Amazon Logistics: Innovation or Exploitation?

In September 2018, Amazon announced that it was buying 20,000 brand new Mercedes-Benz Sprinter vans to help expand its Amazon Logistics division in the US. That doesn’t come cheap, and it’s a lot of wheels – and people – to take care of.

How many new employees, sorting facilities and garages will Amazon need for those 20,000 vans? Actually, they won’t need any at all. Instead, Amazon is encouraging people to start their own independent delivery companies, lease the vans from them, and deliver their packages for them.

Amazon Logistics isn’t structured like a traditional carrier, and it doesn’t perform like one either. It delivers seven days a week, and orders can be with the buyer the same day that they were placed. Often, packages are left outside homes, and no signature is taken as proof of delivery. That’s a lot of industry norms being broken.

So, what’s the verdict on Amazon Logistics? Does it offer a better, more modern and innovative service? Or is it a cheap, unreliable and exploitative pretender? Should vendors and FBA sellers even care how their products get to consumers, or does that only affect Amazon’s own reputation?

What is Amazon Logistics?

Amazon Logistics is a “last mile” shipping and delivery service that gets Amazon orders to its customers. In that sense, it does the same job as national postal services like the USPS and Royal Mail, and commercial carriers like UPS and FedEx.

But on its own, Amazon Logistics is not a huge organization like FedEx. It’s more of a technology-driven network or marketplace, like Uber. Amazon is the buyer of delivery services on one side of the market, and individuals and independent delivery companies are the suppliers on the other side.

The delivery “capacity” is provided by:

• Individual drivers using Amazon Flex to deliver packages for a few hours when they choose to. This is very much the “gig economy” model like Uber.
• Independent delivery companies, called Amazon Delivery Service Partners, running vans and employing drivers, and delivering packages for Amazon all day, every day.

Neither type are Amazon employees, but there are requirements and training to make sure they work to Amazon’s standards. They use Amazon apps to help guide their work, and register deliveries.

There’s no denying that Amazon Logistics is a smart system to provide Amazon with a very large and flexible pool of delivery capacity, without the need to build a FedEx-like organization of its own.

Why did Amazon start its own delivery service?

In many ways, shipping is the messy and unreliable part of ecommerce. Until the orders leave the warehouse, the retailer is in control of just about every everything. But then, they are at the mercy of:

1. Other companies, running things their own way
2. People they don’t control and have no oversight of
3. Vehicles that have accidents or breakdowns
4. Traffic conditions and roadworks
5. Customers who aren’t at home

And a lot more besides. There’s so much that can go wrong. It’s not surprising that a lot of customer complaints are about shipping, for instance:

1. Late delivery
2. Delivery at a time that’s inconvenient
3. Damage that happened during shipping
4. Having to collect packages from the post office or carrier warehouse

With its own delivery network, that it controls and monitors through technology, Amazon can address many of those problems. It can also increase its delivery capacity and lower costs. In 2017, Amazon spent $21.7 billion on shipping.

But the customer is always king at Amazon, and it’s their opinion that carries the greatest weight. I believe that improving customers’ satisfaction with delivery was the primary driver for the creation of Amazon Logistics.

What does Amazon Logistics do differently to conventional carriers?

Many of the world’s largest delivery companies have been around for a hundred years or more. They are generally seen as steady, slow to change, and pretty reliable. You can usually expect them to:

1. Deliver on ordinary business days
2. Deliver during normal working hours
3. Only deliver if there is someone to sign for the package
4. Put security above convenience

Amazon Logistics questions these conventions, and dares to break them. Some of their practices could be seen as sloppy or unprofessional, compared to the established delivery industry.

But it’s those same practices that, most of the time, lead to higher customer satisfaction. They include:

1. Evening, weekend and holiday deliveries
2. Leaving packages with neighbors, in a “safe place” or even just unattended by the door
3. Not taking a signature

There’s a lot to be said for receiving an order quickly, even if it was not delivered as securely as you would really like. But is that innovation, or just cutting corners?

What about the workers?

It’s going to be a while before the skies are full of delivery drones, and the streets teeming with self-driving vans, with robots taking packages right to your door. Until then, getting orders to customers will involve a lot of people and manual work. It’s no coincidence that FedEx and UPS are in the top ten largest private employers in the United States.

These companies rely on conventional employees, with average annual pay over $50,000. They are entitled to a wide range of benefits including healthcare, life insurance, pension and more.

Amazon Logistics, however, uses ordinary people working for themselves and also independent companies with their own drivers. Those aren’t Amazon employees delivering your parcels.

Amazon Flex

Under Amazon Flex, temporary “gig economy” workers get paid by the hour – and that’s it. They choose flexible “blocks” to work whenever they want. They have to follow Amazon’s processes and keep within performance standards, but otherwise they are their own boss.

This is a great opportunity to generate additional income that is appreciated by a lot of people.

But are these desperate people being taken advantage of? Or does this gig economy work allow people who don’t have (or don’t want) an ordinary job, for whatever reason, to earn a living and contribute to the economy?

Or are Amazon just avoiding the responsibilities they should have as an employer, by farming out deliveries to these disposable workers?

Amazon Delivery Service Partners

This program is a whole other kettle of fish. Amazon Delivery Service Partners promises to create an army of new business owners. Amazon helps them get started, with training and support, and those 20,000 new vans. Military veterans can even have their startup costs reimbursed.

Some entrepreneurs could do very well indeed from this initiative. And the Amazon Logistics network will get fed with a lot of additional capacity. Everybody wins, it seems.

But the workers – the drivers – are another step removed from Amazon. Unlike Flex, they are employees, but of the partner companies, not Amazon.

Delivering 257 packages in a 11 hour shift is hard work, there’s no doubt about it. The work all comes from Amazon, and they do it the way Amazon wants. But the working conditions, pay and benefits are all down to the partner companies.

As independent companies, Amazon has no say in how they operate. But with Amazon as their biggest customer, or perhaps their only customer, they’re going to do whatever it takes to retain the work. So, should Amazon get more involved in how their delivery partners treat their employees?

Innovation or Exploitation?

If there’s one thing for sure about Amazon Logistics, it’s that it’s disruptive. Amazon have proved that through technology, and a willingness to throw out standard industry practices, they can build a major last-mile delivery network in just a couple of years. That wasn’t supposed to be possible.

Not only that, Amazon’s customers are getting their orders faster and with more convenience than before. Yes, stories abound about packages left in strange places, such as under cars or thrown over gates, but on the whole consumers just seem happy to get their orders on time.

On the supply side, Amazon Flex offers the opportunity to earn a side income, and with Amazon Delivery Service Partners people can start a business of their own with minimal investment. The drivers, however, have to do their jobs Amazon’s way, but with none of the protections of being Amazon employees.

Then there’s Amazon vendors and sellers. Does Amazon Logistics reflect on your reputation, for better or worse? Do you get praise from customers who are delighted to get their order on a Sunday evening? Do you get slammed when their package is left out in the rain?

Does negative publicity about Amazon tarnish your business too? Or are they still the world’s most trusted brand, who can do no wrong?