Cutting Corners to Increase Speed?

When it comes to competition in the package delivery industry, the so$-$called "last mile" from the local warehouse to the customer's doorstep is where the race is won and lost. At one time, Amazon hired UPS to do this job, but over time, in order to increase the speed of its delivery services and lower costs, Amazon turned instead to a decentralized network of independent contractors to do the work. As we note in the text, decentralized structures do promote speed, but often at the cost of standardized controls when it comes to errors and safety. This fact is becoming increasingly clear as the evidence mounts that pressure to speed up deliveries seems to be causing deadly accidents for Amazon that may be far higher in terms of per capita mile relative to UPS. In fact, at least $10$ recent deaths have been attributed to Amazon drivers and many feel this is just the tip of the iceberg when it comes to the actual number of accidents.

Indeed, Amazon is increasingly becoming a competitor of UPS, and its decentralized structure provides some competitive advantages that allow them to cut the corners when it comes to safety practices. Part of this deals with regulations. UPS is regulated by the Federal Motor Carrier Safety Administration $($FMCSA$),$ and hence, has to engage in extensive government mandated driver training. UPS's multimillion$-$dollar training facilities complete with virtual reality displays and real obstacle course hazard gauntlets are truly impressive, but also costly$.$ In contrast, Amazon trains its drivers via instructional videos that they play on their personal phones. Also, FMCSA investigates and records accident data, but does not regulate the type of smaller vehicle that Amazon contractors use, and hence, has little knowledge of the actual accident rates for Amazon versus UPS.

Beyond regulation, Amazon is also sheltered because unlike the ubiquitous brown UPS truck, loaded with signage, many Amazon vehicles are anonymous white vans with no hint of any logo$.$ Indeed, Amazon argues that as independent contractors, their drivers are not their employees and therefore, the company is not at all liable for their behavior. And even though these drivers can be directly contacted by Amazon if their deliveries are running late, if the drivers get in trouble, the company can simply point to a waiver that each driver signed at the time of their employment. That waiver stipulates that they must "defend, indemnify and hold Amazon harmless," and "assume the liability and responsibility for legal costs due to damage to property or bodily harm including death." Finally, nondisclosure agreements and confidentlality clauses associated with settlements make it even harder to know the true toll that these practices take on innocent victims.

Sadly, and ironically, in one recent accident, this toll was actually paid by former Amazon CFO Joy Covey who was run down and killed by an Amazon contract driver while she was riding her bike in San Francisco. Whether any of these accidents will have any effect on customers is an open question. As one customer has noted, "I think anyone who thinks about it has conflicted feelings. It's sure nice to get something in two days for free, but this idea that they have walled themselves off from responsibility is disturbing." That customer was Tim Hauck, whose own sister was killed by an Amazon driver in San Diego.

DISCUSSION QUESTIONS

If Amazon dispatchers can directly call drivers and pressure them to speed up their deliveries, does this imply that the drivers are really "independent" or is this simply a right that they have after hiring an independent contractor?

If you are managing a competing company in this business such as UPS or FedEx, how might you try to overcome the built$-$in competitive advantages that Amazon enjoys in this space?