Canada's Modern Post

A Former CEO on Canada Post’s Modernization

Michael Warren, a former CEO of Canada Post from 1981-1985, has given a critical analysis of the present Canada Post Modernization program.

In a Toronto Star article, The Future of Canada Post,he argues that there are serious inherent problems with the plan, “the larger concern is that Canadian taxpayers are being asked to guarantee a multi-billion-dollar investment in a process that lacks a clear, long-term business plan.

If these billions are simply intended to speed up the processing of hard-copy letter mail to add some efficiency to today’s unsustainable postal business model, then they will be wasted. This money will also be wasted if the government allows Canada Post to indulge in its costly vision of a separate e-post electronic service when the Internet is readily available.”

The 2009 Annual Report – Some Answers

The 2009 Canada Post Annual Report contains many details that answer a few key-questions as outlined in the previous post, “Important Questions…”.

The 2009 version is much improved over the 2007 one, which the questions were based on. Much more will be pulled out of this document, but in reference to some of the important questions:

• Food Mail program: (Pg. 28) A large portion of this was covered by the Government of Canada. Canada Post attributes to absorb 11 million in ‘foregone’ revenue on the difference between what the Government gave and their actual costs based on commercial rates.

• Government Mail and Materials for the blind: (Pg. 28) 17 million in ‘foregone’ revenue.

• Library Book Rate: (Pg. 28) 6 million in ‘foregone’ revenue.

The total lost ‘foregone’ revenue to Canada Post for these three programs is an annual 34 million dollars.

This total does not include free mail to the military in Afghanistan.

Nor does it include a breakdown of how much the Universal Service Obligation costs. What is meant here by USO? All points serviced that Canada Post loses money on, which is typically rural and non-urban communities. Losses that are required to be recouped through the profitable urban operations.

These two entities, Urban and Non-Urban, should be distinct in all Canada Post financial reports.

The Math behind a Letter Carrier Route

If the Letter Carriers routes are changing, then it is time for the math to get corrected and made fair.

Letter Carriers of the Canada Post Corporation do not work by the hour but by a complex calculation of distance, volume, coverage, average walking speed and obstructions that total 7 hours. The total is brought to 8 when one includes the coffee breaks and a lunch break.

The detailed formula is outlined in a manual called the Letter Carrier Route Measurement System. It is long and hard to quickly decipher key-terms. It has been in existence for decades, if not more, for measuring a route.

The formula has had its strength and weaknesses. It generally equals to 8 hours, while other times it is below or above. Senior letter carriers usually take advantage of the weakness of the system and choose the routes that have been under-assessed while newcomers normally get the over-assessed routes.

This isn’t necessarily a bad thing because by the time senior letter carriers have the 20 years or so of service to do this, their knees, ankles, back or hips are close to being worn out. It enables them to extend their physical ability to complete their duties by a number of years. Although this is far from a right solution to the problem of aging and physical fatigue from the daily mechanical stress the job description entails, it has saved Canada Post millions every year in medical and disability issues.

Now that Canada Post is transforming and modernizing the Letter Carrier delivery system, important changes have happened to route measurement. First of all, it has introduced the two bundle delivery system, secondly less sorting due to the introduction of new machinery has subsequently added more delivery time to each delivery persons day.

It has also brought out the inherent flaws in this mathematical system. First of all it is a calculation based on the laws of averages. It is based on the premise that every day and every month carries the same volume. This is not the case. Volumes from October to the end of December are approximately double of what they are from June to August. This means that what is calculated to be an average 8 hour day should theoretically take 10 hours or so in high season, and approximately 6 hours in low season.

This flaw of averages is especially noticeable when a letter carrier’s actual amount of physical delivery time has increased by approximately 1.5 hours under the new plan. This 1.5 hours was taken from the manual sorting time letter carriers used to have, but now taken over by automation, the introduction of a company vehicle rather than taxis, public transit, or by foot. Time savings are also found in disputed revisions to the Letter Carrier Route Measurement System. This was previously 1.5 hours of work that was not physically stressful. This 1.5 hours more of added physical delivery time per day will, over time, increase the likelihood of injuries.

The system also needs to be more flexible to accommodate these shift in seasons. Not only are the weights heavier and the volumes higher in the peak season, but with the introduction of shifts starting at 10:00 am, those letter carriers will then be forced to deliver in the dark during the winter season. This is a serious flaw that needs to be corrected.

With the new technology available, it should be able to calculate weight and volume on a daily basis. Where the calculation exceeds the 8 hours, extra-staff should be called in to complete the work which would force the regular carrier in an overtime situation. In the summer where there is not enough mail for the average distance, the letter carrier should be required to do extra distance to make up the 8 hours.

Another problem that the route measurement system does not take into account is environment. Storms, rain, snow, dark and any other inclement condition can easily add one hour to the average daily walk. It is well known at least in Winnipeg that heavy packed snow increases the time of all walks by one hour each day. The use of gloves and the combination of a high amount of flyers also effects this variable.

If Canada Post wants to make the route measurement system fair, this environment variable needs to be added.

The two-bundle system adds more time to a route. It adds an average 2 extra seconds to each point of call — though some letter carriers in the earlier editions of this article have disputed this figure is too low. One has to look longer, stop, juggle mail and flyers around to confirm that the oversize and the sequenced mail belongs to the next house. This may seem trivial and petty to the casual observer, but the math concludes otherwise. This adds 2000 seconds to a typical modern 1000 point call which is approximately 33 minutes to a route everyday. This calculation was based on working in natural sunlight. If it is dark, the variable should be doubled.

The LCRMS calculated values are still based on delivering in a one bundle system. This has never changed. It should be updated to the two bundle system values.

Another problem of the route measurement system is new values added by management. The introduction of company vehicles has added a new dimension. However the variables and the math regarding this have not been clearly disclosed to the workers or the union. No one knows what they are. No one knows for example, how finding a parking spot on a busy street has been included in the mathematical formulation.

Canada Post needs to make the route measurement system more transparent to all its employees. It has to be certified or evaluated by those are recipients of the calculations.

Today there is an added problem — the Letter Carrier Route Measurement System has been changed into a database system. What was once a legal published document now resides as a software program in Canada Post’s database. This is not a bad thing, but access is a serious problem. At least one representative of the Canadian Union of Postal Workers in Winnipeg claims they they have been denied access, though he did admit management would allow them to look at the database views at a corporate office.

Another mathematical calculation is flyers. This was excluded in the collective agreement for the calculation of route delivery time – though the number of flyers can often double the average weight of delivery on given days. The collation of flyers is not calculated fairly either. To be fair, this also has to be calculated into the route measurement system.

This is controversial, as Canada Post letter carriers are not paid by the hour to deliver flyers, but by piece and many like it this way. This contradicts and breaks the spirit of the letter carrier route measurement system. The LCRMS is the only way to be accurately fair. The payment by the piece has to end.

The way the flyer system is enforced, it actually abrogates the math for typical coverage of a route. Not every home gets mail everyday, so the math has been calculated into this to build a typical 8 hour day. However, when one is forced to deliver flyers to 33% of all homes almost every day, with penalties of demonstrated firings if not doing so, whether the home has mail or not, it increases the daily coverage by up to 10%. This can add up to 30 minutes or more every day to a route.

This flaw has to be added to the Letter Carrier Route Measurement system as well.

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A newer article on the problems of the LCRMS system is available: Canada Post’s Delivery Software Needs a Serious Update.

Important Questions on Postal Transformation

These are some important questions that come to mind in the process of modernizing Canada Post. There was no public or employee input involved in the decision-making. These are vital questions that should have been publicly addressed before implementation but still remain unanswered.

Why is Canada Post spending so much money on new buildings and infrastructure when mail volumes are declining? If Canada Post was publicly traded, would investors infuse 2 billion dollars for a sales base forecasted on declining volumes or would they just want management to “sharpen the saw” with the least capital possible?
Can the Post Office continue to rely on rate increases to cover costs?
Why should Canada Post bear the cost of Company provided vehicles when historically employees provided their own? In Winnipeg, 70% of the traditional letter carriers use private vehicles, 5% public transit, 23% taxi and 2% walking directly from station to destination. Of the private vehicles 90% do not benefit from Canada Post subsidies of any kind. The costs are all borne by the carrier. In the new modern Post scenario, media outlets confer the purchase of 5000 additional vehicles on top of replacing a fleet of 6000. If the 5000 figure is correct, and this is to replace the private vehicles. The new cost adds 40 million of annual expenditures to Canada Post’s bottom line that never existed before. (27 million a year in lease payments, plus 13 million in additional annual fuel costs, approximately 7.5 million in annual insurance costs, and 2.5 million in annual maintenance)
Is this a good business decision?
Why use expensive air transport when trucking will suffice? USPS is trying to move as much delivery goods to surface transport as opposed to air to cut down on costs. Will Canada Post follow suit, or is moving nearer to the Airport an indication of the opposite strategy? One personal study concludes that air transport is 3x higher than surface transportation. How much would Canada Post save if the majority of goods were shipped by surface rather than by air? (It has been proven that the majority of urban centres can meet time objectives by surface).
Wouldn’t it have been much cheaper to build a facility away from the airport with more emphasis on trucking logistics?
Why such a big cost of transformation with so little return? The 2007 annual report demonstrates the costs are being shifted from labour to infrastructure with little financial change. Suggestions have been made that staffing is to be reduced by 10%. This brings in an annual savings of $350 million dollars. The 2007 Canada Post annual report has stated that total debt obligations will amount to $315 million a year in yearly lease obligations in five years plus other obligations that could push it over 350 million a year. If this is correct, whatever costs associated with the upgrades and reductions in staffing leaves the financial picture unchanged.
Why couldn’t the corporation just slow down the roll-out and use its available yearly profits to fund it?
Why didn’t the corporation first test this plan in a controlled area of study and then implement a national strategy when all the serious problems had been ironed out?
Should Canada Post be involved in ancillary companies such as InnovaPost, or should they shed non-core items and focus more clearly on the direct company mission?
When will Canada Post issue annual reports that comply with the Ontario Securities Commission standards?
Proposed savings from better health initiatives #1. How can letter carriers spending an extra 1.5 hours walking/delivering per day than the traditional model be construed as a health and safety solution? Wouldn’t extra time walking increase the exposure to injury? Shouldn’t the new model be decreasing the amount a letter carrier should be walking?
Proposed savings from better health initiatives #2. Night shift work. It has been noted that mental health issues, productivity and absenteeism have to be addressed in order to control and improve costs. Much of this can be directly correlated to long-term evening and especially night shift work with its physical and social consequences. Productivity could likely be increased by 30%, absenteeism reduced by at least 50%, and would effect long term mental illness leave by a large percentage. There would be a decrease in workplace violence as well if night shift work could be reduced to a minimum. It is one of the most long-term expensive health problems faced by Canada Post. Why isn’t there even a remote discussion on a solution to the problems associated with evening and night shifts? The productivity improvements alone from improving work hours may even be more profitable than installing new equipment.
How much does the universal Government mandate of sending mail from everywhere to anywhere cost Canada Post:

How much does Canada Post lose in sending mail to non-urban centres?
Does Canada Post have a hope of ever breaking even with these points?
Can increasing profits through innovation and better work practices from urban centres ever cover the losses of sending mail to non-urban centres? Is there a point with fuel costs that it will be impossible for urban centres to subsidize costs of delivery to non-urban centres?
How much profit did the urban centres actually make in 2011 to compensate for the losses accrued from the non-urban centres?
Do the Government subsidies for Northern and remote towns/villages cover the costs of delivery? If not, how much does Canada Post lose on this every year?
How much money does Canada Post lose from Fed Ex, UPS, etc. piggybacking Canada Post in delivery to non-urban centres every year?
How much does it cost Canada Post to deliver Parliament mail, admail and to Canadian military establishments such as Afghanistan every year?
Do the Government subsidies adequately cover the cost of delivery for magazines and publications? If not, how much does Canada Post lose on this every year?
Canadian Library parcel delivery service. Do the Government subsidies adequately cover the delivery cost for these? If not, how much does Canada Post lose on this every year?
Since these items are all acts of legislation and Canada Post has no control over these variables, shouldn’t non-urban centre costs be listed separately in the annual report as fixed expenses/liabilities?
Shouldn’t the profitable and the forced non-profitable entities of Canada Post be separated for financial reporting purposes?

Still looking for answers…