Discussion Post
Case: Canada Post to phase out urban home delivery (1 to 2 pages)
In December 2013, Canada Post announced it would phase out urban home delivery of mail services in an effort to restructure its operations across Canada. At that time, about 6,000 - 8,000 positions were expected to be eliminated over the next five years, a 12% reduction of its current workforce. Nonetheless, about 15,000 postal employees were also expected to retire during the same period. Canada Post estimated that the decision would help save $700 to $900 million each year. In another restructuring move, Canada Post also announced it would raise the price of a single postage stamp from $0.63 to $1.00, whereas a booklet of 10 stamps would be sold at a small discount for $8.50 a booklet, or $0.85 per stamp.
Canadian Union of Postal Workers (CUPW) union leader, Denis Lemelin, had stated that it was "a call to action for all the people to stand up and protect the postal service." Clearly, this was not a welcomed change for Canada Post employees who were going to lose their jobs.
Unionized Canada Post employees can earn between $19 to $25 per hour plus benefits, a good wage for the middle class. However, the restructuring plans may signal wide-spread changes that may threaten the interests of more than 50,000 Canadian postal workers.
In 2012, Canada Post celebrated its 100th anniversary of postal service operations. However, the announcement of new changes meant that this door-to-door mail delivery tradition would become extinct like the old ‘milk delivery' service, a Canadian way of life that has become outdated due to modern conveniences.
Modern technology advancements have reduced Canadians' need to use the postal service, making the daily ritual of checking for a daily letter or bill, almost unnecessary. Couriers deliver parcels, bills are paid online, and of course, letter writing has been replaced by emails, texts and tweets. Web conferencing such as Skype has also allowed people to communicate inexpensively.
Canada Post, a federal crown corporation of the Canadian government, has seen a significant decline in revenues for the past several years. While almost 10 billion letters and parcels were delivered each year, there has been a 24% drop in letters since 2008. In the third quarter of 2013, Canada Post reported a loss of $73 million. Without fundamental changes, it was projected to lose over $943 million by 2020. A Canada Post representative said if continued losses are left unchecked, they would jeopardize Canada Post's financial self-sufficiency and could result in thousands of more jobs lost in the future. Certainly, ongoing losses would be added to the federal government's debt and be left for Canadian taxpayers to pay for in the long-term. In fact, ongoing debt may affect the government's ability to provide other types of services that affect a wide range of citizens across the country.
Two-thirds of Canadians already receive their mail by community mail boxes in rural areas and in newer community subdivisions. In 2012, about one-third or 5.1 million people received mail delivered to their door. According to a Canada Post report, the annual cost of home delivery was estimated at $283 per address, whereas the average cost of a community box was $117.
While the changes are necessary to save millions of dollars in operating losses, the change will be a setback for people with mobility issues such as seniors and the disabled. "Door-to-door delivery remains a critical component for people with disabilities who have mobility issues in particular and would have trouble getting to a public mailbox," said Laurie Beachell, the national coordinator at the Council of Canadians with Disabilities. She explained that as Canadian taxpayers, they deserve to be able to receive their mail too. Clearly, there are many seniors who do not use computers, tablets and smartphones to communicate and to pay bills, but rather, still rely on mail for different forms of communication.
While Canada was the first G7 nation to initiate the end to its home delivery services, it was not the first country to make changes to how it delivers mail. The United Kingdom government recently sold a 60% stake in its postal service to Royal Mail following a move by other countries to privatize their systems such as in Austria, Germany and the Netherlands. The idea has also been proposed in the U.S., but did not reach advanced discussions in Congress. Similarly, the U.S. postal service has been accumulating losses which hit $5 billion in 2013.
Indeed, rapid technology is affecting how North Americans communicate and live from day to day. For example, Amazon announced in 2013 that it would be testing out flying, robotic delivery drones to mail Amazon packages directly to customer doors.
Certainly, consumers have some benefits to changes in postal delivery services. For example, mail locked in a community box may actually be more safer than in an unlocked mailbox at your own home. Of course, this is something not everyone agrees with. The Mayor of Coquitlam, Richard Stewart, explained his city has many community mailboxes but they are not always private and secure. He stated "We have some of our neighbourhoods where the community mailbox has been broken into at least once a year for the last decade...we end up with people constantly having to go out and change their credit card numbers, change all their bank account numbers and their security systems to avoid identity theft."
Federal Transport Minister Lisa Raitt said, "The government of Canada supports Canada Post in its efforts to fulfil its mandate of operating on a self-sustaining financial basis in order to protect taxpayers, while modernizing its business and aligning postal services with the choice of Canadians."
According to a Conference Board of Canada Report, parcels are the only expected area of growth for Canada Post over the next several years, even though customers keep growing at a rate of 100,000 annually. A Canada Post spokesperson said something had to be done to deal with its financial crisis. In fact, the government had already been discussing the possibility of privatizing the crown corporation by selling it off altogether, which would mean thousands of more jobs lost. However, the Federal government had decided to keep managing Canada Post for now.
The restructuring efforts have many potential financial benefits. The increase in the price of stamps would help increase revenues by $160-$200 million per year and the switch to community mailboxes will save up to $500 million. Streaming operations would help save another $100 million and opening many franchise post offices will cut $40-$50 million in losses.
Another reason for the urgency for Canada Post to become profitable again was to repay its pension plan which has a $6.5-billion solvency deficit. In order for Canada Post to make additional payments to the plan, it will need to start making a profit. "The regulations provide Canada Post with more time to pay off its significant pension deficit so that it can restructure its operation for long-term viability," said Kevin Sorenson, the minister of state for finance.
Reaction to Canada Post cuts have been posted on the internet under news articles and in some blogs. Some Canadians had asked if the company could have tried something more innovative instead of cutting middle-class jobs and reducing services to seniors and the disabled. Clearly, Canada Post is a unique organization. It is not likely other companies that can easily merge with another corporation or diversify into other businesses. It sells one service - delivering mail and parcels in Canada. Indeed, Canada Post has to stop its operating losses before the condition worsens. Like any corporation, operating losses can only continue for so long. Without profits, a business cannot pay its staff, suppliers, and other creditors, and will ultimately go bankrupt and cease to exist.
• Identify and explain which five stakeholder groups would be most affected by the cancellation of urban postal delivery services and why.
• Describe how any five external forces (from the general environment) may have impacted Canada Post in the last several years. Discuss the nature of each force separately, with examples.
• What stage(s) of the industry lifecycle model do you think the Canadian daily letter and parcel delivery service(s) are in and why?
The response should include a reference list. Using one-inch margins, Times New Roman 12 pnt font, double-space and APA style of writing and citations.