
Amazon to Begin Sunday Deliveries, With Post Office's Help - coloneltcb
http://online.wsj.com/news/article_email/SB10001424052702304868404579190091121691258-lMyQjAxMTAzMDEwMDExNDAyWj
======
jxf
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...](http://www.washingtonpost.com/blogs/federal-
eye/wp/2013/02/08/mandate-pushed-postal-service-into-the-red-for-first-
quarter/)

~~~
yummyfajitas
_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.)

~~~
Retric
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.

~~~
yummyfajitas
How is my post wrong? From my post: _(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.)_

You are simply incorrect that the USPS needs to pay for an employee's pension
on day one. They contribute according to a vesting schedule, same as any
private sector company not grandfathered.

It's only in their _projections_ that they must include full costs. Unlike
many other agencies, the USPS can't tell Congress that a program will cost $X
over the next 10 years, where $X excludes the cost of employee pensions.

~~~
gamblor956
You are wrong because the USPS _is_ required to fully pre-fund all of its
pension obligations. It does not pre-fund based on a vesting schedule, it must
prefund each obligation _all at once._ That is why the prefunding obligation
is always brought up when discussing the USPS's finances--it is a unique
requirement that is not shared by any other entity, public or private.

You are probably misunderstanding the pre-funding schedule. Beginning in 2006,
the USPS was obligated to make pre-funding payments with the goal of fully
pre-funding 75 years worth of pensions by 2017. See the linked WaPo article,
which explicitly states "Congress passed a statute in 2006 requiring the early
payment of 75 years worth of retiree benefits within 10 years. " (This is not
the same as vesting, because the pre-funding obligation is not tied to the
vesting of any particular group of beneficiaries' benefits.)

More specifically, see section 801, et. al., for the specific language of the
Postal Accountability and Enhancement Act fo 2006 which creates the silly
requirement.

~~~
yummyfajitas
I don't care what some innumerate reporter at the WaPo wrote.

According to the actual law, what must be fully funded is the "actuarial
present value of all future benefits payable from the Fund." What this means
is that if an employee's pension has 50% vested, their "future benefits
payable from the Fund" are 50% of their pension. The USPS is then obligated to
put 50% of the NPV of their pension into the fund by 2017.

[https://www.govtrack.us/congress/bills/109/hr6407/text](https://www.govtrack.us/congress/bills/109/hr6407/text)

It's explicitly stated 5 times it should comport with "generally accepted
actuarial practices and principles", which rules out all the insanity people
seem to be attributing to this law.

~~~
gamblor956
Yes, I know what the text of the bill states, which is why I referenced it in
earlier comments. More importantly, you yourself have posted the relevant
language. The "acturial present value" part of the quoted phrase is what must
comport with generally accepted actuarial practices. The problem is that "all
future benefits payable" is by its express language not limited to _vested_
benefits. You need to read the _entire_ code section, not just little
snippets.

~~~
jessriedel
I'm very much enjoying this discussion and I hope you guys can find a
definitive statement about what the bill entails. (I find the language you
have both quoted from the bill to be too vague to my uncertified ear to make a
decision.)

Is your claim that the postal service must pre-fund unvested benefits at the
day the employee is hired? That is, is that how you think "future benefits
payable" is being interpretted? Because what's definitely _not_ true is that
the postal service is being required to fund un-hired (or unborn) employees.
See this article, which has quotes from the Congressional Research Service.

[http://www.cnbc.com/id/45018432](http://www.cnbc.com/id/45018432)

------
JoshGlazebrook
> "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?

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

~~~
jakobe
Yes, and all these things already require a lot of people to work on the
weekend. Blood transfusions are delivered on weekends just fine. But that's no
reason to allow consumer electronics to be delivered on Sunday...

~~~
jsolson
I can go into a store and buy it on Sunday. Why should delivery be any
different?

~~~
kubiiii
It should not. The question might be why going into a store on sundays?

~~~
jsolson
Why not? Stores or more or less universally open, and I've got the day off.

------
rgbrenner
_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).

------
ck2
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.

~~~
yummyfajitas
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.

~~~
ck2
"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.

~~~
yummyfajitas
No, they are not required to prefund before current workers are hired.

The pension costs of future workers are simply required to be included in
future projections of USPS costs. It used to be that the USPS could go to
congress and say "we want to do X over the next 10 years, it will cost $Y".
The $Y value was allowed to exclude the cost of retirement benefits for
workers hired during those 10 years. Now it must be included.

This is simply good accounting practice.

------
aashaykumar92
It is amazing how obvious it is that customer satisfaction is at the core of
every new initiative Amazon launches.

~~~
madeofpalk
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.

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

~~~
icebraining
I think madeofpalk is refuting the "amazing" part. It's not amazing if it's
common.

~~~
ceejayoz
I don't think Amazon-level customer service is all that common. Yes, some
other companies like Apple do the same thing, but it's generally surprising to
get that sort of support.

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

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

------
jotm
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
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.

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

------
vinhboy
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
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.

~~~
freehunter
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).

~~~
BillyMaize
This. USPS for me has also been terrible about updating their tracking
information, so I don't find out until late at night when expecting a package
to find I need to make this trip. It is like they wait until the end of the
day to update every package status.

~~~
wcfields
I think I can echo having a list package from my mailbox vs front door and it
has everything to do with FedEx/Ontrac _/ UPS leaving the box at my front
door.

One of my favorites is the recommended carrier of Monoprice, Norcon, that
emails you a photo of the delivered package once delivered.

_Ontrac is a west coast delivery service, and from what I can tell they keep
prices low by using mid-90s beater white minivans with a company logo magnet
and issuing their employees a polo T uniform.

------
alex4nder
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
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.

~~~
alex4nder
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.

------
abuehrle
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.

------
el_shayan
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](http://www.youtube.com/watch?v=EBfxOatX0tU))

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

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

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

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

~~~
icelancer
With Priority Mail now offering $50 in free insurance to the flat rate
packages, it's now the obvious choice for my online retail business.

Even before then it was the clear winner. Flat rate standardized (free)
packaging is such an awesome perk. USPS loses way too many of my parcels, but
it's just not worth going to UPS/FedEx and paying 2x the rate plus way more
hassle for a slightly reduced lost package rate.

~~~
jonknee
You should at least make UPS/FedEx available--I won't buy from you if you ship
USPS only. Not worth my time for the potential hassle.

~~~
adestefan
And I'm the opposite. I'll pick USPS over UPS/FedEx every time. In over 20
years of shipping I've never had a package show up at my doorstep damaged by
the Postal Service. UPS can't even ship me their own envelope without ripping
it. Don't even get me started on when amazon uses Lazership...

Of course you know what they say about the plural of anecdotes.

~~~
jonknee
I've never had a USPS package show up damaged either, they just don't show up
at all :).

Shipping is highly localized so options are always appreciated, a bad USPS
delivery person or a bad UPS person can be all the difference.

------
xlevus
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).

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

------
bound008
I experienced this for the first time yesterday. It was surprising, especially
with today being a postal holiday.

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wdr1
Well, this explains the Amazon package on my porch this morning. I didn't
expect it until later today.

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

