Pay Attention to the Scorecard
The scorecard can be difficult to completely understand until the second or third month of operations. This document is important in making extra revenue on your existing routes. It may take a while to achieve, but you can receive a serious profit when you routinely score a Fantastic Plus every week. Here are the most important things you can do to get to Fantastic Plus.
- Install driver-facing cameras in all your vans.
Cameras can cost an average of $70 per month per van – but if they can get you to the top score, it is an investment that will pay off. Amazon has their own cameras for their benefit, but you want cameras that are under your control. Cameras will help your scorecard in two ways:
- They ensure that your drivers always wear their seatbelts. Every camera platform should provide a way for you to bring up a matrix of snapshots for all drivers in a web page with only a few minutes delay. This allows you to quickly scan all vans to see who is not wearing a seatbelt. Seatbelt off events account for 9% of your scorecard.
- Ensures your drivers do not speed. The camera platform should provide a way to alert you when a driver is excessively speeding. When you receive an alert you can call the driver and tell them to slow down.
- Make sure your drivers get a Mentor FICO score of at least 800.
Your average Mentor FICO score accounts for 12% of your scorecard grade. Anything less than 800 is unacceptable. Drivers can achieve a perfect score of 850 every single day simply because they care enough to use the app!
- Watch your attrition rate.
The attrition rate measures the number of drivers that have not carried out a route in the last few weeks. Amazon assumes this means they are no longer employed by your company and have “attritted.” Amazon usually disables this metric following peak periods because you are expected to shed drivers as volume decreases. You want this rate to consistently be less than 1%.
- Customer experience matters!
Both infractions/defects and customer delivery feedback account for 11% of your scorecard. When customers complain, it hurts! Actively find the drivers that generate the most complaints and respond accordingly by either coaching them to do better or terminate them.
- Anything less than a 99% delivery rate is unacceptable.
If a driver ever records less than 99% delivery success rate for a given day, investigate the problem immediately. Sometimes the reason is beyond the driver’s control, such as weather, unplanned delays at the station, or van trouble. But for any other reason, you need to take action to make sure it does not happen again.
- Dispute concessions.
A concession (deliver and received) happens when a driver marks a package as delivered, but the customer claims they never received it. The two top reasons for this are stolen packages and packages that are delivered to the wrong address. In both cases, the driver has complete control 99% of the time. This accounts for 11% of your score, and you have three options: change the driver’s behavior, terminate the driver, or dispute the concession with Amazon. Be aware that Amazon will almost always side with the customer.
Watch What Costs You Money
As a DSP some costs cannot be controlled to any significant level, such as van lease payments, insurance costs, Rabbit costs, etc. But you must pay attention to those costs that you have a direct influence on. Do the following to keep these costs to a minimum.
- Keep detailed records on every accident and workplace incident.
Most DSPs pay around 6%-7% on their workman’s compensation insurance rates. That means that for every dollar you pay a driver, you must pay an additional $.06 – $.07 for workman’s comp. As the number of claims against your insurance rises, so does the rate you must pay. Always keep detailed records of every vehicle accident and workplace incident so that you can dispute some claims.
- Record all terminations and dispute invalid unemployment claims.
All employers pay an extra few cents to the state towards unemployment for every dollar of pay. This rate can be anywhere from 1% to 6%, usually around 2.5%. However, if too many of your employees make successful claims to receive unemployment benefits, the state will raise your rate. That is why it is crucial to keep sufficient documentation on why you terminate drivers. A good rule of thumb is to have documented at least three instances where a driver has not met conditions for their continued employment before they are terminated. You must pay attention to and respond to every claim that you receive from the state by sending them documentation proving proof of a valid reason to terminate.
- Track all damage to your vans and hold drivers accountable.
Damage caused to your vans by drivers will more than likely be your second biggest cost after payroll. A reasonable rate of damage to route count is 3% – for every 100 routes you run, 3 vans with minor damage is fairly decent.
To keep your damage to this level you must be able to track previous damage and compare it to new damage as the van is returned at the end of the day. This way, you can determine exactly who is causing the damage and act accordingly. Even though you cannot withhold hourly pay from drivers in order offset damage repair, you can certainly withhold any pending bonuses they might otherwise receive. Therefore, it is always a good idea to set all driver’s hourly pay to the minimum of $15/hour, and reward excellent work with bonuses that remain tightly in your control.
- Forecast overtime and try to avoid it.
Overtime pay is always a major cost factor and is completely avoidable 99% of the time if you are diligent and have the right tools in place to monitor it. The rules for paying overtime differ by state, but most states require you to pay 1.5 times the hourly rate for any hours worked over 40 in a single week. States like Alaska, California, Colorado, and Nevada also require OT when working past a set number of hours in a single day. New DSPs often focus on growth only, and forget to watch overtime, resulting in some very expensive weeks following launch. Avoiding overtime requires two actions:
- Remove drivers from the schedule who routinely exceed a reasonable number of hours each day if there are no circumstances beyond their control. Often, the lack of work will correct this behavior, but some drivers are just not cut out for delivery work and will simply not be efficient enough. You will more than likely need to terminate these drivers or move them into a non-driver position if possible.
- You will need a tool that tracks current hours, can automatically look at the remaining schedule for the week, and calculate estimated overtime for each driver. These drivers should be removed form the schedule before OT happens and replaced with drivers who will not run into overtime hours.
- Keep watch for incorrect driver time punches.
Amazon requires that drivers perform their own time in/out punches using a mobile app. You are not allowed to do it for them. Unfortunately, sometimes drivers will forget to punch out, or in some cases intentionally punch in/out at certain times increase their pay.
To prevent this, you must have a way to capture actual hours worked and compare it to your payroll provider’s information. Then, you must train the driver to correct their punches. Amazon will still require that you pay this driver according to their punches even if the problem persists.
You can update incorrect punches yourself, but if your edits exceed a threshold (around 20% of all punches) Amazon will consider you to be out of compliance, and your continued contract with Amazon may be endangered. The best way to convince drivers to correct invalid punches is to withhold any bonuses until the punches have been corrected.
- Don’t waste bonus money on poor performing drivers.
To increase driver affinity and decrease attrition for your DSP, you must reward your best drivers with increased pay, monetary or physical rewards, or some other intangible benefits.
By far the easiest of these methods is to simply increase a driver’s weekly pay. The difficulty is in knowing who a ‘good’ driver is and who is not. Your scorecard contains a ranking of all drivers delivering routes for that week, and most DSPs will use this ranking to pay bonuses. However, Amazon does not consider three metrics that directly impact your costs – van damage, hours paid each day, and no-shows. It is obvious how van damage and hours paid impact costs, but no-shows also have a negative effect by causing you to drop routes and incur cancellation fees.
Therefore, to make sure your money goes to the drivers who provide real value, you must factor in all of Amazon’s metrics along with those Amazon has no visibility into. Amazon may consider Joe to be a great driver, but Joe could have had two accidents the previous week. Why would you want to waste your bonus money on a bad driver?
Pay Attention to Things That Save You Money.
In addition to avoiding unnecessary costs, you can increase your profitability by focusing on saving money on some aspects of your operation.
- Make sure Amazon invoices are correct.
While Amazon would never intentionally short you on an invoice, their team is human and can make mistakes. They do have an establish dispute process to correct those mistakes. Review each invoice as it comes to you and check for mistakes – you only have a week to dispute them. Only dispute critical items or you will get a bad reputation with Amazon and they will start rejecting your inquiries. Instead, you want to get a reputation of only disputing real issues of substantial amounts. Some common mistakes are:
- Incorrect van counts.
- Missing reduced route payments.
- Missing station closure compensation (usually due to bad weather).
- Pay attention to the damage fine print on lease agreements.
Returning damaged vans at the end of a lease can be detrimental to your pocketbook. Note the amount of forgiveness included in your lease (usually stated in terms of dollars) and perform the repairs yourself with the vendor of your choice before returning a vehicle.
- Establish a good relationship with a body shop.
Ask other DSPs or look around your local area for a smaller repair shop that is willing to cut you a volume deal. Do not discount non-dealer national chains that are locally owned and managed. For example, Maaco will often offer DSPs discounted rates as we provide so much business.
- Shop around for insurance at the 1-year mark, and keep damage claims low
When launching, the best advice is usually to accept the recommendations Amazon gives you for insurance providers. Even if the insurance company may not be the most competitive in pricing, new DSPs should be focused on growth and efficiency instead of spending time on phone and emails trying to find the best prices for insurance. Once you reach the 1-year mark, however, you should start shopping around for health, workman’s comp, and vehicle insurance policies.
Many automotive insurers will not work with Delivery Service Partners due to our high number of claims. In fact, many DSPs find that they are somewhat uninsurable after their first year due to excessive claims. That is why you should establish a set cost for accidents in which you pay for the repairs without filing a claim. A good rule of thumb is that you pay out of pocket for all repairs costing 2x your deductible, and file claims for anything above this amount. For example, if your deductible per incident is $1,000, be prepared to pay for any repair work out of your own pocket if the cost is $2,000 or less. Otherwise, you might find your insurance rates go up drastically after the first year, or worse – no one will insure your vans!
- Use software to automate as many processes as possible.
While paper and spreadsheets are free, you will find that paying money for an online tool will more than pay for itself if you are willing to change your processes to match the tool. For example, a tool such as fleet.io can greatly reduce the amount of time you spend updating your vehicle records. Using a scheduling tool that includes a mobile app your drivers can download to their personal phone will eliminate many phone calls and test messages when scheduling conflicts occur.