With the stabilization of postage rates until 2006, the Postal Service was able to reduce the total number of stamps produced in 2003 to 34 billion stamps, down from the 44 billion stamps that were produced in 2002. This equates to a production savings cost of $22 million. This reduction also decreased costs associated with transportation, storage, and destruction.

     Additional savings have been realized by competitively bidding all of the commemorative stamp issues among the private supplier base. An overall cost reduction of 8 cents per thousand was attained, which resulted in a savings of $2.4 million compared to costs in 2002. In addition, by reducing the stamp commitment to the Bureau of Engraving and Printing, the Postal Service has realized an additional savings of $6 million from 2002 costs.

     During 2003, Stamp Fulfillment Services (SFS) fulfilled 1.8 million customer orders, totaling $139 million in revenue. Fifty-two percent of orders shipped, which generated 44 percent of the revenue, were via the Internet. The remaining 48 percent of order volume was generated via USA Philatelic catalog mail orders (28 percent) and 1-800- STAMP-24 telephone orders (20 percent). Also, SFS processed 179,944 personalized envelope orders for $72 million in revenue. Total revenue flow at SFS for stamp sales, envelopes, consignments, LibertyCash and product sales was $925 million in 2003.

     The mission of the Postal Service's Licensing Program is to protect, promote, and profit from the intellectual property of the Postal Service. Over the past three years, the Postal Service has been working more pointedly to leverage its intellectual property (e.g., trademarks, business processes, icons, stamp images, technology) as appropriately marketable items that can generate licensing revenue for the organization.

     In August 2002, the Postal Service rewrote its enhanced corporate licensing policy and published it in the Postal Bulletin for employees and in the Federal Register for the public.

     The policy, along with frequently asked questions about licensing with the Postal Service, is accessible through the Postal Service Intranet at http://blue.usps.gov/ corporate/licensing and on the external Web site at http://usps.com/communications/ organization/licensing.htm. The Postal Service will continue to seek unique licensing opportunities that best represent the brand in key retail arenas, while showcasing the collection of historical marks and images. The value of Postal Service intellectual property can only increase as licensing becomes second nature across the vast canvas of Postal Service employees, who truly represent the first line of defense against brand infringement.

     The Postal Art Gallery, a ground-breaking licensing agreement, was developed and launched in 2003 to showcase stamps — with and without denomination and perforations — as art for use in home and office décor. The program offers matted and framed stamp images for sale through the Web site www.postalartgallery.com, which is powered by licensee Art Select. The Postal Art Gallery met with instant success.

     In 2002 a licensing agreement was signed with Bank One Corporation to offer employees an affinity credit card with competitive annual percentage rates. Since the launch of the initiative, more than 13,000 employees have signed up, making this the most successful program start-up for Bank One.

     The interagency licensing agreement between the Postal Service and the U.S. Mint to produce collectible products that combine the 50 State Quarters with the Greetings From America stamps continued its success. The program will grow through 2008 as new state quarters are issued at the rate of five per year. In early October 2003, Post Office