Washington - Postmaster General John E. Potter said today that while 2005 was a good year for the mailing industry and the Postal Service, 2006 will be a complex year filled with challenges, opportunities and uncertainties. In his remarks to the agency's Board of Governors he said that despite the challenges and unknowns, "I am optimistic about the future of affordable, universal service for the nation. We have made significant strides in the past five years and we will build on them. The overriding challenge is to avoid the tendency to sit back, pause, and feel good about the recent years' growth and performance." Potter said he was especially proud of the work of Postal Service employees during the recent holiday season, "We moved more than 16 million pounds of holiday mail to our Armed Forces in Iraq and Afghanistan. Those packages from home were a great morale booster." But the Postal Service's busiest First Quarter raised a cautionary note, said Potter, "Preliminary revenue and volume numbers in December were sluggish - even while total cancellations of mail on the busiest day December 19th achieved a new record." He said the agency faces the dual challenge of developing new business and increasing revenue, while maintaining efforts to continue productivity growth into a seventh historic year. He expressed confidence that the agency can succeed by sticking to the updated Strategic Transformation Plan that will act as "a roadmap for 2006 and the next five years." He briefly outlined some of the major technological components of that plan aimed at improving efficiency, service and cost savings: During next 18 months, the Postal Service will replace 646 multi-line optical character readers (MLOCRs) by adding 395 delivery barcode sorters (DBCSs) and OCR kits to the existing DBCSs configuration to sequence mail in order of delivery and eliminate manual mail sorting at the delivery unit. Throughout 2006, the Postal Service will deploy an automated package processing system that sorts bundles of mail and Priority Mail packages. This automated system which uses optical character readers is faster than older, less efficient, small parcel and bundle sorters. Starting in April, the Postal Service will install and test a prototype flats sorting sequencer machine at the Indianapolis Mail Processing Annex which is designed to sort non-letter or flat-size mail efficiently into delivery route sequence. Potter also noted the Postal Service is exploring other opportunities to reduce costs and improve service. "Our ever-evolving transportation and mail processing network is one area we are looking at closely," said Potter "Let me stress that while nothing has been decided, and with the evolving nature of the mail mix, it is the right time to evaluate changes which will make mail processing more efficient. We are constantly reviewing our transportation network, and we are committed to making changes that would move more mail on to ground transportation to increase reliability." Potter also noted a 50 percent change in new supervisory and management level positions as a result of promotions and retirements during the past five years. He said the agency is deploying a "back-to-basics approach" that was used in 2002 that resulted in breakthrough productivity. He cited several unknowns that could have a significant impact on the Postal Service's planning for 2006, such as, legislative reform, consumer behavior and higher energy costs. In other action, the board approved $224 million for design and construction of a new Northeast Metro Michigan processing and distribution center (P&DC) in Pontiac, MI. Construction of the new P&DC, combined with other facility renovations included in the overall project, will consolidate mail processing and district operations currently scattered among more than a half-dozen facilities in the Pontiac, Troy, and Royal Oak area. As is required annually, the board approved a resolution that reserves for decision by the board approval of each capital investment project, each new lease/rental agreement, each research and development project, and each developmental real estate project exceeding $25 million total external costs. The board re-elected James C. Miller III of Virginia to remain as Chairman and Alan C. Kessler of Philadelphia to remain as Vice Chairman of the Board of Governors. The board welcomed John S. Gardner, of Virginia, a recess appointment on January 6 by President Bush to be a Governor of the Board of Governors of the United States Postal Service.