% Priority Mail 1,118 1,223 (105) -8.6% Package Services 1,093 1,128 (35) -3.1% Iteratioal 1,083 1,099 (16) -1.5% Other % 207, ,882 (419) -0.2% 1. Reveue Operatig reveue i 2001 grew 2.0 percet, or $1.3 billio, to $65.8 billio. This is a declie i the rate of reveue growth compared to the previous two years ad evideces a 0.2 percet declie i mail volume compared to Although mail volume growth rates had bee decliig i recet years, o other year-to-year decrease i mail volume had occurred sice the recessio of Operatig reveue i 2000 grew 2.9 percet, but was early $800 millio below what had bee forecast as First- Class Mail grew less tha expected; mailers shifted their choices of mail classes to reap the price beefits of the automated mail classes; ad, as diversio of messagig from hard copy mail to electroic media cotiued. These treds stregtheed i 2001 ad were compouded by the effects of the softeig ecoomy ad ecoomic dislocatios related to the terrorist attacks of September 11th. Together, they depressed mail volumes. Reveue grew evertheless due to a rate icrease i Jauary ad a rate modificatio i July. Tables 3.1 ad 3.2, show reveue ad volume by class of mail. 2. Expeses TABLE 3.3 ANALYSIS OF EXPENSES (i millios) Chage %Chage Persoel compesatio $37,924 $36, % Persoel beefits 13,427 12, % Trasportatio 5,056 4, % Supplies ad services 3,061 2, % Iterest o deferred liability 1,603 1, % Depreciatio ad write-offs 2,255 2, % Other 1,548 1, % Ret ad commuicatio 1,086 1, % Vehicle/buildig maiteace % Utilities % Iterest % Advertisig % Total $67,549 $64,780 $2, % Compesatio ad beefits, icludig iterest o deferred retiremet, comprise more tha 78 percet of our total expeses. I 2001, Postal maagemet cotrolled costs aggressively, cuttig workyears by 11,500, while servicig the atioal delivery etwork with its 1.7 millio ew residetial ad busiess delivery addresses. These actios held the icrease i compesatio ad beefits to 3.6 percet, or $1.8 billio, dow from the 4.6 percet growth of $2.2 billio i the previous year. Still, due to salary icreases ad iflatio i health beefit costs, this year s rate of growth i compesatio ad beefits exceeded that of the Cosumer Price Idex (CPI) ad the Employmet Cost Idex (ECI). Workers compesatio costs, a compoet of compesatio ad beefits, icreased by almost $60 millio i 2001, followig the more tha $300 millio icrease i this category i Chapter 3 Fiacial Highlights 2001 Comprehesive Statemet o Postal Operatios 69

73 TABLE 3.4 WORKERS COMPENSATION EXPENSE AND CASH PAYMENTS* (dollars i millios) Estimated Aual Paymets to DOL Icrease/Decrease Admiistrative Total for Postal Service Fiscal i Liability for Charge Aual Active Claims ad Year Active Claims (DOL) Expeses Admi. Charges** 1990 $ 753 $ 15 $ 768 $ 671 *** , , **** ***** * All years prior to 1993 iclude omial expeses for OWCP health beefits. Listed paymets iclude paymets for active Postal Service claims ad for associated DOL admiistrative charges. ** Paymets exclude all paymets for Post Office Departmet claimats. *** Paymet comprises 1989 ad 1990 active claims ad 1990 admiistrative charge. Separate paymets were made i October of 1989 (1989 active claims ad 1990 admiistrative charge) ad September of 1990 (1990 active claims ad 1991 admiistrative charge). **** Previously-reported umber chaged to exclude POD portio of paymet from Postal Service total paymets. ***** Excludes cotested ad upaid admiistrative expese of $37 millio. TABLE 3.5 INCOME AND EXPENSE STATEMENT (dollars i millios) FY2001 FY2000 Chage % Chage Icome Mail reveue $ 63,426 $ 62,284 $ 1, % Special services 2,341 2, % Reveue forgoe appropriatio % Operatig reveue 65,834 64,540 1, % Expese Compesatio ad beefits 51,351 49,532 1, % Other costs 14,289 13, % Operatig expese 65,640 62,992 2, % Icome from operatios 194 1,548 (1,354) NM Iterest icome (6) -14.6% Iterest expese o deferred retiremet liabilities (1,603) (1,568) % Iterest expese o borrowigs (306) (220) % Net loss $ (1,680) $ (199) $ (1,481) NM TABLE 3.6 FINANCING HISTORY Year-Ed Average Iterest Debt Debt Expese ($ billios) ($ billios) ($ millios) Historical fluctuatios i workers compesatio expese ca be see i Table Net Loss We posted a et loss of almost $1.7 billio i Despite a icrease i postage rates, Postal Service expeses icreased at more tha twice the rate at which reveue icreased. Due to the factors metioed i the Reveue sectio above ad the R recommeded decisio of the Postal Rate commissio that set rates lower tha we requested, reveues came i below expectatios. Total costs were i lie with projectios. Additioally, cotiued iflatioary cost icreases, particularly i postal compesatio ad beefits, exceeded the savigs effected through our cost reductio programs ad the additioal reveue eared from icreased postage rates. The 2001 et loss followed the et loss of $199 millio i At the same time, through effective resource maagemet, the Postal Service achieved a icrease i Total Factor Productivity (TFP) of 1.3 percet i That equated to early $900 millio i reduced expeses for the year ad lesseed what otherwise would have bee a eve greater et loss. This gai i productivity followed the 2000 TFP gai of 2.4 percet, a seve-year high for this measure. Our productivity success is explaied i greater detail i the ext sectio. 4. Fiacig The amout we borrow over time is largely determied by the differece betwee our cash flow from operatios ad our capital cash outlays. Our capital cash outlays are the fuds we ivest i the busiess for such capital improvemets as facilities, vehicles, automatio equipmet, ad iformatio techology, much of which is required to service our everexpadig delivery etwork. From 1997 through 2001, our capital cash outlays exceeded cash flow from operatios by $5.2 billio; the differece was covered with borrowed fuds. Our debt outstadig with the Departmet of Comprehesive Statemet o Postal Operatios Chapter 3 Fiacial Highlights

74 Treasury s Federal Fiacig Bak icreased by $5.4 billio. Debt outstadig at the ed of 2001 was $11.3 billio, a icrease of $2 billio compared to Normally, our debt balace at the ed of our year represets our highest level of debt for the year because, while expeses for workers compesatio ad retiremet beefits are accrued throughout the year, the actual paymets are ot made util late September of each year. The amout that we paid this year was $4.5 billio, icludig $694 millio for workers compesatio ad $3.75 billio for the Civil Service Retiremet System ad Cost of Livig Adjustmets for retirees. Our cash flow durig the year was sufficietly strog to reduce debt from the prior year-ed level. Debt outstadig reached a low of $4.6 billio i July. I other words, we had elimiated 50 percet of the debt that we had eterig the year. Sice we have debt fiacig flexibility, we ca maage the fluctuatios i our debt durig the year by actively maagig our credit lies. However, just as our debt balace at year-ed has icreased i recet years, so has our average debt balace. I 2001, our average outstadig debt was $6.4 billio, far less tha the year-ed balace but a icrease of 36 percet, or $1.7 billio, over the prior year's average debt. The iterest expese o our debt i 2001 totaled $306 millio, compared to $220 millio i Maagig cash to miimize debt o a daily basis produces favorable fiacial results because average debt is oe of the two primary drivers of aual iterest expese. Iterest rates are the other importat driver, as is evidet i a iterest rate compariso of 1997 with I 2001, our average debt outstadig was $2 billio higher tha 1997, a 45 percet differece. Yet our iterest expese was o higher tha i 1997, because of lower iterest rates. Our iterest expese is determied by debt maagemet activities as well as by prevailig iterest rates. It was a challege to maage iterest expese durig a year of icreasig average debt outstadig. We caot claim ay credit for producig lower iterest rates but we did positio our debt portfolio to beefit from decliig rates ad simultaeously took some steps to stabilize future iterest expese volatility by maagig the mix of fixed- ad floatig-rate debt o our books. I plaig for 2002, we prepared a fiacig pla with a $1.6 billio et icrease i our debt. However, we made that estimate before the attacks of September 11 ad the esuig evets icreased our costs ad decreased our reveues. We are ot ow able to predict the 2002 et icrease i our debt with ay degree of certaity. B. Productivity 1. USPS Total Factor Productivity: The Productivity Measure The Postal Service measure of its productivity, Total Factor Productivity (TFP), icludes all factors of productio. TFP measures the growth i the ratio of resources used, or iputs, ad the outputs, or products ad services they produce. By trackig resource use ad outputs, TFP provides a measure of historical performace. The Postal Service s mai outputs are delivered mail ad the servicig of a expadig delivery etwork. To accout for variatios i resources used to process differet types of mail, TFP weights each mail type accordig to its workload cotet ad the amout of labor used i its processig ad delivery. That measure of workload is determied by factors icludig size, weight, mailer preparatio, such as bar codig ad presortig, ad mode of trasportatio used, such as air or highway. The Output Per Workhour compoet of TFP uses oly labor iput as a measure of resource use. I additio to labor, TFP also measures capital ad materials iputs, such as TABLE 3.7 PRODUCTIVITY USPS Total Factor USPS Output Multi Factor Productivity per Workhour Productivity 1 Aual 2 Cumulative Aual Cumulative Aual 2 Cumulative From 1971 From 1971 From (1.8) 6.8 (0.1) 13.7 (1.0) (0.2) (1.9) 8.9 (1.3) (1.3) 7.6 (0.1) (1.0) (0.1) (0.5) MFP Data are estimates of DRI-WEFA. BLS Data for 2001 has ot yet bee released. 2 Historical data are subject to revisio as certai data used i calculatig productivity are periodically revised. Price idexes released by the Bureau of Labor Statistics ad the Bureau of Ecoomic Aalysis that are used to calculate resource usage are subject to regular historical revisios by these agecies. Whe historical revisios are released, they are icorporated ito the TFP calculatio, which ca result i historical TFP revisios. TFP for the reportig year is also subject to revisio whe fial Postal Service cost data for the reportig year is available. Geerally, this revisio occurs i April of the followig year. Note: Certai Aual/Cumulative amouts may ot sum due to roudig. Chapter 3 Fiacial Highlights 2001 Comprehesive Statemet o Postal Operatios 71

75 mechaized ad automated equipmet, facilities, trasportatio, ad other o-persoel costs. Multiple factors may cause TFP growth to vary i the short term. Expeditures to ehace service ad improve customer satisfactio may cause shortterm declies i TFP growth. TFP ca fluctuate from oe year to aother because of time lags betwee makig major ivestmets ad realizig the associated savigs. Cosequetly, whe assessig short-term productivity performace, cosideratio should be give to the factors affectig TFP growth. 2. TFP: 2001 ad the Future Pla I 2001, the Postal Service achieved a TFP growth of 1.3 percet, the secod cosecutive year of positive TFP. Output Per Workhour growth i 2001 was 1.7 percet. The growth i TFP i 2001 equated to $870 millio i expese reductios. Combiig TFP growth for 2000 ad 2001 yields TFP growth of 3.7 percet, equivalet to takig $2.5 billio i expeses out of the system. Whe compared to other years with strog positive TFP growth, the achievemet of 2001 is sigificat. I previous years, strog TFP growth was drive largely by workload growth. Durig the 1990's TFP grew at a average rate of 0.2 percet, while workload grew 1.9 percet aually, o average. I 2001, the strog productivity growth of 1.3 percet was achieved through substatial reductios i the use of resources. As workload declied by 0.6 percet, the Postal Service effectively maaged its resources to achieve a 1.9 percet declie i total resource use. Labor ad materials use declied by 2.3 percet ad 3.6 percet, respectively. This achievemet followed the sigificat reductios of 2000, whe labor use was reduced by 0.2 percet ad materials use by 5.1 percet. The Postal Service plas to cotiue to improve TFP over time while meetig the eed for cotiuig service improvemets to icrease customer satisfactio ad remai competitive i the marketplace. TABLE 3.8 HISTORICAL AND PRESENT-YEAR IMPACT OF CONGRESSIONAL APPROPRIATIONS ON MAIL REVENUE 1971, 1976, 1986, 2001 (dollars i millios) Appropriatio Total Mail Reveue Icome as a percet Mail Without Appropriatio from of Total Year Reveue Appropriatios Category Appropriatio Mail Reveue Deficiecy i rates ad fees; 1971* $ 8,752 $ 6,665 ad Public Service $ 2, % 1976 $ 12,844 $ 11,199 $ 1,645 **12.8% Free ad Reduced Rate Mail 725 Recociliatio for Prior Years oe Public Service $ 30,818 $ 30,102 $ % Free ad Reduced Rate Mail 750 Recociliatio for Prior Years (34) Public Service oe 2001 $ 65,834 $ 65,767 $ % Free Mail for the Blid ad Overseas Votig Material 71 Recociliatio for Prior Years (4) Public Service oe * The figures for 1971 are from the old Post Office Departmet prior to the creatio of the Postal Service o July 1, ** This figure does ot iclude the appropriatio for Post Office Departmet Trasitioal Costs Comprehesive Statemet o Postal Operatios Chapter 3 Fiacial Highlights

76 3. TFP: Relative Value of Bechmark Measures I the past, Postal Service TFP has bee bechmarked agaist the Private No-Farm Busiess Multifactor Productivity Idex (MFP), reported by the Bureau of Labor Statistics (BLS). Although the private o-farm busiess sector represets 77 percet of the U.S. Gross Domestic Product (GDP), MFP measuremets of chages i productivity i this sector are heavily iflueced by performace i the capital itesive ad high techology sectors of the ecoomy. The broad MFP measure does ot provide separate breakouts of service ad labor itesive idustries, such as the Postal Service, ad does ot, therefore, provide a ideal bechmark. Noetheless, historical idices of Postal Service TFP ad the broad MFP measure are icluded here for the record. Table 3.7 shows aual ad cumulative TFP ad Output Per Workhour achieved by the Postal Service ad shows the MFP idex of the broad o-farm ecoomy for the years 1990 through Over the log ru, a successful orgaizatio will average positive growth i productivity, as has the Postal Service, but year-to-year fluctuatios i TFP ad output per workhour are commo. Cumulative TFP growth for the Postal Service from 1971 through 2001 is 11.5 percet, or a average aual rate of 0.4 percet. MFP growth for the etire o-farm busiess segmet of the ecoomy durig this period was 19.7 percet, or a average of 0.7 percet aually. Cumulative Output Per Workhour growth for the Postal Service for the same period was 26.3 percet, or a average of 0.9 percet per year. 4. TFP: Additioal Cosideratios Worksharig discouts to mailers impact Postal Service productivity performace. Worksharig icetives have shifted a greater proportio of the workload associated with automatio compatible mail to busiess mailers. While worksharig discouts provide cost savigs for the Postal Service ad ehace the productivity of the ecoomy as a whole, worksharig also trasfers the Postal Service s prime opportuities for productivity improvemet to our parters, the mailers. C. Federal Govermet Appropriatios The Postal Service ca receive three types of appropriatios from the federal govermet. These iclude appropriatios for public service, trasitioal costs ad reveue foregoe. Curretly, appropriatios are made oly for reveue foregoe ad they accouted for oly 0.1 percet of total reveue i Durig 1971, the year precedig the creatio of the Postal Service through the Postal Reorgaizatio Act, these appropriatios totaled over 23 percet of total reveue. The Postal Service curretly is authorized to request up to $460 millio for public service costs. This is the amout authorized by statute i 1970 ad is ot iteded to represet the preset cost of providig uiversal service. The Postal Service has either requested or received ay public service reimbursemet sice fiscal The trasitioal cost category of reimbursemet provides a meas to fud costs related to the former Post Office Departmet (POD) ad shelters curret ratepayers from such costs. Workers compesatio claims arisig prior to July 1, 1971, are the last kow POD cost. I the Balaced Budget Reform Act of 1997, Cogress trasferred resposibility for these costs to the Postal Service. Therefore, we have ot received trasitioal cost appropriatios sice I 2001, the Postal Service booked a reveue foregoe reimbursemet of $67 millio to fud free mail for the blid ad for overseas votig. That reimbursemet was paid i October 2001, shortly after the close of the fiscal year. D. Breast Cacer Research (BCR) Semipostal Stamp I 1977, Cogress authorized the issuace of the first semipostal stamp for the specific purpose of raisig fuds from the America public to assist i fidig a cure for breast cacer. The stamp was sold for 40 cets ad is valid for the curret cost of a oe-ouce First-Class letter. Cogress directed that the differece betwee the price of the stamp ad the First-Class Mail rate, less program costs, be directed to two desigated research agecies, the Natioal Istitutes of Health (NIH) ad the Departmet of Defese (DOD) Medical Research Program. I accordace with the law, the Geeral Accoutig Office (GAO) has reviewed this program. From program iceptio through the ed of 2001, approximately 326 millio BCR stamps Chapter 3 Fiacial Highlights 2001 Comprehesive Statemet o Postal Operatios 73

77 have bee sold. Three years of sales raised a et volutary cotributio of $22.3 millio, of which $5.5 millio was raised i The law provides for semiaual paymets to be made o a schedule agreed to by the research agecies ad the Postal Service. Proceeds from BCR stamp sales from July 28, 1998 through early September 2001 have bee paid to the research agecies i a total of seve paymets. The costs associated with the BCR stamp iclude: desig, pritig, packagig, advertisig, promotio, traiig, legal fees, market research, programmig for retail automatio ad receipt pritig costs. The Postal Service deducts selected icremetal costs from BCR stamp reveues ad the pays the proceeds to the research agecies. From the begiig of this program through the ed of 2001, a total of slightly more tha $650,000 has bee withheld to cover these icremetal costs Comprehesive Statemet o Postal Operatios Chapter 3 Fiacial Highlights

78 Chapter IV Prelimiary 2003 Aual Performace Pla This chapter respods to the requiremets of the Govermet Performace ad Results Act (GPRA) of 1993 by providig the prelimiary FY2003 Aual Performace Pla of the Uited States Postal Service. The fial FY2003 Performace Pla will be published as a separate documet at the completio of the aual plaig cycle i September. A. Itroductio 1. Govermet Performace ad Results Act (GPRA) Requiremets Cogress created a statutory requiremet for govermet agecies to idetify, measure ad disclose outcome ad performace data for public programs. The purpose of the law is to improve the accoutability of agecies for deliverig results. The law requires agecies to publish log rage strategic plas 1, aual performace plas ad aual performace reports. TABLE 4.1 GPRA REQUIREMENTS FOR AGENCY PERFORMANCE PLANS Requiremet 2. The Missio of the Postal Service The missio of the Uited States Postal Service, as framed i the Postal Reorgaizatio Act of 1970, states: 2 The Postal Service has bee successful i achievig the objectives of the Postal Reorgaizatio Act. The public service subsidy, oce amoutig to about 25 percet of the postal budget, has ot bee requested sice 1982, savig taxpayers billios of dollars sice the. Average postal prices geerally have ot icreased faster tha the overall rate of cost icreases i the U.S. ecoomy sice Service performace ad customer satisfactio have reached record levels, ad the Postal Service is rated favorably eve i compariso to private sector firms. The Postal Service regularly delivers to every address i the atio icludig 1.7 millio ew addresses last year ad maitais a extesive etwork of retail post offices, providig cosumers access to postal services through over 38,000 post offices, statios, ad braches i commuities across the coutry. The Postal Service is still percieved by America busiesses, the public ad their represetatives i Cogress as a vital ad ecessary part of the ifrastructure of the atio. 3 Despite the widespread availability of direct competitors ad techological substitutes for traditioal postal services over the last decade, mail volume geerally has cotiued to grow evidece of cotiued demad for postal services. 1. Establish performace goals 2. Express goals i objective, quatifiable ad measurable form 3. Briefly describe the operatioal processes, skills, ad the techological, huma capital, iformatio or other resources required to achieve performace goals 4. Establish performace idicators to be used i measurig or assessig the relevat outputs, service levels, ad outcomes 5. Provide a basis for comparig actual program results with the established performace goals 6. Describe the meas to be used to verify ad validate measured values The Geeral Accoutig Office (GAO) has provided additioal guidelies as follows: 7. Provide detailed explaatios whe goals, idicators or targets are chaged 8. Provide clear criteria, icludig baselie data, for measurig progress toward achievig targets 9. Iclude complete descriptios of strategies to accomplish stated goals 10. Update iformatio to reflect kow or aticipated chages TABLE 4.2 USPS MISSION STATEMENT The Postal Service shall have as its basic fuctio the obligatio to provide postal services to bid the atio together through the persoal, educatioal, literary, ad busiess correspodece of the people. It shall provide prompt, reliable, ad efficiet services to patros i all areas ad shall reder postal services to all commuities. 3. The Busiess Eviromet The busiess ad operatig eviromet of the Postal Service chaged dramatically i Three major challeges the decliig ecoomy, terrorism ad growig competitio - disrupted postal operatios ad plaig for a. Decliig Ecoomy Mail volume has historically grow with the U.S. ecoomy, ad the Postal Service has bee able to deped o growig reveues to support 1 The most recet USPS Five Year Pla, , was published i September [Title 39, U.S. Code, Sec. 101 (a)] 3 See Seizig Opportuity: The Report of the Mailig Idustry Task Force, October Chapter 4 Prelimiary 2002 Aual Performace Pla 2001 Comprehesive Statemet o Postal Operatios 75

79 the icreased cost of extedig service to ew busiesses ad households. However, the declie of the U.S. ecoomy has reduced reveue from mail volume while the umber of ew deliveries cotiues to icrease. The Postal Service is limited i its ability to reduce costs i the short-term i respose to the severe ecoomic dowtur. For example, the Postal Service is restricted from closig uecoomic post offices. Istead, the statutory requiremet is for the Postal Service to raise rates to cover reveue shortfalls. However, i the curret ecoomy, raisig prices is ot ecessarily a effective solutio sice busiess mailers may reduce their mailigs or seek alteratives to the Postal Service istead of acceptig higher costs. O September 24, 2001, the Postal Service filed a request with the Postal Rate Commissio for a Recommeded Decisio o geeral icreases i rates ad fees. The Postal Service proposed a average overall rate icrease of 8.7 percet that would geerate a additioal $4.3 billio dollars aually. First-Class Mail rates were proposed to icrease by a average of 8.2 percet, icludig a 3-cet icrease i the price of a First-Class stamp, to 37 cets. The September 11 terrorist attacks ad esuig athrax mailigs occurred shortly after the Postal Service s proposals were approved for filig. These evets combied with a slowig ecoomy to substatially icrease the Postal Service s eed for future reveue. As a result, the Chairma of the Postal Rate Commissio suggested that the Postal Service ad the other participats attempt to settle the case. After protracted egotiatios, 56 out of 62 parties, with oly oe party opposig, reached a settlemet agreemet that would eable the Postal Service to implemet ew rates three moths sooer tha if the case had bee fully litigated. After limited further proceedigs, the Commissio must cosider the settlemet agreemet ad issue a Recommeded Decisio to the Postal Service s Board of Goverors, who must approve it before the icreases ca be implemeted. If approved, the icreases could take effect Jue 30, b. Terrorism ad Athrax The Postal Service was severely affected by the costs of the terrorist attacks o the Uited States. Mail volume ad reveue growth, which were already weak due to the ecoomy, plummeted after September 11 ad have ot show sigs of sigificat recovery. I additio to the fiacial pressure resultig from lost reveue, the use of the mail for athrax attacks resulted i uexpected ad uavoidable ew costs. The cost, icludig capital ivestmets, of respodig to these attacks is curretly estimated at $1 billio i FY The impact of the attacks will cofirm to affect our fiaces throughout FY 2005 ad beyod. The actual cost ad timig of these costs will deped o the review ad selectio of techologies to detect, cotai ad saitize biohazards i the mail. The Postal Service has provided a separate detailed report o its Emergecy Preparedess Pla to Cogress. This pla will further defie the ear-term ad log-term costs related to protectig our employees, customers ad the mails from exposure to biohazardous material. TABLE 4.3 EXTRAORDINARY EXPENSES Descriptio Cost ($Millios) Medical Testig ad Emergecy Treatmet 13.0 Protective Equipmet 33.2 Evirometal Testig ad Facility Clea-up 80.0 Commuicatios ad Educatio 60.3 Purchase, Istallatio ad Use of Equipmet for Detectio, Protectio ad Health Risk Reductio Cost of Operatios Disruptios Security Iitiatives 48.5 TOTAL ESTIMATED COSTS FOR FY Fudig Received FY 2002: Presidetial Trasfer from the Emergecy Respose Fud 175 DOD Appropriatios Act, 2002 P.L. No Fudig Requested FY 2002: Supplemetal Appropriatios to be Requested 87 Our goal of providig a safe ad secure workplace was affected. Two Postal Service employees died as a result of athrax ihalatio, ad others were affected. Some postal employees also suffered from side effects of medicatio. Although the Postal Service, maagemet associatios ad uios worked closely together, commuicatio difficulties ad coflictig expert opiio o this complex subject had a impact o the employee satisfactio idex, oe of the key performace measures. Service performace also was affected. O September 11, all flights were grouded. It took some time before flight operatios were resumed. Scheduled airlies, already troubled fiacially, sigificatly reduced flights ad chaged operatig Comprehesive Statemet o Postal Operatios Chapter 4 Prelimiary 2002 Aual Performace Pla

80 schedules. As a result, mail service was disrupted, ad the Postal Service had to seek extraordiary alterative trasportatio to restore service. I additio, FAA regulatios prohibited mail pieces weighig over 16 ouces o most scheduled airlies as a security measure, further disruptig postal operatig schedules. Furthermore, may areas have bee affected by the closig of processig ceters as a result of athrax cotamiatio, ad facilities were disrupted by testig for athrax. Despite these problems, service performace i most areas has retured to previous high levels. c. Competitio The Postal Service provides services to customers i markets where the customers have competitive alteratives ad techological substitutes to traditioal mail services. 4 While total mail volume has cotiued to grow over the last decade, the rate of growth especially for the critical First Class Mail category 5 has bee decliig. Direct competitors i the package market iclude firms such as UPS ad FedEx, as well as privatized foreig postal services such as TPG ad Deutsche Post. Idirect techological substitutes for First Class Mail iclude facsimile, , direct deposit/debit ad electroic bill presetmet ad paymet. Advertisers have a wide variety of choices, icludig direct mail. More tha 90 percet of mail volume is subject to direct competitio or idirect substitutio. 4. Trasformatio Visio The Postal Service Five Year Strategic Pla, , outlied a record of sigificat improvemets for the Postal Service. However, the pla idicated that cotiuous icremetal improvemets i performace would ot be sufficiet to maitai the capability of the Postal Service to cotiue to achieve its uiversal service missio. The Geeral Accoutig Office (GAO) cocurred ad placed the Postal Service o its High Risk list. The GAO focused o the eed for structural trasformatio, ad Cogress directed the Postal Service to develop a Comprehesive Trasformatio Pla. 6 The Postal Service established a cross-fuctioal Trasformatio Plaig Team to coduct a aalysis of the issues facig the Postal Service ad to describe potetial solutios. The team was resposible for coordiatig a sigificat effort to discuss the optios with the multiple stakeholders of the Postal Service major customers, the mailig idustry, postal suppliers, employees ad the public. The report to Cogress is due April 4, 2002, ad the subsequet policy discussio is expected to impact ad perhaps chage some of the goals, idicators ad targets curretly i this prelimiary pla. 5. Prelimiary FY2003 Goals, Idicators, ad Targets The Postal Service has developed a balaced scorecard approach to performace plaig that icludes customer requiremets (Voice of the Customer), employee eeds (Voice of the Employee) ad fiacial requiremets (Voice of the Busiess). These are based o the strategic pla, ad usually do ot chage o a aual basis. The goals ad objectives reflect corporate priorities ad are supported by additioal fuctioal, departmetal, operatig uit ad program goals. Recet performace treds are provided i Chapter 5, Aual Performace Report. For FY 2003, little chage i most orgaizatio-wide idicators ad targets is expected. The geeral ecoomic declie ad the associated reductio of mail volume have reduced the fuds available for sigificat ivestmets i future improvemets. Furthermore, the ecessity to divert resources to address the disruptios caused by threats to the mail system, its employees ad customers also has reduced the resources available to fud improvemets. Review of FY 2003 Chages For FY 2003, the Postal Service is focusig o improvig its orgaizatioal results by idetifyig the most importat measure of orgaizatioal success ad providig clear accoutability for performace. Voice of the Customer The FY 2002 idicators ad targets for timely ad cosistet service performace remai uchaged for FY A sca rate target was added for Express Mail. 4 The curret regulatory structure of the Postal Service was desiged for a protected eviromet with captive customers appropriate to 1970 that may ot be appropriate for the curret competitive eviromet. 5 First Class Mail accouts for about 56 percet of the reveue of the Postal Service, ad, more importatly, about 70 percet of the cotributio to coverig the istitutioal costs of the orgaizatio. 6 The Postal Service published a Outlie for Discussio: Cocepts for Postal Trasformatio o September 30, 2001 to support public discussio. Chapter 4 Prelimiary 2002 Aual Performace Pla 2001 Comprehesive Statemet o Postal Operatios 77

81 TABLE 4.4 FY 2003 PERFORMANCE GOALS, INDICATORS AND TARGETS THRESHOLD/PAY FOR PERFORMANCE (PFP) RECOMMENDATIONS AS OF JAN. 29, 2002 Goal Sub-Goal Idicator FY 2003 Target Log Rage Goal (2005) First Class Overight O Time (EXFC) Threshold 93.0% (Origiatig ad Destiatig Composite) (PQ 1-4) FCM 2/3 Day O Time (Orig & Destiatig Composite) Priority Mail O Time Withi 2 Days (Origiatig ad Destiatig Composite) (FY2002 PETE Network) PFP % Weight* PFP % Weight* 88.0% (PQ, 3 &4) 91% (PQ, 3 & 4) Cosistecy of Performace Across Classes of Mail vs. Service Stadards VOC Growth Timeliess ad Cosistecy Express Mail O Time (Orig & Destiatig Composite) (PTS) PFP % Weight* 88.0% (PQ, 3 & 4) Delivery Cofirmatio Sca Rate (Priority Mail) ad Express Mail Sca Rate** PFP % Weight* 98% less tha 5% maual/multiple sca, Composite (PQ 1-4) VOE Motivated, Productive ad Iclusive Workforce Miimize Impact from Accidets ad Abseces OSHA Illess/ijury Rate Threshold 3% Natioal improvemet over EOY FY2002, allocated by opportuity*** Available for Duty Rate VOB Affordability Employees Committed to USPS Success Improve Productivity to Cotrol Costs ad Improve Cotributio Levels ad Grow the Busiess Targets based o Fiacial Pla VOE Survey * - Deploy will recommed the weights for VOC Idicators. ** - Deploy will recommed a Maual Sca Percetage for Express Mail. *** - OSHA Illess / Ijury Rate Opportuity will be recommeded by Deploy. **** - Note: adjusted for o-productive ivestmet or expediture requiremets relatig to mail ad employee safety (athrax). USPS Total Factor Productivity (TFP) Workload Adjusted Total Operatig Expese (Area) Workload Adjusted Total Operatig Expese (PC) Voice of the Employee The performace targets for the OSHA Illess/Ijury rate ad the VOE Survey were icreased. I FY 2002, the target was a 2 percet atioal improvemet i the OSHA Illess/Ijury rate. The Postal Service is seekig a 3 percet improvemet for FY I FY 2002, the VOE Survey target was equal to or better tha the previous year. For FY 2003, the Postal Service is seekig better tha the previous year. Voice of the Busiess The atioal Total Factor Productivity (TFP) goal for FY 2003 is to improve over the previous year. I FY 2002, the atioal TFP goal was a 1 percet improvemet. PFP Threshold PFP PFP Better tha EOY 2002 Positive Improvemet over FY2002 **** Better or Equal to Pla Icreased Cotributio o Differet Product Lies The performace of the Areas ad their Performace Clusters (PCs) are a major drivig factor that cotributes sigificatly to the achievemet of the atioal TFP goal. To supplemet the TFP measure i FY 2002, additioal productivity idicators kow as Area ad PC Productivity Improvemets were utilized. This measure was calculated usig multiple factors that were ot easily recogized at all levels. Therefore, our plas for FY 2003 call for their cotributio to be measured by achievig or beatig their Total Operatig Expese (TOE) plas, after workload adjustmets. Sice workhours ad operatig expeses are tracked virtually o a real-time basis, this chage will provide a direct lie-of-sight performace idicator at all levels Comprehesive Statemet o Postal Operatios Chapter 4 Prelimiary 2002 Aual Performace Pla

82 Review of FY 2003 Executive Merit Performace Program Chages The chages i the published FY 2002 Merit Performace idicators ad targets are expected to be extesive for executives ad key operatig maagers. The Postal Service is attemptig to create a more detailed set of idicators that are more relevat to idividual operatig uits ad fuctios. USPS Threshold/Pay for Performace Goals, Idicators, Targets Operatig Uit/Fuctio Merit Goals, Idicators, ad Targets Idividual Merit Goals, Idicators, ad Targets The purpose is to icrease accoutability ad provide a clear lie of sight betwee idividual ad uit targets to the strategic orgaizatioal targets. Such specificity would also eable maagers to recogize sigificat improvemets i performace over the previous year as well as achievemet of basic targets. Voice of the Customer (35 percet) The followig idicators are amog the relevat uit specific ad idividual service performace uder cosideratio: EXFC Overight Destiatig EXFC 2/3 Day Origiatig/Destiatig Composite poits to Same Period Last Year EXFC 2 Day Origiatig/Destiatig Composite PETE Overight Delivery PETE Surface withi 2 days Express Mail Itra-district BMC Itra-district Advace (Ad Mail) Customer Satisfactio Measuremet Delivery Cofirmatio Priority Mail Scaig Performace Delivery Cofirmatio Priority Mail Service Performace Effectiveess Voice of the Employee (20 percet) Relevat uit specific ad idividual idicators might iclude: VOE Survey OSHA Ijury ad Illess Rate OSHA Ijury ad Illess percetage of same period last year Motor Vehicle Accidet Rate Motor Vehicle Accidet Rate compared to same period last year Traiig i specified subjects Skills Proficiecy Cotributio to Affirmative Actio ad Equal Opportuity Programs Voice of the Busiess (45 percet) Relevat uit specific ad idividual idicators might iclude: Budget (35 percet) - Total Adjusted Operatig Expeses - Total Adjusted Workhours Overtime (5 percet) - City Carrier Overtime - Customer Service Clerk/Mail Hadler Overtime - Mail Processig Clerk/Mail Hadler Overtime - Pealty Overtime Attedace (5 percet) - Total Sick Leave - Total Sick Leave percetage compared to same period last year The merit items are still uder developmet ad will iclude discussios durig the Deploy phase of the plaig cycle ad egotiatios with Postal Service maagemet associatios. The iitial results will be published i the fial Performace Pla i September, but the process of developig ad implemetig a complete set of itercoected goals, idicators ad targets is expected to take several years to implemet. 6. FY2003 Performace Improvemet Strategies Major postal programs for maitaiig ad improvig postal performace have bee described earlier i the Comprehesive Statemet o Postal Operatios. 7. Resources ad Requiremets The followig projectios were prepared durig the summer of 2001 ad have bee submitted to the Postal Rate Commissio as part of the Postal Service s request for a chage i postage rates ad fees. Subsequet to the preparatio of this TABLE 4.5 PRELIMINARY FY2003 REVENUE PROJECTIONS REVENUE CATEGORY FY2001 ACTUAL FY2002 PROJECTED FY2OO3 PROJECTED First Class Mail Priority Mail Express Mail Periodicals Stadard Package Services Iteratioal Special Services Other TOTAL ($BIL) ($BIL) ($BIL) Note: These projectios reflect assumptios icluded i Postal Service Rate Case Docket No. R ad reflect pre-september 11th estimates. Chapter 4 Prelimiary 2002 Aual Performace Pla 2001 Comprehesive Statemet o Postal Operatios 79

83 material, the geeral ecoomic outlook became worse, ad the U.S. ecoomy etered ito a recessio i March 2001, with a recovery ot foresee util I additio, the evets of September 11 ad the subsequet declie i mail reveue led to a uprecedeted declie of $876 millio i the first quarter of FY 2002 (cocludig November 30). As a result, the forecast for postal reveue will be revised dowward substatially. At the same time, the prelimiary costs submitted to the Postal Rate Commissio are also likely to be revised upward substatially as a result of the expected costs of providig mail security. TABLE 4.6 PRELIMINARY FY2003 EXPENSE PROJECTIONS REVENUE CATEGORY FY2001 ACTUAL FY2002 PROJECTED FY2OO3 PROJECTED ($BIL) ($BIL) ($BIL) Persoel Compesatio Beefits No-Persoel Trasportatio Supplies ad Services Buildig Occupacy Depreciatio/Write-offs Iterest Expese Deferred Retiremet Liability Borrowig Other Rate Case Cotigecy TOTAL The Postal Service is curretly aalyzig the results of recet labor arbitratio awards, ad the results could materially affect the cost projectios. Updated forecasts from the official model are ot available for developig the Prelimiary Performace Pla. 8. Maagemet Process The Postal Service has a flexible ad robust maagemet cycle that has bee able to adapt to cosiderable ucertaities i the past. This process has bee described previously i the Comprehesive Statemet i the sectio o Strategic Plaig. This year, the Postal Service has bee workig with the Geeral Accoutig Office (GAO) to provide Cogress with quarterly updates o the fiacial coditio of the Postal Service, ad has bee workig closely with Cogress ad other agecies o documetig the optios ad costs for mail security. The Postal Service has also bee workig very closely with stakeholders i the developmet Note: These projectios reflect assumptios icluded i Postal Service Rate Case Docket No. R ad reflect pre-september 11th estimates of the comprehesive Trasformatio Pla, due to Cogress i March The chages that result from these iitiatives will be reflected i the fial FY 2003 Aual Performace Pla, due i September 2002, ad i the ext update of the Five Year Strategic Pla, due i September Verificatio ad Validatio The Postal Service is subject to a umber of reviews ad audits of systems ad processes. Fiacial statemets are reviewed aually by Erst ad Youg, LLP, a idepedet certified public accoutig firm hired by the Board of Goverors. Durig the year, the Office of the Ispector Geeral (OIG) coducts fiacial ad iteral cotrol systems ad operatig processes. 7 Durig the last six moths, the OIG coducted 26 performace reviews, 201 fiacial reviews ad ivestigatios, 20 techology reviews ad 85 labor maagemet reviews ad ivestigatios. The Postal Service also is subject to reviews from the Geeral Accoutig Office (GAO), actig i support of Cogressioal oversight. I 2001, the GAO coducted six major reviews: Postal Service: Iformatio o Retiremet Plas, GAO , December, 2001 Postal Service: Update o E- Commerce Activities ad Privacy Protectios, GAO-02-79, December 28, 2001 Postal Service: Few Craft Employees Eared More Tha Their Postmasters, But Adequacy ad Reasoableess of Pay Differeces Remai Uclear, GAO , Sept.13, 2001 Postal Service: Fiacial Outlook ad Trasformatio Challeges, GAO T, May 15, 2001 Postal Service: Trasformatio Challeges Preset Sigificat Risks, GAO T, April 4, 2001 Major Maagemet Challeges ad Program Risks: Postal Service, GAO , Jauary 1, 2001 Postal Service reveues ad costs are subject to itesive scrutiy through the Postal Rate Commissio ad the rate regulatio process. 7 See the Semiaual Report to Cogress, April 1, 2001 September 30, 2001, Office of the Ispector Geeral, icludig sigificat activities of the Postal Ispectio Service Comprehesive Statemet o Postal Operatios Chapter 4 Prelimiary 2002 Aual Performace Pla

84 Chapter V 2001 Performace Report I this chapter, the Postal Service presets its review of its actual performace compared to the 2001 Aual Performace Pla. A. Itroductio The Postal Service developed the 2001 Aual Performace Pla through its structured maagemet process 1 ad i cosultatio with Cogress. The pla sets objectives for achievemet for the year, as defied by specific goals, subgoals, idicators ad targets. Those 2001 goals ad subgoals were approved by the Postal Service Board of Goverors ad were submitted to Cogress i the Uited States Postal Service 2001 Aual Performace Pla. Some of the goals were chaged subsequet to the Pla's release based upo maagemet's assessmet of actual 2000 performace. These modificatios were detailed i the 2000 Comprehesive Statemet o Postal Operatios, Chapter Performace Report. These performace measures go to the heart of the Postal Service s missio. They help evaluate the Postal Service s role as a govermet service providig uiversal postal service to the coutry. Ad they aim at the fulfillmet of aother elemet of our charter: that the Postal Service shall be selfsustaiig, fudig its operatios through reveue geerated by its products ad services. This report meets the requiremets of the Govermet Performace ad Results Act (GPRA), which madates that the report: Review the success of achievig the performace goals of the fiscal year. Evaluate the performace pla for the curret fiscal year (2002) relative to the performace achieved towards the performace goals i the fiscal year covered by the report (2001). Explai ad describe, where a performace goal has ot bee met (icludig whe a program activity s performace is determied ot to have met the criteria of a successful program activity): why the goal was ot met; those plas ad schedules for achievig the established performace goal; ad if the performace goal is impractical or ifeasible, why that is the case ad what actio is recommeded. Iclude the summary fidigs of those program evaluatios completed durig the year covered by the report. This report icludes a sectio highlightig the Postal Service s performace i 2001, a table itemizig our performace agaist each subgoal, a sectio detailig the performace for each goal, ad, a table listig chages made to the 2002 Pla s goals ad subgoals as a result of 2001 performace. A report o Evaluatios of Programs, idicators ad subgoals has bee icluded i Chapter 4. Table 5.1, which follows here, shows all goals, subgoals, idicators ad targets for 2001 ad reports our performace to each target. Detailed discussio of Postal Service performace to specific Idicators ad Subgoals of the 2001 Pla follows this table. B. Year i Review The year 2001 proved eve more challegig for the Postal Service tha had bee forecast i the Aual Performace Pla. The pla called for improvig our service levels, our uderstadig of employee issues ad our overall busiess performace. It aticipated a et loss of $480 millio ad depeded upo sigificat cost cotrol iitiatives to keep the loss to a miimum. This forecasted et loss was based o our expectatio of a rate icrease, slightly lower mail volume growth ad risig labor expeses. Istead, the Postal Service was cofroted with a softeig ecoomy ad reductio i mail volumes, the Postal Rate Commissio's decisio to reduce ad delay our rate request, uusually high iflatioary pressure o our labor costs ad, a icrease i our fixed costs caused by the expasio of our delivery etwork to serve more tha 1.7 millio ew addresses. Combied, these factors produced a loss far greater tha plaed, a loss that could have reached $3 billio had it ot bee for the success of itesified cost maagemet efforts. I respose to these uforesee reveue reductios ad cost icreases, maagemet implemeted eve more aggressive productivity improvemets, reduced persoel, ad, at the Goverors request, called for a freeze o capital spedig for ew facilities. These focused efforts would have held the 2001 loss to just uder $1.4 billio had it ot bee for the evets of September 11. Betwee September 1 Our iteral maagemet system has four phases: Establish; Deploy; Implemet; ad Review. This orgaizatio-wide system was developed through the applicatio of Malcolm Baldrige Natioal Quality Award priciples. It sets up a aual maagemet cycle based o costat refiig ad revisig of goals based o result-focused data. The first phase, Establish, assesses curret strategic goals, strategies, idicators ad subgoal ad sets plas for the curret year. The Deploy phase commuicates these provisioal subgoals throughout the orgaizatio ad agreemet is reached through the budget process o a set of fuded programs aimed at achievig the subgoal. Implemetatio is the carryig out of these programs durig the year. Review is seior maagemet s resposibility. Throughout the year they review the progress of these programs. 2 Details of the idex used to measure this idicator appear i the detailed results portio of this chapter. Chapter 5 Performace Report 2001 Comprehesive Statemet o Postal Operatios 81

85 TABLE 5.1 PERFORMANCE 2001: GOALS AND RESULTS Goal Subgoal Idicator VOC Ear customers' busiess i a marketplace where they have choices by providig them with worldclass quality at competitive prices. VOE Foster a iclusive ad welcomig workplace cosistet with Postal Service values of fairess, opportuity, safety ad security; where everyoe is give the kowledge, tools, traiig ad ecouragemet to be successful; ad where everyoe is recogized for ad takes pride i their participatio i customers' ad the Postal Service's success. Provide timely delivery. Provide reliable service. Improve customer satisfactio. Improve workplace relatios by buildig leadership skills ad behaviors. Esure a iclusive ad fair eviromet with opportuities for all employees. Esure that each ad every employee is give the kowledge, tools, traiig ad ecouragemet to successfully meet the expectatios of their positios. First-Class Mail o time: EXFC overight EXFC 2/3 day Delivery i stadard+ 1 day Priority Mail o time Advertisig o time Groud Parcels o time Periodical o time Express Mail o time Accuracy of delivery idex Overall satisfactio - residetial (CSM survey results) Overall satisfactio - busiess (CSM survey results) REDRESS 100% available Iclusive/fair eviromet idicators are part of merit process Represetatio of all groups i details ad special assigmets Represetatio of all groups i successio plas Activities supportig the affirmative employmet pla Traiig i prescribed curriculum (icludig 4 hours of madatory workplace eviromet iterpersoal skills traiig) VOB Geerate fiacial performace that esures commercial viability as a service provider i a chagig, competitive marketplace ad geerate cash flow to fiace high-yield ivestmets for the future while providig competitively priced produces ad services. Improve employees safety, security ad well-beig. Improve uderstadig of employees issues ad cocers. Improve overall VOB performace. Cotrol costs by achievig productivity gais. OSHA ijury/illess rate VOE Survey Idex Area Productivity improvemet PC Productivity improvemet Capital Commitmets USPS Total Factor Productivity USPS Output per Workhour Comprehesive Statemet o Postal Operatios Chapter 5 Performace Report

86 Prelimiary Target Fial Target 2001 Results Develop performace baselie Proprietary iformatio 1% improvemet Develop ew idicators Develop idicators ad baselie Proprietary iformatio Develop performace baselie 93% overall satisfactio through CSM-Residetial Survey 91% overall satisfactio through CSM-Busiess Accout Survey 100% available, 70% participatio Icluded i PCES merits Quarterly review of affirmative employmet pla (Areas with COO, PC's with AVPs ad HQ with Maagemet Committee No chage No chage 98 No chage Pilot testig of the Electroic Publicatio Watch System No chage No chage No chage No chage No chage No chage No chage Developed a performace baselie. Target achieved, iformatio proprietary. 98 Developed ew idicators. Developed ew idicators ad baselie. Did ot meet the target, which is proprietary. Developed a baselie for ADI Did ot meet the target. Did ot meet the target. 100% available, 76% participatio Accomplished, this item was icluded i PCES merit reviews. This was accomplished through the coordiatio ad ivolvemet of VP, Diversity. 97% of EAS 15 ad over: 20 hours 97% of EAS 14 ad below: 8 hours 100% of craft work uits: 8 hours 7.96 Improvemet over 2000 VOE Survey Idex score of 57.5 Improvemet over hurdle Improvemet over threshold $2.6 billio 0.7% 2.0% No chage No chage No chage No chage No chage No chage No chage No chage No chage No chage Target achieved. Target achieved. Achieved this goal i 74 of 85 Performace Clusters. Did ot achieve target, eded FY 2001 with FY 2001 Survey Idex of 58.1 Achieved i all 11 Areas. Achieved by 68 of 85 Performace Clusters. Did ot achieve target. Committed $1.2 billio due to BOG-madated capital freeze. 1.3% 1.7% Chapter 5 Performace Report 2001 Comprehesive Statemet o Postal Operatios 83

87 11 ad our fiscal year ed of September 30, we saw a further dowtur i reveue of $200 millio ad icreased costs of approximately $100 millio. Thus, while we successfully reduced expeses ad maitaied cosistetly high service levels, we eded the year with a $1.7 billio loss. 1. Busiess Performace Because postage rates are set through a legthy rate case process, productivity improvemet programs are maagemet s best aveue to address short term reveue variaces. This is why four out of our five Voice of the Busiess goals are productivity goals. I 2001, as the ecoomy softeed ad mail volumes ad reveue declied, we effectively restraied resource usage ad realized a gai of 1.3 percet i USPS Total Factor Productivity (TFP) that was equivalet to almost $900 millio i expese reductios. Our two-year cumulative TFP growth of 3.7percet is equivalet to a expese reductio of $2.5 billio. Not sice 1993 have we achieved TFP growth of this magitude. (Chapter 3 reports TFP performace i detail.) Noetheless, the cost efficiecies gaied through these productivity programs were outstripped by structural ad iflatioary pressures o our reveue ad costs. Although we reduced work hours by 2.3 percet, usig 23.1 millio fewer workhours tha i 2000, our labor cost per work hour icreased by 5.8 percet. That was more tha double the Cosumer Price Idex icrease of 2.5 TABLE 5.2 USPS TOTAL FACTOR PRODUCTIVITY USPS USPS Total Factor Output per Multi Factor Productivity Workhour Productivity 1 Aual 2 Cumulative Aual Cumulative Aual 2 Cumulative From 1971 From 1971 From (0.2) (1.9) 8.9 (1.3) (1.3) 7.6 (0.1) (1.0) (0.1) (0.6) ad 2001 MFP Data are estimates of DRI-WEFA. BLS Data for these years have ot yet bee released. 2 Historical data are subject to revisio as certai data used i calculatig productivity are periodically revised. Price idexes released by the Bureau of Labor Statistics ad the Bureau of Ecoomic Aalysis that are used to calculate resource usage are subject to regular historical revisios by these agecies. Whe historical revisios are released, they are icorporate ito the TFP calculatio, which ca result i historical TFP revisios. TFP for the reportig year is also subject to revisio whe fial Postal Service cost data for the reportig year is available. Geerally, this revisio occurs i April of the followig year. Note: Certai Aual/Cumulative amouts may ot sum due to roudig. percet i 2001 ad exceeded the atioal Employmet Cost Idex icrease of 3.7 percet. To meet the challeges of decliig reveue ad icreasig costs, the Postal Service eacted two separate modificatios of our capital commitmets goal. The first modificatio was made by Maagemet after its review of 2000 results ad first quarter 2001 fiacial idicators. The capital commitmet target of $3.6 billio was reduced to $2.6 billio at that time ad was so reported i the 2000 Comprehesive Statemet to Cogress. As it became apparet that reveue ad cash flow from operatios would ot support the ameded pla, we cotiued the freeze exceptio process ad the capital commitmets goal was reduced further to $1.6 billio. 2. Customer Service Throughout 2001, the Postal Service maitaied its primary focus o its missio of deliverig outstadig customer service ad value to the America people. The Postal Service exceeded the target for o-time performace for its flagship product, Overight First-Class Mail, achievig 94 percet o-time performace both for the period of measuremet ad for the year i total. The target was 93 percet o-time performace. For EXFC two-ad three-day mail, the Postal Service did ot meet the o-time performace of 87 percet set for 2001, due to cotiued trasportatio problems resultig from scheduled airlies iability to provide reliable flight service. The Postal Service achieved twoad three-day combied First-Class Mail o-time performace of 84 percet. The Priority Mail o-time target, which is proprietary, was met. The Postal Service met the target for Advertisig Mail delivered o-time withi a requested sales widow with performace at 98 percet as measured by the ADVANCE system. To further improve customer service, the Postal Service has worked with the mailig idustry to implemet a iitial idicator, cosidered to be proprietary, for Parcel Select (groud parcels) performace Comprehesive Statemet o Postal Operatios Chapter 5 Performace Report

88 i 2001 ad has piloted a ehaced Electroic Publicatio Watch System. 3. Employees ad the Workplace I 2001, the Postal Service cotiued its vigorous commitmet to a iclusive ad welcomig workplace. Cosistet with its values of fairess, opportuity, safety ad security, the Postal Service pursued goals aimed at esurig that all employees are give the kowledge ad traiig to be successful ad that all are recogized for ad take pride i cotributig to the success of customers ad the Postal Service. This year, the Office of Equal Employmet Opportuity ad the REDRESS (Resolve Employmet Disputes, Reach Equitable Solutios) program ejoyed its first full year as a itegrated orgaizatio. A reewed effort by EEP professioals at the district level has focused attetio o dispute resolutio at the early stage of the coflict. For the third cosecutive year, the umber of EEO pre-complait couseligs i the Postal Service decreased, attributable i large measure to the REDRESS program. The target participatio rate of 70% was exceeded as a 76.2% rate of participatio was achieved. The Postal Service will cotiue to emphasize the REDRESS process as a meas of brigig employees ad maagers face to face to lear to deal with coflict ad misuderstadig i the workplace. The subgoals set for the goal of esurig a iclusive ad fair workplace eviromet with opportuities for all employees were achieved. Maagers were made accoutable for the iclusive ad fair workplace goal i their ow merit evaluatio process. Ad, the vice presidet for Diversity coducted targeted quarterly reviews of Affirmative Employmet Plas to esure that all groups were represeted i details ad assigmets, successio plas ad other activities supportig the affirmative employmet pla. Employee traiig programs, stipulated as goals, were offered i Workplace Eviromet Iterpersoal Skills. The program target for iterpersoal skills traiig of 97% of EAS employees was exceeded as 100% participatio was achieved; the target of 100% craft work uit participatio was ot achieved, as 98.55% received traiig. Progress was made i improvig postal employees safety, security ad well-beig. I 2001, the Postal Service implemeted the OSHA Illess Ijury Idicator as the uiversal workplace safety measure, pursuat to the requiremets of the Postal Employees Safety Ehacemet Act of I this first learig year of reportig this performace goal as a compesable target, the Postal Service did ot achieve its target of 7.96 for this idicator. The performace result of 8.46 reflected our process of adjustig our previous system to coform to OSHA s complex reportig system. I 2001, the Postal Service met the Employee Survey Idex subgoal of improvig the 2000 VOE Survey Idex score of I 2001, the Postal Service achieved a score of 58.1, a 0.6 improvemet over 2000 s baselie idex. C. The Plaig Process This Performace Pla was developed as part of the ogoig plaig process that respods to the 1993 Govermet Performace ad Results Act. The pla was commuicated to Cogress i four steps. First, the Prelimiary 2001 Aual Performace Pla was submitted to Cogress i February The 2001 Pla was ameded thereafter to reflect the commetary of both the Geeral Accoutig Office (GAO) ad the Office of Ispector Geeral, ad the 2001 Aual Performace Pla was submitted to Cogress ad the America people i September Third, the pla was reviewed durig the preparatio of last year s 2000 Performace Report icluded as Chapter 5 of the 2000 Comprehesive Statemet. Idicators ad subgoals i the 2001 Pla were reevaluated at that time ad adjusted to reflect actual 2000 results ad the experiece of the first half of the year. The 2000 Comprehesive Statemet, cotaiig updated goals ad subgoals for 2001, was submitted to Cogress i March Ad last, if ecessary, correspodece has bee set to Cogress to provide iformatio o ay eeded chages to the pla. D. The Three-Voice Structure ad Performace Goals As stated i the 2001 Aual Performace Pla, the Postal Service orgaizes its corporate goals i a three-voice structure that addresses the fudametal areas of Postal Service performace: The Voice of the Customer goal category ceters o customer satisfactio, meetig customer requiremets ad the achievemet of superior quality at competitive prices. Chapter 5 Performace Report 2001 Comprehesive Statemet o Postal Operatios 85

89 The Voice of the Employee goal category focuses o creatig a workplace eviromet that fosters success ad embraces the values of fairess, opportuity, safety ad security. The focus of the Voice of the Busiess goal category is o fiacial performace that assures commercial viability, bottom-lie results ad sufficiet capital for future ivestmets. For each Voice, a goal statemet focuses o the overall performace sought. For 2001, these were: Voice of the Customer Ear customers busiess i a marketplace where they have choices by providig them with world-class quality at competitive prices. Voice of the Employee Foster a iclusive ad welcomig workplace cosistet with Postal Service values of fairess, opportuity, safety ad security: where everyoe is give the kowledge, tools, traiig ad ecouragemet to be successful; ad where everyoe is recogized for ad takes pride i their participatio i customers ad the Postal Service s success. Voice of the Busiess Geerate fiacial performace that esures the commercial viability of the Postal Service as a service provider i a chagig, competitive marketplace; ad, geerate cash flow to fiace ivestmets for the future while providig competitively-priced products ad services. The followig sectio assesses Postal Service performace i each of these categories as measured accordig to the specific goals, subgoals, idicators ad targets set for each. E. Voice of the Customer Performace Goals: Customer Satisfactio Postal Service Aual Performace Pla Goal: Ear customers' busiess i a marketplace where they have choices by providig them with world-class quality at competitive prices. Performace Goal 1: Provide Timely Delivery As stated i the pla, 2000 idicators ad targets for this subgoal are: Achieve overight First-Class Mail o-time performace of at least 93 percet. Achieve two-ad three-day First-Class Mail o-time performace of at least 87 percet. Develop a o-time performace idicator ad baselie for cosistet delivery (D+1 Overight). Develop a o-time performace idicator ad baselie for cosistet delivery (D+2 Two Day). Develop a o-time performace idicator ad baselie for cosistet delivery ((D+3 Three Day). Achieve targeted Priority Mail o-time performace, as measured by the Priority Ed-to-Ed (PETE) system. Achieve o-time performace for Advertisig Mail delivered withi a requested sales widow of at least 98percet o-time performace, usig the ADVANCE measuremet system. Develop a o-time performace idicator ad baselie for Groud Parcels. Develop a o-time performace idicator ad baselie for Periodicals. Achieve targeted Express Mail o-time performace, as measured by Express Mail Reportig System (AM & PM). With performace measured agaist each idicator ad target for this subgoal, i 2001, the Postal Service: Exceeded the performace target of 93 percet for o-time delivery of Overight First-Class Mail with performace 94 percet o-time. The established target for this Exteral First-Class (EXFC) 3 measured target is the weighted destiatig result of Postal Quarters I-IV. For 2001, i total, the Postal Service achieved Overight First-Class Mail o-time performace of 94 percet, which exceeded the target for the period of exteral measuremet. Did ot achieve the performace target for EXFC two ad three-day mail of at least 87 percet o-time due to cotiued trasportatio problems resultig from scheduled airlies' iability to provide reliable flight service. The established target for this Exteral First-Class (EXFC) meas- 3 First-Class Mail service performace results are measured with a idex called Exteral First-Class (EXFC). This idex is geerated by the Trasit Time Measuremet System (TTMS), which measures service performace from the time mail is etered ito the system at a iductio poit util the time it is received i the home or small busiess. TTMS is idepedetly admiistered by PricewaterhouseCoopers uder a cotract with the Vice Presidet ad Cosumer Advocate. The system provides quarterly estimates of First-Class Mail destiatio service performace for 85 Performace Clusters from their overight, two-day, ad three-day service commitmets i digit ZIP Code Areas Comprehesive Statemet o Postal Operatios Chapter 5 Performace Report

90 ured target is the weighted origi/destiatio combied result of PQ III ad IV performace. The Postal Service achieved two- ad three-day combied First-Class Mail o-time performace of 84 percet. Met the target of completig a baselie for providig cosistet delivery (D+1, D+2, ad D+3) for Overight, two,-ad three- day mail. Met the target for Priority Mail o-time performace. The established target for this Priority Mail (PETE) measured target is weighted origi/ destiatio combied result of PQ III ad IV performace. The specific target ad associated iformatio is proprietary. Met the target for Advertisig Mail delivered withi a requested sales widow with performace at 98 percet o-time, as measured by the ADVANCE system. Implemeted a iitial idicator for Parcel Select (groud parcels) performace i Workig closely with the mailig idustry to cotiue developig supportig systems ad procedures, we aticipate implemetig a more comprehesive idicator ad establishig baselie measuremets i The specific target ad associated iformatio is proprietary. I respose to mailers' requests, piloted a ehaced Electroic Publicatio Watch System that allowed publishers to: eter complaits ito a cetralized data base; request a electroic publicatio watch that will track delivery of idividual mailigs of specific publicatios; ad request resolutio of a systemic service related problem. Utilizig feedback collected durig the pilot test, chages were made to the system ad the ehaced Electroic Publicatio Watch System will be retested ad implemeted i Did ot achieve performace target for otime delivery of Express Mail due to cotiued trasportatio problems resultig from scheduled airlies' iability to provide reliable flight service. The specific target ad associated iformatio is proprietary. Performace Subgoal 2: Provide reliable services. As stated i the pla, the 2001 Idicator ad Target for this subgoal is: Set a performace baselie for the accuracy of delivery of mail usig the Accuracy of Delivery Idicator (ADI). I 2001, the Postal Service: Met the target of establishig a baselie for the accuracy of delivery of mail through the ADI system. Performace Subgoal 3: Improve Customer Satisfactio. As stated i the pla, the 2001 Idicators ad Targets for this subgoal are: Achieve the target of 93 percet Overall Satisfactio for Residetial customers through the Customer Satisfactio Measuremet - Residetial survey. Achieve the target of 91 percet Overall Satisfactio for Busiess Accout customers through the Customer Satisfactio Measuremet - Busiess Accout survey. I 2001, the Postal Service: Did ot achieve the target of 93 percet Overall Satisfactio for Residetial customers through the Customer Satisfactio Measuremet - Residetial survey. Did ot achieve the target of 91 percet Overall Satisfactio for Busiess Accout customers through the Customer Satisfactio Measuremet Busiess Accout survey. I 2001, overall atioal customer satisfactio dropped as the ecoomy declied. The America Customer Satisfactio Idex (ACSI), a atioal ecoomic idicator of customer satisfactio with the quality of goods ad services available to household cosumers i the Uited States, decreased by over 1 percet i The Postal Service's ACSI scores declied alog with other idustries, although the Postal Service still maitaied extraordiary high levels, especially whe compared to other idustries, such as airlies). Postal measures of customer satisfactio, our Customer Satisfactio Measuremet (CSM) surveys, also showed declies i busiess customer satisfactio ad o chage i residetial customer satisfactio sice the previous year. The decrease EXFC is a exteral mail measuremet system of collectio box to mailbox delivery performace. EXFC cotiuously tests a pael of digit ZIP Code Areas selected o the basis of geographic ad volume desity from which 90 percet of the First-Class Mail volume origiates ad to which 80 percet destiates. EXFC is ot a systemwide measuremet of all First-Class mail performace. Chapter 5 Performace Report 2001 Comprehesive Statemet o Postal Operatios 87

91 i busiess customer satisfactio with the Postal Service is a likely a result of the decliig ecoomy. It may also be attributed to customer reactios to what was perceived as two back-toback rate icreases, compouded by public aoucemets of fiacial losses ad the cosideratio of a reductio i delivery days. Eve though CSM targets were ot met, several iitiatives were implemeted to assist postal maagers i improvig customer satisfactio. These iclude a expaded data reportig system with ew aalytic tools to pipoit opportuities for improvemet, a Best Practices website to assist i the sharig of successful ideas ad a recogitio program to promote outstadig customer service performace. F. Voice of the Employee Performace Goals: Orgaizatioal Effectiveess Postal Service Aual Performace Pla Goal: Foster a iclusive ad welcomig workplace cosistet with Postal Service values of fairess, opportuity, safety ad security: where everyoe is give the kowledge, tools, traiig ad ecouragemet to be successful; ad where everyoe is recogized for ad takes pride i their participatio i customers ad the Postal Service s success. are: Performace Subgoal 1 Improve workplace relatios by buildig leadership skills ad behaviors. As stated i the pla, 2001 idicators ad target for this subgoal Make REDRESS 100 percet available, with a 70 percet participatio rate i all Performace Clusters. I 2000, the Postal Service: Achieved the target of makig the REDRESS process available to all employees ad applicats for employmet withi the Postal Service ad the Postal Ispectio Service; ad exceeded the target of 70 percet participatio i all Performace Clusters. At the close of FY 2001, the program achieved a atioal participatio rate of 76.2 percet. were: were: Performace Subgoal 2 Esure a iclusive ad fair eviromet with opportuities for all employees. As stated i the pla, 2001 idicators ad target for this subgoal Make a iclusive ad fair eviromet with opportuities for all employees part of the merit process, with the target of icludig the idicator i PCES merit reviews. Represetatio of all groups i details ad special assigmets with the target of holdig quarterly reviews of affirmative employmet pla (Areas with COO, PC's with AVP's, ad HQ with Maagemet committee) Represetatio of all groups i successio plas ad activities supportig the affirmative employmet pla. I 2001, the Postal Service: Accomplished the idicator of represetig all groups i details ad special assigmets with the target of holdig quarterly reviews of affirmative employmet pla. Accomplished the idicator of represetig all groups i successio plas ad activities supportig the affirmative employmet pla. Performace Subgoal 3 Esure that each ad every employee is give the kowledge, tools, traiig ad ecouragemet to successfully meet the expectatios for their positios. As stated i the pla, 2001 idicators ad target for this subgoal Traiig i prescribed curriculum, icludig: four hours madatory workplace eviromet iterpersoal skills traiig. The target rates were: 20 hours for 97 percet of EAS employees levels 15 ad above, Eight hours for 97 percet EAS employees 14 ad below ad Eight hours for 100 percet of craft work uits. I 2001, the Postal Service: Achieved this target for EAS employees, levels 15 ad above. Achieved this target for EAS employees 14 ad below Comprehesive Statemet o Postal Operatios Chapter 5 Performace Report

92 Did ot achieve the target because eleve Clusters out of 85 did ot give 100% of their craft uits the full 8 hours of traiig i the prescribed curriculum. However, 98.55% of the craft uits did receive at least 8 hours of traiig icludig the prescribed curriculum. Performace Subgoal 4 Improve uderstadig of employee issues ad cocers. As stated i the pla, the 2001 idicator ad target for this subgoal was: Improvig last year's 57.5 VOE Survey Idex score. I 2001, the Postal Service: Achieved this target with a VOE Survey Idex of 58.1, which was a.6 improvemet over last year's baselie idex. Performace Subgoal 5 Improve employees' safety, security ad wellbeig. As stated i the pla, the 2001 idicator ad target for this goal was: Achievig the OSHA ijury/illess idicator target of I 2001, the Postal Service: Did ot achieve this target. The year eded with a 8.46 OSHA Ijury/Illess Rate. This was 0.50 above the target of However, we believe the result to be a success because aalysis durig the year demostrated that chages to the base were required. This, the first year i which this idicator was used, proved to be a learig year. Data validatio ad aalysis icluded a 100% review of our record keepig at year ed as well as radom reviews throughout the year. I additio, as we gaied experiece i iterpretig OSHA s complex reportig system, adjustmets to our process were made. As a result, a accurate baselie is ow i place ad ca be applied i FY G. Voice of the Busiess Performace Goals: Fiacial Performace Postal Service Aual Performace Pla Goal: Geerate fiacial performace that esures commercial viability of the Postal Service as a service provider i a chagig, competitive market place; ad geerate cash flow to fiace high-yield ivestmets for the future while providig competitively-priced products ad services. Performace Subgoal 1 Improve overall busiess performace. As stated i the pla, 2001 idicators ad target for this subgoal were: Improve Area Productivity over a hurdle rate. Improve Performace Cluster Productivity above the Threshold. Achieve a capital commitmet budget of $2.6 billio. I 2001, the Postal Service: Achieved Productivity at the Areas over the hurdle. Achieved Productivity at the Performace Cluster (PC) level i 68 of 85 PCs. Did ot achieve the ameded goal of $2.6 billio i Capital Commitmets. To cotrol costs, we istituted a capital commitmets freeze, resultig i a $1.2 billio commitmet for the year. Performace Subgoal 2 Cotrol costs by achievig productivity gais. As stated i the pla, the 2001 idicator ad target for this subgoal was: Achieve a Total Factor Productivity (a measure of total resource usage efficiecy, icludig capital) gai of 0.7 percet. I 2001, the Postal Service: Exceeded the target for Total Factor Productivity (TFP) Growth, achievig TFP growth of 1.3 percet, early double the target of 0.7 percet. This achievemet is equivalet to almost $900 millio i expese reductios ad is the secod highest TFP growth achieved by the Postal Service sice The growth of TFP i 2001 was brought about by maaged restrait o Chapter 5 Performace Report 2001 Comprehesive Statemet o Postal Operatios 89

93 resource usage. Work hours declied by 2.3%, materials use was reduced by 3.6 percet, ad total resources use was reduced by 1.9 percet. The TFP target is a outgrowth of the productivity gai implicit i our budget ad must be determied through calculatios based o actual figures. Did ot achieve the USPS Output per Workhour goal of 2.7 percet. Actual Output per Workhour was 1.7 percet. Whe mail volumes were lower tha aticipated i 2001, maagemet reduced all resource usage, icludig the labor use compoet of TFP, as idicated above. This ameliorated the impact of lower volume growth rates o the Output per Workhour factor. H. Evaluatio of 2001 Performace ad Chages to Goals ad Subgoals i the 2002 Pla I this sectio, the Postal Service evaluates the performace pla for 2002, relative to the performace achieved toward the performace goals of Fiscal Year 2001 covered by this report. I complyig with GPRA requiremets to report this evaluatio, the Postal Service submits four tables: Table 5.1, Table 5.3, Table 5.4 ad Table 5.5. Table 5.1, Performace 2001: Goals ad Results, leads this chapter. It itemizes 2001 performace to each goal, subgoal, idicator ad target of the 2001 Aual Performace Pla. Table 5.3, FY 2002 Goals, Subgoals, Idicators ad Targets, follows here. This table lists all Fiscal Year 2002 goals, subgoals, idicators ad targets of the latest 2002 Aual Performace Pla for each of the three Voices of the Postal Service Maagemet Process: the Voice of the Customer; the Voice of the Employee; ad the Voice of the Busiess. There are o chages proposed to this table. It is the same as what was published i our 2002 Aual Performace Pla issued at the ed of September Table 5.4, FY 2002 Goals, Subgoals, Idicators ad Targets - Idividual Merit Process, follows here. This table lists all Fiscal Year 2002 goals, subgoals, idicators ad targets for each of the three Voices of the Postal Service Maagemet Process: the Voice of the Customer; the Voice of the Employee; ad the Voice of the Busiess. Performace o these idicators ad targets is tied to idividual merit evaluatios for maagers of work uits, rather tha overall orgaizatioal measures of success. There are o chages proposed to this table. It is the same as what was published i our 2002 Aual Performace Pla issued at the ed of September Table 5.5, Area Productivity Baselie Iformatio, is provided as requested by Cogress ad provides baselie iformatio o Area productivity. Targets are based o projected levels of improvemet as established i our budget ad forecastig process. These targets will fluctuate from year to year ad are ot fixed percetage improvemets Comprehesive Statemet o Postal Operatios Chapter 5 Performace Report

94 TABLE 5.3 FY 2002 GOALS, SUBGOALS, INDICATORS AND TARGETS Goal Subgoal Idicator Voice of the Customer Growth Timeliess ad Cosistecy First-Class Overight o Time (EXFC) Origiatig ad Destiatig Composite Express Mail o Time (Product Trackig System) Origiatig ad Destiatig Composite Weight Threshold 30% FY2002 Target 93% 94% PQ III ad IV Strategic Goal (FY2005) Cosistecy of Performace Across All Classes of Mail vs. Service Stadards Priority Mail o Time withi 2 days (PETE etwork) Origiatig ad Destiatig Composite 30% 91% PQ III ad IV First-Class Mail o Time, 2-3-days (EXFC) Origiatig ad Destiatig Composite Delivery Cofirmatio Sca Rate Priority Mail 30% 10% (2.5% per Quarter) 88% PQ III ad IV 98% <5% Maual/ Multiple Sca Composite (PQ I, II, III, IV) Voice of the Employee Miimize Impact Motivated, Productive from Accidets ad ad Iclusive Workforce Ijuries OSHA Illess/Ijury Rate Threshold 2% Natioal allocated by opportuity Available for Duty Rate Employees Committed to USPS Success Voice of the Employee Survey (VOE) Survey PFP Equal to or Better Tha FY2001 EOY Voice of the Busiess Affordability Improve Productivity USPS Total Factor Productivity (TFP) Area Productivity Improvemet Performace Cluster Productivity Improvemet Threshold PFP PFP 1.1% Over FY2001 Improve Over Hurdle Improve Over Hurdle Icreased Cotributio o Differet Product Lies Explaatios Items i paretheses describe the relevat measuremet system. Italics idicate clarificatios of relevat goal for operatioal implemetatio. Threshold items are basic requiremets for maiteace; they must be achieved i order to qualify for cosideratio i other categories. All targets are subject to chage to adjust for exteral factors, such as ecoomic coditios ad workload chages. Chapter 5 Performace Report 2000 Comprehesive Statemet o Postal Operatios 91

95 TABLE 5.4 FY 2002 GOALS, SUBGOALS, INDICATORS AND TARGETS INDIVIDUAL MERIT PROCESS Goal Subgoal Idicator FY2002 Target Voice of the Customer Growth Timeliess ad Cosistecy Delivery Cofirmatio Sca Rate Parcel Post Baselie Strategic Goal (FY2005) Cosistecy of Performace Across All Classes of Mail vs. Service Stadards Improve Parcel Select Improve Stadard Carrier Route budles withi delivery widow; All others withi stadard Baselie Baselie Voice of the Employee Motivated, Productive ad Iclusive Workforce Reliability Customer Satisfactio Miimize the Impact from Accidets ad Abseces Accuracy of Delivery Idex Overall Residetial Customer Satisfactio (Customer Survey) Overall Busiess Customer Satisfactio (Customer Survey) Available for Duty Rate 98.5% Maitai FY2001 Maitai FY2001 Baselie Available for Duty Rate Skilled Workforce Traiig i Prescribed Curriculum 4 hours madatory workplace eviromet EAS >15 (20 hours) EAS <14 ( 8 hours) Craft (8 Hours) REDRESS Soud Dispute Resolutio Processes 97% Employees 100% Work Uits 100% availability 70% Participatio Iclusive Workforce Represetatio of all groups i details ad special assigmets Represetatives of all groups i successio plas Activities supportig affirmative actio pla Quarterly Reviews for Officers Voice of the Busiess Affordability Improve Productivity Flats ad Parcels Cotributio Improve Fiacial Stregth Retail Reveue Commercial Reveue Expese Budget Total Operatig Expese Developig Idicator Achieve Pla Achieve Pla Achieve Pla Explaatios Shaded areas represet goals where idicators were developed i FY2001, ad baselie data is beig developed for FY2002. Targets will be set, based o these baselies, i FY2003. Items i italics are for clarificatio i operatioal implemetatio. Reveue ad expese plas are fialized at the ed of the precedig year ad are subject to chage durig the year, as ecoomic coditios ad workload chages. Icreased Cotributio o Differet Product Lies Comprehesive Statemet o Postal Operatios Chapter 5 Performace Report

96 TABLE 5.5 AREA PRODUCTIVITY BASELINE INFORMATION* Area 2000 Performace 2001 Target 2001 Performace Alleghey Capitol Metro Great Lakes Mid-Atlatic Midwest Northeast New York Metro Pacific Southeast Southwest Wester * Productivity targets are ot set idepedetly. They result from workload ad budgetary requiremets ad vary with these. Chapter 5 Performace Report 2000 Comprehesive Statemet o Postal Operatios 93

97 Idex Address Maagemet...35, 63, 66 Advertisig...35, 38-41, 44, 65, 69, 84, Affirmative Employmet Programs...7 Architecture Automatio , 35, 45-48, 63-64, 66, 70, Bargaiig Uit Employees Breast Cacer Semipostal Research (BCR) Stamp Board of Goverors...1-5, 21, 41, 51, 76, Busiess Eviromet Assessmet Busiess Mail Acceptace...48, Capital...1-3, 32, 43, 51, 58, 70-73, 75, 81-84, 86, 89 Collectio Box Maagemet System...67 Collective Bargaiig , 13 Combied Federal Campaig...12 Compesatio ad Beefits...13, Cost reductio programs...70 Customer Satisfactio Measuremet (CSM)...1, 27, 45, 79, 87 Cyclig...41, 53 Dedicated Air Trackig (DATS)...50 Delivery Cofirmatio , 31, 41, 48, 60, 65, 67, 78-79, Delivery Operatios Iformatio System (DOIS)...51 Delivery Poit Sequecig (DPS)...48, 51 Delivery Uit Operatios...51 Direct Mail...37, 39, 41, 66, 77 Diversity...6-9, 11, 13, 15, 32-33, 83, 85 Employee Assistace Program (EAP)...20 Employee Developmet...6-7, Evirometal , 27-28, 76 Equal Employmet Opportuity...6-7, 12, 85 Expedited Package Services...40 Expeses...12, 14-17, 25-26, 42, 62, 69-72, 76, 78-79, 81, 84 Express Mail...25, 40, 42-44, 54, 69, 77-79, 82, 86-87, 91 Facilities... 9, 14-15, 17, 19-20, 26-29, 32, 37-39, 47, 50, 55, 63, 70, 72, 77, 81, 84 First-Class Mail...1, 22, 24-25, 32, 38-40, 44-45, 69, 73, 76, 82, 84, 86-87, 91, 94 Flats...2, 17, 22, 37-39, 48-49, 62, 92 Flexible Spedig Accouts (FSA)...14 Forwardig , Health Isurace...13 Iformatio Techology...2-3, 16, 59, 61-62, 70 Ijury Compesatio...12 Itegrated Processig Facility (IPF)...51, 53 Iteratioal Mail...42 Iteret Services...5, 18, 35, 40, 42, 53, 57, 59-60, 69 Ivetory...26, 28, 30 Leave Programs...13 Letter Mail...10, Licesig...52, 57 Mail Cartridge System...49 Mail Distributio...45 Mail Recovery Ceters...31, 37, 38 Mail Trasport Equipmet...26, 29 Mail Volume...3, 4, 6, 37, 42, 44, 69, 75-77, 81, 84, 87, 89 Mailers' Techical Advisory Committee (MTAC) Mailig Evaluatio Readability ad Lookup Istrumet (MERLIN)...16, 37, 48, Comprehesive Statemet o Postal Operatios Idex

98 Maagemet Associatios...1, 11, 21, 76, 79 Material Hadlig Merit Performace Evaluatio...13 Meterig...56, 57 Move Validatio Letter...64 Nobargaiig Uit Employees Office of Ispector Geeral...3, 85 Omibus Rate Case...3, 22-23, 25, Operatios...1, 3, 5-6, 13-15, 18, 20, 25, 30-32, 35, 38-39, 43, 45-46, 48, 49-52, 55, 61-63, 69, 70, 75-76, 79, 81, 84 PC Postage...41, 46, 56 Performace Goals...3, 75, 78, 81, 85-86, Periodicals...16, 17, 22-23, 35, 39, 44, 48, 56, 58, 65, 69, 79, 86 Poit-of-Service Oe (POS ONE)...30, 55 Postage Meters...56, 57 Postal Career Executive Service (PCES) , 15, 18, 82-83, 88 Postal Ispectio Service , 80, 88 Priority Mail...2-4, 20, 23-25, 38, 40-41, 44, 54-55, 57, 60, 64, 69, 78-79, 82, 84, 86-87, 91 Productivity... 1, 4-5, 9, 16, 28, 30, 48-49, 62, 71-73, 78, 81-82, 84, Purchasig ad Materials Ratemakig...22, 58 Realty Asset Maagemet...28 Recogitio Program...2, 6, 88 REDRESS...11, 12, 82, 84, 88, 92 Remote Ecodig Ceter (REC)...46 Retail Programs Reveue...1, 3-4, 6, 16-18, 22-24, 28, 30-31, 37-38, 41-42, 44-45, 47, 52-56, 69-76, 78-81, 84, 92 Safety ad Health...15, 17, 27 Self Service...56 Service Performace Measuremet...38, 45 Sexual Harassmet Prevetio...8 Sigature Cofirmatio...41 Special Services , 54, 69-70, 79 Staffig ad Schedulig...62 Stamp Program Successio Plaig...6, 8, 11 Supply Chai Maagemet , 59 Thrift Savigs Pla...17 Traiig , 14-18, 20-21, 27, 31-32, 35, 39, 42, 53, 55, 58, 60, 72, 74, 79, 82, 85-86, 88-89, 92 Trasit Time Measuremet System...45, 86 Trasformatio Pla...1, 4-5, 77, 80 Trasportatio...2, 4, 25-26, 28-29, 31, 40, 42, 50-51, 59, 61, 69, 71-72, 77, 80, Uios...1, 4, 9, 11, 12, 21, 76 Vehicles...16, 18, 23, 28-30, 32-33, 46, 67, 70 Vedig Equipmet...54 Voice of the Busiess (VOB) , 84, 86, 89, 90, 92 Voice of the Customer (VOC)... 45, 77, 79, 85, 86, 90, 91 Voice of the Employee (VOE)...18, 20, 77, 79, 85, 86, 88, Workforce Strategies...55 Workplace Eviromet Improvemet (WEI)...20 Idex 2000 Comprehesive Statemet o Postal Operatios 95

99 Comprehesive Statemet o Postal Operatios Idex

100 Sice September 11 th the Postal Service has delivered more tha a half billio pieces of mail each day to homes ad busiesses all across America. SAFELY. I times like these, sometimes the most importat thig you ca do is your job. Wat to meet a everyday hero? Shake hads with a postal worker. The Comprehesive Statemet of the Uited States Postal Service is published by: Uited States Postal Service Public Affairs & Commuicatios 475 L Efat Plaza, SW Washigto, DC We welcome your fiacial questios ad commets at: Uited States Postal Service Corporate Accoutig 475 L Efat Plaza, SW Washigto, DC Visit our Comprehesive Statemet o the web at This report is prited o recycled paper usig evirometally safe iks. USPS eagle symbol ad logotype are trademarks of the Uited States Postal Service.