**Minutes of the**

**Mailers\' Technical Advisory Committee**

**October 20, 1999**

**U. S. Postal Service Headquarters**

**Benjamin Franklin Room**

**Washington, D.C.**

**Welcome**

Postal Chair Art Porwick called them meeting to order, welcomed members,
guests and introduced new members:

John Mulford (Direct Marketing Association)

Kurt Harmon (Saturation Mailers Coalition)

Christopher Fomano (National Newspaper Association)

Martin Bernstein (Mail Order Association of America)

Bob Westcott (Red Tag News Publications)

Mr. Porwick awarded retiring General Service Administration Member,

Joan Rau an appreciation plaque from MTAC and the Postal Service for her
dedicated service. Joan expressed her gratitude for the friendship and
support of the MTAC members during her tenure. A similar plaque,
personalized for retiring member and Immediate Past Industry Chair,
Chris Rebello would be delivered to him with a letter

of appreciation.

Administrative announcements included a reminder that USPS building
security requires names of all visitors attending work group and other
meetings. This information should be forwarded to the MTAC Program
Manager prior to the meeting date. Joe Schick, Industry Chair, reviewed
meeting dates for 2000:

February 2-3

April 26-27

July 12-13

October 11-12

**[Note: All meetings will be held in the Ben Franklin Room at Postal
Headquarters, 475 L'Enfant Plaza, SW,]{.underline}**

**[Washington, DC 20260.]{.underline}**

Reporting on the Steering Committee meeting, he reminded members that
they represent the sponsoring association and not their employment
company. Work group leaders were encouraged to bring MITS up to date
and, when preparing reports of work group activities for the annual
report, to recall that the Communications Committee needs
results-related information, especially quantifiable data such as dollar
savings, labor

reductions, specific productivity gains, etc.). Finally, he invited
members to offer suggestions for agenda items and improvements in the
meeting format, etc.

# IT Summit Review

Mr. Schick commented on the Information Technology meeting held earlier
in

the month, noting that even with short notice it was well attended and
productive. Other meetings (e.g., on e-commerce, delivery problems,
etc.) may be scheduled outside the MTAC meeting timeframe.

Jeff Freeman, Manager of Strategic Technology Planning, presented a
brief

report on the content of the IT meeting. The Postal Service made a
formal presentation to demonstrate the overall plan for the information
platform, how it would affect customers, the processes of data capture
and compilation, and operational employment of the data by the Postal
Service and the customers.

The concept is that the entire postal process is a continuing round trip
with stops at both business and household terminals and activities that
flow through induction of mail, processing, transport and delivery. The
IT contribution to this continuum is in tracking mail which begins with
capture of data at induction, adding data as the mail moves through the
system, compiling and organizing the data to make full use of
information available to the Postal Service and interested customers.

Appropriate data can be captured at any of the steps on the round-trip
\-- at induction, processing, transport and delivery. Initially there
will be a focus on automated letters and Priority Mail, taking advantage
of established or nearly established processes (Plane Code, Confirm,
scan where you band, Postal One) and processes under development but not
yet deployed (Merlin, IBIP and information-rich barcodes, Integrated
Data Server).

Customer requirements were identified through consultation \-- timely
information about mailings, a commitment to service standards and
performance, and a continuing effort to improve information processes
(integrated data, rapid and simple access). The goal of data capture is
the ability to track every piece of mail, beginning now with information
on every unit load and samples within the unit load. Planet Code Confirm
will then be supplemented with Postal Service ID codes and
customer-applied IBIP, RFID and the enhanced information-rich barcode.

The strategy will be to leverage the existing systems, spreading proven
processes in one mail class to tracking systems in others, and
uncovering new ways to use data from existing systems. As required,
carefully considered capital investments will be made. The issues
related to IT include ongoing industry participation, the value of
induction information, expanding services to all classes of mail,
improvement in unit load tracking, the integration of existing systems
(e.g., DSAS, Advance), effective integration of the whole database, cost
and rate impacts, timelines and accountabilities and the importance of
mail.dat.

Robert Lindsay commented that the history of similar system-wide
programs reveals four major efforts since the early eighties: Business
Systems Planning (early eighties), use of satellite communications (late
eighties), integrated mail handing systems (early nineties, corporate
information system (mid-nineties) and now the Postal Information
Platform (PIP). He expressed hope that this would be a lasting solution.
A positive aspects of this effort is the strong hands on involvement of
the customers and the fact that, within the USPS, marketing operations
and the Office of Technology (including engineering, information
resources and quality assurance) are both participating.

Mr. Lindsay noted that, from the responses of some customers when
queried about the capabilities of mail.dat, it was clear that more
emphasis must be placed on customer awareness. He added that as data
becomes more sophisticated and detailed, the use of the data should be
proactive, positive and helpful, and not punitive. He said that unit
load tracking must be re-energized, building on the DSAS truck tracking
capability and linking all of the tracking systems with mail.dat.
Finally, there should be a strong engineering focus on equipment that
will bring the information-rich barcode into the system.

Joe Lubenow concluded the presentation, explaining that the increased
data availability will allow both customer and the Postal Service to be
more aware of each other\'s processes and activities, and to allow
service quality assurance on a real-time basis. He added that there were
seven active MTAC work groups concerned with various aspects of this
area.

**Y2K Update**

Robert Stevens and Ann Wright presented the last Y2K update before
year\'s end. The work of the Y2K working group was noted with
appreciation.

Mr. Stevens stated that the technical repair work and planning work (for
contingencies) had been effectively completed. The focus now is on
insuring the year-end program is executed and that Postal Service
maintains a high level of readiness for the year-end process.

He noted that all 137 critical business applications are repaired,
independently confirmed and deployed. The same is true of mail
processing equipment, IT components, and facilities. Although suppliers
are not under the direct control of the Postal Service, a survey of
critical suppliers revealed that almost all were prepared. Even so,
there are contingency plans in place for unforeseen occurrences.

Even with the very high level of preparedness and confidence, the final
step in the Y2K process is to develop and implement plans for monitoring
and reacting to any failures. The business continuity plan for that
purpose is complete and the fiscal year-end transition (closing the FY
1999 books), which did have some Y2K implications, has proceeded
smoothly.

The final act is to implement the Recovery Management Planning Guide,
which will be widely distributed to more than 16,000 Postal Service
managers. The Guide is based on responding under the existing
infrastructure and management policies. That infrastructure is supported
by area command centers reporting to a Headquarters command center.
During the Y2K rollover weekend these centers sill be continuously
manned (from December 28 through January 7) and all key business areas
will be represented. The Postal Service is also linked to the Year 2000
Communications Post, set up for the President, which will be manned by
all key federal agencies.

Ann Wright, BSN Manager, stated that customers would be included in Y2K
activities, particularly the communications aspect. Surveys have
gathered information about customer intentions. They will continue until
year-end. Information, such as the MTAC Y2K briefings, has been
continuously provided since April and the objective is now to insure
that every customer has access to all information required to make
mailing business decisions.

Online information will be posted continuously on the USPS Y2K web site,
and on the RIBBS site, which will have site-specific operations
information about Y2K, as well as other situations that affect facility
functions. The BSN will send proactive e-mail information to customers,
and the entire BSN network will be available to handle local inquiries.
The Corporate Call Center will also have Y2K information and there will
be regular press releases. Therefore, phone inquiry should not be
required for general questions. However, specific questions can be
directed to the usual BSN personnel.

Mr. Stevens concluded the presentation, noting that the Y2K effort has

continued at a high level, that all repairs have been independently
certified, that

extensive contingency plans are in place and, through rehearsal and
active command center control, the Postal Service is prepared to insure
uninterrupted service.

**USPS Core Business in the New Millenium**

Marshall Emery, Acting Vice President for Core Business Marketing,

discussed future core business development. Core Business Marketing
includes

product development responsibilities in First-Class, Standard Mail,
Periodicals and Special Services, as well as corporate market research,
industry, and segmentation. A major challenge, he said, is the
projection that First-Class Mail will peak by 2002 and then begin a
steady decline, eroding as much as 3 billion pieces of mail a year from
gross volume, resulting in a substantial revenue decrease.

To compensate, Core Business Marketing will aggressively pursue new
opportunities. New product applications may be based on an \"idea\"
campaign including employees, customers, associations, and business
partners. These ideas will hopefully

be expedited through an evaluation and test process and, if appropriate,
accepted as new product applications. There will be more focus on
developing and evaluating new

product enhancements (such as Confirm, online mailing, signature
confirmation, etc.). Major partners in the knowledge and information
fields (like IBM, MIT and others) will be engaged to enhance
implementation. Core business will look at new branding strategies, and
new and exciting mail piece design to make marketing mail more inviting
to open.

New service strategies will be developed to improve 2-3 day First Class
Mail, including \"tail mail.\" For advertising mail there will be
marketing support for service standards, the development of a
measurement system (perhaps using Planet Code) and finally creation of
performance goals. The rapidly changing marketplace and the predicted
relatively rapid erosion of First Class volume suggests the need to look
at the traditional rate making process, which may be too cumbersome and
restrictive to respond to tomorrow\'s competitive pressures.

New Advertising approaches will include the Internet, small business,
cooperative advertising, \"Mail Moment\" promotions and sharing with
partners. Therefore, the new century will see Core Business looking at
the relevance and value of mail, working with positive and negative
perceptions and the Postal Service products, and an effort to tap the
creativity and ingenuity of the broad spectrum mailing community.

**Line of Travel (LOT)**

John Sadler explained the definition of line of travel (LOT) as it
relates to mail processing. It is basically the arrangement of mail in
ZIP+4 in the order that the mail is delivered. Walk sequence is the
exact sequence of delivery as the carrier walks the route, most often
different from LOT. The addresses must be in ascending or descending
order, using LOT information updated within the last 90 days. The
mailing must have a presort document prepared with PAVE or MAC-approved
software, and include a Form 3553, the Cash Report Summary. At
acceptance, LOT is not currently verifiable (although Merlin may be able
to verify when installed).

The regulations are presently quite restrictive. Mr. Sadler suggested
that the MTAC might consider a LOT work group to look at the issues,
especially those

related to reorder and spoiled mail. Currently it is difficult to
re-enter mail manually or electronically, although a mailer may propose
a statistical methodology or other proposal to be approved by the Rates
and Classifications Service center. Mail can also be reinserted at a
lower level with an appropriate rate change.

**Revenue Assurance**

Discussing the revenue assurance aspect of LOT, Angelo Wider introduced
Dan Wilson and Marylyn Carson to describe a program in the Allegheny
region to improve Postal Service response to LOT problems. Ms. Carson, a
revenue assurance analyst, described a study that began in the
Cincinnati area to reveal the productivity ramifications of LOT
mailings. A standard operating procedure was developed that included
training for personnel. Although improper presort by mailer\'s is
usually the

problem with defective LOT mailings, she noted that there are several
anomalies that are inherent in the Postal Service procedures that will
also cause LOT sort problems. For those anomalies, there is of course no
revenue assessment.

The SOP provides for careful examination of each LOT problem to identify
the cause, mailer presort error or Postal Service anomaly. During the
first year, working with mailers to analyze identify problems, it was
noted that current software is not particularly effective for post-sort
changes. Ms. Carson also discovered a number of mailers who were not
aware that ordinary presort software would not properly sort LOT
mailings.

During discussion, Ms. Carson noted that, as long as the mailer use
current data from the carrier route ID file within 90 days of the
mailing, the currency of the actual file does not affect the sort. There
was extensive discussion about the restrictive requirements of LOT
sorting, the anomalies versus the relatively common mailer sorting
errors, and it was noted that the 5% tolerance allowed in the DMM for
walk sequence should also apply to LOT mailings. Similarly, members felt
that the order, ascending of descending should not be a factor since
casing efficiency is not affected. Mr. Wilson noted that, through a
statistically valid sampling process in the Cincinnati area, he had
determined that as 30% of the mailings would not conform to the 5%
tolerance if that standard was applied to LOT mail.

The policy in the Allegheny region has been to identify the problem,
ascertain that it is the mailer\'s fault, and then consult the mailer to
discuss the problem and seek a solution before any assessment is
considered. Mr. Wider added that this policy would be expanded to the
entire Postal Service.

**Revenue Finance**

Jack Widener described the process that resulted in an examination of
the revenue finance issue. Angelo Wider explained that early meetings
with MTAC leadership looked at the basis for the revenue assurance
program, the statute of limitations and the concept of shared or mutual
responsibility. A revenue assurance checklist was published and a
preliminary discussion took place concerning time limits for liability.
It was determined early on that training would be required for both the
Postal Service and mailers, and an appeals process was defined. The
appeals process is described in the management instruction. Now, he
said, the limit for mailings is 24 months after the

date of discovery of the deficiency and 12 months for fees. It does not
apply to fraud, including a pattern of non-compliance over time.

Mr. Wider noted that the MTAC meetings would be the main forum for
discussing issues that arise, either in the general meetings or in
appropriate work groups. There will be extensive information sharing
regarding all issues that affect mailers. Focus is now on periodicals,
Standard A, First Class and OMAS. Information on

revenue assurance activity will be reported on both the number of
instances and percent of revenue basis.

Jack Widener concluded the presentation, stating that the information
will be posted on RIBBS, published in the mailer\'s Companion and there
will be briefings at the quarterly MTAC meetings. The MTAC group
assigned responsibility for revenue assurance issues will include
members involved in all classes of mailings. Mr. Widener commended the
revenue assurance group for their efforts to foster cooperation and to
provide information, but expressed a caution about adopting policies
that would undermine the confidence and trust between the Postal Service
and the customer.

During discussion there was agreement that both the Postal Service and
the customers were committed to the same goal, to perform at the highest
efficiency and accuracy possible.

At 4:30, the meeting was recessed until the following day at 8:00a.m.

**Minutes of the**

**Mailers\' Technical Advisory Committee**

**October 21, 1999**

**U. S. Postal Service Headquarters**

**Benjamin Franklin Room**

**Washington, D.C.**

**Opening/Welcome**

Industry Vice Chair Joe Lubenow called the meeting session to order.

**Work Group Reports**

[Issue #10 - Publication Watch:]{.underline} Jo Ann Miller reported that
the Publications Watch work group had been relatively inactive because
of the Y2K restrictions, but would move forward again in March. An issue
discussed at the last meeting, but not completely resolved, was the
issue of ownership of the responsibility for Pub Watch. Also discussed
was the definition of goals and system requirements. PubWatch will be an
electronic process available on the Advance web page linked to Postal
Service certification programs. Date of arrival at the DDU and date of
delivery to addressee will be tracked and made available weekly. In
addition to basic tracking information, the web site will contain other
information of interest and support to publication mailers.

[Issue \# 11 - Presort Optimization:]{.underline} Joe Lubenow stated the
objectives of the work group, to move mail further into the system,
reduce \"tail mail,\" and emphasize fuller containers. The target
audiences are the major mailers and the route to achieving the
objectives is thought to be more sophisticated and efficient software.
The work group has completed a first step \-- the development of the
L001 table (which allows combining multiple zip codes into a single sack
or pallet) and package reallocation (which allows borrowing from other
containers in the system to protect an SCF sort on one pallet). To help
mailers use these option effectively, the work groups has recommended to
software manufacturers that the defaults in their programs be set to
take advantage of the options. The mailer could then override the
selection if desired.

Two new Federal Register notices will be published as a result of work
group recommendations. One is related to mail destined outside CONUS,
especially to Guam and Alaska and the second discusses combining
automated and non-automated mail in the same container, made possible
mainly by OCR capabilities.

Finally, the work group envisions online access within the new
information platform so that members can obtain the latest information
about presort-related Postal Service capabilities.

[Issue \# 13 - Postal One:]{.underline} Dan Minnick reported that the
work group met and discussed the imminent implementation and
connectivity. Two beta sites are up and running and additional
participants will soon be added to test connectivity. Volunteers are
solicited. Postal One will be online by the end of the year.

[Issue \# 14 - Mail.dat:]{.underline} Dan Minnick reported that Mail.dat
Specification 98-2 is available. The User\'s Guide has been published
for those who would like preliminary information on the benefits of
Mail.dat, and there is a brochure available that explains the use of the
viewer to eliminate hard copy report requirements. The upcoming 00-1
Specification is in review. It will contain the next rate change
information. Finally, the work group is planning a conformance testing
program for user\'s to employ to insure that the standard of
communication between users is valid.

[Issue 19 - Periodical Service:]{.underline} Paul Vogel reported that
the Chicago focus meeting was successful, although the process of
planning and running the meeting delayed some work group activity. Now
back on track, the work group is resuming work on a number of issues.
Training programs for Postal Service employees are being implemented to
help them understand the needs of periodical mailers. The ESPP system is
in beta test and a processing standard operating procedures manual has
been completed and should be ready for distribution soon.

New issues that will be considered at the next meeting include an
unexpected increased use of sacks and a focus on \"hot spots\" in the
system, both positive and negative. Finally, there will be a periodical
mailers meeting on January 11-12, location to be announced. There will
also be an ESP meeting in San Diego on January 17-18. Mr. Vogel
expressed appreciation for the both the Postal Service and customer
representatives who contributed to the work group and who made the
Chicago meeting so successful.

[Issue \# 22 - Maximizing the Value of Planet Code:]{.underline} Joe
Lubenow introduced Jeff Sinn, who reported on a recent WG meeting. He
stated that Confirm is the key program for per piece tracking in the
information platform. The field research for Planet Code has been
completed and preliminary indications are for a subscription fee or a
per piece rate, although no decision has been made yet to include Planet
Code/Confirm in the next rate case.

There was discussion about extending Confirm to flats and Mr. Sinn
invited interested flats mailers to participate in initial tests.

Mr. Sinn discussed services available on the web site (planetcode.com)
which now includes origin confirm. Long term, that web site will move to
the USPS site.

During the summer of 2000, the full scale production site will be online
(using Electronic Post Office capability) and mailers will begin to move
to the main platform by November. By the following spring, over 1,400
associate offices should be Confirm-enabled. There is also a Confirm
Users Group, working with the pilot program, that has helped in the
development of the program.

[Issue \# 27 - Drop Ship Appointment System (DSAS)
Enhancements]{.underline}: Chuck Doria reported that the shift to the
web-based system has been completed, with some slow-down in efficiency
during the final stages of transition. In solving the problem there was
substantial input from the mailers involved. Now the system speed will
be improved (with software and hardware enhancements) and it is
anticipated that 8,000 facilities and 2,000 users will be online by the
end of next year. DSAS data will also be integrated into the Postal
Information Platform. A variety of enhancements developed by the work
group will be addressed immediately after the current Y2K freeze which
ends in March.

[Issue \# 30 - Increase Coding of Colleges and
Universities:]{.underline} Tom Roylance made his final report, noting
that the work group had finished its assignment. He gave a brief history
of the basis for establishing the work group. Of several styles of
university addresses (single address to institution, local street
addresses, artificial \"on campus\" streets or buildings, contract
station PO boxes), the Postal Service has been able to integrate several
of the formats into the system to allow improved delivery service. Some,
such as the single address to institution, clearly won\'t work and some
universities refuse to adapt. However, most colleges and universities
have become more aware of the acceptable formats and progress has been
made in expanding the base of deliverable addresses, with the support of
several university-related associations. In a few words, universities
now have the opportunity to adopt address systems that will allow the
Postal Service to sort and deliver.

.

[Issue \# 33 - Parcel Service Improvement:]{.underline} Clarence Banks
announced that work group had completed its work and had been retired.

[Issue \# 34 - Information-Rich Mailpiece Barcodes:]{.underline} Joe
Lubenow reported that the work group had reviewed all of the barcodes
now in use or in development (including IBIP and ICS for Postal Service
internal use), checking them against the DMM and other sources for
viability and applicability. Since the Planet Code does not have the
information capacity needed to apply to a unique mailpiece, an
alternative barcode that would fit into the same space would an
exceptional advantage in tracking mail. That barcode would require a
more complex design than the current tall bar, short bar design and it
would have to have error correction capability.

Technically, a major issue is the size of the barcode and the ability of
readers to interpret the barcode. Presently, neither the mailer\'s
printers or the Postal Service readers can handle such a code. Progress
toward achieving an information-rich barcode, perhaps a four-state
barcode, will depend on progress in both technologies.

The Postal Service has endorsed the concept of the information-rich
barcode in the context of a second-generation Planet Code.

[Issue \# 35 - Flats Packaging Methods and Package
Integrity:]{.underline} Russ Shores reported that, even after the
original work group on package integrity was completed and closed, it
became clear that the issue remained unresolved in some areas,
especially Standard A and periodicals. This new work group is in the
process of conducting site visits, looking at the entire process, but
focusing on the point where the mail leaves the mailer\'s container. A
check sheet was developed for the site visit teams to record detailed
information about handling procedures. The visits should be completed by
the end of November, when the work group will review and analyze the
data. Interested mailers are invited to participate in the site visits.

[Issue #36 - Window Size and Position for Envelopes:]{.underline} Robert
Muma explained the work group\'s task of looking at window envelope
specifications to ascertain compliance with various current regulations
and to evaluate future requirements (e.g., related to Planet Code and
other barcodes under consideration, Confirm, Fast Forward, etc.). The
work group will invite stakeholders \-- mailers, manufacturers, Postal
service \-- to participate in future discussions. Mr. Muma added that a
limiting factor is current manufacturing equipment, which requires a
tolerance of about 1/8 inch.

[Issue \# 37 - Increased Parcel Volume in Mail Recovery
Centers:]{.underline} Aaron Horowitz reported that the 1999 fiscal year
volume of letters returned was 98 million pieces (including 6.5 million
checks worth over \$1.5 billion) 1.2 million parcels entered the MRC and
450,000 were returned, of which 311,00 were returned to mailers
participating in the expanded return policy. It simply requires making a
formal request for such service.

MRC currently offers return of parcels opened and resealed to mailers
when it is deemed not possible to recover postage from the addressee.
The policy maybe extended to Standard B in the next rate case.

The work group has determined that the main problem related to
endorsements service (especially change service) is a lack of training
for both the Postal Service and the mailers. Addressing training should
have the highest priority in any effort to solve the current problems.
Other issues that may come from work group discussion will b referred to
other appropriate work groups. The work group agreed that the Postal
Service must take the lead in solving the problems, but that the MTAC
should develop specific action items (not just identification of problem
areas) and submit them to the Vice President, Government Relations.

Issue \# 38 - Identifying Non-Profit Mailer Issues: Ed Schmidt reported
that the Postal Service had completed its report and recommendations on
the non-profit issue, including some suggestions for process improvement
by mailers. The work group will consult MTAC non-profit mailers for
reactions to those proposals. A survey is being prepared for that
purpose and discussions with the Postal Service will resume when the
surveys have been returned and analyzed.

The work group was not able to resolve any of the eligibility questions
and agreed to move the discussion to the Non-Profit Advisory Panel.

[Issue \# 43 - Preparation of Trays on Pallets:]{.underline} Robert
Walker reported that the work group conducted a review of pallets,
including uses, stability, durability, etc. It was clear that level
filled trays were more stable in stacking than partially filled trays.
After testing, the stability of quad stacking (versus the DMM maximum
three-high regulation) was confirmed and the regulation was changed.

Mr. Walker explained that the Postal Service initiated a program to
develop a prototype rigid tray that would better respond to the needs of
a wide variety of stakeholders within the Postal Service, as well as
serve the customers needs. He displayed a graphic of the prototype, a
molded plastic tray, smaller than the MM

tray, that would handle letters and some flats. The tray label would be
designed to be secure but probably removable, a false bottom would
enhance stability for partial tray loads. The pilot project should begin
in the spring with 10,000 trays for an initial operational test.

[Issue \# 44 - Address Change System
Enhancements/Corrections]{.underline}:

James Schemmel reported on the organizational efforts for the new ACS
work group. A conference call meeting was held to define ACS issues,
which included duplicate notices related to Standard mail. There are
also quality issues (e.g., incorrect processing of change service and
address service requested) that will be discussed early on. The focus of
the next meeting will be a discussion of a recommendation to remove all
such mail from all sites to be sent to the CFS for handling. The
rationale relies on the fact that training 6,000 or so personnel that
would be required to accomplish this would be much easier and more
economical than trying to train 240,000 carriers in all of the subtle
technical aspects of properly handling the various endorsements.

[Issue \# 45 - Verification of Electronic Subscription
Requests:]{.underline} Peter Moore explained that it is difficult to
validate requests received electronically via Internet or telemarketing
processes. The major audit bureaus agreed to a test program, using a
third-party process to perform the audit for several publications. The
Postal Service will work with the bureau to conduct the test.

[Issue \# 46 - Postal Facility and Distribution Database:]{.underline}
Peter Moore reported

that this new work group is involved in trying to build a system-wide
facilities-related database that would contain information related to
readiness, capabilities, equipment status, etc. This would give mailers
a much higher level of intelligence in preparing mail.

[Other Issues - USPS Tabbing Policy:]{.underline} Dan Minnick reviewed
the actions taken and the current Postal Service policy related to
tabbing mail for the purpose of improving internal mail handling
efficiency. There will be no over-tabbing (folding and tabbing already
tabbed mail); no folding of any mail to achieve a letter-size
configuration; no further equipment purchases or orders until the issue
has been resolved and a final policy written. The Postal Service will
tab only destination mail, not incoming mail, and only tab full trays.
Mailers may prevent that tabbing by including on the tray label a
notation (currently DO NOT AUTOMATE) to be determined later.

The Postal Service will publish a notice in the Federal register
shortly, inviting comment on the issue. Mr. Minnick noted that this was
an exceptionally open approach to solving the problem, demonstrating the
Postal Service\'s interest in meeting the needs of customers.

[New and Proposed Work Groups:]{.underline} The following work groups
have been established or are being considered.

A new work group sponsored by Jay Freitas has been established to assess
the [future flats strategy]{.underline} in light of new developments,
including future tracking and the development of a new flats collator.

A work group will be established to examine an anomaly [in handling
Standard A under Periodical Destination Entry]{.underline}. That
currently requires payment of postage before the Postal Service takes
responsibility for the mail (i.e., when the truck leaves the mailer\'s
facility). There are issues of liability and insurance involved.

A work group has been proposed to examine [processing of light weight
flats bundles]{.underline} which are small enough to be confused with
firm bundles, which would result in delivery to a single address. The
Postal Service has requested deferral on activation of the work group,
so that a review and possible solution can be accomplished, thereby
obviating the need for the work group.

A new work group will be formed to look at [line of travel
issues]{.underline}.

**Fall Mailing Season/DOA Mail Policy**

Nick Barranca began his presentation with a review of the Fall Mailing
Season. Noting that the objective is to meet or exceed 1998 service
levels, he stated that performance has been below last year in recent
weeks and that a telephone conference between Clarence Lewis and the
area VPs reaffirmed their commitment to meet this goal.

Early deployments of the Drop Shipment Appointment System (DSAS) to the
Web proceeded smoothly. It was not until the New Jersey and Springfield
BMCs joined the network in late summer that customer demand exceeded
capacity. This resulted in a tremendous slowdown in our customers'
ability to make appointments. We communicated the situation to customers
and established contingency plans to ensure all mail was accepted at
facilities. The problems have been corrected, and based upon the
response from customers, the system is now operating at an acceptable
level.

This year, facility threshold volumes are being analyzed along with
daily on-hand volumes to determine if there are capacity shortfalls in
the system which could be preventing optimum performance. The Inspection
Service has been actively monitoring conditions in facilities and
providing detailed reports on their findings. These reports are reviewed
at headquarters and referred back to the Areas for response and
corrective action.

New deliveries of mail transport equipment (MTE) began arriving in
September and are starting to provide relief to tight MTE conditions.
All 22 of the Mail Transport Equipment Service Centers (MTESCs) are now
open and will be at full operating capacity in early 2000. These MTESCs
are helping to manage equipment inventories more efficiently and
economically.

A national policy is in development to address the reporting of "past
in-home" and "dead-on-arrival" mailings. This policy will be similar to
current policies used by some of the Areas and will serve to establish a
standardized approach to the identity and handling of this mail.
Customers will be asked for input during development of this policy.

Communications with customers continues to be primarily through the
Business Service Network (BSN). Telephone conferences with National
Account Managers have been conducted to communicate customer issues and
concerns. The BSN continues to track customers issues pertaining to MTE,
drop shipments, and delivery. Statistics shows that a large percentage
of issues are resolved quickly through the BSN.

The MTAC work group on service standards produced a white paper that
defined customer requirements for each class of mail. The Postal Service
has accepted the white paper and will build its recommendations into the
management cycle as appropriate. The Marketing and Information
Technology groups have agreed to support these recommendations.

**Financial Update/2000 Projections**

Richard Porras presented an overview of the current year operations
(Fiscal 1999), noting that the figures are not yet final. In 1999, the
Postal Service reached

record service levels, deferred a rate increase, experienced unexpected
revenue

softness and faced a number of unforeseen management challenges.

Looking at trends, Mr. Porras noted that overnight service has steadily
improved (now 94%), that the net income trend slowed while volume
increased at an average of about 2-3%. Over 200 billion pieces of mail
will be handled in Fiscal 1999. Finally,

the rate increase was the smallest ever.

Mr. Porras provided preliminary annual figures with the caveat that they
will change slightly as the final audit procedure wind down. Net income
will be about \$300 million on about \$62.7 billion in sales (below
plan) and \$62.4 billion is expenses (better than plan). The rate
increase clearly affected revenues, resulting in a shortfall of nearly
\$650 million.

In volume, both Priority and Standard A fell below plan, although all
major classes increased \-- First Class by about 2%, Priority about 1%
(approximately 10%

of volume that was formerly classified as first Class beginning in AP-6
due to a classification change for 12-13 ounce pieces), and Standard A
4%. Standard A was

hit hardest because of the rate increase, negative publicity related to
sweepstakes mailings, advertising on the Internet and a general
tightening of business ad budgets. Although it increased by 4%, by the
final quarter volume was less than 2%.

On the cost side, there was a dramatic reduction in expenses beginning
in mid-year. Work hours exceeded plan during the first half of the year,
but management emphasis on efficiency brought the rate down below plan
for the remainder of the year. The complement trend is slightly down for
career employees, who now number about 800,000.

Anticipating Year 2000, Mr. Porras suggested that net income would be
about \$100 million. Growth in volume should continue at about 4.1%,
work years should be down about 0.7%, deliveries up 1.4 % and labor
productivity up 2.9%. Volume growth

is planned at 4.1% depending on the economy. Productivity growth is both
supported and limited by the service incentive system that requires
maintenance of service levels

in spite of any budget reductions.

Capital commitments will be approximately \$4 billion: R&D 4%, Retail
7%, Infrastructure 9%, Vehicles 9%, Facilities 35% and Equipment 36%.

Mr. Porras summarized the challenges of the next fiscal year\--
maintaining high levels of service in face of a possible revenue
shortfall and continuing efforts to reduce expenses and maintain
productivity. The risks associated with the projections include
uncertain revenue growth, the condition of the national economy, a very
ambitious

productivity growth objective (which will include a labor arbitration),
and uncertainty about Y2K should unforeseen expenses occur. Finally,
although good management can improve net income in a year like 1999,
revenue growth is critical to sustained financial health and a rate
below 2% would cause concern.

There being no other business, the meeting adjourned at 11:30 a.m.