Sometimes the assets you need to have are the ones you don’t want to own.
Take FedEx, for example. Their delivery vans are visible on every street corner of every city. They directly own the ones needed for Express, but they have found that they are better off paying ground ISPs to handle much of the last mile.
But ISPs are not the end of the food chain. There is a way for them to follow suit and gain flexibility with a related strategy. It is called the Alternative Vehicle Program, or AVP, for short.
The AVP (Alternative Vehicle Program) is similar to the ‘gig delivery’ models used by Grubhub, DoorDash and Uber Eats in that the contractors use their own vehicles. Like Amazon Flex, it provides an attractive option for the drivers. They can pick up their packages at one location instead of dealing with busy restaurant and retail staffs, they typically get paid hourly instead of per delivery, won’t have to rely on customer tips and they get a full day’s schedule of deliveries at the onset instead of having to decide which ones to bid on all day long. If their ISP has a good DRO system their routes can be optimized and they won’t find themselves in crosstown traffic several times a day.
AVP is a huge win on the ISP side as well. In fact, it could be a critically important one.
“Package levels are unpredictable on a daily basis. One day you have salaried drivers without routes to fill, the next you may get a spike in deliveries and not have the resources to handle it” says industry expert Shivam Shah. “Either situation can destroy an ISP’s profit margins. The AVP program provides the flexibility to cover spikes, without dragging down your overhead on slower days”.
Shah advises his clients to establish connections with a pool of AVP contractors, many more than might be needed on any given day. “You might need to put out the call to as many as 30 or 40 in order to get the five that you need today”. Carefully planned incentives are key to managing productivity of AVP drivers.
The AVP should be viewed as a supplement to, and not a replacement for salaried drivers in FedEx vans which are, by definition, more effective. The van drivers are trained, monitored and commercial level insurance is locked in. Ecommerce is moving in the direction of ever larger packages, many of which are too big for the back seat of a Toyota.
There are also setup procedures that need to be followed before an ISP can begin to effectively use the AVP program. There is paperwork and vehicle images to file with the terminal and agreements to sign with the contractors. A system is needed to isolate the smaller, lighter packages that are best handled by AVP.
There are ongoing managerial considerations as well because of the nature of the gig workers. Vetting processes need to be designed and implemented, performance needs to be tracked, questions need to be answered and, of course, the proper incentives need to be tried and managed. If you are looking for more information on how to find the best AVP drivers, you can read our dedicated blog post here: https://blog.beansroute.ai/build-the-right-avp-team-a-guide-by-beans-recruiting
The AVP system works, as validated by Amazon Flex. It is the best way for an ISP to build the flexibility needed to efficiently deliver on both slow and busy days. It will require some careful planning and monitoring, but for many ISPs it can become an asset that increases the value of their business without being something that they have to own.
Reach out to sales@beans.ai if you are looking for a definitive guide to FedEX AVP Program, today!