Supply Chain Matters highlights two rather significant announcements made by Amazon this week, each related to multiple dimensions of inventory management and customer fulfillment.
Amazon Raises Pay for Contract Drivers
At an annual closed door conference held with members of Amazon’s last mile Delivery Services Program (DSP) independent contractor network, the online retailer indicated it will raise the wages of delivery drivers.
According to a published reports from business broadcasting network CNBC, the wage increase amounts to $440 million and is targeted at upwards of 279,000 drivers of Amazon Prime branded vans among DSP providers.
The report cites Amazon Vice President of Last Mile Delivery, Beryl Tomay indicating that the investment is being made directly with DSP contractors so that they can offer competitive pay rates as well as retain existing workers. Reportedly, while DSP’s have the ability to set their own pay rates for their respective regions, Amazon sets a minimum pay rate floor. The online retailer further indicates that with this move, it is anticipated that DSP delivery drivers will average $20.50 per hour, plus benefits.
These pay raises are effective by mid-October.
Interesting enough the report indicates that this move comes as the online retailer: “faces a renewed push from the International Brotherhood of Teamsters to unionize its (Amazon’s) delivery driver workforce.” The Teamsters have reportedly set-up picket lines as various Amazon warehouses to raise concerns about working conditions.
Another backdrop to this move is the recent labor contract ratification among parcel carrier UPS and the Teamsters union resulting in tenured full-time drivers garnering a maximum rate of $170,000 in wages and benefits.
Supply Chain by Amazon Program Announcement
This week at Amazon’s annual seller conference, the company announced a Supply Chain by Amazon services offering.
The program is described as an end-to-end, fully automated set of supply chain services that provide sellers with a complete solution to move products directly from their designated manufacturers to customers around the world. The program leverages advanced logistics, fulfillment, and transportation capabilities to keep products in stock, ship faster and more reliably, and reportedly, significantly lower costs. Inventory can be picked-up from designated manufacturing facilities globally, shipped cross-border if necessary including customs clearance and ground transportation.
Additional capabilities are described as storing inventory at bulk, the management of inventory replenishment across both Amazon and other sales channels, while delivering parcels directly to customers. In the area of cost savings, Amazon points to discounts up to 25 percent on all cross-border transportation destined for an Amazon warehouse. Later this year, sellers have the ability to take advantage of utilizing a Partnered Carrier Program (PCP) to streamline domestic transportation into Amazon warehousing centers. Sellers can reportedly count on reliable and fast transit times with trusted carriers, at up to 25 percent lower costs compared to alternatives.
A new Multi-Channel Distribution (MCD) program supports the ability of sellers to move inventory in bulk from an Amazon warehouse to any sales channel (including online stores and physical store locations), allowing selling partners to replenish across all their sales and fulfillment channels, not just on Amazon, from a single inventory pool. MCD is reportedly in pilot with an initial set of sellers and is expected to be available to all sellers later this year. The recent announcement from Shopify indicating a new partnership with Amazon for last mile fulfillment is a further timely backdrop in multi-channel distribution needs.
Finally, Amazon indicates that it will make available to Fulfilled by Amazon sellers, its advanced machine learning and supply chain optimization capabilities to automatically replenish inventory into the most optimal Amazon customer fulfillment center that supports expected customer demand.
Added Takeaways
As readers take-in these announced services, you will likely come to the observation that Amazon’s next transformation is leveraging its own third party, or fourth party logistics services capabilities as an alternative to existing providers.
From our Supply Chain Matters lens, such services can additionally provide options beyond the use of traditional parcel and last mile delivery providers FedEx or UPS. Both of these last-mile providers recently announced yet another general rate hike for 2024 averaging 5.9 percent for shippers, on top of previous rate hikes for the past four years.
The caveat in these moves is that sellers will have to expose customer buying and history data to Amazon, which tends to be uneasy arrangement especially when the online provider offers a private or Amazon branded product very similar to your own.
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