There have been three developments involving online retail platform provider Amazon which supply chain management teams should take special note of.

The first involves the online provider’s plans to take on more last mile fulfillment for third party customers. The second is a proposed California legislative law that would force Amazon to disclose work quotas imposed on its operational workers.

 

Added Logistics and Shipping Services

According to a published report from business broadcasting network CNBC, Amazon is now shipping cargo for outside customers. This latest move is being interpreted as an effort to take additional shipping services business from the likes of FedEx and UPS. However, Supply Chain Matters does not view this as a direct afront.  Data sourced from SJ Consulting Group indicates that the online retailer is currently shipping 72 percent of its own parcels, up from upwards of 46 percent in 2019.  Supply Chain Matters would add that this number would be well ahead of what online retail industry observers were predicting for Amazon’s logistics and last mile fulfillment capabilities at this point in time. The online retailer’s aggressive capital investments are a testament to this increased self-sufficiency strategy.

Further reported is that a “logistics as a service” program currently being piloted in the United Kingdom will likely launch in the United States over the next 18 months. In essence, the report notes that the online retailer’s strategy amounts to “cherry-picking of routes” which would allow for the leveraging of parcel volumes among selective logistics and transport segments. This is consistent with the strategy of making maximum use of the online retailer’s transport capacity and at the same time, allow served customers to be able to garner discounted parcel and LTL freight rates for their own benefit. This need has become a more important need given the ongoing explosion in freight rates.

Supply Chain Matters Perspective

This development is consistent with Amazon’s strategies with most of its business segments such as AWS, a holistic perspective on maximum efficiency of all deployed capacity and at the same time, garnering additional revenues from that capacity. From our Supply Chain Matters lens, parcel carriers FedEx, UPS and others are unwittingly aiding in the attractiveness of this business strategy because of their persistence in elevating transport and volume surcharges each and every year. Lately, parcel carriers such as UPS have shown a tendencies to also cherry pick which customers and segments, they prefer to serve based on margin return. Thus, retailers, wholesalers and manufacturers will increasingly have to assess their online fulfillment programs based on these changing market dynamics. A third-party logistics option of Amazon is becoming more viable for certain shippers.

 

 

California Legislative Initiative

The Wall Street Journal reports that the California Legislature has passed a bill which takes direct aim at Amazon’s system administered employee performance monitoring. The legislation would require Amazon to disclose any work quotas being applied to workers at facilities within that state. Reportedly, the legislation supporter’s aim is to allow state regulators to assess whether performance goals applied to employees are affecting the health and safety of workers. The legislation requires the signature of California Governor Gavin Newsom, who currently faces a recall election scheduled for today.

Reportedly, Amazon has not taken a direct position regarding this legislation and declined to comment to the WSJ. The legislation has garnered the opposition of the California Chamber of Commerce and the California Retailers Association.

Labor groups including the International Brotherhood of Teamsters are backing this legislation. In June, the Teamsters labor union indicated that it would specifically mobilize resources and efforts toward aiding Amazon workers.

Employee quotas and break times were among the reasons that employees sought to organize at the Amazon customer fulfillment facility in Bessemer Alabama earlier this year. While the results of that organizing effort did not succeed, the election remains contested after a Federal official ruled that Amazon violated election practices during the vote, a charge being denied.

As we pen this posting, there is breaking news that Amazon warehouse workers in Alberta, Canada have petitioned for a union election. A local chapter of the Teamsters labor union filed for this election with the Alberta Labor Relations Board. Worker grievances are indicated to be job security, pace of work, and wages among others.

Supply Chain Matters Perspective

Supply Chain Matters views this proposed California legislation as a further step of increased scrutiny being placed on Amazon’s business and workplace practices at both the Federal and state levels. The online retailer surely is aware of the increased scrutiny being applied from multiple fronts. In his final letter to shareholders, Founder Jeff Bezos specifically indicated: “Does your Chair take comfort in the outcome of the recent union vote in Bessemer? No, he doesn’t. I think we need to do a better job for our employees.” He then went on to disparage news reports that have not been complimentary to how the retailer manages its employees or treating them like robots. He further flat-out states: “We don’t set unreasonable performance goals. We set achievable performance goals that consider tenure and actual employee performance data.

We continue to believe that the bulk of newly appointed CEO Andy Jassy’s leadership attention will be on addressing the increased scrutiny being placed on Amazon from multiple fronts. There is already evidence of added programs and initiatives that soften the online retailer’s image including the now much more visible labor practices. On the legislative and regulatory front, such increased scrutiny can often spillover to other online and traditional retail and wholesale businesses.

Economists refer to the term “The Great Resignation,” a new realization that the effects of this global pandemic are leading employees toward switching occupations and jobs in droves because of new work-life priorities related to career, personal health and work-life balance.

The principal takeaway is that in warehouse and customer fulfillment processes, viewing labor as strictly as a flexible cost of operations that can metered to surges and ebbs in operational needs is no longer a sustainable practice. The recruitment, retention, safety and wellbeing of warehouse and customer fulfillment employees has become more than one dimensional.  The new test of this reality will come in coming weeks as the seasonal holiday fulfillment surge ramps-up.

 

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