A Review of Canada Post’s Five Point Plan

Canada Post’s Five Point Action Plan is the second iteration of the modern post business plan. The first version, which started in 2008, was unsuccessful and this new one adds the elimination of door-to-door delivery to bring it back to profitability.

This is not the typical business blueprint for future growth. It is a survival plan.

The Five Point Action Plan available at Canada Post’s website has no author, nor any endorsements by any leading corporate or government figures. Nobody, including the president of Canada Post, wants to take direct ownership for this document.

Declining volumes are partially to blame for the present predicament but there is an important variable completely left out — the Canada Post Transformation program is a financial disaster, or at minimum a boondoggle. The Government, employees, or the public have to pay for this poor business strategy.

It won’t be the Government who will pay for this. Lisa Raitt, the Minister Responsible for Canada Post, has made it clear in a September 2013 CBC interview that the Canadian Government has no intention of offering direct financial assistance. She believes that the company must be self-sustaining at almost any cost. She has not publicly recognized any responsibility, whether directly or indirectly, of Government involvement in the transformation program that has led up to the debt crisis. She cited the Conference Board of Canada’s Report, The Future of Postal Service in Canada, as justification for any future changes to Canada Post.

This same report is highlighted in the Five Point Action Plan; the Future of Postal Service in Canada urges a fundamental change in Canada Post business model. This was reviewed previously by Canada’s Modern Post, and was found to be very limited in its scope. It was recently revealed by the National Post that Deepak Chopra, President of Canada Post, is a board member of the Conference Board of Canada — a potential conflict of interest. It appears this was the beginning framework for a spin campaign to justify the new business plan.

In 2007 Canada Post was uniquely positioned for the future — an aging workforce that could be reduced through attrition, little to no debt, a pension plan that was in good shape, and an infrastructure in need of updates. It was ripe for change with minimal negative effect. They could have easily reduced the workforce by 12% under the old system, restructured routes and transportation systems, and would have been able to save roughly $500 million a year through this without any major revamping. It likely could even be more if sound business practices were introduced throughout the network.

Canada Post knew volumes were declining when they chose to start the $2+ billion in upgrades — with money that they envisioned through future profits. However they had absolutely no cash reserves in case something went wrong and it did go wrong. The markets crashed in 2008. They had no profits and no money. Government intervention through loans and an issuing of bonds helped ease the crisis but this left the corporation straddled with serious debt.

See A Brief History of Canada’s Postal Transformation for more information.

Why they put so much money into revitalizing infrastructure for a product that was known to be declining is a mystery. Canada Post could have simply started the slow process of winding down its mail processing system to a much smaller footprint to reflect decreasing demand.

Why couldn’t Canada Post have just sharpened the saw under the old system, built up their cash reserves so that if a rainy day came, or wanted to upgrade, pay for it in cash?

If they had the cash, they could have tested the modern post initiative in a single city or region to test its viability first before a national roll-out. This was never done.

In the last year, Canada Post was looking at alternate day delivery as a cost saving solution. Many Canadians seemed open to this idea. There were some problems with this scenario. The cost of expanding warehouse space to hold alternate day mail would be expensive. The high volumes of mail that occur during Christmas could also not be sustained in an alternate day model. It would have to revert to once a day to keep up during this period. The corporation would also not be able to guarantee businesses that their goods would reach their customers at a committed time, which would mean businesses would look for alternative carriers. It would also require a change to the Canadian Postal Service Charter.

The phasing out of door-to-door delivery and the use of CMBs is more cost-effective and fits within the Canadian Postal Service Charter. This was the reason why CMBs were chosen.

The installation of CMBs combined with the stiff hike in the cost of postage is a serious threat to Canada Post’s future. It may accelerate the shift to electronic communications. The negative publicity may urge the public to use alternate delivery forms for parcel delivery too. There may be a sudden 30 percent drop or more in volumes and in related revenue because of this change. Does the corporation have a strategy if this happens?

There is a serious logistical problem of where these CMBs will be located. Most public sidewalks in residential areas do not have room to safely accommodate such a large piece of equipment. Many homeowners will oppose the stationing of this object in front of their property. Canada Post will have to work with communities and local governments for setting up these boxes on urban streets. It will be time consuming and generate negative publicity. It may take more than five years for some neighbourhoods along with numerous consultations to allow for this installation. Some neighbourhoods may choose to permanently refuse or not cooperate at all. This is going to be a logistical nightmare.

By switching to CMBs, this will significantly reduce the letter carrier workforce. This will mean that there will be excess inventory of new vehicles and buildings recently leased by Canada Post. There will be an oversupply problem. Modern Post Version 1 will become a partial write-off.

Labour attrition was one of the key elements of the first version, but the profits were not realized from it. The present second version attempts to revive this same concept.

The loss of 6,000 to 8,000 positions is of great concern. The concentration of losses will be in the letter carrier sector. A smaller percentage will be supervisors, clerks, middle managers and streamlining in the plant operations. There were approximately 15,000 full time and 1,000 part time letter carrier routes at Canada Post in 2011 — though there has been some reductions in the count since then. It is uncertain how many positions the plan will eliminate since delivery to homes represent only 33 percent of the total points of call according to the Five Point Action Plan document (Pg. 5), or corrected to 71 percent by Jay Bryan of the Montreal Gazette in his article Canada Post Plan is a Disaster — regardless of what percentage door-to-door requires more labour than the other methods. The elimination of this method may reduce the letter carrier workforce anywhere between 40 and 50 percent.

The Five Point Plan outlines that 15,000 employees will be retiring in the next five years, but it fails to point out that this is company wide, not just letter carriers. It may require anywhere from 5,000 to 7,000 letter carriers to retire in order for this attrition to work. If there are not enough letter carriers retiring during this period, it is unknown how this will work out.

The reduction of 6,000 to 8,000 positions also has a negative effect on the pension and will cost the corporation more money. With less contributors subsidizing the plan, Canada Post as a corporation is forced to pay more into it. It is not known how much this will cost Canada Post.

The Five Point Action Plan reveals upcoming changes to the pension plan itself. In a December 13th letter sent to the Hon. Jim Flaherty, Minister of Finance, Denis Lemelin, President of CUPW, outlined that the pension is part of the negotiated collective agreement and no unilateral changes can be made by any party. He questions if the reprieve is contingent on changes to the pension plan and if these changes are going to be imposed by the Government rather than through the collective agreement process.

It is the employees and the public that will have to pay for version 1 of the modern post and its current successor. Employees have to suffer job losses and a decline in benefits. The public loses its home delivery, faces increased prices, and receives less services.

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