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Transform? Yeah, we can do this

Resolve. Flexibility. Hard work. Put it all together and what do you get? A transforming United States Postal Service. Look around you. Service performance is at record high levels. Productivity is on the upswing. And the new financial year is beginning on a note of optimism. You should be impressed, especially considering what a year it's been. "What brought about the quick turnaround? In a word: focus!" says PMG Jack Potter. "In every area of the country, we focused on the core business and developed innovative solutions to move the mail." What a difference a Transformation Plan makes.

A year ago, events changed the world. And they changed the USPS. Business as usual? Not possible. But even before the terrorism of Sept. 11, anthrax attacks and mailbox-pipe bombings, it was clear changes were needed if the USPS was going to survive well into the new century. A squishy economy in 2001 had bared fundamental flaws in the USPS business model. With little marketplace recourse, mail volumes were declining while delivery points were increasing. Time for some sweeping organizational changes.

USPS started at the top - reducing the number of officers by 20 percent. Eight hundred headquarters positions were eliminated. The field management structure was realigned and 20 percent of area offices were eliminated. USPS reduced administrative staffing by 10 percent - another 2,000 positions in districts and plants across the country. And, with volumes declining by some 6 billion pieces, USPS focused on balancing the appropriate workhours against workload. It worked. Costs were reduced by more than $2.5 billion. USPS is now operating with about the same number of career employees it had in 1995, yet it will be delivering 21 billion more pieces of mail to 12 million more addresses.

Know what? It's not over yet. "There is much, much more to be done," says Potter. It's called transformation. And, yeah, we can do it.

Read it again
A summary is a glass half full. Read the entire Transformation Plan yourself. It's online on Blue and www.usps.com.

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IT'S IN THE PLAN
SHOW ME THE PLAN

Think of this as the postal version of "Where's Waldo?" Whenever you hear about a new USPS product or service, or headquarters initiative, or new procedure, or change in policy, ask yourself, "What does this have to do with transformation?" And you'll find the answer is: everything. If it's not in the plan, it's not on anybody's plate.

WHERE'S TRANSFORMATION? SHOW ME THE PLAN!

THE CONFIRM TRACKING SERVICE lets customers know when their letters or flats have traveled through various stages of the automated mailstream and provides USPS with useful operations data. It's available now by subscription.

IT'S IN THE PLAN: USE TECHNOLOGY TO ENHANCE VALUE.

THE POSTAL AUTOMATED REDIRECTION SYSTEM (PARS) is a next-generation automated system expected to reduce the handling and processing time associated with redirected mail.

IT'S IN THE PLAN: ENHANCE ALREADY EFFICIENT LETTER PROCESSING.

USPS IS UPGRADING AND MODERNIZING ITS INTRANET INFRASTRUCTURE THROUGH THE ADVANCED COMPUTING ENVIRONMENT (ACE). The initiative will save USPS up to $200 million over five years by centralizing and reducing support functions for 130,000 computer users among some 28,000 postal facilities nationwide.

IT'S IN THE PLAN: DESIGN ENHANCED TECHNOLOGY INFRASTRUCTURE.

REDRESS is a voluntary program that uses mediation to resolve EEO (Equal Employment Opportunity) disputes in the workplace.

IT'S IN THE PLAN: IMPROVE LABOR/MANAGEMENT RELATIONS.

THE ADVANCED LEADERSHIP PROGRAM (ALP) is developing a pool of top-notch potential postal managers for the future through training and advanced education opportunities.

IT'S IN THE PLAN: ENSURE TRAINING AND DEVELOPMENT.

THE FINAL AUTOMATED FLAT SORTING MACHINE (AFSM) 100 was dedicated in San Antonio, TX - the 534th. The AFSM 100 program has enabled USPS to significantly improve productivity and control processing costs for flat mail.

IT'S IN THE PLAN: COMPLETE AUTOMATION OF FLATS PROCESSING.

DIVERSITY DEVELOPMENT in partnership with Retail will release a bilingual translation toolkit to selected markets nationwide. These will include translation cards featuring special service forms and receipts offered by USPS. Cards will be translated in both Chinese and Spanish.

IT'S IN THE PLAN: DEVELOP NEW RETAIL SERVICES THAT INCREASE CUSTOMER VALUE AND POSTAL REVENUE.

Welcome to the next generation of the Domestic Mail Manual - the DMM. It's being transformed into a series of books that focus on the different needs of USPS customers - household and retail, small- and medium-size businesses and large business mailers.

IT'S IN THE PLAN: DESIGN RATES AND MAIL PREPARATION TO MATCH CUSTOMER CAPABILITIES AND NEEDS.

IT'S NEVER BEEN EASIER OR MORE CONVENIENT TO GET STAMPS. They're available from The Postal Store at www.usps.com or by calling 800-STAMP-24. Stamps also are available at thousands of ATMs, supermarkets, convenience stores and other retail outlets.

IT'S IN THE PLAN: MOVE SIMPLE TRANSACTIONS OUT OF POST OFFICES.

PURCHASING AND MATERIALS HAS BEEN RESTRUCTURED. IT'S NOW CALLED SUPPLY MANAGEMENT, reflecting the success of supply chain management as a business strategy. With an eye on the bottom line, the new organization integrates supply and purchasing functions into a single process. It's saved us hundreds of millions of dollars already.

IT'S IN THE PLAN: EXPAND USE OF SUPPLY CHAIN MANAGEMENT

WE COULD GO
ON, BECAUSE TRANSFORMATION INITIATIVES ARE EVERYWHERE. BUT
WE THINK YOU GET THE PICTURE. DON'T YOU?

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REMARKS BY POSTMASTER GENERAL JOHN E. POTTER

NATIONAL POSTAL FORUM BOSTON, MASSACHUSETTS SEPTEMBER 23, 2002

Twice a year, you, the leaders of the nation's mailing industry, and the leadership of the Postal Service come from across the country to learn, discuss new ideas, build relationships and share expectations for the future.

Each of us has a stake in the success of this industry. We have a commitment to provide the most efficient service possible to our clients and customers - the American people.

Together, we all have built a foundation of trust and confidence in the nation's mail system. That system has become - and make no mistake about this - an increasingly integrated, interdependent national network of 99 million men and women.

From entrepreneurs operating out of from offices, to some of the largest corporations in America - that's our industry.

Together, we all have a responsibility to strengthen and maintain the public trust and confidence that has been invested in our industry by the American people.

In the past year, we in the Postal Service have worked to do our part. We have kept our eye on our core mission: to provide dependable, universal mail service to every American, regardless of where they live, where they do business and regardless of their economic status.

I'd like to publicly thank the Governors of the Postal Service, our leadership team, our managers, our postmasters and supervisors, and all our clerks, carriers and mailhandlers, for their resolve, their flexibility, and for their hard work. It was a year like we have never seen before.

I also want to thank you, our customers, for your support, for your ideas, and most of all, for your business.

Together, we focused on new ways to use the mail and control costs. We brought about an unprecedented negotiated rate settlement.

And together, despite the horror of September 11 and the bioterrorism attacks, we helped keep this nation united and connected as never before.

Thirteen months ago, I laid out a business plan to refocus the Postal Service on our core business. Six months ago, when we last met in San Diego, I made two pledges to you.

First, I said we would continue our strong focus on improving service performance.

And second, I promised we would do our part to make the Transformation Plan a reality by beginning to make changes that are possible now under the current legislation.

In essence, our management team committed to managing the business like never before.

Today, I want to give you a progress report on those commitments.

First, even before the tragic events of September 11th and the anthrax attacks, we foresaw declining mail volumes, even as the universal mail delivery network continued to expand at some 1.7 million new deliveries a year.

We knew we had to take some strong steps. And we did. They included sweeping organizational changes that started at the top when we reduced the number of officers by 20 percent. We eliminated 800 Headquarters positions.

We realigned our field management structure, eliminating 20 percent of our area offices. We reduced administrative staffing by 10 percent - some 2,000 positions in districts and plants across the country.

And, after the terrorist attacks, it became apparent that volumes would decline faster than our forecast for 2002. We focused on balancing our use of resources against the lower workload. The strategy worked.

I am pleased to report that we have pulled $2.9 billion out of our bottom line this fiscal year by reducing workhours by more than 77 million and reducing career employees by more than 23,000. Our total complement today is similar to what it was in 1995. Since then, mail volume has risen 21 billion pieces and our delivery network has added 12 million new addresses.

Our operating group destroyed the myth that they couldn't react quickly and decisively in declining mail volume periods.

Employees and managers rose to the challenge and delivered a positive total factor productivity for the year - as well as a 1.9 percent increase in labor productivity.

Moreover, we promised we would continue our focus on service, and we did just that. Indeed, there were service issues earlier in the year - and I appreciated your patience while we reacted.

Last fall's attacks on America required major realignments in our transportation system and major adjustments to our national processing networks.

Service performance across the country rebounded in quarter three. By the fourth quarter, we reached record levels of performance for overnight, 2-day and 3-day First-Class Mail and Priority Mail. Express Mail scores are the highest they've been in 4 years.

What brought about the quick turnaround? All our employees rose to the challenge and focused on service. We made strategic decisions.

We made better use of our transportation partnership with FedEx to move mail by air. And we made adjustments to our processing windows in plants throughout America to extend the reach of our surface transportation.

We made better use of our automated equipment - in particular, the use of 530 new automated flats sorting machines. Today, only 10 percent of flats mail in our plants is processed manually.

Do you know what this is all about?

It's about managing the business. It's about service. And it is about our Transformation. It's about preparing the United States Postal Service for the future.

Our Transformation Plan didn't begin last April when we delivered this book to the Congress. It began in September 2001 when we started making hard decisions.

We moved away from the distractions of e-commerce; we concluded the debate on whether we were a delivery company, a communications company, or a logistics company.

We refocused on the core business: processing and delivering America's mail and doing it affordably with top notch service.

We set transformational targets for ourselves - and we are well on our way to achieving them.

And, make no mistake about it, this Transformation Plan is not the "plan du jour." It will not gather dust in the L'Enfant Plaza Library. As long as I am Postmaster General, we will use the Plan to advance universal service and America's mail.

When people ask me where is the Postal Service headed, I tell them it's all in the broad context and detail of the Transformation Plan. When they ask me what's next, it's obvious they haven't read the Plan.

It's all right there.

But we do face a continuing challenge - a communications challenge. It is a challenge to keep our customers, our employees, and all our stakeholders up-to-date on the progress we are making.

Look what has happened in the past year. We have worked with stakeholders to gain broad understanding of our long-term goals. We leveraged that understanding to open a dialogue with our customers that led to an historic rates settlement.

We joined with the Postal Rate Commission and customer groups to discuss proposals to improve and streamline ratemaking for the future.

Last Thursday, we filed with the PRC a negotiated service agreement with our largest end-user of First-Class Mail to give them an incentive to grow their business and ours.

This week, we will file another proposal with the Rate Commission that would offer small-circulation periodicals a way of achieving work-sharing discounts so common with larger, mass-circulation periodical mailers.

We listened to customers and took advantage of what we can do under the existing laws by increasing the size of presorted flats bundles.

We also worked hard with the Congress on a bi-partisan bill earlier this year. Although it did not move from the House Committee, it did draw more and more lawmakers into the debate about the future of the Postal Service.

A year ago, interest in modernizing postal legislation was focused in the House. Today, members of the U.S. Senate are actively involved in our future. And senior members of the Bush Administration are now engaged in discussions about the Postal Service.

The Executive and Legislative branches came to our aid and appropriated $750 million for costs related to the anthrax attacks to help reduce the risk to our national mail system from biohazardous materials.

My thanks to all who made it happen: The Congress, the Administration, our customers, postal managers, and our union and association leadership. That commonality of purpose served our nation and the entire mailing industry well.

Speaking of our unions, we reached a negotiated agreement with the National Association of Letter Carriers this year. We did it by achieving a common understanding that for the Postal Service to move forward, each party had to look anew at the issues.

Moreover, we signed an historic agreement recently with the NALC to work together to advance Transformation, and to explore workplace flexibility to enable the Postal Service, our letter carriers, and our customers to be successful in the long-term.

Looking ahead, there are many things we can do in 2003. We are going on the offensive to accomplish four objectives:

• First, we will continue our commitment to improve service performance. As part of that commitment, we will continue to focus on making improvements to reduce the risk our systems face against another bio-terrorism attack.
  
• Second, I am committed to exploring with the Postal Rate Commission, alternatives to the ratemaking process within the current legislation. Those alternatives include negotiated service agreements and phased rates.
  
• Third, we will use our Transformation strategy to grow our business by enhancing existing products and services - and expanding access and convenience to postal services.
  
• Finally, we will continue to manage our finances and reduce costs. Fiscal Year 2003 will be the second year in our five-year commitment to take $5 billion out of our costs by 2006.

Last year, as the economy worsened, and we dealt with the terrorist attacks, the employees of the Postal Service realized that we needed to take dramatic steps to manage our finances.

Six weeks ago, we updated our financial forecast and announced that we expected an operating deficit for FY 2002 in the neighborhood of $1.2 billion. We were headed into our final 7 weeks of the fiscal year.

And what an amazing six weeks it has been.

Our employees and managers held the line on costs. They bettered our budget forecast by some 400 million dollars. You, our customers, brought us strong revenue. We bettered our 8 billion dollar revenue forecast during this period by over 100 million dollars.

I'm very pleased to tell you that as a result of the increased volume from you, our customers, and cost reductions on our end, it now appears that we will finish the year with a loss well below $1 billion.

What does that mean to you, our customer? Besides a lower deficit in FY 2002, it means we will have a net income for Fiscal Year 2003. And that projection reinforces the pledge I made to you in San Diego that there will be no general rate hike until well into 2004.

My expectations are high for us, for the nation's economy, and for the entire mailing industry over the next couple of years.

Keeping our rates affordable and improving service for you are at the heart of the Transformation Plan. The need to execute the entire Transformation Plan remains as critical today as it was 12 months ago when we faced dire circumstances.

We must not lose sight of the fact that the Postal Service continues to operate with an outdated business model. The current model needs adjustment.

The Governors of the Postal Service are committed to advancing the need for legislative change in the coming years.

Tomorrow morning, you'll hear more about our Transformation Plan. And later this morning, I would encourage you to attend the business builder session on universal service chaired by Ralph Moden, our vice president for Strategic Planning.

Ralph will be joined by Governor Ernesta Ballard.

She will discuss universal service and what it means for business mailers today and in the future.

Before moving on this morning, I also want to recognize another Governor of the Postal Service who is with us - Einar Dyhrkopp. This will be Einar's last National Postal Forum as governor.

During his 9 years as a Governor, including two years as Chairman of the Board, Einar has helped lead the Postal Service through new and challenging times, and he has done so with vigor and strength. He has been a constant champion of our employees and our customers.

Einar, I'd like to personally thank you for everything you have done. Would you stand and be recognized.

Earlier I mentioned that we had filed our first Negotiated Service Agreement last week. It was clearly something we had designed to benefit both parties by offering volume discount pricing for growing First-Class volume. I know many of you are interested in this idea.

This NSA is really a landmark initiative in the Transformation Plan to help us grow the business and share the benefits with our customers.

Turning now to another Transformation goal - to enhance our products - I am delighted that Confirm has been implemented on a subscription basis.

Confirm uses web-based data technology to enable users of the mail to know the status of their mailings as they go through our processing systems. You've told us that this service adds real value and integrity for everyone. Moreover, I am convinced customers will find a number of new and dynamic uses we haven't even thought about.

Just as important for you, postal operations managers use Confirm as a diagnostic tool to isolate operational problems and take corrective action to improve service and delivery predictability.

I might add that since our meeting in San Diego, we've enhanced our Parcel Select service by including electronic delivery confirmation in the basic rate.

In terms of our Transformation goal to expand customer access and convenience, I want to announce that starting in January, Priority Mail and other postal products will be available in select Hallmark Gold Crown stores across the country.

Over the years, we've talked about modernizing the ratemaking process and enhancing our products and services. These three initiatives - NSAs, Confirm and retail alliances to increase access - are just the beginning.

But we must not stop there.

We are committed to refocusing all 750,000 postal employees on growing the business in 2003. And I want your ideas and your solutions. Use these next few days to help us add new relevance and new value to the mail.

I am excited about the progress we've made this past year. I remain excited and proud that this partnership of ours - the 9 million of us who are part of this nation's mailing industry - continues to meet the communications needs of the nation and keep over 280 Americans connected.

Ours is a partnership that works - and together, we will continue to build on our past successes and achieve new successes in the future.

I've said it before and I'll keep on saying it: the Transformation Plan is not just about the Postal Service. It's about all of us. We all have a stake in securing the future of universal mail service in America.

I want to thank all our partners in the audience and everyone in the mailing industry who helped us keep our commitment to provide universal service to our customers this past year.

Together, we've accomplished a great deal this past year. We've begun to chart the course for the future of the mailing industry.

Together, we have made dramatic improvements in service performance. We've introduced new product enhancements, launched new service initiatives and we're well on the way to making it easier to do business.

Together, we will not only transform the Postal Service in the year ahead, we will also transform the mailing industry. Thank you for your support.

And thank you for helping us stay the course this year. That's what partnership is all about.

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