Amazon is looking to expand its logistics operation and solve for last mile deliveries by giving small businesses turnkey tools to launch delivery companies.
The model behind Amazon's program ties together traditional franchise opportunities, technology and a variable revenue model based on packages delivered. For the e-commerce giant, the effort is worth it if it can expand delivery services.
In theory, Amazon's expansion with small business logistics firms could enhance same-day delivery, fulfillment and customer service.
Amazon has projected that individuals can get rolling with as little as $10,000 in startup capital and earn up to $300,000 in annual profit based on a fleet of 40 delivery vehicles. Amazon is looking to expand its delivery network and reduce its dependence on the U.S. Postal Service, UPS and FedEx. Think of Amazon enabling a bevy of SMB logistics firm in the context of Prime Air, drone delivery and innovative tools.
While Amazon's initial release is more of the feel-good job creation variety, there are other facts, figures and projections worth pondering. Here's everything you need to know about Amazon's delivery plans for SMBs.
How much are startup costs?
Amazon says that owner costs are as low as $10,000 largely due to leveraging the company's discounts, technology, logistics network and services. An SMB would be part of Amazon's Delivery Service Partner (DSP) network. The goal for Amazon is to enable its DSPs to grow to have 20 to 40 vans with up to 100 employees to deliver packages. That scale may cost more than $10,000 and Amazon expects a small business to scale quickly.
A DSP will have to spend on licensing, lawyer fees, setup supplies and job posting as well as travel to Seattle for training.
How much would a DSP make?
Amazon's assumptions for owners with 20 to 40 vans is startup costs as low as $10,000 with annual revenue potential of $1 million to $4.5 million and profits of $75,000 to $300,000 a year.
Revenue pays a DSP based on a fixed monthly payment based on vehicles operating, a route rate based on length of route and per package rate based on successful package deliveries.
What does Amazon provide to get a DSP started?
Amazon said it has exclusive deals on buying branded vans, insurance, handheld devices and other services. Amazon also provides training starting in Seattle for one week and then two in the field with existing owners. Technology tools, on-demand support and logistics best practices are included.
What are a DSP's responsibilities?
A DSP has to set up the business, recruit and retain drivers, deliver up to 20 to 40 routes a day and serve customers. A DSP is also responsible for motivating his team. Among the other details a DSP has to handle:
- Order vehicles, devices, fuel cards and uniforms through Amazon's recommended vendors and negotiated rates. DSP also has to get motor carrier operating authority and vehicle insurance before delivering packages.
- Set up various services for drug testing, background check, payroll, accounting and human resources including employee handbook, pay rates and health benefits. These services will be ongoing expenses.
- Use DSP Portal for tax review, business documents and banking details.
- Vet and interview first drivers as well as set up area within local delivery station to learn how to load vehicles and tweak processes.
- Train drivers as vehicles, fuel cards and uniforms arrive. Expectations are first week companies will deliver five routes a day.
- Meet performance levels. DSP business owners are expected to meet with Amazon reps and account manager in order to add 5 more routes in week 5, 9 and 11. The goal is to hit 20 or more routes after three months.
What's a day in the life of a DSP?
A DSP will schedule drivers, set up routes, hand out devices and do an equipment check daily. A morning huddle is expected as progress tracking throughout the day. Metrics, coaching and motivation will be needed to "maintain a customer-obsessed culture." At end of day, troubleshooting, refueling and maintenance are required.
How does the training program work?
The first week is in Seattle to learn Amazon's culture and see the deals the company has negotiated to get rolling. Best practices on hiring, training and managing are explored. The second week revolves observing the process at Amazon delivery station, sorting and loading, dispatch and meeting personnel.
For week three, Amazon goes over the tools used in the field and starts you on delivery. Troubleshooting and continuous improvement tips are covered.
How is this different from Amazon's Flex program?
Amazon Flex is a program for contract delivery workers. These workers make anywhere from $18 to $25 an hour and are individual contractors. The Flex and DSP programs require separate accounts. A Flex worker could in theory become a DSP and potentially have a jump on the model, delivery best practices and Amazon culture.
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