TrueBlue, a Tacoma staffing firm, told investors that Amazon.com, its largest customer, was reducing its reliance on temporary labor for delivery stations and doing more hiring on its own.
Amazon seems to be cutting its reliance on temp labor even as it furiously ramps up its fulfillment and delivery operations, if the experience of a local staffing company is any indication.
TrueBlue, based in Tacoma, provides contingent blue-collar staffing for warehouses and the like. On Wednesday it told investors that Amazon, its largest customer, didn’t need it anymore to staff delivery stations, the relatively small facilities close to cities where Amazon sorts packages for their final destination.
“Amazon will be directly sourcing the workforce needs for these locations,” TrueBlue chief financial officer Derrek Gafford said on an earnings call.
The news sent TrueBlue shares down 7.3 percent to $18.55 on Thursday.
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It’s the second unexpected blow to TrueBlue’s relationship with Amazon. In April the staffing firm announced that Amazon was dialing down its outsourcing needs in U.S. fulfillment centers.
In 2015, Amazon accounted for $355 million of TrueBlue’s revenue. For 2016, that gravy train is expected to shrink to $165 million, and going forward it looks more like a $30 million business, TrueBlue executives said.
Amazon’s decision reflects a desire to have more control over its key logistics operations, much as the company has done with other parts of the supply chain by adding a fleet of aircraft, buying trucks, and starting its own last-mile delivery network in some cities.
It also coincides with a huge expansion of its workforce, which approached 270,000 at the end of June, up 47 percent from the previous year. The hiring binge could soon make Amazon the second largest Fortune 500 employer, after Wal-Mart, if it keeps up its current pace.
Amazon might be able to “pick up some profit margin” from handling its own staff, but “the main thing, I think, is control and knowing that they’re controlling their own processes more,” TrueBlue CEO Steven Cooper said. It’s a matter of not being “subject to providers,” Cooper said.
Analysts with Cowen said the reduced reliance on outsourcing for delivery stations is a “net positive” for Amazon in terms of costs. The shift could also indicate that the company has either saved more money, or improved its operations more than it originally expected, by bringing work in-house at its big warehouses.
The savings to Amazon from bringing in work previously outsourced to TrueBlue are not huge in the bigger scheme of things: They could amount to some $22 million for the fourth quarter, according to Cowen.
But Amazon could be undertaking the same reductions with other staffing firms. The change also may indicate that Amazon is in shape for the holiday retail season due to its recent hiring and doesn’t need an aggressive infusion of temporary workers, the analysts said.
Amazon didn’t immediately respond to a request for comment.