Amazon to Begin Sunday Deliveries, With Post Office's Help

http://online.wsj.com/news/article_email/SB10001424052702304868404579190091121691258-lMyQjAxMTAzMDEwMDExNDAyWj

by coloneltcb • 13 years ago

179 127 13 years ago

online.wsj.com

graemian• 13 years ago

There's a lot wrong with the US, but this kind of thinking is exactly what's right with it

alex4nder2• 13 years ago

Oddly enough, I got my first Sunday delivery today from Amazon via USPS, and I don't live in either of the referenced cities.

dsl• 13 years ago

The USPS currently does Sunday delivery to catch up when it falls behind. This agreement allows Amazon to drop off at postal hubs on Sunday for same-day delivery.

alex4nder2• 13 years ago

In this case, I don't think that's it: this package wasn't due for delivery until the following Monday. I was pleasantly surprised when I got the text saying it had been delivered.

jxf• 13 years ago

From the article:

The Amazon contract will be a much-needed financial boost to the Postal Service, which continues to bleed red ink as more Americans eschew "snail mail" in favor of email, instant messaging and social networks. The agency, which said it expects to lose around $6 billion this year, has been closing locations and has proposed ceasing Saturday delivery of many items to cut costs.

But the USPS is, operationally speaking, profitable; it makes about $400M in operating profit per year. So where does the $6B loss come from? It turns out that the overwhelming chunk of USPS expenses are due to a 2006 Congressional mandate that forces the agency to prepay for 75 years of benefits.

In other words, Congress believes that a hypothetical 30-year-old USPS employee's benefit costs need to be fully covered at current levels for 75 years, when the employee would then be 105. Likewise, a retiring 60-year-old USPS employee's pension benefits need to be fully covered for 75 years out -- when the retiree would then be 135 years old.

So, if USPS wants to hire, say, a new mail carrier whose benefits are worth (say) $20,000/year, they must immediately pay $1.5M into the fund (it's actually higher than that because there is a discount factor applied to account for interest and rising health care costs). Imagine if your startup or small business were held to the same requirements, and any reasonable person can see this is insanity.

Here's a WaPo article covering the problem in more detail:

http://www.washingtonpost.com/blogs/federal-eye/wp/2013/02/0...

Wingman4l7• 13 years ago

When I first heard about the absurd benefits-prepayment scheme, I could swear I read that even USPS employees were against it because they knew what repercussions it would have. I don't have a citation for that unfortunately.

lotsofpulp5• 13 years ago

The older ones may have been, because they would have reaped the benefits. But sooner or later, when the taxpayers would have started getting hit with astronomical bills for keeping USPS retirees alive, someone would have had to pay the price.

See Detroit's pension retirees. The older retirees took advantage of the nice pension, and now the younger retirees are going to have to have their benefits cut because there is no one left for Detroit to tax.

yummyfajitas11• 13 years ago

So where does the $6B loss come from? It turns out that the overwhelming chunk of USPS expenses are due to a 2006 Congressional mandate that forces the agency to prepay for 75 years of benefits.

So do all private sector businesses. You can't promise employees $X in future benefits without putting $X into a pension fund. This requirement is uncommon in government, which is why many municipalities have unfunded pension obligations, but it's completely reasonable. The scary fact is that we only require the USPS to do this.

You are also misrepresenting the 75 year time horizon. The USPS is required to make the following (wildly oversimplified) spreadsheet:

    year    #living employees   # earned costs/employee
    2014       1000000            50000
    2015        900000            51000
    etc

The pension fund needs to have SUM(column B x column C) dollars in it (again, wildly oversimplified - it's actually the Present Value of Future Benefits). The 75 year requirement means the spreadsheet must have 75 rows. This prevents the fund from cheating by cutting off the calculation early and failing to account for payments they promised to make. Changing 75 years to 100 years wouldn't change anything.

The number "earned costs/employee" is the fraction of the pension costs that have already vested. I.e., if the employee has earned a pension of $100/month so far, but will have earned a pension of $5000/month at retirement, their earned costs are $100/month, not $5000/month.

This is the same calculation that ERISA requires of all private sector companies.

(Certain grandfathered companies in the private sector are also allowed to escape ERISA, and this will be a problem if any of them go out of business.)

jessriedel3• 13 years ago

My memory from previously looking at this is that you're completely right. But if so, news coverage like that WaPo article are egregiously intellectually dishonest (even if they don't technically lie).

Is there a counter-argument to what you've written that smart people on the other side will offer even if it's not convincing? The only one I could imagine is "The federal government has a special economic status so it doesn't need to fund the future costs it commits to, a la social security". But that's pretty weak.

matthewmcg2• 13 years ago

"This is the same calculation that ERISA requires of all private sector companies."

Not quite. It should be "all private sector companies that offer pensions." That's only about 18% of private employers as of 2012. See http://www.bls.gov/opub/mlr/2012/12/art1full.pdf

Retric2• 13 years ago

Nope, not even close. GM for example has a lot of unfunded pension obligations. Which is one of the reasons for the auto bailout if the US auto industry failed a lot of pensioners would see a huge drop in there monthly pension checks.

Above and beyond that companies set aside money each year for each working employee which is supposed to cover the majority of there pension they don't need to set asside the full cost on day one like the USPS.

rayiner• 13 years ago

It should be noted that post-ERISA, the preferred alternative to promising $X in future benefits without putting $X into a fund is to put in $X, but then get the money back on the backend when some private equity company takes the company through bankruptcy to reduce its pension liabilities. Private sector pension plans are overall in much better shape than public sector ones, but that's not saying all that much.

interg12• 13 years ago

No organization fully funds a pension 75 years out.

AsymetricCom• 13 years ago

I'll just pretend I don't know about the dozens of times pensions were withdrawn by big corporations because they can. Just Google "pensions gone" or similar queries, if you're really that clueless.

gamblor9564• 13 years ago

After reading through the entire thread, I can see where your misunderstanding arises.

You are referring only to the payment of vested pension benefits. In this regard, you are correct--ERISA generally requires companies to fully fund vested pension benefits. Pension plan payments for vested benefits are not "pre-funding payments" since the liability has already accrued. A "pre-funding payment" would be a payment for pension benefits for which the liability has not yet arisen, i.e., for unvested pension benefits.

That is what is significant about the USPS--it is required to pre-fund its pension liabilities for its current and past employees, including for those benefits that have not yet vested and which would, absent the specific Congressional mandate not be required to be funded under ERISA.

The USPS is not required to prefund pensions for employees it hasn't hired yet, but you're the only one on the thread arguing that.

walshemj2• 13 years ago

As they say lies,lies, statistics and pension scheme forecasts :-)

I had an off the record briefing about Hermes (the uk's largest pension fund) for some reason the government makes pension funds appear to have major short falls by assuming that magically all the members will suddenly start drawing their benefits all at once.

On more reasonable forecasts the scheme was sightly under on more positive estimation it was actually in surplus.

Cynics might think that FS pensions are being made artificially expensive to allow employers to kill of the schemes.

lotsofpulp5• 13 years ago

Actually, at least in the US, it's the opposite. The US government requires private organizations to abide by strict funding standards to ensure their retirees get their promised benefits, via laws like ERISA and PPA of 2006.

On the other hand, government entities don't have to abide by ANY laws regarding funding for future benefits, so the politicians and union leaders/elders promise higher and better benefits to get the votes, while taxpayers get shafted when the bill comes due. It's ridiculous to promise full retiree healthcare (even the US government doesn't offer it to its citizens). That is why when Congress required USPS to prefund the benefits, it became an issue for their budget. Because when benefits actually get accounted for, and you start setting money aside, you realize how stupid it is to offer someone full retiree medical benefits.

Shivetya• 13 years ago

Untrue.

Even if you took away the requirement to fund their retirement/pensions the Post Office would have lost nearly five billion dollars last year.

The pension funding is a common misdirection that is brought up far too often in discussions about the Post Office.

The USPS problems are

1) Congress, how many "corporations" have 535+ people to tell them how to run their operation. Congress routinely prevents the closing of obsolete Post Offices and Sorting facilities. 2) People simply do not use mail, dropping more than a third of the letters shipped in the last six years 3) Businesses are also dropping the amount of mailings made.

In 2006, the unfunded liability of the USPS was nearly 75 billion dollars. Who should be funding it? Certainly not the public. The law requires the USPS to put aside 5 to 6 billion a year. The issue that came up was, mail use plummeted.

michaeldhopkins3• 13 years ago

This is not true. The USPS loses billions every year before pre-funding. However, pre-funding pushes them against their statutory debt limit.

You can see in their annual report that they expect losses of up to $20 billion annually even after 2017 (when pre-funding catchup ends) and their plan to eliminate pre-funding would only save about $8 billion per year -- and do nothing to address that the USPS will not be able to pay pensions since they lose so much money.

I urge you to read primary sources. The USPS' annual report is an easy-to-understand slide deck that explains everything very well. http://about.usps.com/strategic-planning/five-year-business-... Please read it before the next time you say something about this issue.

pbreit3• 13 years ago

I leafed through the 37 pages. If I understand correctly, the losses are projected only if they don't partake in some initiatives. If they actually follow their plans and mail volume is in the upper 2 (of 4) projections, they make money.

Florin_Andrei• 13 years ago

Even so, the bill seems designed to make them fail.

philwelch• 13 years ago

USPS is also one of the largest spam operations, and if it filtered out spam they would be much worse off.

ck22• 13 years ago

Working for the post office has to be probably the best job in the USA right now - your retirement is already funded before you are even hired, thanks to congress trying to put the post office out of business.

They are not "bleeding red ink" they are just being gouged and forced to fund things even the largest corporations do not do.

yummyfajitas11• 13 years ago

ERISA forbids unfunded (PAYGO) pensions in the private sector. A private sector employer must put the PVFB of your pension into the fund as you earn it.

ck22• 13 years ago

"as you earn it" is the key phrase here, the post office has to fund pension plans before you are even hired, it's a future pool of staggering size.

Pensions at the post office are probably the most secure retirement fund in the US right now, well other than what congress awards itself.

lotsofpulp5• 13 years ago

I don't think ERISA says anything about health benefits. As far as I know, health benefits are also unregulated in the private sector, but then again, there is no government insurance for health benefits either like there is with defined benefit pensions (i.e. PBGC).

According to Wikipedia:

During the 1990s and 2000s, many employers who promised lifetime health coverage to their retirees limited or eliminated those benefits.[4][5] ERISA does not provide for vesting of health care benefits in the way that employees become vested in their accrued pension benefits. Employees and retirees who were promised lifetime health coverage may be able to enforce those promises by suing the employer for breach of contract, or by challenging the right of the health benefit plan to change its plan documents in order to eliminate those promised benefits.

jotm• 13 years ago

Amazon is really trying to be the end all for online purchases - I bet in 10-20 years, when you need anything, you just Amazon it (you know, like Google it) :-)

AlexanderDhoore• 13 years ago

Except for food (and some clothes) I already "Amazon" anything I need. Once your credit card is in there, it's too damn easy to buy stuff.

JoshGlazebrook2• 13 years ago

Psh. I needed those twelve bags of sour fizzy soda bottle gummie candies.

stevenwei• 13 years ago

Amazon does grocery delivery in Seattle and parts of Los Angeles via AmazonFresh, and it is pretty awesome.

JoshGlazebrook2• 13 years ago

"Delivery on a Sunday would be very compelling for consumers. There are certainly people who decide not to make an order on a Friday because it won't get there until Monday,"

I am definitely one of those people. It seems like I always end up remembering to order something late Thursday night or Friday. When using my Prime membership's 2 day shipping on a friday, the package does not arrive until Tuesday. Is this ever going to change?

What exactly is the reason these shipping companies seem to go into a kind of hibernation over the weekend? Surely there are people out there who would be willing to work weekends (if the pay was right)? How much more would it cost them?

megablast• 13 years ago

What exactly is the reason these shipping companies seem to go into a kind of hibernation over the weekend? Surely there are people out there who would be willing to work weekends (if the pay was right)? How much more would it cost them?

This disturbs me, just like forcing shops to open on the weekend. People need a break, and should have a break, just because you can't wait an extra day?

Sure, they have a choice to work, just as shop workers have a choice to work, they can always get a job somewhere else.

GauntletWizard• 13 years ago

People need a break. People should get a break. They should also hire extra weekend help. Spreading the load out by hiring part-time but weekend-bonused workers would benefit society as a whole. It's not just going to be overtime, it's going to be more interesting and flexible work hours - And society will benefit.

clarkm• 13 years ago

What? No one said anything about taking away breaks. People work Saturday and Sunday and take their breaks during the week.

eru2• 13 years ago

You might want to move to France or Germany.

biot• 13 years ago

It disturbs me that you seem to think that Saturday and Sunday are the only two days a week that someone can not work.

jakobe2• 13 years ago

If we allow shipping companies to work on sundays, we should also allow some warehouse employees to work on sundays. Now all these companies will need electricians and mechanics that work on the weekend to fix stuff that breaks on weekends, because else they would have to wait until monday to continue working. These technicians will need to get their spare parts somewhere, so their distributors need to work on the weekend too. With so many people working on the weekend, it'll be necessary for typical white collar workers to work on the weekend, because a business owner doesn't want to wait until Monday for his accountant to do the paperwork for his new weekend employees. At some point the IT system of a shipping company, or a warehouse, or an accountant will fail on a sunday, and then some HN reader will have to go to work on sunday and miss the delivery of some parcel they ordered and they will have to wait until monday anyway.

rb2k_• 13 years ago

That chain of events is a bit questionable since there are already enough people working on Sundays. Hospitals, Restaurants, Police, ...

utopkara• 13 years ago

That HN reader will probably take Mondays off.

The real question is: Will this will just create more jobs in the end? I am not sure though. Because, it will make life even harder for B&M stores. I already use only the local hardware store, and the bicycle shop as far as the local retail stores go. Even then the nearest bicycle shop closed last summer after many years of service.

unsignedint• 13 years ago

Actually I thought of the same thing when I read the article. These expectations are what making Japanese working environments so insane like unpaid hours and people fatiguing to death -- though I won't say such expectations would create same effect as mindset and legal ramifications are different, but these changes can create shift in peoples' expectations and someone do have to pay for it.

xxpor• 13 years ago

I noticed you're from Austria. If the rules in Austria are like I understand them to be in Germany, you're actually not allowed to work on Sunday. There are no laws against that the the US. Most stores are already open on Sunday, and plenty of people work.

michaelt• 13 years ago

It is possible - indeed there are companies that will do it. Sunday delivery driver pay is about 25% higher. The thing is, the changes to the company are bigger than you might imagine, and that can make them expensive in other ways too.

One factor is what type of deliveries your company does. Some delivery companies want to deliver to offices; most offices have receptionists and are open 9-5 so deliveries are quick and you don't have to make multiple delivery attempts, the parking and roads are usually good, and offices tend to be in densely populated areas so you don't have to drive too long. Offices aren't open over the weekend.

Another factor is the shifts your staff are going to work. You have to give people several days a week if you want to keep them skilled and stop them needing a second job. You need managers as well as drivers. So you don't just have to hire one day's more warm bodies, you need to reorganise all your existing employees' shifts too.

If your company has always done Sunday deliveries, and your drivers knew they'd be working Sundays when they signed up, that's all well and good. But if you have a bunch of people who signed up with a company that always gave them Sunday off, and you have to change that, that's going to cost you a lot of staff goodwill, a.k.a. money.

Avshalom2• 13 years ago

What exactly is the reason these shipping companies seem to go into a kind of hibernation over the weekend? Surely there are people out there who would be willing to work weekends (if the pay was right)? How much more would it cost them?

Supposedly preachers lobbied the government to shut down the USPS on Sunday because people were hanging out at the post office instead of going to church.

http://atheism.about.com/b/2006/02/19/sunday-mail-service-in...

logn• 13 years ago

What exactly is the reason these shipping companies seem to go into a kind of hibernation over the weekend?

You can thank the Jews, the Christians, unions, Henry Ford, and the Great Depression.

dllthomas3• 13 years ago

Yeah, I think it's important we have time off (possibly more than we do), but I think it's much less important that all line up...

pessimizer• 13 years ago

I just read https://news.ycombinator.com/item?id=6711121 which explains the (fairly obvious?) Christian connection, but what do Jews, unions, Henry Ford, and the Great Depression have to do with it? The Jews don't even have a Sunday sabbath.

aashaykumar92• 13 years ago

It is amazing how obvious it is that customer satisfaction is at the core of every new initiative Amazon launches.

madeofpalk3• 13 years ago

Is it really? A lot of companies do this. Apple pays _a lot_ of attention to what it's customers says and guides a lot of decesions by it.

ceejayoz2• 13 years ago

So you're refuting the "Amazon cares about customers" point by saying other companies do too? Huh?

CamperBob2• 13 years ago

So we can expect most of the design decisions in iOS 7 to be reverted in iOS 8, then? Because that's what most Apple users seem to want.

el_shayan• 13 years ago

Non-American here. Why at the start of the article does it say "...with an unlikely partner"?

(to be honest I immediately though of Owls! http://www.youtube.com/watch?v=EBfxOatX0tU)

So any idea why Amazon-Post partnership was considered as "unlikely"?

sliverstorm• 13 years ago

Perhaps because USPS is a pseudo-goverment organization, and the US government (and its many appendages) usually doesn't strike this sort of cooperative deal with private companies.

adestefan2• 13 years ago

Except the USPS does. Just look at what they do for Netflix.

sneak• 13 years ago

Few people see the USPS as a serious shipping competitor to FedEx and UPS and others. They're for letter mail.

hayksaakian• 13 years ago

... Except for anyone doing business involved in shipping.

When I was reselling used books, USPS was the best ROI for shipping (packages and media).

vinhboy• 13 years ago

This is great news. The USPS is hands down the best shipping provider. Priority Mail, especially the Flat Rate boxes, are often the cheapest and fastest way to ship packages.

ghaff• 13 years ago

Not for me it isn't. In fact, one of the things I like about Amazon Prime is that--at least in my case--it means that UPS delivers a higher percentage of my packages. The issue is that, while UPS drops off the package at my door (as they have to), USPS tends to leave it hanging off my mailbox out by the road because they don't want to spend the time coming down my driveway. And I've had more than one such package stolen.

freehunter2• 13 years ago

Also from my experience with apartments, UPS will leave the package at the front desk while USPS leaves the package at the post office (forcing me to go to the post office to pick it up).

Ettolrahc• 13 years ago

I got very excited. Then I realised you meant "Postal Service" and not "Post Office".

xlevus• 13 years ago

Meanwhile, in the UK, Amazon appear to have opted to not use existing services like the Post Office (who are capable enough to deliver packages) and gone with their own "Amazon Logistics" (who don't seem to be able to deliver a package).

rgbrenner• 13 years ago

Representatives of Amazon and the Postal Service said the Seattle-based company was taking advantage of a little-known offering available to any shipper.

So it sounds like they're just using Express mail.. not really anything special. USPS will deliver express mail on Sunday for an extra fee ($12.50). I'm in Denver, you can drop off an express mail package @ the post office in stapleton until 10pm on Saturday, and it will be delivered on Sunday by 3pm.

That facility used to be open 24hrs a day/7 days a week.. so it wouldn't surprise me if the cities amazon picked have facilities open for 24hrs, and they are able to drop off packages at 2-3am sunday, and still have them delivered on sunday (within the city, or near it).

nandemo• 13 years ago

TIL that Amazon doesn't deliver on Sundays in the US.

In Japan (well, at least in cities) pretty much everything works on Sundays.

bound008• 13 years ago

I experienced this for the first time yesterday. It was surprising, especially with today being a postal holiday.

wdr1• 13 years ago

Well, this explains the Amazon package on my porch this morning. I didn't expect it until later today.

abuehrle• 13 years ago

Companies like Instacart, Doordash, Postmates, Amazon, and Google are (in different ways) building a new, siloed delivery infrastructure. At the same time, the USPS and their local delivery infrastructure are in trouble.

Is it conceivable that the USPS could leverage their infrastructure to build a national same day delivery network? It's obviously a stretch, but they already have the scale and resources. As a country, we aren't as interested in having letters delivered to our houses anymore, but we sure are interested in groceries and appliances.

Amazon to Begin Sunday Deliveries, With Post Office's Help

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