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Inside the Amazon DSP Model — Transcript

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0:00Welcome to Industry Insights with Route Consultant, your front row seat to the
0:04fast moving world of logistics and beyond.
0:07Each week, we bring you game changing insights, real world strategies and
0:12fresh perspectives to fuel smarter investments and build stronger businesses.
0:16Join us as we sit down with expert guests to explore emerging trends and pressing
0:21topics across a wide range of industries.
0:25This is industry insights.
0:31Hey everyone.
0:32Welcome to Industry Insights.
0:33This is a special episode that was actually recorded live at the
0:36Route Consultant Expo in 2026.
0:38We're releasing this over time so that if you weren't at the expo or if
0:41you missed the session, or if you're just catching up, these are all coming
0:45out over the course of the year so that you can go back and watch this
0:48content and make sure that you see everything that we went over at the expo.
0:51Today we're gonna hear from Andrew Polito of Go HQ, and me Josh Gregory,
0:56about the true realities, costs and profitability of the Amazon DSP space.
1:00Good morning everybody.
1:02Welcome to Expo Day two.
1:03Thank you for being here.
1:04Hopefully you have gotten your coffee.
1:06I again have had at least four cups this morning, so I'm surviving.
1:11Hopefully you all are too 'cause we've got a lot of content left to go over today.
1:14Um, so this morning.
1:17This session is really about something on the Amazon side that I feel like
1:20often kind of gets glossed over.
1:21We talk a lot about the advantages, like kind of the differences between FedEx
1:26and Amazon, but we don't always get into the real operational numbers of Amazon.
1:29So I really wanted to have a session where we dig into those and kind of give you
1:33some examples of what reality looks like, especially maybe if you're new and trying
1:37to come into the space for the first time.
1:38What do those first six months, first year look like?
1:41So, uh, we've brought Andrew here from, uh, go.
1:45Go.
1:46What is your Go hq?
1:47Yeah, they changed their name recently.
1:49It's not my fault.
1:49Yeah.
1:50Um, so if you wanna kinda introduce yourself, ta talk a little bit about
1:53why, you know, uh, about the Amazon space, then we can get into it.
1:56Yeah.
1:57Thanks.
1:57Thanks Josh for having me.
1:58And so I've been working in this space now for going on in six years.
2:02Uh, started go hq, uh, and at, in 2020.
2:06And then we launched our bookkeeping services in 2021.
2:09So my role as A CFO at at o HQ if I didn't mention that.
2:12And so my team oversees bookkeeping services for.
2:15Hundreds of DSPs and FedEx contractors as well.
2:18But really we started in this Amazon space, and so we've seen its
2:21progression from the early days all the way through to what it is today,
2:24and then have a really good insight into like what the future looks like.
2:27And so that's.
2:29That's, that's my history here in this space.
2:31Yeah.
2:31So it's not just their numbers, it's hundreds of other
2:34DSPs that they get to see.
2:35So I think it's a pretty broad swath and, and gives a lot of context there
2:38when we're talking about general themes.
2:40So I know probably one of the easiest ways to start is just a lot of these
2:44people are not Amazon contractors and are trying to think about, you
2:47know, if I was to get into the space.
2:50What does that even look like?
2:51What's the process look like today?
2:52'cause I, I, I know the way I talk about it might have changed some
2:55over the years too, 'cause it, with Amazon, things like to change quickly.
2:58So what, what today is kind of the process of getting into Amazon.
3:02Yeah, so it has a, it's different than in the FedEx space as we know.
3:06You know, there's not really, the buying and selling of contracts and routes
3:09is like the same way that it is with FedEx or bread routes or, or whatnot.
3:13And so you apply with Amazon to join.
3:15Uh, to be a DSP, you go through a multi interview process.
3:18Sometimes they even fly you up to Seattle and then what you get
3:21put on what's called a bench.
3:23And then the bench is really, you might get a call in three months that, hey,
3:28A DSP is ready for you or in a year.
3:30And you have to be able and willing to basically drop what you're
3:34doing at that time and accept a, accept a contract with Amazon.
3:38Uh.
3:39It is location based too.
3:40So if you're very specific on, I don't wanna be anywhere outside
3:43of my home region, well, you're probably gonna be more limited in
3:46what opportunities arise for you.
3:48But if you're willing to move cross country relocate, you can probably
3:52get into the program quicker.
3:54Uh, one of the major changes right now going on is they're really
3:58investing in their rural and super rural program, is what it's called.
4:01Whereas so that they can deliver and we've, we've helped stand up DSPs and
4:05the Texas Panhandle and the Dakotas, and so if you're willing to move there
4:09and start up a company, you can probably get into the program a lot faster.
4:11And that's been really where the opportunities have been.
4:14But yeah, you stand up and you're basically given, I, I believe, one
4:17or two weeks to accept the position.
4:19And if you don't accept it, they move on to the next person.
4:21You just continue to wait for the next opportunity and then.
4:24From there, it's about a 60 day to 90 day process to actually start the business.
4:27Do you have any sense of like how long people will sit on the bench
4:30for, on average or anything like that?
4:33You know, it's, it's all different.
4:34Whenever you talk to certain people.
4:35Some people I know of got interviewed, got accepted, and within three months
4:39they had a DSP, others I, I, we speak to, and they've been on the
4:42bench for two years, three years.
4:44But it does come down to like how selective they're
4:46being with the opportunity.
4:48Yeah, so if you're, if you're in Atlanta and waiting on Atlanta, it
4:51might take a little bit longer than if you're in rural North Dakota.
4:54Yeah, right.
4:55And we've seen that a lot, obviously, like, just like what you're saying,
4:58Amazon has areas that they're really focused on filling, that if you can fit
5:02that niche, you can move a lot faster.
5:05Uh, otherwise it's gonna take longer if you're gonna sit on the bench.
5:07'cause Amazon uses the bench to fill their needs.
5:10It's not as much about, you know, wherever you want to go, they're gonna fill it.
5:13It's more about what does Amazon need?
5:15And they're looking at the bench to see who fits those boxes and they'll ask you
5:19if you want to adjust to fit one of those boxes and kind of move you from there.
5:23That's right.
5:23Uh, there are opportunities I will say to, to buy in the Amazon space.
5:27It's just, there's not as many as there are in FedEx for sure.
5:30It's not even close to as many.
5:31It's much.
5:32More difficult approval process, to say the least, I would say.
5:36Um, so when, so let's, let's skip that whole approval side of things.
5:41You know, you found a business, but what does it actually look like?
5:44You said you guys stand up a lot of DSPs and help them kind of get started.
5:47Mm-hmm.
5:47What does standing up look like?
5:49I know Amazon does some training, but what do they expect you
5:52to come in on day one with?
5:54Yeah, the, it is a, you drink from the fire hose of information in
5:57those first few months and usually you only know 60 days, 90 days out.
6:02And then through that process you're given your ramp plan.
6:05They are, you do have checklists of sorts of, Hey, you need to get insurance, you
6:08need to have these, these boxes checked and you kind of know when your standup
6:12date is and how many routes you're gonna be required to commit to that that week.
6:16And then they actually do give you an eight to 12 week
6:18plan or a ramp plan for that.
6:20So you can kind of know where, what you need to meet to.
6:22And so, yeah, during that, during those initial phases, you need to start
6:26hiring, you need to start training all before you're getting paid also.
6:29So that's like a one weird part is, uh, while there's not, uh, unless you buy,
6:34you know, an, an existing Amazon DSP, while you don't have the, the large
6:37initial investment, you do need to have available capital, whether it be through
6:41lines of credit, what, what, whatnot.
6:43Because you need to make deposits with your insurance.
6:45You need to source rental vans.
6:47Oftentimes there's not leases available that Amazon does provide
6:51and pay and pay you for, which we'll probably get into a little bit.
6:54But yeah, you need, you need to make those deposits.
6:56You also need to start paying people for training and whatnot before
6:59you, before you're getting paid.
7:01And so it's usually a few weeks out.
7:03Yeah.
7:04So, so gimme a little bit more in terms of, so if it's a few weeks out.
7:09And you're given a plan, like how much do you typically see that people need
7:12to float or have available as capital leading into those, um, the beginning
7:17period before they're getting paid?
7:18Yeah.
7:18It, you know, many are, if you have about $50,000 in capital available, that
7:24that should get you what, that, that typically gets you more than what you
7:27need in terms of what you need to float.
7:30Uh, one nuance that people don't realize coming into Amazon is you're giving
7:34these route commitments and they say you need to service five routes in week one.
7:39Five routes in week two, step up to 10 routes in week three, 15
7:43routes in week four, so forth.
7:45There are opportunities to pick up more than that.
7:47So if you actually, if you have more available cash and you can staff more,
7:51people get more vehicles, you can pick up that extra volume and that does.
7:56Behoove you, 'cause it gets you to scale faster.
7:58You're not, you're not limited to that unless they don't have that volume.
8:00But typically what we see is they do, but they know that they can't
8:03require every new DSP to come in at 20 routes right off the bat.
8:07So is there, is it, is it typically, it's something like 10 routes that
8:11they start you out on to ramp you up?
8:12Is it something close to that?
8:13It's about five.
8:14Yeah.
8:14Five.
8:14Usually five and then 10 by week two or three.
8:17And then.
8:17Typically by week eight, you're up to where you're gonna be at,
8:21which is typically around 25 to 30.
8:24Okay.
8:24So beyond just having the capital ready, are there other things that
8:28you tell people to do even before standup, you know, hiring, it sounds
8:32like, but what are the other things they need to put in place even before
8:36they've stood up on the business?
8:37Yeah, it, it's very important.
8:39Very early on, as a, as an owner, you can probably do most things in
8:44the business and do everything but.
8:46It's not gonna scale with you very easily.
8:49Like at very quickly you will get burnt out.
8:51So finding an effective leader to work alongside of you and, and give
8:55them the right incentives with, you know, scaling the business
8:57with you is, is really important.
8:59Some of the most successful DSPs we work with that scaled like found that
9:03person that they can partner with that is their, essentially their bc, their
9:06operations manager, and then through the training process, identifying
9:11people who can be lead drivers.
9:13'cause you don't want to.
9:15Get into a situation where you have to be pulled away for something else.
9:18Your operations manager, you have nobody you can lean on early on.
9:20'cause it'll lead to a quick turnover early on and it can
9:22really affect a lot down the road.
9:24And so that's one thing, uh, you know, getting the right and getting
9:29in contact with the right vendors.
9:30You're gonna need rental vans, you're gonna need repair
9:32shops, you're gonna need a lot.
9:33So just finding those right vendors and kind of telling them, this is my plan.
9:37I wanna be able to get these amount of vehicles, I'm gonna
9:39need these at these stages.
9:40And establishing those relationships is very important as well.
9:44So you, you brought it up.
9:45So let's jump ahead a little to it.
9:46But on the fleet side, so you're coming in, can you walk through a
9:51little bit of what it looks like to operate a fleet with Amazon?
9:54Like, what do they do for you?
9:55And then explain why you would need a rental van.
9:57Yeah, that, that's a great point.
9:58Yeah.
9:59And so Amazon will pay, pays you for your fleet.
10:03So if you are committed.
10:0630 vehicles, and they know that you need those 30 vehicles to
10:09run your route every month.
10:10At the beginning of every month, they have what's called a fixed monthly payment.
10:13And depending on the type of van that you have, you get paid for that.
10:17While oftentimes those leases are not available early on or even as you scale.
10:21So during peak, for instance, A DSP that runs 30 routes, might be running
10:2550 or 60 rentals, DSPs are very reliant on rentals in their area.
10:29And so it becomes fairly competitive too, among DSPs in the region.
10:33And so.
10:34Uh, ensuring that you can get those rentals and in order to support
10:37the volume is very important.
10:40And if you are told that your route commitments are now 55, if you can't
10:44meet those route commitments, Amazon has what's called a reliability score.
10:49That score is how much of your route commitments are you meeting
10:53and are you reliable and can you pick up the extra volume?
10:56That's a percentage.
10:56So if you're at a hundred percent, it means you've met your route commitments
11:00generally a hundred percent of the time.
11:02Very often in many of the stations we we work in, that is every DSP is at 120%.
11:08That's the bar that needs to be met.
11:10And if you don't have a good relationship with a vendor to be able to source
11:14vehicles when you need them, if you don't have a pipeline of drivers to
11:18keep, to keep moving through and you know, to be able to staff for extra
11:22opportunities, you'll get below that.
11:24And then they use that reliability score to give out extra volume in the future.
11:28So they'll, if, if volume grows in the station, the DSP with a hundred.
11:3220% reliability.
11:33We'll get that extra volume over the DSP that's not meeting their reliability.
11:37And so anyway, it's important.
11:39Yeah, I think that's a really interesting part of Amazon that that is different
11:42than some of the others, where a hundred percent is kind of the minimum.
11:45And if you're trying to get above or trying to grow, you have to be operating
11:49consistently above a hundred percent.
11:51It's a weird kind of mindset shift, but it is very standard with Amazon.
11:55Mm-hmm.
11:56Yeah.
11:56So.
11:56Uh, one of the things you've touched on a little bit is that routes can
12:00vary some, and so trucks can vary some.
12:04Is that a, you know, you're running 20 routes today and 25 tomorrow and
12:0830 the next day, or how, how much variance is there day to day, or is it
12:12month to month or quarter to quarter?
12:14What does that look like?
12:15Yeah, it's more, it's more seasonal and probably month to month, like in general,
12:19during certain times of the year, you can expect to meet, it'll probably fluctuate
12:23three to four routes on the weekends.
12:25You might.
12:25Run.
12:26If your, typically your average is 23, on the weekends, you're probably
12:29running 19 or 20, and then middle of the week it might be closer to 25 or 26.
12:33So it, it does fluctuate within probably five to six during
12:36normal times of the year.
12:37And then during peak, we usually see an in increase of 25 to 50%.
12:41And, uh, one other nuance with Amazon is they offer what's called popups.
12:47Uh, that is, Hey, we have this station, it's three hours away from you.
12:51Or do you wanna stand up in operation for the next four months over there?
12:54And.
12:54Uh, we'll pay you a little bit more and then, but you essentially have to stand
12:58up a brand new DSP for four months.
13:00Staff it send managers and whatnot.
13:02Uh, and so anyway, that's, uh, that, that will significantly increase.
13:06You know, I talk to DSPs that triple when they get an opportunity like that
13:10'cause their home station increased and now they have this new opportunity.
13:13So do you ever see people who do popups get to stay in those areas after the time?
13:18Yeah, we do.
13:18We do see that.
13:19Yeah.
13:19So sometimes, uh, Amazon has this program called the Pinnacle Program.
13:23It.
13:24Most DSPs, uh, operate outta one station or terminal?
13:27That's a one-to-one, you know, one to many relationship, I guess.
13:30So, uh, Amazon rolled out what's called the Pinnacle Program.
13:34So high performing DSPs have the ability to scale their
13:37business and add extra locations.
13:40So that becomes a permanent location.
13:42So now that's another application process, but you need to have a proven track record
13:46of performance in order to do that and meeting reliability and, uh, your, your
13:50safety scores and whatnot that, uh, is, is really important in this space as well.
13:54And so sometimes that popup does lead to a full-time and they say, you did great.
14:00Can you just stay?
14:01And so, yeah, yeah, it's obviously easier for them if, if somebody did really well
14:06and they can leave them in place, but.
14:08Yeah, we'll talk about some of those metrics later that you
14:10kind of need to stay on top of.
14:11Um, before we get to metrics though, let's talk expenses.
14:14So what are the biggest expenses on the Amazon side that you
14:17need to be prepared for?
14:18Yeah, obviously payroll.
14:21Payroll is the largest expense.
14:22It takes up 60 to 70% of your revenue is, it goes to payroll typically.
14:27Um, and one thing that people underestimate is early on it,
14:32it's going to lag your revenue.
14:34So you need to hire and train.
14:36A dozen, two dozen people and have them ready and paying them during
14:39that before you run a single route.
14:41And so that's where that extra capital that you have available comes in.
14:45And then on the, so that, that's the payroll side and being able
14:49to train and, and have that ready.
14:50And then on the, the other expenses is your fleet.
14:53That makes up the vast majority of the rest of your expenses, the
14:56cost of your vehicles for renting them, especially early on if you
14:59don't have the leases available.
15:01Uh, the deposits on those, on those vehicles, usually it's, you know, the
15:05first month's rent of the rental cost is the deposit amount or at least 50% of it.
15:10And, uh, deposits on your insurance.
15:12So you have to, you know, you have to bind your insurance, auto, uh, auto
15:16insurance and workers' comp specifically.
15:17And so usually you need to pay the first month upfront.
15:20And what that is one cost that can creep creep up a lot.
15:24Um, you'll get a rate.
15:27For your insurance very early on, like when you're first
15:29launching and you're much smaller, you have a less smaller fleet.
15:31But then as your fleet grows, suddenly you get renewed in, you
15:35know, usually six months to a year and it goes up quite a bit.
15:39You kind of like get outta that like early stage rate and so finding
15:42the right partner there as well to like work with you and scale
15:45with you is, is important as well.
15:48Okay.
15:48We touched on insurance, so let's talk about it more.
15:50I know that's one of the biggest concerns people have, especially.
15:53Let's say they came from the FedEx world where they're not used to dealing
15:55with liability insurance and they, you, you hear the stories of Amazon having
15:59really hot, high insurance costs.
16:01It's just a, a big brand name out on the road with a bunch of trucks.
16:04The liability insurance, uh, I know is expensive and continues to balloon.
16:07So what are strategies that you've seen where people can control that
16:11expense and, and be successful there?
16:13Yeah.
16:14Uh, it, it does come down to best practices in terms of safety
16:17and really pushing safety, uh.
16:20Amazon has what's called a scorecard, uh, and what we probably talk about
16:24that a little bit as well, but they, they rate you on safety and quality.
16:28If you are acting within those safety metrics, generally speaking, then
16:32you shouldn't have too many incidents that are requiring, you know.
16:36Uh, a claim ultimately.
16:37And so that's really important, just building that culture
16:39of safety very early on.
16:41And I know sometimes it sounds cliche, but it, it really is true and, uh,
16:44it, it's better for the drivers, their wellbeing as well as for your business
16:48and your profit from being safe.
16:50So it's one interesting piece of it.
16:52There's hard dollar cost associated with meeting safety metrics.
16:55So just like limiting the number of issues would be one and
16:57training the right way and whatnot.
17:00Also working, you know, whoever you're working with in terms of a broker, like
17:03making sure you're getting guidance and you know, leaning on expertise there
17:06to understand what claims should I be putting through, what should I not be?
17:10Uh, I think a lot of the premium hikes that we've seen over the last couple of
17:14years, which they have been significant, that's been a big topic of conversation.
17:1850, 60, 70% increases for DSPs that have been around for three years.
17:22Uh.
17:23Is controlling what, what you're actually putting through insurance early.
17:27Early is important.
17:28A lot of those DSPs were just taking everything and just
17:30saying, oh, I have insurance.
17:31I'll just put it through.
17:32But it's mostly, uh, it's just lack of understanding of how insurance
17:37works that these claims that you're submitting now are gonna cost you.
17:40Six figures in two years and three years when everything renews.
17:44So yeah.
17:45So people not paying attention to the fact that those claims they
17:47send through really affect the rates and they're, I, I do think that
17:50what you said is really important.
17:52You need to have somebody who, when you have questions about this, if you
17:55call them, they'll give you good advice about how to actually manage your
17:59claims and the right decisions to make.
18:00Because yeah, it is simple to see that, okay, this is an expense
18:05that insurances cover, but not think about the multiplicative
18:07effects that happen over time.
18:10I guess, so those are strategies that we've seen people do.
18:13Do we think there's any chance like Amazon seeing any of that and
18:17are saying maybe there's something we tweak in how we pay DSPs?
18:21Or is that, do you think that's just not something they're
18:23worried about covering for people?
18:25I have heard mixed reviews about that.
18:27Uh, there are some people that say, I met with somebody and they said Amazon has
18:32done their business reviews and they think the average DSP is profitable enough where
18:36we're not gonna make this adjustment and.
18:39DSPs are taking a hit.
18:40But then I, some of our DSP partners, and some of this is
18:43station specific and region specific.
18:46They're getting adjustments to their rate card to increase
18:48their fixed monthly payment.
18:49And they're citing insurance costs as the primary factor in that.
18:53But it doesn't seem like that's a broad across the board change.
18:56They're doing that very regionally.
18:58So it might be just the right DSP groups barking up the right tree or Yeah.
19:03Or so forth or, but as a general program change, we're not hearing anything that.
19:07They're gonna significantly increase how much they're paying you for your free.
19:09Yeah.
19:09We haven't seen Amazon come out and say everybody gets a 5% increase,
19:12but at least there's some positive indications that in certain areas
19:15people are getting some movement and, and specifically pointing to insurance.
19:19Yeah.
19:19And I will add too, so they just changed their repairs and maintenance
19:22program as well last year.
19:24And so that, that's also one of the reasons why they're citing that they're
19:27not gonna increase their payment is they're covering a lot of the preventative
19:31maintenance now, or they've always covered most of the preventative maintenance.
19:34But even, uh.
19:35Non preventative damages and whatnot.
19:38They are covering that.
19:39And then they've established what's called a fleet improvement fund,
19:42where every DSP gets allocated anywhere from 20 to 40 or $50,000
19:47that they can use in a calendar year.
19:49And it can be used for anything.
19:50So you total, you know, you damage a van, you bang up a, you know, the door,
19:56any, anything that goes into servicing the fleet, you can use towards that.
20:00And it's, you use it or lose it.
20:02So.
20:03If you're given $40,000, we advise all of our clients use it to the max.
20:09There's no penalty for using it all.
20:10And in fact, you might actually get penalized if you don't use it.
20:13'cause then it is saying to whoever's determining how much, well, they
20:17didn't need all that, so I'm actually gonna lower it next year.
20:19So, uh, that is a, that is a big change that happened.
20:23And so they're, they are, they are moving the needle in certain areas.
20:27And I think a lot of the.
20:28Algorithmic changes that ha they very, they very much work in
20:31like algorithms and, and whatnot.
20:34They'll tweak this here, but then this area starts to falter.
20:37And so they are pretty good about changing.
20:39Like, I, I wouldn't say that, uh, they're too set in stone with like not making
20:43improvements that do help the DSP, that's like, one thing that I think is a little
20:47bit misunderstood is Amazon's just out to get the DSP, but they're really not.
20:52They, they do make changes that benefit.
20:55Yeah.
20:56Can you, are there any other expenses that you see in the first, you know,
21:00six months to a year that people don't expect that are kind of surprise
21:03expenses to be aware of when you're starting up and getting into this?
21:06Yeah.
21:07Uh, that increase in insurance that might just trigger in that six months,
21:10that suddenly you're paying a lot more in premiums 'cause you're off
21:13your intro rate with Marsh or whoever.
21:16Um, and then some other, some other expenses is really like the, the
21:21large repairs that come in and, you know, that you need to make, uh.
21:25And then also the, I would almost say the opportunity costs are the biggest ones
21:30that you miss out on because as you ramp, you might start to see some other DSPs.
21:34A lot of the DSPs launching today are at new stations.
21:37So they're launching three or four DSPs in the same station.
21:39'cause they're building out new, more terminals everywhere.
21:42Um, you see your other competitor, they're essentially competitors in your station.
21:47Getting more volume, and it's because you weren't able to meet
21:49your route commitments early.
21:50So like the ability to scale, but again, that goes back to having enough capital
21:54to be able to hire more people than you need and get more vehicles than you need,
22:00knowing that that volume is coming and you can kind of snag it when it's there.
22:04Or another DSP isn't meeting theirs and now somebody else needs to grab it.
22:07So you do, you know, um.
22:10Okay, so that's the expense side.
22:11Let's talk a little bit more about how Amazon actually pays in the scorecard.
22:14So can you talk about the main kind of revenue pieces and also, I guess, get
22:19into the scorecard as it makes sense?
22:21Yeah, yeah, yeah.
22:22So Amazon pays you for every route that you run and every package that
22:26you deliver, and they pay your route based on a budgeted number of hours.
22:30So it, they're gonna allot 10 hours generally for your route.
22:35And so.
22:36Your 10 hour route is your block of hours, and then that route
22:39is paid based on an hourly rate.
22:41So maybe it's, you know, 31 or $32 an hour.
22:43They'll pay you $320 for that route that day.
22:46And so that's the primary driver for the weekly, and then they pay you 10 cents
22:49per package, uh, starting this year that has gone up to 12 cents per package.
22:53So they're just, they're increasing that, uh, about 20% with, you know, up to 12.
22:57Um, so that's generally how the weekly servicing gets paid.
23:01Uh, so a little bit different than, you know, FedEx with the stops, but it's,
23:05it's not really stop dependent, it's just you get a block of hours and then
23:09you get paid for your fleet every month.
23:11So if you have 30 routes, generally they'll pay you for 30 vehicles, and
23:14they look to see if you have the number of leases to support that, and if
23:17not, they'll approve you for rentals.
23:20And then those rentals will get paid at a rental rate.
23:22Uh, and then you have the scorecard.
23:24So that's the big, that's the big thing that everybody talks about.
23:27Get your scorecard.
23:28So there's three, there's tiers to getting your scorecard essentially.
23:33And what your scorecard is, is they're measuring you on safety and quality.
23:36On the quality side, it's things like, uh, customer delivery feedback.
23:40Is the driver following those notes that someone put in the Amazon app to
23:43say, please deliver to the back door.
23:45Are they actually following that or are they getting dinged on that?
23:48Uh, successful deliveries.
23:49So you dispatched with 10,000 packages.
23:52You came back with nine, with 10 packages that affects your,
23:56your, uh, delivery score.
23:58And then on the safety side, it's things like seatbelt off
24:01rate, speeding violations.
24:03They have, every single vehicle is required to have what's called
24:05ndy cameras inside the vehicles.
24:08And you do get penalized if one of those breaks and you send a van out on the road.
24:12So like main, maintaining those is also important, but, uh,
24:16it's measuring distraction rates for drivers, it's measuring.
24:20Uh, whether they're rolling through a stop sign or not, and it, it dings them
24:23every time something like that happens.
24:25And so why that's beneficial is if you get over a certain metric,
24:30which is, you know, they score you based on like a zero to 100 scale.
24:33Anything over 85 you get fantastic.
24:36Plus that's an extra 15 cents per package.
24:38Generally that could be as much as 12 or $15,000 a week.
24:41So it's significant and we do see that getting that fantastic or, and
24:46then fantastic, which is one tier below, which is about 75 to 85.
24:49That is a 7 cents per package.
24:52So still it, it's less than half, but you're still getting an extra
24:555,000 or $4,000 for that week.
24:59And we do see a direct correlation for that with the profitability.
25:02I mean, naturally you would, uh, I'm not saying that it's the total amount of the
25:06profitability, some DSPs that you know that that is the case, unfortunately.
25:11But there's other areas of opportunity they probably have, but.
25:14Yeah.
25:14'cause that's, that's what I've heard a lot is, you know, Amazon
25:17pays to cover all of your expenses.
25:18You gotta be in the top one or two tiers to make a lot of profitability.
25:22So you say some cases that's true, some cases it's not.
25:26But regardless if you can be in those top two tiers, you're significantly
25:29impacting your profitability.
25:31Oh yeah.
25:31Yeah.
25:31And so we can, we can talk about it more, uh, related to the payroll
25:35cost, but all of your incentives for your managers and drivers should
25:39really be centered around that.
25:41Because it has so many downstream impacts and you're gonna make so much more,
25:45and you also have more to give as well.
25:46And so incentivize, aligning incentives, the incentive is for you to get that.
25:50So everybody else's should be as well.
25:52Yeah.
25:52Well, let's talk about it there.
25:53So you know, what types of incentives, how does that work and, and how
25:57do you, we can start there too.
25:59Like what, what does payroll.
26:01Typically look like?
26:01Is it hourly, is it day rates?
26:03Like what are, what are people doing and how do you incentivize
26:06that scorecard behavior from it?
26:07Yeah, it's all hourly.
26:09So every, every driver has to be W2 hourly employee.
26:13Um, and, you know, if you're, you know, 40 hours of, you know, 40
26:17hours a week, and then anything over that's overtime and time and a half.
26:20And then unless you're in some states that have that after eight hours.
26:23And so Amazon does build that into the rate card though, that, uh,
26:27and so your payroll is going to be.
26:30Your, your hourly payroll and then every driver, any hour that they take more
26:35than that 10 hours you were allotted for your route, you're working for free.
26:39At that point, you're paying, you're paying the driver.
26:42Amazon does not care that it took you 11 hours to complete that route.
26:45That one hour that you paid your driver is on, compensated by Amazon.
26:48So really monitoring your labor hours within that allotted hours that every
26:53route is given is really important, and some of the most successful DSPs.
26:57Keep that on a daily record.
26:58And try to keep their average hours on the road down below that number.
27:04Um, 'cause a lot of times they won't even go into overtime.
27:07So like a lot of people track their overtime rate early and that's the, that's
27:10like, oh, I'm running 2% overtime or 3% overtime and that's healthy for me.
27:14But they're not seeing the drivers that only work two shifts, that's
27:17spent 26 hours on the road and that that extra six hours essentially
27:22cut out your profitability.
27:23Like at that, at that amount.
27:25And so we, you know, we see that a lot where people aren't doing that.
27:29And so that's really important that you do.
27:32Hey guys, we just wanted to pause for a moment to invite you to our free events
27:35that are happening throughout the year.
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28:02Now let's get back to the episode.
28:03And then, uh, a lot of people will tie some sort of incentive score.
28:07So along with your, your scorecard, every driver gets their own score as well.
28:13That's a fantastic, or less than that.
28:15So a lot of DSPs will say, if we as a company get fantastic, plus every driver
28:21will get an extra 50 bucks this week.
28:24But the driver, you, you driver, need to have.
28:27Worked a certain number of shifts and also gotten fantastic on your score.
28:31So it's not like giving, you know, bad, you know, congratulating bad
28:35behavior by some people that just so happen, uh, the company achieved it.
28:38So, uh, there's a lot of that.
28:40And then also incentivizing management around those same metrics.
28:43So that operations manager that I talked about earlier that you
28:45hire and your dispatchers that you need, that you need to have.
28:49Uh, if they're incentivized that hey, if your labor hours come
28:52within our budgeted hours, you will get a hundred dollars bonus.
28:56Uh.
28:57I've seen it where if the labor hours are exceeding your budgeted hours by as
29:00little as 5%, that's six figures by the end of the year on a, it's very, very
29:05significant 'cause it's every single day.
29:07So, yeah.
29:08Yeah, yeah.
29:08That makes a lot of sense.
29:10And I mean, it, it, it is, one of the things I, I think you, you kinda
29:13highlighted it earlier, but when we think about Amazon, people are scared
29:16about working with them, but they have so much data that they provide and a lot
29:20of technology that does actually make your decision making, uh, you know, a
29:24lot more effective when you can see.
29:26Here are the good drivers, here are the exact things I need to compensate
29:29for and I can pay incentives around it.
29:31So I think that's a a, a really good point.
29:34Another of the things that you just brought up layer wise, so you
29:37have an operations manager and you said you mentioned dispatchers.
29:39So what are the different types of people a standard DSP brings into
29:43their organization beyond just drivers?
29:45Yeah, so you have that operation matter, like we talked about, someone
29:48who's a direct point of contact for the station and you know, they're really
29:51the leader on, the leader on the team.
29:53And, uh, oftentimes we will see dispatchers now really effective
29:58DSPs can take a driver and they kind of flex drivers into dispatchers.
30:02So maybe a, a high performing driver that always finishes their routes
30:06within seven hours or eight hours and does it safely and whatnot.
30:09They'll say they'll give them the afternoon, you know, the evening shift to.
30:13Be a dispatcher for the late night dispatcher or whatnot.
30:15And, uh, or maybe they, you know, you can be creative, but
30:19you do need a dispatch function.
30:20You can't really operate without one.
30:23Um, and so that's, that's a primary part of the team.
30:25And then from time to time, you do see people, it depends, you know,
30:28you might have a fleet, a fleet manager that's on site, that's
30:31doing repairs on site and whatnot.
30:33Uh, or people outsource that as well.
30:35And then, uh, they, most people have some sort of hiring arm of the business.
30:39You do need a hiring and recruiting arm of the business and an HR
30:42arm of the business for sure.
30:44Uh, whether you use a consultant or you hire somebody internally,
30:47uh, it all, it all depends on what your strategy is and you know, what
30:50you're able to pay for as well.
30:52Um, and so yeah, that's, that's generally like the management team that's required.
30:57So you just touched on a late night dispatch.
31:00So worlds of FedEx and bread, you know, they dispatch in the morning once.
31:06So how is that different with Amazon?
31:08Yeah, so, uh, they, there there's oftentimes several waves that
31:12happen throughout the day.
31:13So you might have three different waves that you're sending
31:15drivers out throughout the day.
31:16So the drivers that started at 8:00 AM are getting back by hopefully
31:205:00 PM and then there's a wave that went out at noon that isn't getting
31:24back till eight o'clock at night.
31:26And you do need dispatchers monitoring them because, uh, Amazon, in their system,
31:30you could see where every driver is on the road and it even tells you if they're
31:34behind based on what the algorithm says.
31:36And they're gonna be two hours late tonight.
31:38And so you need somebody managing it to say.
31:42Hey, this driver over here is gonna be finishing up early.
31:44Can you go what's called rescue this other driver and they do what's called rescues.
31:47And then you might incentivize that driver with some extra dollars, like a
31:51rescue bonus for helping somebody else out to try to get those labor hours down.
31:55'cause you don't want somebody out there too late and not completing
31:57their routes and also driving around when it's too dark out and so forth.
32:01So that also affects your safety.
32:02So yeah, you do need a dispatch function, monitoring the drivers on
32:06the road, like especially at dispatch early and then at the end of the
32:09day as well, getting everybody back.
32:12So you might not have all of your drivers always out at the same time,
32:15but there are, there may be more hours, significantly more hours from a, you
32:19know, a total hours in the day that you do have drivers out on the road than
32:22what you may see with FedEx or bread.
32:24So I think that's a, an important reality.
32:27And so with that, you know, you have dispatchers, but what does it look like
32:30as an owner from a day-to-day perspective?
32:32How often are people driving?
32:34What are, what are they monitoring throughout the day
32:36to stay on top of as an owner?
32:37Yeah.
32:39It really does depend on how, what, how much you want to be included in the weeds.
32:44I recommend that you do really lean on management and like build a team around
32:49you and because you will get burnt out, uh, we, we see it all the time and so the
32:54day-to-day of a, of a owner operator is, we don't typically see them driving, like
32:59typically, you know, that we, I don't see that too often, but it does happen.
33:02I mean, you need to.
33:03You can't staff up, but the good operators have a bench of drivers as
33:06well that they can call on and flex in if somebody calls out last minute and they,
33:10they need to meet a route commitment, uh, also using your dispatchers
33:13and whatnot to, to, to drive, but.
33:16Um, yeah, really measuring.
33:18I think the most important thing that an owner should be doing is
33:20really, is really like measuring the numbers of the business.
33:23Looking at those labor hours at the end of the day and making corrections, uh,
33:27performance management's very important and doing that coaching and like
33:30coaching bad drivers out and keeping the good drivers happy and really always.
33:34Keeping track of that.
33:36And then also the station management relationship is, is very important.
33:40I mean, we work with DSPs who are in the station every day.
33:42We work with DSPs who are three states away from their DSP, but they all,
33:46anyone who's successful has that good relationship that they can call
33:49that that manager at that station and be able to speak to them, have a
33:52phone call, conversation with them, and show face and, and so forth.
33:55So that, that showing face and relationship is very
33:57important as the owner as well.
33:59Um.
34:01And yeah, that, that's like the, the typical day to day.
34:03But there are DSP owners that are going in and fixing that light bulb and like
34:07really getting their hands in the weeds.
34:08But really I think it's important that you kind of stay separated a little bit
34:13from, so that you can manage, you know, the business and not be too in the weeds.
34:17Yeah.
34:17So, so with that, you know, we talked about how many, you know, the
34:22scorecard and all the operational metrics that Amazon gives you.
34:26Do you find that the best operators exclusively stick to that, or are they
34:31balancing that with their own internal KPIs to manage safety and profitability?
34:36Like is, is that a, a give and take that you have to balance?
34:38Is it just meeting Amazon's criteria or do you have to use your own kind
34:42of internal KPIs to balance against?
34:44You do need your own internal KPIs to balance against majority of it.
34:48If you stay within those scorecard metrics like you, it's gonna benefit you.
34:52It really will.
34:53Uh, the one thing I keep going back to it 'cause I see it so often
34:56where people don't know where, uh, where their money's going.
34:59Is those labor hours, like really monitoring that.
35:01Nobody's required to do that.
35:02The only there are labor hour compliance rules that Amazon
35:05requires you to stay within.
35:07Like somebody can't work seven days in a row, things like that.
35:10But, uh, monitoring it so that people are getting, you know, that your labor hours
35:14are controlled is, is very important.
35:16That's something that people do.
35:17The other thing that I really do recommend most DSPs to do is set up.
35:21A rolling cash forecast.
35:22So, uh, cash flow is a, is a funny thing in this space because whenever you're
35:28ramping, your costs are gonna come in.
35:32Before any revenue, your revenue is going to lag.
35:35So you might say you're running 30 routes in July.
35:40You know that by September you need to be running 45.
35:42You're gonna have payroll costs and all that same cost that we talked about on
35:45startup, you're gonna be incurring those.
35:47So having a. Uh, even a rudimentary just cash forecast.
35:51This is about how much revenue I'm gonna come in next week, over
35:53the next, you know, 13 weeks.
35:55Uh, this is about how much my payroll should be running based
35:58on the number of drivers I have.
35:59This is the known fleet cost that I have.
36:02And just keeping, maintaining that to be able to foresee.
36:05'cause I do see that sometimes where things have been tight for a few weeks
36:08and people get very nervous, like, why did I lose money that my bank account
36:11went down over the last couple weeks?
36:12But it's because revenue is coming.
36:14It's just, it's lagging your expenses.
36:17So, uh, that's something that I think is really important to do is
36:20just measuring like that forecast at least for three months out at a time.
36:24Yeah, yeah.
36:25I, I do, I see it all the time, not just Amazon, but in a lot of industries
36:28where people just look at their bank accounts and, and it, you can miss out
36:31on some of the trends that are affecting you and, and things that are lagging.
36:34It's, I think it's a great point.
36:35Yeah.
36:36What does stabilized average kind of profitability look like for A DSP?
36:41Yeah.
36:42Uh, a stabilized average profitability is about eight to 12%.
36:45You know, and that's honestly oftentimes after the owner is taking a salary.
36:49So if you add that back, you're, you know, a good profitable DSP could be between 12
36:53and 15% before you may be paying yourself.
36:56So that's what I would, and when you're saying in, in that range, are you saying,
36:59are those people that are typically, you know, Fanta fantastic or fantastic
37:03Plus to be kind of in that range?
37:05Or is, you know, yeah, more often than not they, they would be, yeah.
37:09Yeah.
37:09And if you're consistently fantastic, plus you probably are exceeding 15%.
37:13Um, if you were to not be.
37:15Getting fantastic.
37:16Fantastic.
37:16Plus, at least consistently, or, you know, 75% of the year, you
37:20probably would see it closer to like that 5%, you know, three to 5%.
37:24And do you have a sense of kind of what average revenue looks
37:27like for an average sized DSP?
37:28I know that can vary a lot.
37:30Yeah, sure.
37:30It's a, it's about three to $5 million in revenue.
37:34Okay, so I, I think that alone, the average Amazon DSP is significantly
37:39larger than the average FedEx contractor.
37:41Yeah.
37:41And I think that's an important thing to understand.
37:43The number of routes that you run in this business and the number of employees
37:46you have in trucks that are on the road, even if it's not spread out across the
37:50country, is often significantly larger in the Amazon space as opposed to, to FedEx.
37:54And that does, so your margins, you know, they are what they are,
37:57but it's a significantly larger pie than the average FedEx contract.
38:01Absolutely.
38:02Yeah.
38:02Yeah, yeah, yeah.
38:02And, uh.
38:04I mean, I DSPs will easily get to 120 employees in a, in a given
38:08year, you know, at any point.
38:10And so, and that, that's pretty average, you know, probably the average is
38:13closer to like 80, but still that's, uh, to your point, a lot larger
38:16than the average on the FedEx side.
38:18So, I'll open it up for questions in just a second.
38:20But one of the things that I want to, uh, ask about is, in general, when you
38:27think about the biggest pitfalls, biggest challenges that you see people run into
38:30in the first years, anything other than what we've talked about already, like.
38:33When you see people who come in and struggle or even potentially fail, like
38:36what are the usually the big reasons why they didn't train their team well enough
38:41and delegate enough to other people?
38:43Uh, like, like I said, I, I think I did mention that, but, uh, that's the
38:47biggest pitfall because it's easily, you're easily gonna get burnt out.
38:52You can do everything and manage the whole business without help with
38:55up to like 15 routes, 20 routes.
38:57You could probably make it work, but it is a seven day a week operation,
39:00oftentimes 14 hours a day, 16 hours a day.
39:03So some of the most burnt out operators are there every
39:07single day, seven days a week.
39:08And they haven't put in those systems because very quickly you'll be asked to
39:13scale and pick up more opportunities.
39:15So yes, I'm able to do it at 15 routes, but when you get the call
39:18and you're able to now have to go up to 45, you need that team already.
39:22You can't wait till then to start establishing that 'cause it's gonna take
39:24them three to six months to be effective.
39:26So putting that in place early will enable the scale in the future and
39:30be able now allow you to be able to.
39:32Yeah, grow and also meet all the requirements as you grow.
39:37And then I guess just as a, you know, what are we seeing in the
39:41Amazon's DSP space right now?
39:42Like what is the, are there anything big coming or what's kind
39:45of the general outlook right now?
39:46Yeah, it, it is very optimistic right now, I will say, because.
39:51So people may have, may be aware, but they had a, uh, contract
39:55with UPS that expired last year.
39:57And so they were, they had a, essentially a non-compete for
40:01UPS's business to ship for them.
40:03Now they've launched ship with Amazon.
40:05They are building out six, a $6 billion investment in
40:08terminals around the country.
40:10To a net to enable delivery for third parties.
40:13So very soon, and in some markets already when you go to ship something
40:18off of any sort of website or with, you know, through Walmart or like,
40:20or whatever it might be, uh, you could ship with Amazon at that point.
40:26So that's gonna shift the whole mindset around the program and
40:29how Amazon sees the program today.
40:30It's a cost center for them going forward.
40:33It's gonna become a profit center for them, and they're going to
40:36have their own customers that they're gonna be wanting to.
40:39Meet metrics for not just the, not just everybody at their homes,
40:42it's gonna be box stores, gonna be grocery stores, whatever it might be.
40:45So that's going to, I think, change the mindset of even the
40:48people running the program as well.
40:50I think there's gonna be more investment in the DSPs and be more willing to get
40:54dish out investment because it's not just a cost center anymore, and that's gonna
40:57be a change over the next few years that I think is gonna really impact the space.
41:01Grow it quite a bit.
41:03Yeah.
41:03And you're almost downplaying how huge of a shift that is in terms of just the
41:07way that Amazon has looked at this space.
41:09And you know, we've always seen when Amazon came to the space, how big of
41:12a player they are and it's like, well, you know, this is just a way for them
41:16to enable what they're already doing.
41:17And that's kind of what, you know, a way to ship what they're already doing.
41:20But as they continue to expand and say, we're investing a ton of money
41:23into offering these services to third parties, it really, you know.
41:27They're a trillion dollar gorilla that have been here, and they can,
41:30they can throw whatever money they want into this to be really successful
41:33and to grow as much as they want.
41:34So it's one of those things I've always told people is, you should be paying
41:37attention to Amazon if you can get in, even if you're not, you know, if you're
41:41FedEx or if you're somewhere else, like this is something you should be
41:43considering and adding onto your portfolio because they're not going anywhere.
41:47They're, and, uh, they're doubling down right now, especially.
41:51I think that's a, a really important point to highlight for people.
41:54Yeah.
41:54Yeah.
41:55And their technology, right?
41:56Yes.
41:57Yeah.
41:57If the, you could see where your driver is on the road, you know?
42:00Yeah.
42:00Like companies would pay a lot of money for that.
42:02That's right.
42:02Yeah.
42:03Amazon is internally built a lot of the things where you have to use
42:05external vendors and other industries.
42:07Mm-hmm.
42:08Just provide to their people.
42:09Yeah.
42:10So we've got a few minutes left.
42:11Does anyone have any questions?
42:13I'll start here firsthand.
42:14I saw it's coming from your left.
42:19Hi.
42:20Um, so I'm kind of interested on beginner buyer, but what is the
42:23relationship between A DSP and an A MZL look like as an owner?
42:28Yeah, so it, it's usually, it's usually positive.
42:30I mean, so you have to, you're gonna have relationships established
42:34with your station manager.
42:35And real quick, what is an A MZL?
42:37Oh, an A MZL is a, is a DS is the DSP program, right?
42:41Uh, yeah, so that is a, um.
42:44You will have relationships with, you know, higher ups as well, you know,
42:47through the interview process and whatnot, but you're really communicating
42:50with station management and a lot of the people working within your station.
42:53More often than not, you also are assigned a business coach.
42:56So Amazon has a business coach program where they are consultants
43:00essentially, that they are your liaison with Amazon corporately.
43:03And so, uh, that's a really important relationship to foster as well.
43:07Um, because they can kind of get you information faster.
43:10If there's something that's going wrong, they can put you in the,
43:13put you in the right place to talk to the right person and so forth.
43:16But that, that's the primary relationships that you have with, with Amazon.
43:20Okay.
43:23Uh, do you own, uh, territory or do they, um, do you work out of a
43:27terminal and they'll send you wherever?
43:28One of the advantages in FedEx land is you get to know, you get familiarity
43:33with an area, you know, which routes are bad and which routes are good,
43:36where you can make money where you can.
43:38Is that similar in, uh, Amazon land and also do they pay you for an extra
43:43truck or two in case one goes down?
43:46Great, great questions.
43:47So it's not built the same way that FedEx is, where you
43:50have a dedicated service area.
43:52You all the DSPs in the area essentially service one region or
43:57like radius around that station.
43:59Now the same DSPs oftentimes will service the same areas just
44:03based on the way Amazon did it.
44:04But there's no, you don't own a contracted service area.
44:07They can change that on you.
44:08And we've seen it before where.
44:10A DSP suddenly was doing, you know, in New York, they were going out
44:14to New Jersey and doing more like suburban and suddenly now they're
44:17delivering in Staten Island or Queens.
44:18It's just very, it could be, they could change that on you.
44:21And so you don't necessarily own a contract the same way
44:24that you do in the FedEx world.
44:26And then, great question on the rental.
44:29If you have a van that goes down, that is a change that happened recently where
44:32if you have a vehicle that goes down and it was a, that it's deemed preventable.
44:36Uh, when you have to go replace it for however long it's down, they
44:39are not paying you for that extra vehicle if it was deemed preventable.
44:42So that's a significant cost.
44:44So that goes back to finding the right vendors that will, uh, you know, get your
44:47van back on the road faster, because every day that you don't, you are incurring
44:52costs that are not getting replaced.
44:54And so, uh, but there are mechanisms for you to get vans approved if there
44:58is a, um, if you do have vans that go down, they have what's called
45:02a, uh, an approved fleet size.
45:05As long as you can get the right documentation that it was pr,
45:08that it wasn't preventable, that you know you need this rental in
45:11order to meet your out commitments.
45:13And there's certain like, uh, compliance things that you need
45:16to stay maintaining in the, in the portal related to your fleet.
45:19You can get approved for that and then they will cover the cost of the rental.
45:22It all kind of depends on the nature of why the van went down and whether
45:25you're providing the right documentation.
45:28Related to that a little bit.
45:29So if you're in an urban area and they shifted your territory, we're delivering
45:33to some rural stuff, would that change the types of vehicles that you may need?
45:37And would Amazon change those vehicles for you?
45:40Like what, what would that look like?
45:41It it could, it could not.
45:43Generally, we don't really see that, but sometimes, I mean, they,
45:45uh, you're using the same types of vehicles to, for the different areas.
45:50Um, it usually isn't that extreme of a change, so, yeah.
45:57Hi.
45:57Uh, you said when, uh, on the bench, when you get a call, you have to be ready,
46:01drop everything and uh, go and take it up.
46:03Right?
46:04What does that mean?
46:05That means you have to leave your job, or if you have another business,
46:09leave everything and take it up.
46:11Uh, in essence.
46:12Yeah, like they, they give you a timeline to accept the, the, the job
46:16essentially, or the, the DSP, so.
46:18You, you can't, it's not, and it's not gonna be three months or
46:21four months to make a decision.
46:23They want a decision from you in the next few weeks.
46:25You probably don't have to, if you are working a W2 job, you probably don't
46:27have to leave that job right then and there, but you do need to start
46:30making plans to probably leave it.
46:32And then if you have other businesses, you can continue to operate those and
46:35it just forces your hand to go find help faster and to be able to stand it up.
46:39But, uh, early on, it is a. Pretty big commitment to go to the training
46:44classes that they have and, and so forth.
46:46Go to the station, meet people, that sort of stuff.
46:49And do you ever see first time operators let them operate?
46:52It's mainly Oh, oh yeah.
46:53I was like, his mouth's not moving it.
46:56Uh, do you ever see them allow first time operators to operate remotely?
47:00Yeah.
47:01Yeah.
47:01I mean, they do.
47:01They do.
47:02Um.
47:03We, we, there's plenty of DSP owners that live eight hours away
47:06from their station and whatnot.
47:08It's not prescribed that way.
47:10They really want the owner operator.
47:11And so even for those that do live remotely or across state lines, that you
47:17do have to make an effort to still like, show that you're very involved in the
47:20business, you know, join the calls, like know that you have your ear to the ground
47:24and, uh, they, you know, so they allow it.
47:27I mean, it's not, you know, a hard, fast rule, but it's not, it is frowned
47:30upon if you're completely absentee.
47:34Yeah, I'm waiting on a interview with Amazon, um, back in November.
47:39I made it so far up to, you know, where I'm already approved.
47:42So they tell you to pick three desired locations, and so I pick those.
47:47And really, there's not many locations at all right now.
47:51Hopefully that'll improve with what you're talking about
47:52with their investment into it.
47:54Um, but if I were to pick up a FedEx business during the meantime.
48:00Would that help or hurt my chances of getting approved as a DSP?
48:04I don't know that it'll have a significant impact either way.
48:07I don't know that they're necessarily looking at, looking at that, so, okay.
48:11Uh, in terms of getting approved to be a DSP, um, so.
48:15Okay.
48:16Interestingly, correct me if I'm wrong, but I think, you know, FedEx,
48:19a lot of times they're looking more at, you know, operationally like,
48:22do you know the logistics business?
48:24And, you know, can you answer those questions?
48:26But Amazon cares a lot more about you as a person.
48:28Am I wrong there?
48:29Yeah, like your management capabilities, your leadership capabilities, um,
48:33you know, they, they're really looking at at that more so, yeah.
48:35So it's not necessarily that like, oh, you run FedEx so we think you'll be better.
48:38It's, they're still kind of evaluating you as a person and your leadership skills.
48:44What, what are the typical contract term lengths for a SP?
48:49Yeah.
48:49Yeah.
48:50Great.
48:50Que it's a one year, one year at a time.
48:52Uh, sometimes you can get approved for two years, but it is a
48:55one year contract every year.
48:57And, uh, so do you negotiate it?
49:01No.
49:01No negotiation.
49:03You're given, you're given your rates.
49:05There's nothing really you can negotiate on.
49:13He says the same as FedEx.
49:14Yeah.
49:17Hey, good morning.
49:17Good morning.
49:17Some of the frustrations I've heard about Amazon DSP owners were one day Amazon
49:22would tell you, Hey, you need, you have 15 routes on Tuesday, but then the next
49:26day they're like, you have 20 routes.
49:28You have to come up with the staffing and you have to come
49:30up with the, uh, the vans.
49:33Is that still occurring frequently?
49:34Do you see?
49:35But it, it seems like a lot of the DSP owners, they got out
49:38early on because of those issues.
49:41You, you do see that somewhat sometimes, but it's usually not a requirement.
49:46Like within the same, within like next day suddenly they're
49:49saying, now you need to do 20.
49:50They usually give you some notice, but it's only maybe a week or so.
49:54Uh, so it could, that could happen.
49:56So as far as personnel, do you see yourself hiring a lot more
49:59part-time personnel than full-time?
50:01And incentivizing them to come in to work.
50:04Short notice.
50:05Yes.
50:05Yeah, that, that's right.
50:06You basically have a bench of drivers that you can, that you can call on,
50:09and you have more people on staff than you need, and, uh, you keep a pipeline.
50:13So, uh, a lot of DSPs deploy what's called pipeline recruiting, where they're
50:17just always recruiting year round.
50:19So they're constantly interviewing, they're constantly, and then they're
50:22basically, they know that they like someone, I'll call you when,
50:25when we're ready, essentially, but.
50:27That does pose some risks, of course, as well.
50:29So, do you see DSP owners fighting over personnel in the same station?
50:33A lot.
50:35Sometimes, uh, you know, uh, uh, you do see drivers who worked at this DSP
50:40and now they're over here at this DSP, and so there is some, some level of
50:43competition for drivers in that sense.
50:45Uh, depends on the market, of course.
50:47What's, what's the hourly rate of a driver?
50:48Right now?
50:49Uh, on average it's about $20 an hour across the country.
50:54Thank you.
50:55Yep.
51:06Who's next?
51:07Oh, okay.
51:08Quick question.
51:08So as a percentage of revenue, what is your, uh, what should your
51:13target be for your salary, for your drive, for your employees?
51:18Like as a, as a, as a total?
51:20Yeah, as a total, yeah.
51:21So.
51:22What I like to do is I compare the, uh, driver payroll compared to
51:27your weekly route revenue because you get a big chunk of money every
51:30month that goes to your fleet.
51:32I like to disregard that because that should be covering
51:34your fleet related expenses.
51:36So as a percentage of your weekly route revenue, it's about 70 to 70%, 70 to 75%.
51:42Yeah,
51:46good morning.
51:47My name is Wanda Curry from the Columbus, Ohio area, and I have a question about
51:51the process of getting approved as a DPS.
51:55Um, you might have covered it.
51:56I came in a little bit late, so I don't know if you covered it at the
51:59beginning, but if you could share that.
52:01And then secondly, out of 10 candidates, what would you say is the average
52:06amount you guys approve to become a DPS?
52:09Like how.
52:11Structured, is it?
52:12Yeah.
52:13Well, so the process is that you get, um, you go through a several rounds
52:17of interviews, you apply and so forth.
52:19And then you, uh, after those interviews, you get approved and you
52:23get put on what's called a bench.
52:25And the bench is essentially a waiting list for D to become a DSP.
52:30And uh, somebody else mentioned earlier that you do kind of select where your
52:33preferred locations are, but sometimes there are opportunities that pop up that
52:38are not in those preferred locations and they're just trying to fill it.
52:40And so if you're willing to relocate, you might get the opportunity faster, but
52:44if you're not willing to relocate, you might sit for a little bit longer because
52:47they're not investing in that area.
52:49And then in terms of the number of people that get approved, I, I
52:51actually don't know that number.
52:53Uh, I, I don't work for Amazon, so it's not something like
52:56I'm necessarily privy to.
52:58Um, so yeah, I'm not sure exactly like what percentage of people
53:01get approved and, and who don't.
53:04I, the approval process is a lot harder if you're buying an existing business.
53:07I'll say that for sure.
53:08Um, Amazon's more selective if you're buying an existing one as
53:12opposed to applying to be on the bench because in the situations
53:17where you're taking over an existing one, there's a higher expectations.
53:20You're able to come in and immediately be able to service
53:22whatever size that territory is
53:28to.
53:31No, so it would be two different interviews.
53:33So what we're talking about here, the bench is the standard process
53:35for getting into the DSP program where you're essentially going
53:37to Amazon and interviewing to be.
53:39You know, you choose a few selections and you're saying, these are
53:42the top areas I'd like to be in.
53:44If you have those, and Amazon may give you one of those, or they may say,
53:48those are nice, but we have a need here.
53:50And if you accept that, you may get off the bench faster.
53:53What I was talking about is if, if you were buying an existing business,
53:56that means you're essentially, Amazon's evaluating you to come
53:59in and take over that territory and, and those are typically.
54:02A little bit more exciting, uh, interview processes, um, than just being, uh,
54:07the typical application for the bench.
54:09Yeah.
54:13Uh, does that mean then that for those who, for DSPs who are trying to sell
54:18their business, it's then probably not as profitable because it's going to be
54:23harder to find someone to take, take over?
54:26Does Amazon prefer that you sell it back to them?
54:29And how does that work?
54:32Yeah.
54:32So I, I guess, uh, the first way to answer that.
54:35So what would Amazon do if you were just to say, I wanna walk away?
54:37Like, what's their process there?
54:40Yeah, I mean, you can, you can just not renew your own contract and you can just
54:45walk away and say, I'm shutting down.
54:46And there's usually a, like about a month long process where you
54:50have to then return vehicles.
54:51And so that is the process for, for shutting down if you
54:54were not going to sell it.
54:55You just kind of close your doors and it's, and to let your
54:59employees know and so forth.
55:01And so that is, that is the one path.
55:03And then would Amazon allow you to like, sell it to your manager or have
55:07your manager take over the operations?
55:10You know, we, we are starting to see that now that the DSP program has matured,
55:14where there are owners that wanna start stepping away and doing other things.
55:17And they've had this manager that's been working for them for.
55:20For years.
55:21And so they do, in some cases at least, offer some equity stake in it.
55:24Now, that's also a bit frowned upon.
55:26By, by, they don't want multi owner, they don't want a, a, a, a company that has
55:3240 owners coming in and buying the DSP.
55:34They don't, they don't allow for that.
55:35They want that owner operator, but they do offer what's called the Path
55:39to Ownership program for drivers, where it's an actual program where a company
55:44nominates an employee of theirs to go through a training program and then.
55:48The end result of that if approved, the driver is given a DSP themselves
55:52and we've, we actually see a lot of the new DSPs standing up are
55:55from Road to Ownership program.
55:57And so they, I think that they do, like if you do, if you are gonna leave
56:02to hand it off to somebody who's been in the business already and their,
56:05it seems to be their posture with the things like the road to ownership.
56:12Follow up on that.
56:13What do you have to sell drugs.
56:17Right.
56:18That, that's a, that's a great question.
56:19Yeah.
56:20That's probably something that you guys, that you that have to answer
56:22a lot too, but it, yeah, if, if you want to have that real conversation.
56:25Luke's actually the guy who, he's at the back of the room on our
56:28team who does that all the time.
56:29He doesn't, I'm not gonna make him put on a mic right now, but
56:32it's, you know, you're essentially selling the rights to the business
56:35and, and the, the people as well.
56:37You know, that's, that is like, you've got 60, 120 employees.
56:40That's not a trivial thing.
56:42Um, but it's also.
56:44We talked about it before.
56:45One of the hardest things about Amazon is how do I get into the business
56:50in a place that I want to be in?
56:51Like if you're trying to get into Atlanta, there may never be a
56:54bench opportunity that comes there.
56:56And so part of it is just the ability to choose where you start and want
57:00to be not in rural North Dakota.
57:02So that's part of what you're buying is the access to a certain
57:05area that you wouldn't have been able to have access to otherwise.
57:14One more probably.
57:15Yeah.
57:15I'd say this is the last question time-wise so that I don't get yelled at.
57:19You said that, um, usually it's just one year contract, correct.
57:23And it has to renew.
57:24Um, how often are not, do those contracts extend to like the next year to people?
57:30I mean, how, or have you ever seen, you know, they start one year and then.
57:35Amazon is like, we're done with you.
57:37And how often does that happen?
57:39Yeah, that's a great question and it does happen.
57:41Uh, I'm not gonna sugarcoat that that does happen where Amazon says,
57:43we're not gonna renew your contract.
57:45Sorry, you gotta shut down in 30 days or 15 days, or whatever it might be.
57:49Uh, more often than not, the people that that happen to is have con,
57:53have consistent compliance issues, constantly, not meeting, you
57:57know, work hour compliance issues.
57:59They're editing their employees time cards, they're not doing things that are.
58:03Within the legal bounds and also within the Amazon bound, like compliance bounds,
58:07they're not meeting their route targets.
58:08So that's more often than not what we see.
58:11And I would say it's hard for me to really pinpoint a percentage
58:14of of DSPs that that happened to.
58:16I would probably put it on 5%, five, you know, 5% of the network that's happened
58:20to over the past, like four years, five years, where it's just non-renewal.
58:23Like more often than not, we'll see a DSP leave on their own accord than
58:27having their can, their contract canceled overnight by Amazon.
58:34Uh, not too often.
58:36No.
58:36That has, sometimes that has happened though with, um, some terminals that
58:41they just thought that was gonna have more than, than what it was gonna have.
58:45Oftentimes they give them an opportunity to relocate though,
58:48before they'll just say you're done.
58:50Um, and then most recently, because you might hear in the grapevine, they
58:54did used to have what's called a 1.0 program before 2018 where it was.
58:59Closer to a FedEx model in a way where like 1D SP would operate
59:04out of four terminals all within a region, like all over Florida.
59:07And there was a much larger operation.
59:09And, uh, we, you know, we've worked with, you know, a few of them
59:12where it was, you know, 300, 400 employees across all these terminals.
59:16They did sunset that program recently.
59:19And so those DSPs were forced to downsize to one location and a lot of them just
59:23decided to say, well, it's not worth the squeeze anymore at this point.
59:27So.
59:28That is one thing that happened recently.
59:32Alright.
59:32Thank you guys for being here.
59:33Thank you Andrew for answering all of my questions and everyone else's.
59:36Uh, and again, everyone, thank you for coming to the first session on
59:39a Friday morning and, and being here at nine o'clock and hopefully you
59:42guys have a great rest of the day.
59:43Thanks.
59:44Yeah, thanks.

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