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We are very pleased to present you with this progress report on our Strategic Transformation Plan, 2006–2010. Published a little more than one year ago, the Plan builds on the foundation set by Postal Transformation in 2002, a process that has delivered unprecedented achievements in revenue, productivity, service, and employee engagement.
Transformation recognizes that small, incremental improvements alone are not enough. Technology and competition continue to raise customer expectations, and cost increases — many beyond our control — undermine our mission to deliver affordable universal service. Transformation works because it faces these challenges head-on and invests responsibility for success in every postal employee. It also recognizes the Postal Service is part of a much larger mailing industry, and our success can be sustained only in cooperation with our customers and industry partners.
In 2006 we implemented a rate change to fund a $3 billion escrow account mandated by law. The cost of fuel and inflation-triggered benefits increased along with the continued growth of our delivery network. We responded by attacking all costs under our control. The result was a seventh straight year of increased total factor productivity. We achieved this in conjunction with consistent service quality, new product features and convenience, and continued improvements in workplace safety.
Strategically, 2006 was most notable for several important steps taken to ensure the future of mail:
• Launch of the new 4-state barcode and a revolutionary new visibility strategy will give our managers, customers, and partners a continuous view of the flow of mail, from production to delivery.
• Multiple enhancements to streamline commercial mail acceptance will cut paperwork, simplifying payment, and create a host of diagnostic tools to improve service quality.
• Development of new price and mail classifications will remedy long-standing cost-coverage disparities and better align with processing and delivery operations.
• Incorporation of advanced technology in processing automation, including live tests of the Flats Sequencing System, holds the promise of radically reducing flats processing costs as early as 2008.
• Steady growth in customer awareness and use of services such as usps.com and Click-N-Ship will make using our products quick, easy, and convenient.
Transformation has helped deliver solid results across-the-board, but even greater results lie ahead. Aided by powerful new technologies, disciplined field management, and unprecedented information flows between customers and postal operations, we are poised for new breakthroughs in service improvement and cost reduction. We are not merely defending our products against diversion; we are reshaping them for emerging markets and new customer needs. By combining strict fiscal control, strong operational focus, and dynamic product and service development, we are better prepared than ever to help ensure a prosperous future for mail.
 John E. Potter Postmaster General, Chief Executive Officer |
 James C. Miller III Chairman, Board of Governors |