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The Proposed USPS Network: A Second Best Solution

Yesterday the Postal Service presented its proposal to restructure its processing and transportation network.   The proposal is a second best solution meaning that pricing,  financial, labor contract constraints prevented it from making a proposal that could provide better service or further reduce operating costs.

Pricing and Services

The change in First Class service standards mostly reflect the results of the constraints the Postal Service has on raising First Class rates to cover peak-load and transition costs.  Switching to a network of fewer than 200 plants would have some service impacts but would not require adding a day to the current service standards without changes to plant operating plans. An analysis of the proposed network could easily be completed comparing the cost difference of consolidating plants and consolidating plants and changing the operating plan to implement slower delivery standards.

A previous post illustrated that it is possible to retain current First Class service standards with higher single-piece rates. [Could First Class Mail Service Standard Be Retained?]  That post suggested that single-piece First Class Mail prices would have to go up by 6 to 10 cents over the next few years. However, pricing constraints prevented the Postal Service from evaluating whether higher First Class single-piece rates or slower service and lower costs is the more rational option for ensuring maximum contribution from this product as volume declines over the next decade.  In the review of the Postal Service's proposal, the Postal Regulatory Commission needs to evaluate both options as it is important to understand the impact that the pricing constraint has on potential contribution from single-piece First Class mail.   In addition, the Postal Regulatory Commission needs to clearly rethink its decision to maintain the link between single piece and bulk First Class mail rates. Both Congress and the Commission need to determine whether maintaining the Postal Service's First Class mail commitment should be retained at higher rates, a practice common in Europe, or whether First Class mail service should be allowed to decline.

Pricing Constraints and Rural Areas

The map of new facilities also raises questions about seasonal variations in First Class mail service quality.   Many of the areas that see significant reductions in mail processing facilities are in parts of the country with winter weather resulting in slower inter-city transportation  than in other seasons.  The seasonal difference in service quality needs study by the Postal Service and the Postal Regulatory Commission before it makes a final decision on an operating network.

Financial Constraints

The new Postal Service network represents a network that minimized capital spending.  It uses only existing facilities and existing mail processing equipment.  In addition by expanding processing windows, the Postal Service expands the use of its new letter sorting equipment and eliminates the need to replace its older automated sortation equipment.

The financial constraints have an impact on both the Postal Service's operating costs and the quality of service that the Postal Service can offer. 

The financial constraints affect the operating costs of a streamlined network in two ways.

• First, the network must use existing facilities.  While some existing facilities are close enough to the cost-optimized locations for a 200 plant network that they would continue to be used, significant parts of the country would be better served by replacing an existing facility with one a significant distance from where existing facilities are located.  Also some plants in optimal locations may be too large or too small for its optimal service area and a less optimally located facility has the capacity in place.    Using facilities in locations that less than optimal eliminates the need for significant capital to build an optimal network but most likely will generate higher processing and transportation costs than would be found in an optimal network designed without the capital constraints.  Facility location has a big impact on decisions to transport mail by air or truck
  
  [Changes in the next few paragraphs reflect the first comment and presents a better understanding about the use of Postal Service sortation equpment. 9/16/2011 12:51 p.m.]
  Using existing facilities also limits the Postal Service to using the footprint of existing facilities.  This set the limit on the amount of sortation equipment that a facity can hold extending sortation times.   Longer sortation times may shift some mail from ground to air transportation to meet two and three day service commitments as wel as affecting mail processing costs.
• Second, the network can use only a portion existing equipment.   The Postal Service operates multiple generations of automated sortation equipmen with varying levels of productivity.   The amount of equipment used reflects capital constraints that set limits on the amount of equipment that can fit into the proposed network   The focus on minimizing equipment use also focuses on improving capital utilization with an uncertain impact on labor utilization.   A network optimized to minimize total costs might be less constrained by the amount of equipment used and depending upon other constraints might require more equipment than is now in the Postal Service's inventory to minimize costs or sort mail over shorter periods of time in order to further reduce transportation costs.
  
  .  Most origination sortation is performed on older automation equipment while destination sortation and carrier route sequencing is performed on newer equipment.   The new operating plan minimizes the use of older equipment by using newer equipment over more hours in a day. 
  If the network was restricted by the amount of  newer equipment available, then some less than cost-optimal consolidations exist to accommodate the limits on available new equipment.  Capital to replace older equipment would have increased the flexibility of the network model builders to develop an operating-cost optimized network.

The financial constraints affect service quality in two ways as well. 

• First, constraints on capital spending puts facilities in sub-optimal locations that result in increased transportation time between facilities and reduced time to sort mail to meet critical dispatch times in processing plants.   Combined, these factors will add a day or two to service in many locations that would not exist in a network not constrained by a lack of capital.
• Second, restrictions on capital, combined with labor contract constraints, restrict the ability to reduce the time mail is not moving (i.e. transported, or being delivered) and total time from origin to destination.   Ideally, distribution networks, including networks of Deutsche Post, FedEx and United Parcel Service, minimize time spent at network nodes in order to maximize the distance between nodes and ensure overnight and two-day service commitments over geographic areas much broader than the Postal Service does now.   Their capital spending on plants and equipment accept the fact that its sortation facilities will be fully utilized only during limited peak periods and sit mostly idle for many more hours than the Postal Service plans to have its equipment remain idle.
  
  The difference between the network optimization approaches of Deutsche Post, FedEx and United Parcel Service and the Postal Service reflects the approach of companies with easy access to capital from retained earnings and private capital markets and an enterprise with no retained earnings or access to capital markets.  The difference in capital makes a significant contribution to the ability of these enterprises to offer better service than the Postal Service does now or will under the proposed operating plan.

Labor Constraints

Even with the new American Postal Workers Union contract, most employees working in processing plants have full time jobs.   The full-time job requirement constrains the optimization of network costs and origin-to-destination delivery times.   Also the full time requirement results in operating plans that use more labor relative to capital than would be optimal from both a cost and service basis. 

The labor contract constraint combined with the financial constraint on capital purchases results in the Postal Service having a higher proportion of its costs as labor than would be optimal.  In many ways, the proposed daily operating schedule that maximizes the use of sortation equipment over a 24 hour day illustrates a constraint driven by the combination of labor contract and financial constraints.

A higher proportion of part-time employees would allow the Postal Service to more easily substitute capital for labor.  Plants would likely be larger and further apart as part-time employees allow the Postal Service to sort mail over short processing windows.   The shorter processing windows would allow the Postal Service to more easily increase distance between facilities without affecting service quality.

Opportunities for Improved Profitability and Service Quality

The constraints illustrated show that a Postal Service operating without these constraints could offer better service at lower costs that generate profits.   The Postal Service's proposal to allow layoffs may have some impact on its labor contract constraints.  It would allow it to increase its proportion of part-time workers to contract limits more quickly but would not give the Postal Service as much flexibility as would be needed to operate an optimal network.

Neither the pricing or the capital constraints are adequately addressed in either the Postal Service's proposal or in any legislative proposal.  

Discussion of increases in Postal Service prices is limited to mail that travels at rates below costs or receives a legislatively mandated discount.   No one has raised removing the constraint on First Class single piece rates in order to minimize service disruptions as the Postal Service downsizes it network.

The capital constraint illustrates the significant investments in plant and equipment could reduce costs and increase profits.   The capital constraint illustrates than maintaining the current payment schedule for retirement obligations, or adding more debt to cover those obligations would not help the Postal Service develop a netowrk that optimally minimizes cost or sets a the capital/labor ratio.  The capital constraint hints that the Postal Service, cleared of the disputed portion of its retirement obligations, would be attractive to private investors who could use their capital to make network improvements that the Postal Service could not afford as long as it remains a government enterprise. 

A Financially Self Sufficient Postal Service

Three recent articles and blog posts illustrate why any postal reform measure has to go beyond fixing retiree obligations or restructuring operations to reduce costs.   If the White House Postal reform bill does not deal with these three issues than Congress will likely have to revisit the Postal Service Business model again in three or four years.

The Postal Service Cannot be Self Sufficient Unless it is Profitable.

Andrew Gelman, a professor of statistics at Columbia University and a prolific writer on statistics and its use in public policy and political campaigns illustrated that the financial problem facing the Postal Service is a legacy of the regulatory structure and financial objects of the Postal Service under the Postal Rate Commission. While not familiar with the current debate, his post in Statistical Modeling, Causal Inference, and Social Science, states what should be clear for anyone who has studied business.  An enterprise will find profitability difficult if not impossible if its customers have more market or political power than it has.

Basically, the post office is always broke because it’s legally required to be broke. It’s not like other utilities which are regulated in a gentle way to allow them to make profits. Looking at this from a political direction, things must somehow be set up so that the Postal Service’s customers have more clout than the Postal Service itself. I don’t really have a sense of why this would happen for mail more than for gas, electricity, water, etc.

Rates charged by the Postal Service need to reflect rates that a profitable well managed firm would charge.   The Postal Service cannot afford to offer lower rates to customers that have political clout.   This will likely result in higher rates for single piece First Class, Periodicals, and non-Profit Standard mail.

The Postal Service Cannot be Self Sufficient Unless it is Independent.

Felix Salmon, in a Reuter's op-ed focuses his attention on freeing Postal Service from Congress.  His solution is deregulating the Postal Service to free it from the shackles that Congress has created.

It seems to me that a significant part of the problem here lies with Congress and that a massive bout of deregulation could be just the solution that the Post Office is looking for. Congress is micromanaging the Post Office, telling it how much it can raise postage rates, telling it that it can’t offer financial services (despite its huge business in money orders), telling it that it can’t get into all manner of other businesses either and telling it that it has to deliver mail on Saturdays. Astonishingly, amid all these rules and regulations, the Post Office is losing billions of dollars.
I see a lot of scope for bipartisan agreement here — unshackle the Post Office so that it has a hope of serving the country indefinitely into the future. Republicans like deregulation, right?

His idea of deregulation goes further than any bill before Congress.  His focus is on commercial freedoms that includes a significantly reduced role for the Postal Regulatory Commission.

He also offers the suggestion that the Postal Service expand into financial services like Australia Post, La Poste (France) and Poste Italiane.   Even without expansion into financial services, expansion of the Postal Service's business interests could include the sale of non-postal products through both its corporate-staffed and franchised outlets as Australia Post does, or the provision of secure e-mail boxes as both Canada Post and Deutsche Post do.

Deregulating the Postal Service is a different direction than any bill in Congress is now taking.   Part of the reason is the political challenge that Mr. Salmon clearly understands. 

The problem, I think, is that for all that Republicans like deregulation, they really hate the idea of a state-owned organization competing with the private sector. Of course, the Post Office does that already — it competes with FedEx and UPS. But the USPS, as a government-subsidized organization with thousands of locations nationwide and a massive reserve of public trust, could be a formidable competitor in all manner of different markets and none of the incumbents in those markets would welcome the competition.

A Self Sufficient Postal Service Requires a Corporate Business Model and Possibly Privatization.

Privatization is a dirty word in postal policy.    However, privatization is the 800 pound gorilla in the room that cannot be ignored.
Two articles by economist Gary Becker and Judge Richard Posner in the Becker-Posner Blog make a strong case for not only political independence but also financial independence from the Federal Government.  
Gary Becker's commentary focuses on privatization and elimination of the monopoly.  

The solution: completely privatize the postal system, and allow other carriers to make daily mail deliveries using business and residential mailboxes. There are now enough actual and potential competitors, including the Internet, to make delivery of mail a highly competitive industry.

His thoughts on competition in the market and the mailbox monopoly represent a naive understanding of competition in the delivery of mail and parcels.  It also ignores security issues that are important for differentiating delivery by the Postal Service from delivery by a newspaper carrier or other hand delivery service.  However his discussion as to why privatization should be considered is worth listening to.

In particular are these points that he makes:

• Defenders of the postal service correctly point out that part of its troubles is due to regulations that significantly raise its costs of operation.
• Nevertheless, the efficiency of the postal service still lags far behind that of Fed Ex and UPS. Part of this lag is due to regulatory restrictions, but some is due to its own mismanagement. As in prior discussions on our blog I refer again to the small town on Cape Cod where I have a summer home. Since its population expands 8-10 times during the summer, first class and other mail rises enormously during the summer. Fed Ex adjusts to this peak load problem in many ways, including renting trucks from Enterprise rental, delivering packages during longer hours, and shifting some employees from other locations. The local post office, by contrast, hardly adjusts at all. It has exactly the same hours as during the low volume winter months, which includes closing from 12-1 on weekdays, and only being open until noon on Saturdays. Since there is no mail delivery in this small town, most residents have mailboxes at the post office. Even though these boxes are in a separate room, which could be kept open when there is no other mail service, this room is closed too at about the same times when other mail service at the post office is closed.
• Government enterprises, even quasi-independent ones like the USPS, are notoriously inefficient because of political and regulatory inefficiencies.

The example that he gives regarding the Cape Cod Post Office is exactly what the new contract with the American Postal Workers Union should allow the Postal Service to deal with.   Hiring seasonal summer employees or even transferring employees from other offices for a few months to expand operating hours during the summer should be normal operating practice in seaside towns and other communities with a large number of snow-birds or sun-birds.

His last point is similar to the conclusions of Andrew Gelman and Felix Salmon.  As a government enterprise, the Postal Service cannot compete on either service quality or price effectively and efficiently due to political and regulatory inefficiencies imposed by the Postal Service and the Postal Regulatory Commission.

Judge Richard Posner concurs with Dr. Becker's conclusion that the Postal Service should be privatized.

Becker is certainly correct that the U.S. Postal Service should be privatized. Although government is probably more efficient at providing some services than private enterprise is, such as the military, national security intelligence, the police, the judiciary, the central bank, and prisons, because the output of these services is so difficult to measure, there is no reason to think it any more efficient at providing postal service than it would be at providing telephone service or airline service. Its origins as a public service reflect government concern with conspiracies (and its desire therefore to be able to read letters in transit), the natural-monopoly character of postal service (multiple postal services would require duplication of delivery trucks, post offices, and sorting stations), and the desire to provide universal service at flat rates in order to improve information flow throughout the entire society (i.e., to achieve network externalities).

However, he uses his more practical experience as a Court of Appeals Judge who has dealt with economic regulatory issues as well as his understanding of universal service obligations that exist in the provision of telephone, electricity, natural gas, and water services to develop a practical method of considering both freeing the Postal Service from the shackles of Congress and regulatory precedent and still ensure the provision of universal service.

Judge Posner notes that neither outright sale of the Postal Service with the current restrictions imposed by the Congress and the Postal Regulatory Commission nor the sale of the Postal Service without these restrictions are not acceptable solutions.

The federal government could no doubt sell the postal service, just as states are busy selling turnpikes and bridges. If it sold it subject to the buyer’s assuming the universal service obligation, it would have to convey along with the postal service's physical assets its monopoly protections against cream skimming—the monopoly of first- and third-class mail and exclusive access to post boxes. But then little would have been achieved by the sale—not nothing, because the buyer would be more strongly motivated than government to seek economies, but not a lot.

A sale without conditions would be different—the results would be radical: a large reduction in post offices and delivery trucks, and correspondingly large reductions in numbers of employees. But then what of the people living in remote areas? Email and fax are not a complete answer, because there is still a demand for letters, magazines, advertising brochures, and other items of snail mail. All these are things that can be delivered by Fed Ex or UPS, but the price for pick-up and delivery in remote areas might be quite high. There is no good economic reason to subsidize people who decide to live in remote areas, but there would be political pressures to do so.

As neither of these options seems realistic, Judge Posner proposes a third one.  This option reflects a fairly straightforward and traditional  economic approach to handling the transition to privatization while still ensuring rural service and is based on a traditional public utility model.

As a practical matter, reform of the postal service should I think proceed in three stages over a period of years. In the first stage, the postal service should be allowed to charge double postage for mail to or from designated remote areas and to terminate Saturday mail service to and from those areas. In the second, the postal service should be sold to private enterprise but with the legal restrictions (universal service, in its modified form with double postage and no Saturday delivery in remote areas, and exclusive access to post boxes) intact. And in the third the legal restrictions should be removed and all postal service be open to competition.

His proposal to double rural mail delivery prices  is absurd.  It indicates both a lack of understanding of both Postal Service costs and the competition that faces the Postal Service for hand-delivery of communications and parcels.  However it identifies a key point.  To survive, the Postal Service needs to have pricing freedom to price its commercial letter, flat and parcel services based on regional cost differences and regional competition differences. 

His second point on privatization reflects the current public utility model.  This model requires that regulated utilities are governed by laws that ensure that universal service is provided within their service areas.

His third point suggests that eliminating all competitive restrictions, including elimination of the mailbox monopoly, depends on more careful study of the delivery market than has been done to date.  

Three Keys to Successful Postal Reform

Postal reform has to both serve the citizens of the United States both in urban areas and the most rural parts of the Great Plains and Appalachia.  It must also ensure that business customers that now generate 90% of mail volume will continue to see the Postal Service as an attractive delivery service in 5 and ten years.  These four individuals who have limited understanding of the details of the Postal Service's problems identify three critical elements that have to be part of any postal reform that ensures both universal service and the Postal Service's survival as a self-sufficient entity. They are:

1. Profit must be an explicit goal for organization and profit must reflect a sufficient operating margin to ensure cash is generated to make capital investments needed to improve service once the current financial difficulties pass.  There is no excuse for the Postal Service to be the only large national post suffering major losses in the Euro Zone, North America, and Oceana and Australia. 
2. The Postal Service has to be granted significant relief from both Congressional and Postal Regulatory Commission oversight.   To the extent that either law or regulatory precedent freezes the status quo and prevents market-based pricing and market-based service quality that law and those regulations must be removed.  In particular both restrictions on distance based and regional pricing for commercial mailers need to be lifted in order to develop market-based and not cost-based prices.
3. Transition of the Postal Service to an entity that operates under standard corporate business, employment, and contract law must occur within a reasonable period.  During this period, the privatization of the Postal Service as a public utility providing delivery services must be examined serious.

Postal Service Plans to Cut More Post Offices

In an interview with Kelly Holmes of My Print Resource, Deputy Postmaster Ron Stroman indicated the Postal Service's retail optimization initiative before the Postal Regulatory Commission was just the first phase of a muti-phase plan.   In the interview he indicated that the the next phase will look at another 4,000 Post Offices, stations and branches.

Given the current review process that includes both the current Postal Regulatory Commission review of the Postal Service's proposal as well as review of possible appeals, The next phase of the retail optimization will likely occur sometime in mid to late 2012.  

Upon completion of these two phases, as well as retail closure efforts already progressing, the Postal Service will be examining nearly 9,000 Post Offices or as much as one-quarter of all retail facilities.

Postal Service Cannot Avoid Layoffs

The Postal Service seeks to cuts its full time employees by 228,000 in the next two to three years.  A review of attrition rates over the past three years indicates that layoffs are unavoidable.  Even with early retirement incentives, layoffs will likely be between 120,000 and 130,000.  Without these incentives they would be even higher.
Attrition of Employees over 50
Attrition of Postal employees over 50 comes from retirement, death, and voluntary and involuntary separation from the Postal Service  Early retirement incentives were offered to different groups of employees in 2009 and 2011. So the attrition rates below include the impact of these incentives.
Regarless of the reason an employee over 50 left the Postal Service, about 27% of the Postal Service employees over 50 in 2008 had left by 2011.  Similar percentages for over 55, 60 and 65 are shown in the following table.

Comparison for Pay Period 18 for 2008 and 2011

Assuming that the Postal Service offers similar incentives to eligible employees, it should see a reduction in full time career employee among employees who are 50 or older today by around 94,000.  The Postal Service should see total full time employee count by 100,000 if those under 50 leave Postal Service employment at historical levels.   This quick analysis confirms Postal Service statements that it would have to lay off at least 120,000 employees in the next few years as it restructures its service.

The Importance of Early Retirement Incentives

By looking at one-year attrition rates, the importance of incentives becomes clear.  Attrition rates of those over 50 rose between 2009 and 2010 reflecting the impact of the early retirement incentives for 150,000 employees that went into effect in the fall of 2009.  As could be expected attrition rates fell in 2010-2011 as early retirement incentives pushed up retirement by a year for some employees. 

Attrition rates for employees over 65 appears to suggest that the incentive may have had a real impact for these workers as it induced more retirements than would otherwise occur without having much impact on retirement decisions of employees who continued to work after the incentive expired.

Attrition rates for those between 50 and 60 actually dropped after an early retirement incentive was offered which suggests that the incentive may have only had the effect of convincing employees who were likely to leave for other employment to leave a year earlier and may not have had much of an impact on the number of Postal employees in that cohort over a longer period.  

Comparison for Pay Period 18 for 2008 through 2011

If this estimate is correct, offering early retirement incentives could boost attrition rates for those over 50 by 3%.  If these incentives were offered to all Postal Service employees over 50, the Postal Service would see its employee count cut by retirements increase by around 11,000 more than it would otherwise.


Statements Implying that Cuts in Postal Service Employment Can Occur Without Pain Are Wrong.

Yesterday, the Hill reported that Representative Darrell Issa stated on the Morning Joe on MSNBC,

"You can get the 200,000 or so excess workers off the payroll without having to use punitive measures."

In the same interview, Mr. Issa talked about forced retirements and implied that a forced retirement was not a punitive retirement.  Even if you accepted that forced retirements did not violate age discrimination law and was not a punitive measure, forced retirement of Postal employees would still require a significant number of layoffs.

 If one assumed that every employee over 65 could be forced to retire, then forced retirement would cut Postal employment by 17,000 more than normal attrition.  If one assumed that every employee over 60 could be forced to retire than forced retirement would cut Postal employment by71,000 more than normal attrition.  So forced requirements would still require layoffs of between 50,000 and 100,000 employees.

Cutting Postal Service Employment by 220,000 Requires Major Service Change

Cutting Postal Service employment by 220,000 requires that it cut its processing capacity, the number of delivery days and retail network significantly.  These changes reduce service levels for both individual and commercial mailers retail customers is affected depends on the effectiveness of the Village Post Office concept and other efforts to switch retail services to franchisees and contractors.

The changes in service standards and delivery days represent a change in the Postal Service's universal service obligation.   The changes in service standards represent a change in what the Postal Service promises its customers and do not reflect a specific obligation set in law. The change in delivery days represents a specific legal obligation that can be considered to be part of the Postal Service's universal service obligation.

The Postal Service's service standard obligation is similar to common carrier obligations that FedEx and United Parcel Service have to meet published delivery standards.  Therefore this obligation can be changed at will by the carrier who is only obligated to provide the service that it promises.   So technically the change in the service standard could be argued is not a change in the Postal Service's universal service obligation as it is a change in its common carrier obligation.  Either way, the change in standard is a reduction in the Postal Service's commitment to its customers.

Congressman Issa in his interview stated that "Universal service is part of the [Postal Service's] mandate, and we think that's extremely important." As cutting employees would require changes in delivery days and service standard,   Congressman Issa's understanding of the Postal Service's Universal Service Obligation does not appear to be fixed with the obligations that now exist.

Conclusion

Cutting 228,000 Postal Service full time jobs will eliminate jobs of people who wish to continue working.   As forced retirements are most likely illegal, the Postal Service will have no choice but lay off 120,000 to 130,000 employees over the next few years.  

In order to cut this number of employees, the Postal Service needs to change its way of doing business.   Retail services will need to be increasingly performed by contractors and franchisees.  Days of delivery would need to be reduced.   Service standards would have to be relaxed.   The latter two changes represent a major change in the Postal Service's commitment to its customers and a change in the understanding of the Postal Service's universal service and common carrier obligations. 

100 Years of New Yorker Covers Illustrates How America's Connection with the Postal Service Has Changed

The New Yorker in its current issue has an article that shows covers with postal themes over the past 84 years.   The covers show the gradual shift of the perception of mail and the Postal Service.

Looking at the covers, the illustrators clearly show the changes and present a fairly scary picture of the future of the Postal Service.

•  Covers from the 1920's through the 1970's show the Postal Service as the critical communications link between households and other households. 
• A cover from 1973 illustrated mail as a critical part of political campaign communications with voters.   Today's campaign mailings are a significant step beyond volunteers hand-addressing and stamping envelopes as shown in that cover.
• In 1976, a cover by Edward Sorel, illustrated how the combination of lower Postage rates and computerized lists created the catalog and direct mail industry that generated a deluge of catalog deliveries that became as much a sign of Autumn as falling leaves.
• In 2004, a cover illustrated the growth of growth of computers and e-mail.   This cover coincided with the early years of the decline in First Class mail.

• Finally, the current cover, suggests a rather ominous future for the Postal Service.   The stone cutters chisel  new words on the New York Post Office that continually modify the unofficial slogan of the Postal Service as service diminishes.  Even more ominous are the tourists on the double decker bus which suggests that we are not far of that the the Postal Service and printed communications are viewed by tourists looking at a historical monument and not a living, breathing enterprise.  

Flooding in Pennsylvania will Delay Shipping

Flooding in eastern Pennsylvania will have a big impact on e-commerce shipping in much of the eastern United States.   The area facing record level flooding is home to fulfillment centers of nearly every large e-commerce company.  With roads closed, these centers will have difficulty both getting products delivered to the centers and shipments to customers out.   Among the e-retailers that will be affected is Amazon which has three fulfillment centers in the region.

Shipments from United Parcel Service, FedEx and the Postal Service that travel by ground through this region will need to find circuitous alternative routes as some major Interstates may remain closed for a few days.   The delay in opening highways in Pennsylvania is due to the task of inspecting 100's of bridges over flood swollen creeks and rivers.  UPS shipments may also face delays if the flood affects rail service that transports United Parcel Service trailers.

The Pennsylvania Department of Transportation has urged that travel in eastern Pennsylvania be curtailed.  Flooding in the Susquehanna, Schuylkill and Delaware watersheds are at or near record levels not seen since Hurricane Agnes in 1972.   Mandatory evacuation of areas flooded in 1972 is occurring in nearly all communities along the Susquehanna River.

The flooding has already closed both I-80 west of I-81 and I-81 north of Harrisburg as well as numerous U.S. highways and state roads.   Later today Harrisburg is expected to be isolated as I-81 and I-83 entrances to the city are closed.