A recent article about the working conditions at an Amazon Fulfillment Center has gotten some interesting coverage. There are varying opinions on the slant of the article, but I found some interesting information about the operations and expectations of those employed in these facilities that gives some insight for those sellers who use FBA regularly.

Let’s Do the Math

Integrity Staffing Solutions is contracted by Amazon to provide much of the labor in their warehouses. They seem to be paying around $11 to $13 per hour based on numbers mentioned in the article. It sounds like they also have managers at the location to handle coordination between their employees and Amazon management.

For my math in this article, I’m going to figure that it costs Amazon about $15.00 per hour for each of the workers. I believe this is a conservative figure and should include the direct cost that ISS pays the workers, as well as their overhead for management, accounting and similar expenses. Additionally, Amazon employs a sizable number of workers as well, and will have additional payroll costs associated with their full-time employees.

I’m interested to see how the fees that I pay as an FBA seller are allocated and used. FBA Sellers pay four different fees when they utilize Amazon’s Fulfillment Services. The storage fee and weight-based fee are closely tied to the value of the space and the postage respectively, so the “Order Handling” and “Pick and Pack” fees are what are seen in action in the warehouse.

Tasks and Costs at Amazon ABE2 and Amazon ABE3

The Leigh Valley article is about the ABE2 and ABE3 facilities which are currently being used primarily for books and media products, so that is probably what most of their rates are based on.

It seems there are four basic tasks done in the warehouse:

Receiving

“Unloading inventory from boxes, scanning bar codes and loading products into totes”. A worker mentioned that their quota increased from 250 to 500 items per hour. That is 4-8 items per minute. At $15.00 per hour, it costs $0.03 to $0.06 for Amazon to “Receive” each item.

Stowing

“Putting products in bins in the warehouse”. No productivity rate was mentioned in the article. It seems to me that this would be the opposite of “picking” which has a rate of about 120 items per hour, so I’ll use that for my math. 120 items per hour at $15.00 per hour costs $0.12 per item.

Picking

This would involve finding items in the warehouse and sending them to the packaging people. Specific rates were mentioned in the article: “It started with 75 pieces an hour. Then 100 pieces an hour. Then 125 pieces an hour.” and “He said he was expected to pick 1,200 items in a 10-hour shift, or one item every 30 seconds.” Again, $15.00 per hour for 120 items is $0.12 per item.

Packaging

This wasn’t mentioned much in the article, but I’ve seen the process in videos of the FC. Quotas also weren’t mentioned in this news article. The process would involve picking the correct box for an item, placing the item in the box, and then putting any packing slips and filling into the box, sealing it, and applying a label to the box. Since I don’t have any more specific numbers to use, I think the 120 items per hour rate is reasonable, again at $0.12 per item.

So if we add up those four tasks, it costs Amazon roughly $0.40 in labor for each item that they fulfill. Amazon also has other significant costs in providing this service, such as the building, power, specialized equipment, management, HR, and computer systems to name a few. FBA Media sellers currently pay either $0.60 (for items sold for under $25) or $1.00 for these fulfillment services.

I should briefly talk about the working conditions described in the article. It was clearly written to tell only one side of the story. FBA has been growing and changing significantly in the past year, and I think there would have to be some learning and “growing pains” as that occurred. I can think of several things that I know about as an FBA Seller that have occurred over the same time period, for example, 2011 had an unusually long and hot heat wave (who wasn’t complaining about the heat?).

Overall, I think that Amazon is well positioned and is actively dealing with these issues. The negative press will likely cause them to be a little more proactive about this type of potential problem in the future as well.