USPS Service Changes Issues Opportunities N.E.A.C.E. May 20 th , 2013 Tom Salvo, Postal Operations-Gannett Publishing Se

1. USPS ServiceChangesIssuesOpportunitiesN.E.A.C.E.May 20th, 2013Tom Salvo, Postal Operations-Gannett Publishing Services

2. The United States Postal Service continues to endure the negative effects of electronic diversion combined with a weak economy and increased funding obligations. While the USPS has continuously sought to make operational improvements and improve efficiency, the organization’s current financial position requires additional action to ensure viability and self sufficiency. Financial impacts of both the difficult operating environment and regulatory framework under which the USPS operates. Actions USPS is planning to take to address its financial position and outlook. The USPS is losing up to $25 million dollars a day. Until now, taxpayers have not been on the hook for its mounting losses, but that could be about to change.

3. USPS Closure Update Modified Network Plan and Revised Service Standards The Postal Service is moving ahead with the rationalization of its network. The implementation will be executed by modifying service standards in two phases. The first phase is now done and the second phase as already started, with more to come. Should changes in circumstances warrant, this phased approach will allow the Postal Service to reconsider implementation of the third phase. The plan is to retain all current business mail entry units (BMEUs) for the time being. Should the Postal Service decide to relocate or consolidate any BMEU operations, mailers will be given 120 days advance notice and BMEUs will be relocated or consolidated to nearby locations to minimize the impact on mailers. The Postal Service is committed to simply and clearly communicating all changes throughout the implementation process.

4. DUO Operational Change Delivery Unit Optimization involves relocating letter carriers out of local Post Offices, stations and branches and consolidating them into centralized delivery offices that will continue to be served by the same processing and distribution center. The existing retail operation will require less space and the office could then be downsized to a smaller space nearby. This process increases operational efficiency across the board and considerable savings are realized in economies of scale regarding transportation, maintenance, custodial, leasing and employee complement.

5. Delivery Unit Optimization could affect larger mailers who drop-ship their mail as they will be required to take their mailings to the new centralized location; however, the new centralized location could save transportation costs since multiple ZIP Codes will be sorted in one facility. • The Postal Service is doing everything within its authority to reduce costs, save money and streamline operations and will continue to look for opportunities to improve customer service. By consolidating operations, adjusting delivery routes and restructuring administrative and processing functions, the Postal Service is adapting to meet the evolving needs of its customers. These changes also help meet one of the four critical business goals established by Postmaster General Pat Donahoe: taking steps to become a leaner, faster, smarter organization.

6. Contribution Factors

7. Mail Volume Decline: 25% from 2007 to 2012 Pieces in Billions

8. Postal Service Financial Condition >Key Problems Healthcare benefits prepayment of $5.5B (2X) >Congress continues to pass resolutions >80% of budget related to labor costs >Mail Volume Shifting To a Less Profitable Mix

9. Collapsing USPS Revenue

10. HOPES

11. Achieving the Business Plan requires full realization of all the Strategic Initiatives Net Debt ($ in billions) virtually eliminated

12. NAA STUNNED BY approval of sweetheart deal for newspapers' largest direct-mail competitor Arlington, Va. – The Newspaper Association of America is stunned by the U.S. Postal Regulatory Commission’s decision today to approve an anti-competitive and damaging negotiated services agreement (or special contract rate) between the U.S. Postal Service and Valassis Direct Mail.   “NAA believes this decision is contrary to law, and will challenge it immediately and vigorously in the U.S. Court of Appeals for the District of Columbia Circuit,” said NAA Chairman James M. Moroney III, CEO and publisher of The Dallas Morning News.   Prior to the decision, NAA and its members called on Postmaster General Patrick R. Donahoe to acknowledge the overwhelming opposition expressed by the newspaper industry and others in the mailing community during this proceeding, and urged him to withdraw this special deal that benefits only one mailer.

13. Sweetheart Deal As NAA’s comments filed with the PRC noted, granting this special rate to one major competitor in the mailing business will cause significant financial harm to newspapers throughout the country, and will not improve the financial condition of the nation’s postal system.   "In reaching this decision, the Postal Regulatory Commission ignored the many compelling comments it received objecting to a profoundly anti-competitive proposal,” said Caroline H. Little, NAA president and CEO. “In fact, the Public Representative appointed by the Commission itself to represent the views of the general public pointed out that this is the ‘first NSA that is designed to manipulate prices and to alter the balance of market forces.’ The Public Representative also said that ‘this NSA as currently structured is a lose-lose proposition for both the newspaper industry and the Postal Service.’ "The nation’s newspapers and the Postal Service share a long history of working together to keep Americans informed and connected with one another,” Little added. “The Postal Service should focus on cutting costs and getting the mail delivered on time – and not on using rates to confer a significant and unwarranted advantage on one competitor at the expense of an entire industry. This special arrangement calls into question whether the Postal Service should offer these types of deals in the first place.”

14. Changes • The Postal Service Is Changing • Transportation • Processing Sites • Speed of Processing & Delivery • Critical Entry Times

15. Transportation • Network Optimization • NDC Network • Managed Transportation • Hubs • Full Loads Between Processing Sites

16. Current

17. What it could look like

18. Processing • Studies are complete • Some plants will be closing • Remaining sites repurposed for increased mail volume at these sites • Consolidation of Processing & Delivery • Equipment

19. Speed of Delivery • Changes To Service Standards • 5-Day Delivery was expected Aug, 2013 not going to happen yet • Carrier Routes Eliminated and/or Expanded • Deliveries Continue To Increase

20. Electronic Documentation • Electronic versions of postal reports • Information uploaded to PostalOne! • Replaces printed documentation • Reduce paper usage and supplies • Reduce manual-entry errors • Save time at entry • Required for Full-Service discounts

21. Postal Wizard • Enter Postage Statements directly • Easy to use • No additional software or files • Manual entry • Ideal for basic mailings

22. Postal Wizard

23. Resources http://ribbs.usps.gov • Guide to Intelligent Mail for Letters and Flats https://gateway.usps.com • Access to PostalOne! and Postal Wizard • Test Environment (TEM) access

24. Discounts • Learn the discount structure of all classes of mail Discounts are available not just in Periodicals or Standard but 1st Class as well, i.e. PIA invoices, classified billing, and accounts payable • Promotions: Two New USPS® PromotionsRight on the heels of two currently-running USPS incentive promotions (the Mobile Coupon and Click-to-Call Promotion and the Earned Value Reply Mail Promotion), come two additional promotions scheduled to begin running August 1. One of the promotions is called the Emerging Technologies Promotion and the other promotion is called the Product Samples Promotion. Both promotions are scheduled to run from August 1 through September 30, 2013. • 2014 Full Service Periodicals Machineable Flats - .9 cents to 4.5 cents per piece.  No difference for Saturation, High Density or Basic. Standard Letters - 0.3 cents to 2.3 cents  per piece Standard Flats – 3.4 to 3.7 cents per piece

25. Implementing Full Service • Register for the Business Customer Gateway • Acquire Customer Registration ID’s and Mailer ID’s (CRID’s & MID’s) • Register for a PostalOne! Account • Test Environment for Mailers (TEM): test uploading data to PostalOne! • Register Get Your Register Get Tested & Gofor the USPS ID’s for Approved for Live!Business Register PostalOne! USPS to useCustomer For CRID’s account eDoc Gateway & MID’s

26. Audits Conduct an operational audit of handling all classes of mail to ensure staffers understand USPS regulations, this could be done with USPS representative • Address Hygiene, clean mailing list • Monitoring the piece weight 3.3 ounces • Monitoring saturation, high density, and basic rates($0.04 to $0.055) • Knowing the best drop location for the best discount (Des. Delivery Unit, Des. Sectional Center Facility, and Des. Bulk Mail Center)

27. Audits (cont.) • Checking all postal statements to ensure proper charges • Eliminating PO box deliveries (bulk drop pieces that are eliminated to protect pre-print revenue) • Reduce mailed pieces to carrier delivery(i.e. 3rd party, daily carriers) • Eliminating/reduce apartment delivery (bulk drop pieces that are eliminated to protect pre-print revenue) • Plan a meeting with Post Office rep to go over best practices

28. Weights DSCF (6.5 ounces) Saturation $0.07 $0.40$0.24 High Density $0.10 $0.40 $0.28 Basic $0.13 $0.49 $0.33 DDU (6.5 ounces) Saturation $0.07 $0.36 $0.21 High Density     $0.10 $0.36 $0.24Basic     $0.13 $0.45 $0.30 • (20,000 pieces all going to DSCF switch to DDU, $800 week postage savings)

29. Discount Structure Postal discount structure is based on 2 premises, automation and work sharing a) Automation consist of the Optical Character Recognition (OCR), commonly known as Intelligent Mail Bar-coding, this feature is now in play for discounts, Full Service to be implemented in January, 2014 b) Work share cuts cost, presorting by zip code, carrier route, or walk sequencing, also trucking to the Sectional Center Facility (SCF) or the Destination Delivery Unit (DDU) gives you a better rate

30. Relationships Build relationships with your local postmasters and postal account representatives: a) These individuals are experts in rates, requirements, and regulations b) Newspapers are generally at a disadvantage because they have nottaken time to learn or manage the postal system c) Call meetings with the local USPS manager of mailing requirements or your assigned Business Service Network Manager

31. Relationships (cont.) d) Your newspaper should subscribe to the Domestic Mail Manual which includes quarterly updates e) There is also a Business Mailer Review letter that will give advance notice of important changes in rates and other news, they are available at http://pe.usps.com f) Another website with good information is http://ribbs.usps.gov

32. Learning Attend Seminars a) The USPS holds several seminars & webinars throughout the year b) MAILCOM Conference, the Art and Science of Mail Communications, is the largest mail communication convention in the world c) National Postal Forum d) Join your local Postal Customer Council

33. Gannett Postal Plan • Centralizing and standardizing our entire process • 80 newspapers doing all their own process • 33 different vendors throughout the company • CAPS (Centralize Account Process System) and manual funding account • We are broken up into 5 zones, East, South, Mid-West, Upper Mid-West, West • Verify delivery, electronic statements • Employees that understand the postal process, check accounts, check delivery

34. Questions? tsalvo@gannett.com Thank You