Post Office. Amazon. Covid19. 2020 Election.
I was at our local social club contemplating if it was worth joining poolside yoga class as it seemed to come with a glass of (and a class on) wine, when I received this email from Tepper Marketing team:
Inc. is working on a story about Amazon sellers who use USPS to ship directly or for their seller fulfilled prime program. She is trying to understand the unique challenges posed by the USPS slowdown with Amazon sellers specifically.
Could speak with her about this in greater detail today?
As a cinephile, of course, the movie Il Postino (nominated for 5 Oscars at the 68thAcademy Awards, and won one for Best Music) flashed into my mind.
Which movie won Best Picture? Braveheart.
It was a good year for movies:
Apollo 13, The Usual Suspects, Mighty Aphrodite, Dead Man Walking, Leaving Las Vegas, Toy Story, 12 Monkeys, Sense and Sensibility, Pocahontas.
It was also the year of the James Bond film GoldenEye (with Famke Janssen as Xenia Onatopp, who was also in Taken, with Liam Neeson, and of course in X-Men as Phoenix).
Il Postino reminded me reminded of Pablo Neruda’s Die Slowly:
He who becomes the slave of habit,
who follows the same routes every day,
who never changes pace,
who does not risk and change the color of his clothes,
who does not speak and does not experience,
He or she who does not turn things topsy-turvy,
who is unhappy at work,
who does not risk certainty for uncertainty,
to thus follow a dream,
those who do not forego sound advice at least once in their lives,
He who does not travel, who does not read,
who does not listen to music,
who does not find grace in himself,
she who does not find grace in herself,
So, what about Seller Fulfilled Prime Program and USPS?
It is involved. Let me break it down in steps.
- The Business Model of the Post Office was already in trouble, way before Amazon even came into the picture as an E-commerce giant, due to emails replacing physical mailing (with stamps).
- Then in 2006, a Democratic Congressman led a successful campaign to really ruin USPS: pre-funded pension program for current and future employees, for 75 years. By 2013, the USPS simply could not make a profit due to reduced revenue (item 1 above) and vastly increased cost (item 2 above).
- Amazon appeared as a savior! The Last Mile logistics partnership that USPS signed with Amazon boosted revenues. Nearly 40% of Amazon packages are now delivered by USPS. But, it increased costs and delays due to (a) 7-day work week (b) (heavier) packages versus mail deliveries and (c) not increasing personnel and vehicle capacity, leading to vastly increased overtime compensation. It also increased physical and mental stress on the employees leading to higher absenteeism and turnover. A low morale became even lower.
- Then came COVID19. This increased E-commerce shipments and reduced personnel capacity. Delays increased noticeably.
- USPS does not get any tax revenue.
- It also has the mandate to deliver to every ZIP code. Amazon disproportionately gave packages to USPS to deliver to ZIP codes that was not profitable for Amazon. The Amazon-USPS contract (whose details are not known to the public) was based on marginal cost (already a problem as any decent Accountant will tell you), let alone not accounting for the cherry-picking issue of item (4). Renegotiating the contract should be a top priority.
- In February 2020, thankfully, with bi-partisan support, the pre-funding mandate of 2006 (item 2 above) was cancelled. But this simply was not enough due to items 3-6 above.
- How to reduce costs and improve efficiency? Decrease the number of mail pick-up points in urban neighborhoods with so many mailboxes that access is not an issue. In Sewickley Village, near where I live, there are 5 mail boxes within 500 steps between neighbor boxes, in addition to the Post Office! But, optically, it has become a political issue due to the 2020 Election!
- What else can one do? Reduce overtime. Oh, that is so politically savvy!
- What else? Increase funding so as to hire and train more folks, at least to cover the Election season. Let us see what happens here.
The Inc reporter heard me out patiently. In summary, she wondered, if I would approve this quote for her article:
The pandemic has been hard on the post office, and the changes made are complex and politicized, so it is not easy to say when and how the delays might clear up, according to Sridhar R. Tayur, professor of operations management at Carnegie Mellon University’s Tepper School of Business.
Sure, I said.
Let me see what her article looks like when it comes out (soon, she said).