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Amazon Poised To "Double Down" On In-House Truckload Program By Rolling Into Power Unit Purchases

Amazon Poised To "Double Down" On In-House Truckload Program By Rolling Into Power Unit Purchases, Inc. (NASDAQ: AMZN) is preparing to take a step that many thought would be inevitable – acquiring its own power units.

Amazon, which has spent the past six years forming a massive shipping and logistics network, already owns or leases thousands of truck trailers. But it relies on contractors to bring their own power units to the shipping relationship. That is changing. The company is poised to "double down" on its in-house truckload capabilities, and is ready to jettison many of its contractors if necessary, according to a person familiar with the company's plans.

Medium and heavy-duty truck manufacturer Volvo Trucks, a unit of Swedish manufacturer AB Volvo (OTCMKTS:VOLVF), confirmed October 11 that Amazon is a customer. In addition, Kenworth Inc. is reportedly building power units for Amazon. A Kenworth spokesperson declined comment, deferring instead to its customers to respond to such queries.

Amazon did not reply to a request for comment. However, in mid-April, the company posted a video on Twitter Inc (NYSE: TWTR) showing two tractor-trailers with the familiar Amazon logo on the sides rolling up next to an Amazon-branded aircraft. Dave Clark, who heads Amazon's global supply chain operations, said in the video caption, "Say hello to my little friend."

The power units in the video were so-called "day cabs" designed to allow drivers to execute short-range pick-ups and deliveries within the federal driver hours-of-service (HOS) requirements. Amazon has been beefing up its network that supports what is known as the "middle-mile," which, in Amazon's case, would link its fulfillment and delivery centers. Amazon has 457 U.S. facilities and 58 more on the drawing board, according to consultancy MWPVL International. Of the 457 locations, 160 are classified as fulfillment, supplemental and return centers, and an additional 151 are delivery stations, according to MWPVL data.

Middle-mile stage lengths typically run 200 to 300 miles, and the use of day cabs means that drivers can execute pick-ups and deliveries well within the federal driver HOS rules, which cap consecutive behind-the-wheel hours at 11 and full work days at 14. 

Amazon wants to attract drivers by helping to finance the purchase or lease of power units, according to the person. The company is working on fuel discount/reward programs, insurance, and partnerships with truckstop operators like Love's to secure parking spaces, showers and other driver amenities, the person said. The long-term objective is to gain more control of its supply chain, which it is aggressively working towards in freight brokerage, airfreight services and last-mile parcel deliveries.

According to the person, the company has driver schools in various areas where fulfillment center employees are getting their commercial drivers licenses (CDLs) and are driving yard hostlers for practice. Amazon has done its research on prevailing driver pay rates and will pay drivers "above average" wages, the person said. Private fleet drivers for Walmart Inc. (NYSE: WMT) make in the $80,000 to $90,000 a year range. Amazon's last-mile delivery drivers typically are not required to have CDLs.

The unanswered question at this time is whether Amazon will expand its driver workforce over the long-term by training fulfillment center employees, hiring credentialed drivers for in-house roles, or providing power to owner-operators, according to the person.

Amazon has been on the prowl for drivers for some time. For example, in March 2018 the company exhibited at the huge Mid-America Truck Show in Louisville, Kentucky, to recruit fleets to join its dedicated trucking operation. The business, which went by the name of, wanted fleets that had at least three trucks, their own operating authorities, and drivers who could operate twin-trailers to haul goods in the company's distribution center network, Amazon said in literature distributed at the show, known in the trade as MATS.

Image Sourced from Google

Posted-In: Amazon Freight Freightwaves truckingNews Markets General


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