Super High Turnover Rates Key Factor, as Former FC Manager in Phoenix Says Situation so Bad Workers almost Couldn’t be Fired

During its Q1 earnings call in early May, Amazon surprised most observers by saying after two years of torrid hiring in its fulfillment centers, it now had too many workers.

Amazon now says that it hired too quickly in its fulfillment centers during the pandemic in an effort to keep up with soaring demand for hand sanitizer and masks, and to have back-up workers for others that caught the omicron COVID variant.

Supply Chain Digest Says... Perhaps the most important of the news coming out of the internal research report is that the labor situation at its Phoenix area FCs is so stained that Amazon has reversed, or stopped enforcing, some workplace policies there. What do you say? Click here to send us your comments Click here to see reader feedback

But now sales of masks and other protective gear is slowing, while COVID cases have been way down. Add to that, Amazon’s own overall sales have been slowing, with on-line sales actually falling 3% in the first quarter.

“As the variant subsided in the second half of the quarter and employees returned from leave, we quickly transitioned from being understaffed to being overstaffed, resulting in lower productivity,” Chief Financial Officer Brian Olsavsky said on the earnings call. (See In Surprising News, Amazon Says It Now has too Many Fulfillment Center Workers.)

That here in 2022. But this week, news of an Amazon report authored in 2021 that warned Amazon would actually run out of workers in 2024.

According to a story on the vox.com web site, that was the conclusion of a leaked Amazon internal research from mid-2021.

“If we continue business as usual, Amazon will deplete the available labor supply in the US network by 2024,” the research estimated.

The research said the situation was especially dire in a few market, with internal modeling showing that the company would exhaust its entire available labor pool in the Phoenix metro area by the end of 2021, and in the Inland Empire near Los Angeles by the end of 2022.

The internal research also identified the Memphis and Wilmington, Delaware markets as other areas where Amazon was on the cusp of exhausting local FC labor availability.

The model calculated the available pool of workers based on characteristics such as income levels and a household’s proximity to current or planned Amazon fulfillment or other facilities, Vox reported.

Amazon spokesperson Rena Lunak didn’t deny the contents of the internal report Vox obtained but did not offer a response.

The model included data relative to turnover at FCs, which is well over 100% at many sites – as high as 159% nationwide in 2020. That does not mean every employee at a facility leaves each year. Instead, it is probably the result of many new workers who stay only for a few months or even weeks or days. Those rapid employee turnovers drive the overall percentage up, even as some workers stay for years.

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But with the high number off FC workers Amazon needs in combination with the high turnover rates, it means Amazon may reach a point where the company cycles through every worker who’d be interested in applying for a job in a local FC.

Interestingly, the New York Times reported that for most of its history Amazon founder and former CEO Jeff Bezos saw his FC workers as necessary but replaceable, and feared that workers who remained at the company too long would turn complacent or worse, disgruntled.

But the internal research says there is a limit to that approach.

Perhaps the most important of the news coming out of the internal research report is that the labor situation at its Phoenix area FCs is so strained that Amazon has reversed, or stopped enforcing, some workplace policies there.

Vox spoke with a former entry level FC manager who told the site that “There was a joke among the … managers that it didn’t matter what [workers] got written up for because we knew HR was going to exempt it. It was almost impossible to get fired as a worker.”

That even though in other markets, Amazon’s computer systems automatically often fire employees for a variety of minor infractions, without exception.

Besides changing termination or retention policies, increasing pay is another obvious lever that Amazon could pull to expand its labor pool – even though it is aleady paying more than $20 per hour in some markets.

Of course, increasing FC automation is another path – though likely an expensive ones.

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