DEEPER DIVES: Amazon (Indirectly) Employs Over 275k Delivery Drivers

Good Morning,

First, as always, thank you for joining.

I bought some new toys, so you’ll probably see differences in content this week.

Matt and I are back tomorrow (Monday Aug 26) with Wake Up And Deliver to help kick off your week. It’s our LinkedIn Live audio show that ANYONE can join and speak.

It’s all about sharing perspectives, learning and making things easier. Come out and grab the mic!

Here’s what this issue brings:

• I get into the NLRB’s regional decision from Thursday, that said Amazon acts as an employer for one of its DSPs 🫨
  

• A3 Thinking is weight training for your brain. Get more clarity and better solutions with a simple mindset (and a little discipline!)

DSP Unionization Threatens to Upend Amazon’s Delivery Model

It’s a scary moment for Amazon.

Jonathon Ervin is the owner of Battle Tested Strategies (BTS), one of Amazon’s 3,500+ Delivery Service Partners (DSPs) in the US.

He’s found himself at the center of a labor conflict that everyone could start watching. If the case gets upheld, it could set a brutal precedent for Amazon.

What started as a unionization effort by his drivers—workers who endure the daily grind of Amazon’s famous last mile offering—has turned into a legal standoff that might transform the entire DSP program.

Amazon’s relationship with its DSPs has always been a touch suspect.

On the one hand, DSPs are technically independent contractors, operating their own businesses.

On the other, Amazon exerts a level of control that is well above that of a normal IC model. They dictate everything from delivery routes to the uniforms drivers wear.

Ervin’s case is a prime example of the dangers of “too much control”.

Amazon has built its last-mile delivery on the backs of these small businesses.

The DSP program, launched in 2018, was supposed to empower entrepreneurs while keeping Amazon’s logistics detached and cost-effective. But, Amazon’s grip on these operations is so tight that the “independent” in independent contractor starts to feel more like a technicality rather than reality.

The contractor / employee debate isn’t new.

Tons of businesses are having their models challenged because it allows them to reap the benefits of a flexible, low-cost workforce without bearing the full responsibilities of an employer.

Uber and Lyft went through similar challenges in the last 12 months as well.

They were seen as not being employers in their model. Even though they have rules and guidelines when people are signed onto the platform, they have no control when people start, finish, how often they work or what else they can do with their time (and when).

This isn’t the case for Amazon - delivery promises have been made.

The more control they exert (over schedules, routes, and even minor details like vehicle maintenance), the harder it becomes to argue that these DSPs are truly independent, they actually become captive contractors.

For Ervin, things came to a head when his drivers, fed up with working conditions, unionized with the Teamsters.

The drivers demanded changes to their working conditions and base pay. They wanted safer working environments, a significant wage increase, and the right to refuse deliveries they deemed unsafe.

When the drivers ratified their contract, they secured an immediate wage increase from around $20 an hour with a roadmap to $30 by September.

They also gained the right to refuse to deliver packages under unsafe conditions (this was seen a major win given the hazardous situations they often faced), like extreme heat and excessive package loads.

But Amazon wasn’t having it.

The company immediately terminated its contract with BTS, citing previous performance issues—a decision that started the legal battle now under the scrutiny of the National Labor Relations Board (NLRB).

The NLRB’s regional office in Los Angeles dropped a bomb on Amazon Thursday, when they said that they are a joint employer of BTS’s drivers (despite its insistence otherwise).

This ruling, if upheld, could force Amazon to negotiate directly with the union—a scenario that Amazon has spent decades avoiding.

A lot of people might not think that this is a big deal for Amazon. With billions in the bank, they can afford higher wages (especially with the UPS contract that was negotiated last year for its drivers).

But this would likely have a massive impact to the Amazonian model and how it operates.

Here’s why

Rising Costs

Unionized workers mean higher wages and better benefits. For a company that thrives on thin margins, this could lead to big increases in operational costs.

Loss of Control 

Amazon’s efficiency relies on strict control over its delivery network.

Unionization could force the company to relax some of that control, potentially leading to slower delivery times and reduced reliability (huge components of Amazon’s brand promise).

Service Model Challenges 

Amazon is known for strict delivery performance standards (like the number of deliveries per day). These standards could come under fire and their reasonable ability to be achieved questioned.

Union rules might also limit Amazon’s flexibility, potentially causing delays and affecting customer satisfaction.

Legal and Regulatory Scrutiny

The ruling could open the floodgates for other DSPs across the country.

As the legal landscape shifts, Amazon could find itself facing more regulations and scrutiny, not only from labor boards but potentially from lawmakers re-evaluating gigwork models more broadly.

In addition, the Teamsters has been co-operating and working with groups looking to unionize Amazon warehouses. A decision that the company is seen as an employer for drivers, and having them unionize would make it extremely difficult for their warehouses to not follow.

Impact on Innovation

Amazon’s ability to innovate might be limited by the new constraints that come with a large unionized workforce.

The flexibility that Amazon has leaned on to drive its success could be hampered, limiting future growth.

If DSPs across the country follow BTS’s lead, Amazon could be forced to rethink its entire approach to last-mile delivery.

This would have a major impact for retail and eCommerce as a whole. Not to mention sway other retailers or organizations with the types of models offers made to customers.

The company’s next moves will be crucial in setting the tone for its labor relations moving forward.

In the end, Amazon faces a choice: adapt to a new reality where its workforce demands more rights and recognition, or continue to fight, potentially at great cost. For Ervin and his drivers, this battle is personal. For Amazon, it could be existential.

How Sticking To One Page Helps You Solve Big Problems

For over 10 years now I have been heavily focused on continuous improvement.

Being able to squeeze the most out of your system will make a noticeable impact to your P&L.

Everyone has probably heard about it, but one of my favourite (and most used) tools to help my clients (or my teams in the past) is an A3.

Toyota made in famous, it’s named after the A3 paper size (two standard letter sized pages side-by-side), this method/tool is all about taking complex problems and breaking them down to what matters most—onto a single page.

There’s beauty in simplicity.

When limit yourslef to a single sheet of paper, it forces you to cut through the noise and focus on what really matters.

It refines your understanding of a problem.

Every word, every diagram, every number on that page serves a purpose. There’s no room for fluff—just clarity.

The Strucutre of an A3

A good A3 report isn’t ja document; it’s a thinking process.

Background: This is the first step in the A3 process. Here, you identify the issue that needs to be addressed. It's crucial to define the problem clearly and specifically. For example, instead of saying "Our delivery system isn't working well," you might say, "Our delivery system is causing delays that lead to customer dissatisfaction."

Current Condition: Once the problem is identified, the next step is to understand the current situation. This involves gathering data and information related to the problem. In our delivery system example, this might involve tracking delivery times, identifying where delays are occurring, and gathering feedback from customers and delivery personnel.

Root Cause Analysis: This step involves identifying the underlying cause of the problem. One common tool for this is the "5 Whys" technique, where you ask "Why?" five times to get to the root cause. For example, "Why are deliveries delayed?" might lead to "Because packages aren't ready on time," which might lead to "Because the packaging process is inefficient."

Countermeasures: Once the root cause is identified, you can propose countermeasures to address it. These should be specific actions that will help achieve the goal set in step 3. For example, if the packaging process is causing delivery delays, a countermeasure might be to implement a more efficient packaging system.

Implementation Plan: This step involves planning how to put the countermeasures into action. This includes who will do what, when, and with what resources. It's important to consider potential obstacles and how to overcome them.

Follow-Up: The final step in the A3 process is to plan how to track the effectiveness of the countermeasures and make adjustments as necessary. This might involve regular check-ins, data tracking, and feedback sessions. It's also important to celebrate successes and learn from failures.

A3 thinking is a mindset.

It encourages discipline, clarity, and a systems approach to problem-solving.

When you can fit your thoughts onto one page, it means you understand the problem.

A3 thinking helps you see the bigger picture, making sure that solutions contribute to your long term goals.

If you’re tired of endless meetings and reports that go nowhere, try and A3.

You’ll find that this process sharpens your thinking and brings a level of clarity that’s hard to achieve with a longer report. The best part is that your conversations with senior management (or customers) will never be easier.

That’s it for this week. Thanks for being here.