Amazon's on-line sales grew 46% in Q4, as on-line sale continue to soar and Amazon appears to still be taking market share.
That has led to an interesting problem: Amazon is struggling to find enough trucking firms to move its freight.
And with seemingly limitless resources, Amazon is doing something about it.
Supply Chain Digest Says...
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| Amazon pays AFP carriers daily rates based on the type of service provided, and that they can earn a maximum of $300,000 in annual profit if they operate a full fleet of 20 tractors. |
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According to an article this week on theinformation.com web site, Amazon is developing an incubator program willl eventually train hundreds of people to launch their own trucking firms.
There is just one catch: the new trucking firms coming out of the incubator program will only be able to haul freight for Amazon, The Information says,
The approach seems analogous to the Delivery Service Partners program Amazon launched in 2018, in which entrepreneurs are trained and subsidized by Amazon to build fleet of up to 40 vans to execute local deliveries on Amazon's behalf.
This new truckload freight program is on a fast track, with a goal of more than doubling the size of Amazon's trucking fleet in 2021. Currently there are about 100 carriers serving Amazon, a number the company hopes to increase to about 285 by the end of the year, according to the plan, which was seen by The Information. It appears the focus is on smaller carriers and owner-operators.
Apparently, this is all part of a strategy of increasing the number of independent trucking firms that will haul goods only for Amazon. The program's name, not surprisingly, is Amazon Freight Partners, and Amazon hopes to use it reduce its dependence on larger trucking firms to move "middle mile" freight to its fulfillment centers, just as it is building its own parcel delivery network to reduce its need for UPS and the US Postal Service for last mile delivery.
“The AFP program is a key part of Amazon's ambitious plan, previously examined by The Information, to become a dominant force in middle-mile logistics - the trucking of goods between Amazon fulfillment centers and local delivery stations,'' the web site reported.
The AFP program is still technically in a private beta test, The Information says, but already has130 trucking firm globally, most of whom are US-based. AFP carriers can employ as many as several dozen truck drivers.
To find AFP candidates, Amazon is leveraging an app it built called Relay, which matches independent owner-operators or small trucking firm with available loads from Amazon, similar to how Uber Freight and other on-line load matching services work.
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CATEGORY SPONSOR: SOFTEON |
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 Amazon wants to build a pool of dedicated drivers or firms to lock-in trucking capacity, and likely to reduce the big swings in rates for commercial truckload transportation.
Of course, the program may be a two-edged sword for trucking firms: benefits from a steady volume of loads at a decent rate in tough times in the industry – but missing the upside when rates soar. as they did in 2018 and many times before that.
The Information reports that Amazon pays AFP carriers daily rates based on the type of service provided, and that they can earn a maximum of $300,000 in annual profit if they operate a full fleet of 20 tractors - or $15,000 per tractor per year.
Interestingly, when the Delivery Service Partners program was launched, Amazon also touted potential income of $300,000 for partners with a full fleet of 40 vans.
The Information also says that each carrier is expected to pay truck drivers a minimum of $20-22 an hour, plus benefits. Amazon will guarantee the carriers at least 80 hours of work for each tractor they operate per week, though they can't choose their own routes.
And how about this: "Entrepreneurs will bring fresh ideas and be more suitable for the AFP pr ogram structure which requires a trade-off between pure revenue/profit dollars and consistency, reliability and better driver experience," said an Amazon document reviewed by The Information. "Legacy carriers who solely optimize for maximum revenue/profit may not find the AFP program attractive."
In other words, Amazon is looking to lower costs through the program, it appears in part by paying below market rates.
What do you think of this Amazon Freight Partners program? Let us know your thoughts at the Feedback section below.
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JB Schaffner
Independent Carrier, Mosier Transport Services |
Posted on: Feb, 24 2021 |
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| As I begin to read this article, this sounds like a program that finally makes sense where a successful company is sharing their experience because they have earned more then enough to set up their families for their future. But as I continued to read farther into this article, I read the ridiculously low rates they are being offered to the potential AFP members. One can't help but recognize "HOW" AMAZON was able to post $100 billion dollars of profit in a single quarter. The sad thing about this is, if they get a considerable number of carriers, other companies, and/or brokers and logistics companies may try to force this into the industry, just to run one truck one trailer Independents, to small fleets out of business. Because current economics, including operating costs, dictates a higher generation of revenue in order to cover all costs with even a conservative profit margin. Dear Mr Jeff Bezos, CEO of AMAZON, why don't you actually help to IMPROVE this industry instead of giving us "LIP SERVICE" while you try to eliminate all the other companies that work hard to provide for our families. And besides, it's against the US Constitution to monopolize an entire industry. Because no matter what "COLOR" you paint it, we all know that you will be at the top controlling it. And that's a Monopoly. |
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