June 4, 2014. Value of the Area Mailer Industry Focus Groups: Immediate Issue Resolution Provides...

MEGAN J. BRENNAN

CHIEF OPERATING OFFICER

CAPITAL METRO FOCUS GROUP

June 4, 2014

Greensboro

Mid-Carolinas

Greater So Carolina

Baltimore

CapNOVA

Atlanta

Richmond

THANK YOU FOR YOUR PARTICIPATIONIN THIS VALUABLE PROCESS

Value of the Area Mailer Industry Focus Groups:

Immediate Issue Resolution

Provides a Forum for Crucial Feedback / Suggestions / Ideas

Builds Critical Relationships at All Levels of the Organization

Forum to Communicate Operational Changes

2

Capital Metro Focus Group

3

USPS Core Objectives

Core Business Objectives

Strengthen the business to consumer channel

Improve the customer experience

Compete for the package business

Become a leaner, faster, smarter organization

4

Volume

Price Labor Costs

Universal Service Obligation

Limited pricing flexibility

Postal network driven by: Delivery points Retail locations Sortation facilities Six-day delivery

~80% of total costs COLA increases Benefits: pensions, retiree

health, health insurance Limited flexibility Retiree prefunding

obligation, rising workers’ compensation costs

These trends will continue to put

pressure on USPS ability to provide

affordable universal service

Decliningsteadily Transactional volume

declining due to e-diversion Advertising mail is subject

to more substitution options

Mail volume highly sensitive to economic changes Mail mix changes –

lost profit contributions

Fixed cost base

Rising but capped

Rising cost per hour

Business Imperative for ChangeBusiness Imperative for Change

800

696

'06

685

'07

663

'08

623

'09

584

'10

557

'11

528

'12

491

13

DESPITE SIGNIFICANT COST

REDUCTIONS LOSSES REMAIN

AT UNSUSTAINABLE LEVELS

$15.8

$1.2

$3.2

$9.3

$12.3$13.7

$14.8

1,074

1,1491,183

1,258

1,122

1,459

1,110

1,373

1,423

1,000

1,100

1,200

1,300

1,400

1,500

2006 2007 2008 2009 2010 2011 2012 2013 2014IFP

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

Career Employees – Reduced by 205K since 2006, without layoffs

Postal Service is More Efficient Than Ever

$16 Billion of Annualized Savings in the past seven fiscal years with workhours reduced by 24%

Tota

l Wo

rkh

ou

rs (M

illio

ns)

Sav

ing

s (B

illio

ns)

Annual Growth 1.2% [2000 – 2013]

0

5

10

15

20

25

30T

FP

Cu

mu

lati

ve T

ren

d

24.2

1972 1980 1990 2000 2013

Annual Growth 0.3% [1972 – 1999]

5

Continuous Efficiency Improvements HaveHelped Mitigate the Impact of Business Threats

6

A Deep Financial Hole

Unrestricted Cash

Buildings & Equipment, net of depreciation

Other assets

Total Assets

$ 2.3B

$ 17.5B

$ 1.8B

$21.6B

Retiree Health Benefits

Workers’ Compensation

Debt

Accrued Compensation, benefits and leave

Deferred Revenue*

Other

Total Liabilities**

$16.8B

$17.2B

$15.0B

$ 3.5B

$ 3.6B

$ 5.4B

$61.5B

ASSETS LIABILITIES

• Liabilities exceed assets by approx. $40 billion

• The USPS has only 35 cents of assets to cover each dollar of its liabilities

* Newly available data on forever stamp usage resulted in a $1.3B reduction in Deferred Revenue – Prepaid Postage** Under multi-employer accounting rules, there are approximately $51B in obligations not shown on the balance sheet.

Significant profits over years and legislation are needed to recover.

*Before RHB pre-funding and non-cash adjustments to workers’ compensation liabilities.

Retail and Delivery days were equal to FY2013.

Preliminary and Confidential

Preliminary Financial Results

April YTD - 7 months Prelim FY(Billions) 2014 2013

$39.5Revenue $40.539.4 Expenses* 39.3 0.3 Separation Costs -

(0.2) Operating Income (Loss)* 1.2 (3.3) Retiree Health Benefits Pre-Funding (3.3)

0.1 Workers' Comp. Fair Value Adj. (0.1) (0.6) Workers' Comp. Other Non-Cash Adj. (0.5)

($4.0)Net Income (Loss) ($2.7)

79.6BTotal Volume 80.1B

7

8

Total Revenue vs Volume:FY14 Q2 YTD vs. SPLY

Source: RPW/RVC

FY13 Q2 YTD VOLUME

First-Class Mail Standard Mail Total Shipping & Package Other (includes Periodicals) International Mail

(Mill

ion

Pie

ces)

- 2.6%82,249

-4.4%

+8.8%

-3.8%

-1.3%

-6.5%

FY13 Q2 YTD REVENUE

($ R

ev B

illio

ns

REVENUE VOLUME

®

CLOSING THE GAP

9

LEGISLATIVE INITIATIVES

2016 SAVINGS

OPERATIONAL INITIATIVES TRANSFORMING INFRASTRUCTURE

CONTINUOUS IMPROVEMENT

$6.0

WORKFORCE REDUCE THE UNIT COST OF LABOR INCREASED FLEXIBILITY

$2.6B

$11.1B

USPS Business Plan

TRANSFORMING INFRASTRUCTURE

10


Facilities

Delivery and Post Office Operations

Network Operations

Ret

ail O

ps

11

Management ActionsManagement Actions

Network More than 350 Processing Facilities Eliminated Reduced over 75 Million Miles

Delivery Eliminated 24,000 Delivery Routes Consolidated 2,513 Delivery Units

Retail POStPlan – 50% of Post Offices Realigned to

Match Community Needs

Facilities Eliminated over 6.7 million Square Feet

Service has remained at predictable levels

12

NETWORK CAPACITY

1970 2014

2006

Network Rationalization

Plant Consolidations

200

300

400

500

600

700

800

Phase 1

673

623 614599

528

461

417

487

320

PROCESSING PLANT CONSOLIDATIONS

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DELIVERY OPTIMIZATION

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2013 OPERATING EXPENSES

TRANSPORTATION

11%

OTHER NON-PERSONNEL

15%

OTHER PERSONNEL

10%

RETAIL & CUSTOMER

SERVICE12%

DELIVERY34%

MAIL

PROCESSING

18%

USPS Delivery Operations

15

USPS LARGEST COST CENTER

• 225K DELIVERY ROUTES

• 133.3M PHYSICAL DELIVERIES

• 212K VEHICLES

• 158.4B PIECES DELIVERED

• 311K LETTER CARRIERS

2013 OPERATING STATISTICS

• 1.0M NEW DELIVERIES

DELIVERY OPTIMIZATION

Major Optimization Initiative

TRANSFORMING INFRASTRUCTURE

Units Delivery Unit Consolidations

Routes City Route Reductions

Deliveries Efficient Mode of Delivery

16

Delivery Mode Conversions

USPS DELIVERY MODES

TOTAL STREET DELIVERIES – 133.3M 17

CURBLINE

DOOR CENTRAL

37.8M 40.5M

31%28%

55.0M

41.0%

FY 2013 GROWTH BY MODE

Door

Curbline

(61.2K)

490.9K

(6%)

47%

Centralized 607.6K 59%

Current Policy/Strategies are Driving Migration to More Efficient Delivery Mode

FY 2013 Growth % Total

Total Growth 1.04M - -

Fiscal Year 2013

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ACCESS OPTIMIZATION


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USPS Retail Network

Grow Revenue

Reduce the Cost to Serve

Transform Customer Experience in High Traffic Post Offices

Enhance Customer Convenience Through Expanded

Retail Partnerships

Preserve Retail Services in Rural America

Retail Strategy

RETAIL CHANNEL STRATEGY FOCUS

20

FACILITIES MANAGEMENT & DISPOSAL

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Capital Metro Area Focus Group

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OWNED 8,596

LEASED 23,763

Facilities Optimization

USPS FACILITIES

New Jersey Network Distribution Center – 1.4M Sq Ft

Ochopee FL Post Office – 62 Sq Ft

23

Generate Revenue and Reduce Expenses by:

Selling owned buildings

Terminating leases

Re-purposing space

OBJECTIVE

Facilities Optimization

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Advantages of a Transformed InfrastructureAdvantages of a Transformed Infrastructure

Fewer Facilities Denser Bundles/Trays and Pallets Increased Equipment Utilization Increased Productivities

Maximized Transportation Better Utilization of Air/Surface Trips Gain Economies of Scale

Right-sized Workforce Employee Flexibility Revised Pay Structure

Complement

25

MAJOR FY 2014 INITIATIVEDSCF STANDARD MAIL LOAD LEVELING


26

Imbalance of Mail Delivered by DOW

Postal Quarter 1 FY 13

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

Disproportionate amount of Standard Mail is scheduled for delivery on Monday resulting in:

Service Variability Operational Inefficiencies Increased Cost

SAT MON TUE WED THU FRI

27

Current Proposed

Thursday Friday, Saturday, Monday Friday, Saturday, Monday

Friday Saturday, Monday Saturday, Monday, Tuesday

Saturday Monday, Tuesday Monday, Tuesday, Wednesday

Sunday Monday, Tuesday, Wednesday Monday, Tuesday, Wednesday

*The current Critical Entry Time (CET) for Standard mail is 4 pm

**For delivery in the continental United States

DSCF Standard Mail**Dropped Before 4pm* on

DELIVERY DAYS MEETING SERVICE STANDARD

Expected Days of Delivery

SCOPE OF LIMITED CHANGE

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Expected Days of Delivery

WHAT DOESN’T CHANGE

Standard mail dropped at a DDU does not change

Standard mail dropped at a NDC does not change

EDDM Retail does not change

Periodical/Newspaper processing does not change

First-Class does not change

Priority does not change

Delivered Volume

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% OF TOTAL DELIVERED VOLUME BY DAY

BASELINE PERIOD DSCF LOAD LEVELING TO DATE *

* 4/19 through 5/23

Service Performance

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DSCF STANDARD LETTERS

DSCF STANDARD FLATS

4/12 – 5/17

4/12 – 5/17

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Standard DSCF Flats

April 11 – May 23

Friday Start-the-Clock

% of Total 23.94% 53.36% 19.60% 2.11% 0.57% 0.20% 0.21%

Cumulative 23.94% 77.30% 96.91% 99.02% 99.59% 99.79% 100.00%

Sat Mon Tue Wed Thu Fri Sat0%

10%

20%

30%

40%

50%

60%

Days to Delivered

Perc

ent o

f Tot

al

Service Variance

Day 1 – Saturday 23.94%Day 2 – Monday 53.36%Day 3 – Tuesday 19.60%

DSCF Standard Mail Load Leveling

Results are Promising Mail Processing working to capacity Reducing average hours per route Balanced workload with consistent service performance

Controls and Monitoring Facility Audits New data driven diagnostic reports Address the Vital Few Opportunities Operational Tiger Teams for site visits and improvement

recommendations

32

33

Benefits

Consistent Delivery Times by Day of the Week

Cost Containment – Maintain Affordable Prices

Predictable and Reliable Service

Less Competition in the Mailbox

Benefit to Mailers and Customers

Increase Visibility

LEVERAGING TECHNOLOGY

34


TO DRIVE BUSINESS VALUE

100% PRODUCT VISIBILITY

PROVIDES THE ABILITY TO TRACK MAIL PIECES AND CONTAINERS THROUGH THE POSTAL NETWORK AND PROVIDE BUSINESS INTELLIGENCE TO ENHANCE OPERATIONAL PERFORMANCE AND PROVIDE CUSTOMER VALUE

35

100% Visibility

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Attributes of 100% Product Visibility

Unique barcodes on letters, flats, packages, trays and containers

Access to analytical capabilities for forecasting and predictive workloads

Real-timeData & Intelligence

37

Predictability

Does USPShave the

mail?

Where is it in the process?

When will itbe

delivered?

How did the overall mailing

perform?

An optimized plan for:

Consistent, predictable

delivery

Avoidingbottle necks

Maximize transportation & resource

utilization

Balance resources & reduce costs

38

Predictable and Measureable

Does USPShave the

mail?


When will itbe

delivered?


perform?



delivery


Response Rates & ROI


Business Intelligence Enhances the Performance

& Value of Your Mailings

HOW?

IncreasingVisibility ThroughTechnology

39

Next Generation Equipment

C007

Nov 2012-Sept 2013

Delivery Sortation System

Scanning Units

800

Dec 2012- March 2014Feb-May 2013

Scanning Units

1,030

PASS Real-Time Scanners

Jan–Dec 2014 Deployment

Scanning Units

11,700

Scanning Units

3,137

Scanning Units

210,608

May-Nov 2014 Deployment

Total – 12,500 Total – 4,167

Jul 2014-Dec 2014

Mobile Delivery Device(Replaces Real-Time Scanners)

Scanning Units

75,000

Scanning Units

150,000

Jan 2015 – Aug 2015

Total – 225,000

40

Delivery Management System (DMS)

Evaluates Carrier Route Status to plan and color-coded route status

Estimates Delivery Time for all packages in unit Currently being tested in limited ZIP Codes

41

Predictable and Measureable

Does USPShave the

mail?


When will itbe

delivered?


perform?



delivery


Response Rates & ROI


Business Intelligence Enhances the Performance

& Value of Your Mailings

HOW?

Full ServiceIntelligent MailStrategies

42

Full Service – Enables Mailer Visibility

Electronic Info for Containers and Trays

Received

Piece level automation scans

Full Service Customers Only

All IMb™ Users

133,835,000

59 Billion(as of April 1, 2014)

Container Scans

Tray Scans

Entered at USPS: 3,434,000Enroute Arrive: 497,000Enroute Depart: 176,000

4,107,000

104,160,000Enroute: 88,805,000Enroute Arrive: 7,757,000Enroute Depart: 7,598,000

New Visibility for Mailers

Data from 2013-10-05 to 2014-04-11

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Full Service IMb

We Are Committed to Full Implementation of IMb

ACS Recordsfor all Mail

F R E ECheck-in

at BMEU

Electronic

Mail Unit PrivilegesFor Full Service Mailing Sites

DetachAssessments

Based on Trends

Move Update

WHY?

Cost Effective,ConsistentReliable Service

43

GROWTHOPPORTUNITIES

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Continue to Optimize the Value of Infrastructure

45

Enhance the value of Direct Mail and Catalogs

Increase Marketshare of Packages

Innovate across USPS Business Platforms

Growth Opportunities

46

Growing Direct Mail – The Challenge

Today’s Challenge

Keeping mail relevant in an online world

47

Growing Direct Mail

Studies have shown that using direct mail and email in integrated campaigns creates synergies that boost response over using either medium alone. One study showed that using direct mail with email increased response by nearly 30% over direct mail alone.

Direct Mail is Relevant!

Source: Marketing Sherpa Study

48

Mobile Commerce

Mobile Technology Helping Drive Long-Term Value with Direct Mail and Catalogs.

• Smartphones and tablets interact with the printed page

• Direct Mail or Catalog becomes “catalyst” for mobile commerce

• Direct Mail and Catalog integration with technology increases:• Relevance• Effectiveness• Convenience• Responsiveness• Engagement

NFCMobile Barcode Image Recognition Augmented Reality

Integrate Mobile Technology• Build upon previous promotions and continue

strategy to encourage mailers to integrate direct mail with mobile technology

Evolve Mail for New Uses• Color promotions

• Variable data printing

• Premium advertising

Drive Trial Of New Technology • Leverage the value of innovative direct mail

techniques that are effective but less widely used

Promotional Objectives

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Committed to Mail

We remain committed to growing mail

Will collaborate with the industry to grow and enhance direct mail and catalogs

Embrace technology to attract consumers to new possibilities

Continue to seek promotional ideas from customers

50

The power of mail enhances package delivery & returns.

OPPORTUNITY IN

PACKAGES

BUILDING A WORLD CLASS

PACKAGE PLATFORM

Growth Opportunity

51

ATTAIN MARKET SHARE NOW GROW WITH HYPER-GROWTH OF MARKET

E-Commerce Continues to Grow Rapidly

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COLLABORATION & OUTREACH


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USPS – Industry

USPS – INDUSTRY COLLABORATION & OUTREACH

Commitment to Communicate

SUCCESS REQUIRES COLLECTIVE EFFORT

Continue to collaborate through: MTAC Assn. Meetings NPF Trade shows and other events

Leverage PCC’s & Area Focus Groups to Work With Local Leadership to Resolve Issues

Area Mailing Industry Focus Groups – Calendar by Area at https://ribbs.usps.gov/index.cfm?page=periodicalsfocus

https://ribbs.usps.gov/index.cfm?page=periodicalsfocus

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Thank YouQuestions?

Thank YouQuestions?


June 4, 2014. Value of the Area Mailer Industry Focus Groups: Immediate Issue Resolution Provides...

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Transcript of June 4, 2014. Value of the Area Mailer Industry Focus Groups: Immediate Issue Resolution Provides...