Key Takeaways:
– Two delivery companies affiliated with Amazon in Orland, California are suspending operations, leading to over 170 layoffs.
– The companies, Beacon Logistics and Dave’s California Logistics, blame the implementation of new routing algorithms by Amazon that overloaded their routes and vans.
– The companies were part of Amazon’s Delivery Service Partner (DSP) program, now home to over 3,500 such firms globally.
– Amazon’s DSP program is under criticism, with some sighting unfair treatment and allegations of false profit promises.
– Despite the loss of jobs, the local economic impact may be softened due to the regional nature of the workforce and the possibility of other companies filling the resultant gap.
Two independent delivery firms situated at the Amazon facility in Orland, a small town in Northern California, recently reported termination of operations. This decision has led to more than 170 layoffs, creating significant ripples in the local job market.
Located in the Amazon Orland Delivery Station, both Beacon Logistics and Dave’s California Logistics were part of Amazon’s Delivery Service Partner (DSP) program, which employs local businesses to handle Amazon’s package deliveries. The DSP program includes over 3,500 companies worldwide, who together handle 20 million packages every day across 19 countries.
The companies cited changes to Amazon’s delivery routes as the main driver of their decision. Amazon made these changes earlier this year, based on its automated routing algorithms. Delivery personnel in Orland argued that the new changes overloaded their routes with stops and their vans with packages. In most cases, these changes made it impossible to complete their assigned deliveries without skipping breaks or compromising safety.
While Amazon highlights safety as its prime priority and significant part of the $8 billion invested in the DSP program over the past five years, many contend otherwise. The company acknowledged that designing routes is challenging and are continuously investing in route design and technology to factor in the complexities drivers face on routes, such as delivery locations, package sizes, and weather conditions.
Dave Koentopf, owner of Dave’s California Logistics, claimed that Amazon’s changes led to his business operating at a loss since March, ultimately forcing him to discontinue operations. He mentioned having raised the issue multiple times with Amazon, which allegedly acknowledged these problems but failed to address them thoroughly.
Similar concerns echo among business owners in the Amazon DSP program elsewhere. Many maintain that the changes enacted by Amazon are increasingly squeezing their margins to the point of threatening their businesses’ sustainability.
These grievances arise when Amazon is evidently attempting to reduce costs and enhance efficiencies. The company has recently reported revenues just shy of Wall Street expectations, accumulating nearly $148 billion in the second quarter. However, Amazon’s profits nearly doubled to $13.5 billion, as CEO Andy Jassy set out plans to further reduce costs and increase competitiveness on price.
Orland’s Amazon facility, sprawling over 75,000 square feet, was one of Amazon’s first rural delivery stations. While the exit of these two DSPs might cause a slight hiccup in Amazon’s plans, Amazon believes other companies will quickly fill the vacuum. The firm also states it’s assisting laid-off drivers in finding new opportunities with other delivery partners in the region.
Despite these claims, Amazon’s route changes introduced earlier this year led to many drivers’ jobs becoming more challenging than necessary. The restructuring resulted in a sharp increase in the number of stops and packages that drivers had to deal with, making routes more spread out and hectic.
Amazon is known for leveraging technology heavily in setting its routes. However, these technologies seemingly increased the volume and size of routes without considering ground realities. As a result, delivery drivers experienced physical and psychological strain where they failed to complete their deliveries regularly.
Numerous legal suits have been filed claiming unfair treatment, false profit promises, and unlawful contract termination by former DSP owners. The DSP program’s growing criticism and resistance could potentially pose considerable challenges for Amazon’s business model going forward. Amazon, on its part, continues to emphasize safety and continues investing in new technologies to improve operational efficiency.
