Supply Chain by the Numbers

- April 19, 2019 -

  Supply Chain by the Numbers for April 19, 2019

Amazon Flex Drivers Say Pay is Low; Differing Signals on Health of US Manuacturing; US DC Space Availability Finally Stabilizers; 3rd Party Sales Fueling Amazon



That is the effective hourly wage on Amaxon "Flex" driver in the New Orleans area claims he made on a recent route for the on-line giant, according to an interesting story on the web site. With the Flex program, which Amazon started about three years ago, drivers accept delivery routes from Amazon and then pick up and deliver packages using their own vehicle. The driver cited above told splinternews said the base pay rate is either $18 or $22 per hour, with that rate varying according to unclear factors. But Flex drivers must cover their own expenses. The driver said that "This Saturday, for example, I had a block that paid me out $66 for a 3 hours. While that seems like it is $22/hour, I drove about 45 miles and using the standard mileage deduction that would imply my expenses are about $25.78, bringing my earnings down to $40.22 or $13.40./hour." He added that if the bases rate was $18/hour, as if often is, the net pay would have been just $9.40 per hour. Despite the low pay, we have reported on claims from some Flex drivers that they are being pushed out in favor of the Amazon Delivery Partners program, under which local entrepreneurs lease Amazon-branded delivery trucks to do last mile delivery.



That was the overall availability rate for US distribution space in Q1, according to new analysis from real estate firm CBRE. That keeps the rate essentially unchanged from Q4 2018, and at last ends a trend of ever declining availability for many consecutive quarters. Supply marginally outpaced demand in the first quarter across 55 US regional markets, CBRE said in a preliminary report released this week. Developers completed roughly 33 million square feet of DC space, while aggregate net absorption - the net amount of space either newly leased or newly vacated - came to 32 million square feet, CBRE said. The market for DC space remains tight, however, with availability still at the lowest level it has been since 2000, suggesting retailers, logistics providers and manufacturers will continue to have a tough time leasing DC space, particularly in high-demand areas near urban centers. But the development pipeline remained robust, another real estate firm, JLL, said in its Q1 report, with some 258.8 million square feet under construction. Developers added nearly 10 million square feet to the pipeline, up 4.3% from the last quarter of 2018.



That was the growth rate of US manufacturing year-over-year in March, according to the index for as compiled monthly by the Federal Reserve bank. While variations month to month are common and shouldn’t be taken too seriously, this marks third consecutive month of sub-par growth, with a flat March following a decline of 0.3% in February and 0.5% in January, according to the latest revised data from the Fed. That has many economists worried that the US economy has slowed, and that an overall economic slowdown may be imminent. However, the US Purchasing Managers Index from the Institute for Supply Management, which also tracks US manufacturing growth, tells a different tale. The PMI for March came in at a level of 55.3, well above the 50 mark that separates US manufacturing expansion from contraction, and up 1.1 percentage points from the February reading of 54.2. Is the US manufacturing cup half full or half empty? Difficult to say right now, with contradicting data.



That is the share of so-called "gross merchandise sales" on that now come from its third party or marketplace sellers, according to the annual letter to shareholder from CEO Jeff Bezos last week. With marketplace sales, the product supplier gets the order from the Amazon web site, but is responsible for inventory and fulfillment – though marketplace sellers can use services such as Fulfilled by Amazon, a 3PL service, to get orders to consumers. Marketplace sales have grown at a compound annual growth rate of 52% since 1999, which is more than twice the pace of the online sales that Amazon manages itself. And marketplace orders are more profitable for Amazon. Revenue from third-party transactions is much smaller than that of traditional sales since Amazon recognizes only the commission it earns. But Amazon isn’t taking on any inventory risk with those sales, providing far fatter operating margins than first-party transactions. They also provide a ready market for the fulfillment services that Amazon continues to expand, from pick, pack and ship to direct parcel shipping on integrated China to US delivery services.

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