Amazon Transportation Services (ATS), the captive logistics arm of Amazon India, has created a network of 225 hubs run by delivery-service partners to run the last-mile delivery hubs in metros and tier-II and -III cities and manage the peak loads.

The Service Partner (SP) network, which was rolled out in 2013 by the company, currently handles between 15-20% of Amazon India’s last-mile deliveries in tier-II and -III cities as well as large metros, according to experts tracking the sector. ATS added 100 new hubs ahead of its sale season to ramp up the last-mile capabilities.

“The volume of deliveries increased to four times during the sale period over the daily volumes of 200 shipments per day. We processed close to 8,000 packages per day across the 14 delivery hubs,” says Sandeep Yadav, a service partner who was onboarded four months back. Yadav is a former senior manager programme management at ATS, who currently operates a network of 14 hubs created over the last four months to manage last-mile deliveries in 20 pin codes across Rajasthan, Haryana, Delhi-NCR Gurugram.

The move is similar to what express delivery companies like BlueDart and DTDC have done to expand their network in rural regions and small town and cities through a franchisee model.

“Ecommerce marketplaces look at this model in regions where there are low threshold volumes and local partner has good reach and delivery productivity in the region. This model converts the fixed last-mile cost into a variable cost model and it becomes easier to scale up or wind down the centres,” says Manish Saigal, Managing Director at consulting firm Avarez & Marsal India.

The programme provides a minimum guarantee of volume to the Service Partners and pay according to the number of packages delivered. “The framework of the model is such that the SP is paid on the basis of packages delivered. The SP then in turns pays his/her delivery associates a monthly salary,” said Akhil Saxena, vice-president of India Customer Fulfilment at Amazon India.

Amazon India has been aggressively expanding its logistics footprint across the country. It has invested in six new fulfilment centres taking the total number up to 27 with a total area of close to 2.5-million square feet. It has also signed up 12,500 kirana stores under the ‘I Have Space’ programme enrolling the stores as pickup and last-mile delivery hubs. Over 100 delivery stations were also set up in preparation for the festive sale season.

“According to our estimates, for a last-mile delivery centre to be viable in a small town, the daily shipment volumes should be close to 400-500 per day while for larger cities, the viable number would be close to 900 deliveries per day,” says Saigal of Alvarez & Marsal. According to industry estimates, the fixed cost for last-mile delivery make up for 50% of the costs on delivery of each package.

Source: The Economic Times