The importance of full daily delivery

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Wednesday September 21 2016

Introduction

Two visions compete for Canada Post’s future. One rests on the notion that the post office is a “sunset industry” and its decline must be somehow managed until the day when a few more profitable branches – parcels, for example – can be lopped off and privatized. The other vision is far-sighted and more optimistic. It regards the post office, with its vast network reaching into every community across our huge nation, as a launching pad for successful innovation. In what follows, CUPW argues that the latter vision should prevail and for that reason, further reductions in delivery frequencies are neither necessary nor desirable.[1] Reducing delivery days would damage Canada Post’s ongoing viability by undermining its ability to diversify and the cost-effectiveness of its booming parcel sector.

CUPW understands that cutting delivery days or some other form of reduced delivery may sound reasonable when mail is not arriving every day and Canada Post argues it must save money.[2] Very recently, three other countries have experimented with some form of reduced delivery. In 2015, New Zealand announced it would switch to alternate delivery days for basic mail as part of a five-year plan to cut costs. This was despite reporting large profits (mainly as a result of its successful Kiwibank postal bank). Following a public outcry, rural residents in New Zealand continued to receive their mail five days a week, while urban residents get three. Parcels are still delivered daily. As this has been a very recent change, the results and impact of cutting delivery days in New Zealand have yet to be thoroughly documented, including the promise made by New Zealand Post at the time to maintain a 3-day service guarantee. Finland also recently cut delivery on Tuesdays, and Italy is starting to cut delivery in low-population density areas.

All these countries are tiny, compared to Canada’s enormous landmass.[3] They would certainly be unable to deliver on promises to maintain a 3-day delivery standard if, like Canada, they stretched from Newfoundland to Vancouver Island to the high North. Cutting delivery days in the Canadian context cannot be a solution. Nor should Canadians be asked to trade daily delivery for some other form of needless cut.

 

 

The importance of daily delivery for businesses

Businesses of all sizes depend heavily upon time-sensitive delivery for payments and goods, and also for publicity – flyers and other promotional items. For example, the owner of a local pizza restaurant might need to send out a batch of flyers for a weekly promotion. Canada Post currently has a three-day window to deliver the pizza restaurant’s flyers. Cutting delivery days would significantly hinder the restaurant’s ability to advertise in a timely fashion and to attract customers.

In the United States, the National Association of Letter Carriers (NALC) has successfully argued that six-day a week (including Saturday) delivery is good for businesses because the size of the USPS network means it can offer UPS, FedEx and Amazon “the most affordable prices for last-mile delivery service, which has been an effective and profitable partnership.[4]

In addition, direct mailers, weekly newspapers and small businesses (such as eBay merchants) depend on Saturday delivery for invoicing, bill payments and shipping. Slowing mail service while charging the same price would be especially harmful to these mailers. According to NALC, USPS’s “own customer surveys show that 35 to 40 percent of business mailers (who account for more than 95 percent of postal revenue) want Saturday delivery. Ending that service would drive mailers to alternative delivery methods or to leave the postal system altogether. Indeed, a 2012 study showed that cutting USPS’s Saturday service would “lead to a drop in mail volume of 7.7 percent, causing a revenue loss of $5.26 billion and overwhelming a projected $3.3 billion reduction in expenses.”[5] Cutting delivery days is clearly detrimental to the mail business.

 

Canada Post agrees – Cutting delivery is not the way

Canada Post management is on record as saying that cutting delivery days is not an option for a crucial customer base – Canadian businesses. For example, Mary Traversy, senior vice-president of mail at Canada Post, publicly acknowledged in an interview with the Charlottetown Guardian[6] that many businesses, particularly small and medium-sized businesses, rely upon regular daily delivery while current President and CEO Deepak Chopra has also[7] discussed the importance of daily mail for businesses’ cash flow.

In a feedback section on its website (which has since been taken down), Canada Post published replies to many questions and concerns regarding the elimination of home mail delivery. When several members of the public suggested that delivering on only 2 or 3 days a week might be an acceptable alternative to losing their home delivery, Canada Post responded with several different versions of the same answer:

Canada Post considered a wide range of options to sustain postal service, including reducing the frequency of delivery. Your solution sounds simple enough, but Canada Post is simply not structured in a way that makes this feasible, efficient or cost effective. Our customers – both the senders and the receivers – expect us to deliver parcels every business day, and this daily delivery is all the more important, given the rise in online shopping and e-commerce. More and more, we are structuring our operations so that we deliver mail and parcels at the same time. Daily delivery for parcels and alternate day delivery for mail simply doesn’t make sense for us or our customers.[8] 

In other responses to similar suggestions, Canada Post repeatedly emphasized the importance of daily delivery for businesses, many of which are “small home-based businesses located in residential neighbourhoods that send and receive cheques by mail to maintain their cash flow.” The possibility of delivering daily delivery to only a “business corridor” would not work for these scattered home-based businesses.

In the same reply, Canada Post insisted that “moving to alternate-day delivery for residents only would not have allowed us to provide the service that our customers expect, nor would it have been operationally feasible or cost effective for Canada Post.” It would be very difficult, if not impossible, for Canada Post to maintain its 94.2% success rate meeting the current domestic letter mail delivery standards while cutting delivery days.[9]

 

Delivery standards for Lettermail service[10]

Delivery Zone

Local

Within Province

National

Major Urban Centres

2 days

3 days

4 days

Non-major Urban Centres

2 days

3 days

4 days

Northern Regions and Remote Centres

2 days

up to 6 days

up to 8 days

If mail is delivered fewer days each week, it will take longer, on average, for each letter to reach its intended address.  Canada Post will either be forced to reduce delivery standards or its failure rate to reach the existing standards will increase, driving customers away.

 

Integrating parcels and other mail is more efficient

Canada Post has stated that while some Canadians may find reduced delivery days for letters acceptable, they still want their parcels every day. The parcel business is integral to maintaining Canada Post’s self-sufficiency and our delivery density makes us the most efficient parcel business: “Parcels, advertising mail and high-value mail will generate revenue that will be essential to Canada Post’s financial sustainability.”

Close to half[11] the parcel items delivered by Canada Post weigh 3 lbs (1.36Kg.) or less and are 200 cubic inches (3277 cubic centimetres) or less.[12] While sold as parcels, these smaller items (“packets” in postal idiom) are light enough and small enough to be delivered at the same time as the letter mail.

Larger parcels (over 3 lbs/200 cubic inches) must be delivered by vehicle, with a separate stop for each point of call. Cutting back on delivery days during the week would mean that the smaller items would either:

  • Not be delivered in a timely and competitive fashion, or
  • Be delivered at a much greater cost per item.

Canada Post uses Industrial Engineering predetermined time standards to measure the work of a letter carrier.[13] Using these time standards, it is possible to compare the incremental time (and thus the cost) needed to:

  • deliver a smaller parcel (packet) at the same time as the letter mail to a residential address (0.2312 minutes), and
  • deliver the same item to the same address by vehicle, when no letter mail is being delivered to that route that day (1.6114 minutes).

Separating the delivery of these smaller parcels from lettermail would increase the cost of delivering these items to residential houses by almost seven-fold. While delivery to other point of call types (apartments or commercial addresses) has a lower cost difference, the average increase is still nearly three-fold for all address types when items are delivered separately by vehicle as compared to the current “with letter mail” method.

It is much more efficient to combine parcel and packet delivery with other types of mail. If Canada Post were forced to delink the delivery of lettermail and parcels, it would substantially reduce the efficiencies Canada Post has found by delivering both these mail products together.

 

The system can already handle mail volume declines

Canada Post likes to justify cuts by referencing falling mail volumes. However, falling mail volumes are not a crisis that justifies cuts in delivery days. What Canada Post often neglects to mention is that they have very successfully managed to deal with drops in mail volumes by adjusting labour costs through a process that was mutually agreed to with the union.

If you look at the decline in mail volumes over the past few years, you will see a corresponding drop in the number of hours worked by inside postal workers (see the CUPW submission on Canada Post finances). Outside postal workers have a route measurement system which reduces the number of staff as mail volumes decline. For example, letter carriers are not expected to go to every door every day. As mail volumes drop, letter carriers bring mail to fewer houses on each block. As a consequence, more addresses are added to each letter carrier's eight-hour route, leading to a corresponding reduction in the number of letter carriers needed to deliver to the neighbourhood and the nation.

Looking at the past 10 years (2005-2015), the number of letter carriers in Canada (per 1,000 addresses) has declined almost in lock-step with the reduction in volume of mail per address.[14] Canada Post is therefore already very well equipped to deal with fluctuations in the amount of mail in the system. 

 

Full daily delivery is the greener option

The boom in online shopping means that millions more parcels are being delivered by Canada Post and other delivery companies, increasing traffic and emissions.

Last year, the number of parcels delivered by Canada Post alone increased by almost 10%. But with Canada Post, the amount of greenhouse gas emissions barely increases because, unlike other delivery companies, Canada Post is already delivering mail and parcels to every neighbourhood in the country on a daily basis. A vehicle delivering letters and parcels together keeps down not only the cost but the environmental impact of each piece. According to a 2011 report, getting a parcel delivered by Canada Post can cause up to 6 times less C02 emissions than an overnight delivery by a courier, and 3 times less than having a customer make a 5-km trip to pick it up in a store.[15]

Cutting delivery days would discard this environmental advantage. Canada Post’s parcel delivery would become more expensive, which would result in the corporation losing market share to less environmentally efficient companies. Businesses of all sizes rely on daily delivery for cash flow and time-sensitive items. So courier companies would step in to fill in the gap, meaning three or more delivery trucks and vans polluting the same streets.

 

Cutting delivery days is a job and community killer

Reducing delivery days means eliminating jobs for thousands of tax-paying workers who support families and local economies in communities all over the country.

It is unlikely that Canada Post would realize its projected labour cost savings with the loss of these jobs. A study cited by NALC found that the USPS significantly overestimated the amount of money it thought it could save through ending Saturday letter mail delivery.[16]  

In addition to losing business, Canada Post would likely be paying out a great deal of overtime to fulfil expectations for parcel delivery. With fewer letter carriers, Canada Post will find it impossible to handle the millions of parcels it now receives each day during peak times such as the holiday season.

 

Cutting delivery closes the door on other options

Reductions in basic services such as eliminating home delivery or cutting back on delivery days should not be contemplated. Other postal systems around the world have faced declining mail volumes and have risen to the challenge by seeking ways to expand the services they provide (see CUPW sections on the potential for postal banking, new services at the door and new services in retail). They have used their daily delivery network to meet the changing needs of their populations.

Canada Post is amply fulfilling its mandate to remain self-sustaining.  It’s now time for Canada Post to fulfil its other responsibilities within its legislative and policy frameworks, which include delivering five days a week (Canadian Postal Service Charter),[17] providing “basic and customary postal service” and looking at improvements to its products and services in keeping with modern communications technologies (Canada Post Corporation Act).[18] We need to discuss what else we can deliver every day. At a time when our post office could successfully be reinventing itself by leveraging its vast delivery network to create new and better services for people at their homes and businesses, downgrading delivery will permanently close off opportunities, making the pessimistic vision of Canada Post a self-fulfilling prophecy.

 

 

Recommendation:   That Canada Post be required to maintain Canada's basic and customary daily weekday delivery of mail.

 

 

 

 


[1] Canadian households used to enjoy delivery twice a day and businesses three times a day. Saturday delivery in urban Canada ended in 1969. Rural addresses kept Saturday delivery until the early '80s.

[2] This begs the question that a Crown Corporation that has reported annual profits in the millions for the past 19 out of 21 years (see CUPW Financial submission) somehow needs to cut costs.

[3] Finland is 338,424 square kilometres, New Zealand is 268,021 square kilometres and Italy is 301,338 square kilometres. By comparison, British Columbia alone is 944,735 square kilometres.

[4] Canada Post has experience as a provider of last-mile delivery for private companies such as Fed Ex in rural and small-town Canada.

[5] See NALC fact sheet on six-day mail delivery dated January 2015 (Appendix A)

[8] See B for screenshots of these responses from Canada Post.

[11] Based on a review of IRMA data for more than 30,000 parcel and packet items from 10 Forward Sortation Areas (FSAs) in Calgary, Winnipeg, Toronto and Montreal. 

[12]See Canada Post Corporate Manual System 1203.4 (Weight Limits for Letter Carriers) (Corporate Standards Manual, Appendix C).

[13]See Canada Post S4 Time Standards for Delivery with PDT – BCFIT, for R receptacle – including MM Stop, Delivery on Own Route/Other Route Stop Values and Item Value. (Corporate Standards Manual, Appendix D). 

[14] See Canada Post revenues, volume and point of call data in annual reports 2005 through 2015 (Appendix E).

[15] Canada Post Corporation, Canada Post 2011 Social Responsibility Report

[16] See Appendix A.

[17] https://www.canadapost.ca/cpo/mc/assets/pdf/aboutus/ombudsman/en/cpservicecharter_en.pdf

[18] http://www.laws.justice.gc.ca/eng/acts/C-10/