What’s Going on With Amazon’s Last-Mile Supply Chain?
Amazon’s last-mile delivery plans will further leverage U.S. small businesses as the e-commerce giant appears to be relying less on its own warehouse space to cut costs.
Amazon will partner with “thousands” of small businesses, from bodegas to florists, to deliver its packages by the end of this year in a program called Amazon Hub Delivery, Axios first reported. Amazon confirmed the program to Sourcing Journal.
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The expansion comes as the tech titan is projected to surpass Walmart next year as the largest retailer in the U.S., estimates from J.P. Morgan say. Already dominating U.S. online sales, Amazon’s e-commerce market share is expected to be 42.2 percent to close 2023, up 1.06 percent year-over-year. J.P. Morgan estimates that Amazon will have roughly 300 million Prime members globally by the end of this year.
Amazon has set up a public online portal where third-party sellers can apply to become Amazon Hub partners. Partners would have to commit to delivering 20 to 50 packages each day for seven days per week, leveraging their existing staff, vehicles and devices, using an Amazon app to help with deliveries.
The Axios report says Amazon will start actively recruiting existing small businesses in 23 states on Monday, including Alabama, Alaska, Arkansas, California, Florida, Iowa, Indiana, Illinois, Massachusetts, Minnesota, North Carolina, North Dakota, New Jersey, New York, Ohio, South Dakota and Washington.
At least 20 big cities across the country, including Boston, New York, Los Angeles and Seattle, will be targeted by the program, the report said, serving a wide range of potential local partner businesses including bodegas, florists, coffee shops and clothing stores, among others.
Axios also said Amazon is looking to partner with 2,500 small business drivers by the end of 2023.
The Axios report comes as more than 80 delivery drivers and dispatchers that previously contracted with Amazon have gone on strike at two California warehouses, once in Palmdale on June 15, and then again on Sunday in San Bernardino.
In April, the 84 workers joined the Teamsters Union, which is currently representing more than 330,000 UPS workers in a monumental contract negotiation that could set the tone for delivery contracts and working conditions going forward.
Unlike a potential national UPS strike, the labor actions at Amazon involve union drivers and dispatchers that are not directly employed by the e-commerce giant. Instead, they work for third-party delivery company Battle Tested Strategies, which operated under contract for Amazon in a deal that expired June 24 and was part of the company’s Delivery Service Partner (DSP) program.
As such, Amazon has not honored the union contract. Battle Tested Strategies voluntarily recognized the union, with the workers in Palmdale joining Teamsters Local 396.
Amazon terminated its partnership with the last mile-delivery provider on April 14 claiming breach of contract, with representatives at the time citing a “track record of failing to perform.”
The contract officially ended Saturday ahead of the second strike, with Amazon cutting ties with all 84 Battle Tested Strategies employees.
“These Amazon workers organized a union for fair pay and safe jobs, but Amazon illegally refused to recognize their union or bargain with them,” said Victor Mineros, secretary-treasurer of Teamsters Local 396. “Now we are taking the fight to a second Amazon facility to ensure we can hold this corporate criminal accountable.”
Sourcing Journal has reached out to Amazon for comment on the strike and recent terminations.
Knowing that the terminations were coming, the union workers filed unfair labor practice charges against the e-commerce giant in May.
They first organized in April over concerns about starting wages, which they wanted to increase from $19.75 to $30 in California. Additional concerns also spread to worker safety during extreme temperatures, particularly high heat in the delivery vans.
Currently, only one Amazon warehouse in the U.S. has voted to join a union, which still has yet to reach a contract with the Seattle Big Tech firm. Workers at the “JFK8” warehouse in Staten Island voted last April to be represented by the Amazon Labor Union (ALU), a grassroots group of current and former employees led by terminated employee-turned-labor organizer Christian Smalls. The ALU was defeated in two subsequent unionization elections at other facilities.
The Hub Delivery program could theoretically minimize the labor disputes that might come with using either contract workers like those at Battle Tested Strategies, or Amazon’s own employed delivery drivers. The program also comes amid labor complaints that include past allegations of misusing Flex drivers’ tips, which forced Amazon to pay $61.7 million.
That’s before even getting into the criticisms lobbied against the company’s warehouse safety. Amazon has now caught the ire of Vermont legislator Bernie Sanders, whose Senate committee has launched an investigation into what he calls “dangerous and illegal” conditions at the e-comm giant’s facilities.
