Richa Naidu & Lisa Baertlein

LOS ANGELES/CHICAGO – Amazon.com Inc.’s (NASDAQ) push to find big-rig drivers for its warehouses is causing a shortage of truckers as it moves record volumes of packages this holiday season.

Amazon Freight Partners (AFP) is its project that enlists the help of independent trucking companies in moving goods between Amazon facilities. All AFPs (exclusive Amazon contractors) can move package to or from 85 North American planes owned or leased by the company.

Amazon has employed 250 AFPs in the world since 2019. This makes it possible for these companies “to scale up their transportation businesses and provide job opportunities to thousands of drivers,” a spokeswoman for Amazon said. Small AFPs are in intense competition with Walmart (NYSE:) Inc for driver positions. This network is independent from Amazon’s home delivery contractors who drop Amazon packages at shoppers’ doorsteps. United Parcel Service Inc (NYSE:). Ebony McKinley of Seven Strong Trucking, says that there is a shortage in drivers. This Phoenix-based company was one of the first to sign up for the AFP program, in April 2020. The company now employs 45 drivers and 20 semi-truck tractors that are Amazon-branded.

According to data from the Department of Transportation, Amazon’s logistic unit purchased 1,395 Amazon-branded big rig tractors in order to haul trailers of cargo across America. McKinley and other independent contractors fill the seats of these vehicles at a moment when there is a shortage in big-rig drivers, which has seen an industry record of only 80,000. McKinley said that everyone is experiencing the heat.

Big-rig trucking companies are especially vulnerable to labor woes because they require more qualifications: They must have commercial driver’s licenses from government agencies, while insurers now demand that drivers have two years of experience. In an era of record consumer demand, qualified drivers are able to move on to better jobs with higher pay and greater compensation.

Amazon, a Seattle company that is based in Seattle, stated in October that $2 billion more in expenses resulted from higher wages and worker incentive. Amazon is threatening to lose profit at its most successful selling period by predicting that those expenses will rise for the holiday quarter.

According to the U.S. Bureau of Labor Statistics, truckers have not seen an increase in their pay, which has left “real” earnings at about 70% of the level they were back in 1970. Many truck drivers quit because of federal limits on their daily work hours and the COVID-19 epidemic.

New drivers at Seven Strong start at $22 per hour. The perk package includes a $1,500 annual bonus as well overtime compensation. The base pay corresponds roughly to the $47,130 annual median wage, or $22.66 an hour for U.S. truck driver, according BLS. McKinley stated that Amazon payments cover compensation for driver.

RECOVERY, RETAIN

According to Reuters, AFPs in the United States offer $18-$27 an hour pay before benefits. There are many nights at home. This is according to a review of dozens on ZipRecruiter, Indeed and other sites. The postings indicated that signing bonuses could range from $1,000 up to $2,000

Amazon informed Reuters it suggests a minimum wage to AFP drivers. But it encourages contractors not to exceed that amount to attract and keep talent.

Amazon could impose trucker wage rates on its workers, which would be against the rules of independent contractors. This is at a time in which some states require such workers to be classified as employees. Legal and trucking professionals said.

Two current AFPs spoke out to Reuters, but they declined to name them for fear of retribution. They said that the work is predictable and stable, although other less experienced operators might be overloaded with unexpected expenses and overtime.

Although older drivers may prefer the stability and reliability of established companies like UPS or Walmart, smaller trucking owners might be attracted by Amazon’s potential growth opportunities.

Page Siplon (CEO of TeamOne Logistics), a third party logistics firm that employs 700 drivers and operates in 43 US states, said, “Hitching to the Amazon train — that’s difficult to turn down.”

COMPETITION HEATS UP

Amazon expects fourth quarter net sales to be between $130 billion and $140 billion. This could lead to an increase in package handling. Marc Wulfraat (president of consultancy firm MWPVL International) said this year that Amazon could handle 32 million packages in the United States each day.

Amazon’s old shipping partner FedEx Corp, (NYSE:), also reported a quarter-end profit from unexpected costs. This was mainly due to its Ground delivery service that relies on contract drivers.

UPS and Walmart, both trucker employers, were also subject to this pressure but they did not experience the same amount of financial woes.

UPS has Amazon listed as its number one customer and spent more to unionize its workforce, which appears to be providing labor stability for profit.

Walmart employs more than 11,000 drivers of big-rig trucks on its payroll. In the most recent quarter, Walmart reported that higher supply chain costs had reduced its U.S. gross profits rate by 12 basis point.

Walmart will increase pay and offer sweetening bonus for its long-standing in-house trucking business. It uses 8,400 owned and leased tractors for moving goods to its 5,300 U.S. Walmarts and Sam’s Club locations. Walmart, which works mostly with long-haul truckers and offers truck drivers jobs immediately starting at $87500. Signing bonuses up to $8,000 are also available. Walmart spokesmen said that during peak seasons, bonuses for working extra days can jump up to $250 per hour from 150.