by Brad Stone
Mountz was disappointed. “I was burning relationships I had built in the industry for years,” he said. “I was pretty sour on the whole experience.” He tried to appeal directly to Bezos but didn’t get anywhere.
Instead Bezos, Mountz recalled, was mostly fixated on the potential of robotic arms in the FCs. As a way to indulge the CEO’s interest and stimulate research in the field, his Kiva cofounder, Peter Wurman, proposed a competition among universities called the Amazon Picking Challenge to try to find a robot that could do a better job than humans lifting items off a shelf. The contest, with a meager top prize of $20,000, lasted three years and probably attracted more media hand-wringing about the potential of robots to steal human jobs than actual advancements in robotics.
Over the next few years, Amazon methodically redesigned the Kiva robots and moved Kiva’s software to AWS. Then it introduced the machines into its newer FCs, with profound results. As Clark had hoped, they magnified worker productivity and decreased the rate of growth of Amazon’s seasonal labor needs relative to its sales. They also allowed Amazon to build denser fulfillment centers, with the shelf-toting robots swarming over the ground floor as well as a series of reinforced mezzanines. In a 2014 TV interview, Clark estimated that Amazon was able to get 50 percent more products per square foot into new fulfillment centers than the previous generation.
The robots also transformed labor that was physically exhausting, characterized by endless walking, into work that was instead mentally straining, with employees standing in place and monotonously repeating the same movements over and over. (A 2020 report in the Center for Investigative Reporting’s Reveal magazine cited an OSHA letter to Amazon that said the robots exposed employees to “ergonomic risk factors” including stress from repeated movements and standing for up to ten hours a day.) Just as the tyrannical invisible force of software guided the robot swarms, it also monitored worker performance, flagging any quantifiable decrease in productivity and subjecting employees to performance improvement plans and possible termination.
The acquisition of Kiva established Clark’s credentials as the kind of transcending leader Bezos sought to run operations. He took over the role from Marc Onetto in 2012 and was promoted to senior vice president the following year. Clark now had a spot on the S-team, and his old Campbellsville buddies, Mike Roth and Arthur Valdez, were back by his side in Seattle as deputies—ready to help him implement Jeff Bezos’s most audacious vision yet.
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Like many of the managers at Amazon who so snugly fit the Bezosian leadership template, Clark’s intellect trumped his emotional intelligence. He liked to talk about his family and Auburn football and could speak with eloquence and even a sense of romanticism about Amazon’s mission of serving customers. But dozens of operations employees also described their boss as a truculent personality who hardly acknowledged others in the halls and was reluctant to meet with anyone below the rank of vice president as his organization grew.
On one of his first conference calls with his direct reports after taking the top operations job from Onetto, Clark stunned his subordinates by casually recalling his old nickname from the East Coast FCs—the Sniper. Many later recalled with trepidation his notorious sayings, such as “There’s no room for art degrees here” (even though he himself was a music education major). At one memorable meeting to review a team’s proposal to put RFID chips into Amazon pallets and packages, to better track them through the FCs, Clark walked in, apparently unimpressed with the plan, and said: “Tell me why I shouldn’t just fire all of you right now.”
But all of that was handily overshadowed by Clark’s strengths—a sharp, analytical mind and masterful ability to dive into the most intricate level of detail to identify problems and negative trends. He possessed a crucial skill at Amazon that was about to prove exceedingly useful: he could take Bezos’s ambitious visions, convert them into something approximating reality, and then grow them into systems that didn’t blow apart at Amazon’s tremendous size.
Over Christmas 2013, UPS, Amazon’s primary shipping partner, was overwhelmed by the volume of last-minute orders amid a confluence of bad weather and the sharp increase in the popularity of online shopping. UPS’s 5.2-million-square-foot Worldport center in Louisville, one of the largest package handling facilities in the world, choked on the onslaught and failed to deliver an estimated hundreds of thousands of Amazon packages in time for the holiday. Clark was furious, colleagues recalled, castigating UPS execs over the phone and browbeating them into helping Amazon compensate disappointed customers with $20 gift cards and refunds on shipping charges.
But the “Christmas fiasco,” as Amazon operations employees dubbed it, was not entirely the shipping company’s fault and may have been inevitable. It is worth slowing down for a moment to examine why. Amazon’s famed flywheel was beginning to spin faster at the time, with the ranks of Prime members growing by millions every holiday season and merchandise streaming into its FCs from third-party sellers.
Amazon ran its fulfillment centers seven days a week, to keep up with customers ordering from its website around the clock. But UPS and FedEx, a less significant Amazon shipping partner, didn’t operate on Sundays or on national holidays. The difference didn’t matter for most of the year, but after the extended Thanksgiving holiday—which included the Black Friday shopping extravaganza—the delivery companies’ networks became woefully backlogged.
Amazon harangued UPS and FedEx to deliver over the weekend and to build more capacity to keep up with Amazon’s surging growth. But they were wary; Amazon alone could stretch the shipping companies’ employees to the breaking point and devour all of their shipping capacity, leaving no room for other customers. Amazon also negotiated ferociously every few years to procure ever-steeper discounts. For the shipping companies, the online retailer generated increasing revenues while eroding the fat, double-digit profit margins that kept their investors happy and stock prices buoyant.
UPS and FedEx tried to mitigate Amazon’s corrosive effects by levying surcharges and capping its use of their air freight networks over the holidays. Amazon executives didn’t appreciate that. Four employees from that time told me they heard Clark and other senior Amazon executives gripe about FedEx and say that its founder, Fred Smith, “surrounds himself with sycophants and has completely off-the-charts arrogance.” The obvious irony, even to Clark’s employees, was that this could describe Amazon’s senior leaders too.
All of these tensions culminated after UPS failed so prominently over the 2013 holiday season. Amazon executives had had enough. If they couldn’t reliably count on the shipping companies to support their growth, the company would have to build an in-house logistics network—controlling merchandise from the warehouses of its suppliers to its fulfillment centers, and all the way to customers’ doorsteps.
The day after the 2013 holiday meltdown, Clark called Michael Indresano, a former FedEx executive who had joined Amazon as a transportation director, and asked how many “sortation centers” they could build before the next holiday peak. These were the facilities that consolidated packages by zip code and injected them into the U.S. Postal Service for last-mile delivery to people’s homes.
Indresano estimated that he could open sixteen by the end of 2014. “Build ’em all!” Clark replied. Inside Amazon, the rapid creation of sort centers in cities like Atlanta, Miami, and Nashville was dubbed “the Sweet 16.”
During this buildout, Amazon packages also began showing up to customers’ homes on Sundays. Bezos, said an ops executive, was frustrated with UPS and FedEx’s refusal to deliver over the weekends. Clark and his colleagues had found an ingenious solution: a deal with the USPS to deliver on the proverbial day of rest. The arrangement quickly reinforced the post office as Amazon’s top carrier by volume and allowed Amazon to achieve a total lower cost per delivery than it could achieve by using UPS and FedEx.
Amazon’s sort centers, combined with Sunday delivery, changed the experience of being a Pr
ime member. Customers no longer had to abandon their online shopping cart on a Friday afternoon and visit the mall for instant gratification. Proud of the achievement, Bezos brought Amazon’s board of directors to San Bernardino, California, to tour one of the new facilities.
But the sort centers and Sunday delivery were only the first step toward the goal of an in-house logistics network. Amazon was never entirely comfortable relying on the USPS, just as it was distrustful of UPS and FedEx. The post office was subject to unpredictable political forces and the lingering public perception that it provided a less reliable service. So Clark and his colleagues began pitching their most ambitious move yet: a so-called “last mile” network to customers’ homes. If it couldn’t count on the giant package carriers to keep up with its growth, it would simply oversee the delivery of orders itself.
A primary concern, said executives who were in those meetings, was not whether Amazon could effectively build such a complex network. Rather, it revolved around whether getting into the transportation business would increase Amazon’s exposure to unions. Delivery stations would have to be placed in the urban areas where most of Amazon’s customers lived—places like New York City and New Jersey that were the locus of the organized labor movement.
Clark and his colleagues assuaged themselves by considering the nonunion workforces of FedEx Ground, DHL, and pretty much every other ground delivery firm that competed with UPS and its unionized delivery workforce. Amazon would use the exact same model in creating Amazon Logistics, its new transportation division. It wouldn’t directly hire anyone but instead create relationships with independent delivery companies—DSPs (delivery service partners)—that employed nonunion drivers. That would allow it to pay lower labor rates than UPS and to avoid the prospective nightmare of drivers bargaining collectively for higher wages, which could destroy the already fragile economics of home delivery.
Such arm’s-length deals with drivers would indemnify Amazon from all of the unseemly and inevitable corollaries of the transportation business—such as botched deliveries, driver misbehavior, or worse, car accidents and deaths. Economists called this kind of arrangement, where companies outsourced specialized forms of work to subcontractors, “the fissured workplace,” and blamed it for eroding labor standards and fomenting a legalized form of wage discrimination that exacerbated inequality. This was a decades-long trend propagated not just by transportation providers like FedEx and Uber but by hotels, cable providers, and other tech companies like Apple. Amazon’s size, of course, spread it that much further, and policymakers, whose job it was to protect workers, were caught flat-footed.
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As Amazon gradually spread its arms around home delivery, Clark and his colleagues moved to take over another important stage of the supply chain. Until that point, the company had relied on big freight transporters to move merchandise from suppliers to Amazon’s FCs and between the FCs and sortation centers. In December 2015, as Amazon was building new sort centers and Amazon Logistics slowly opened in new cities, Amazon announced that it had purchased thousands of truck trailers with the Amazon Prime logo on their sides, a program called Mosaic that was executed in part by Mike Roth. Once again, Amazon employees wouldn’t do the actual driving—the company would rely on a mosaic of line-haul service providers to attach their truck tractors to the Prime-emblazoned semitrailers.
Colleagues viewed the older Roth as a masterful strategist, saying that he was playing the game Go, while everyone else was playing checkers or chess. They also saw him as an empathetic leader who was more inclined to check in on an employee’s well-being after a bad meeting or to discuss their long-range career plans. “Mike covered up a lot of Dave’s sins,” said a longtime Logistics executive. “He was the people person, the guy behind the scenes who put his arm around you and fluffed you up after Dave tore you apart.”
But there were limits to his compassion. When a Mosaic driver apparently showed up intoxicated to a supplier’s facility, the resulting email of complaint went right to Bezos’s public email address. Bezos forwarded it to an Amazon executive—who asked not to be named—going beyond the customary question mark by adding three ominous letters: “WTF.”
The executive showed it to Mike Roth, who said in his inimitable German accent, “Oooh, you got one! Oh, that’s from Jeff. It says ‘WTF’! Oh, that’s Jeff, that’s very Jeff. Good luck with that.”
Roth’s old Campbellsville boss, Arthur Valdez, was having a rougher time. Valdez had moved back to the U.S. from the UK to take over the new Amazon Logistics division. In 2013, he recruited a talented logistics executive from FedEx in Europe named Beth Galetti to help him build a delivery capability akin to FedEx Ground. But when Clark interviewed her, he decided that she would make a perfect replacement for David Niekerk, the team’s retiring human resources director.
Even though Clark’s instincts were right and Galetti would later join the S-team as the head of all HR at Amazon, Valdez was annoyed and felt his independence was being usurped. He and Clark lived a mile from each other in Seattle’s eastern suburbs and their families remained close. But after that episode, their relationship began to fray.
Under Valdez’s stewardship, Amazon Logistics had gotten off to a rocky start. As anticipated, the company was building an entirely new type of smaller facility in urban areas, called a delivery station, to organize packages and hand them off to the delivery service providers. But the system was disorganized and prohibitively expensive at first, while the drivers were proving unreliable and were periodically caught engaging in a variety of uncouth acts, such as fighting with customers or flinging packages onto front porches from afar. Employees received so many question marks from Bezos about these reported incidents that they nearly lost track of them.
Bezos also couldn’t understand why the original metrics for last-mile delivery were so poor. Paperboys and pizza delivery drivers, he remarked, visited homes for $5 a trip! Some of the early per-package transportation costs for Amazon Fresh were many times that amount. “I’m okay with you making sophisticated mistakes, but this is just us being stupid,” Bezos said in one review of Amazon Logistics, according to an operations exec.
Fairly or not, Valdez caught the blame for the transportation network’s embarrassing start. In early 2015, Clark reassigned him to work on Amazon’s operations in emerging markets like Brazil and Mexico, reporting to Mike Roth. It was essentially a demotion and a major comedown for an executive who had been both Clark and Roth’s manager in Campbellsville and whose career at Amazon was now clearly off track.
A year later, John Mulligan, Target’s chief operating officer, approached Valdez about taking over as executive vice president of the retailer’s supply chain. Valdez initially replied that he planned to be “an Amazonian until the day I die,” but then started to consider the offer in the context of his recent setbacks, and accepted the job.
Target planned to announce the hire on the last day of February, to coincide with a speech that CEO Brian Cornell was delivering at an industry conference. Valdez couldn’t bear to face Roth with the news, so he called Clark and asked if they could meet privately in his office. But Clark was taking the day off to attend a school event for one of his children. Valdez had to tell him over the phone that he was leaving. Clark responded genially at first. “Where are you going?” he asked.
Valdez informed him it was Target—and Clark erupted. Here was one of the more naked hypocrisies at Amazon, which aggressively poached employees from competitors but considered it an act of absolute treachery when an executive left for a rival. “He told me that if I made that decision, Amazon was coming after me,” Valdez recalled painfully years later. Clark then hung up the phone.
A few minutes later, Beth Galetti called Valdez to tell him that he would have a big problem if he left to work for Target. “Beth, my role is to manage the replenishment of eighteen hundred stores and a very small e-commerce business,” Valdez pleaded. Galetti said that Amazon didn’t see it that way.
Valdez then texted Jeff Wilke, saying that he would “cherish the opportunity to speak” but never got a reply.
Amazon sued Arthur Valdez in King County Superior Court, a week before he was due to start at Target, for violating his noncompete agreement and sharing proprietary information with a competitor. The lawsuit asked a judge to exclude Valdez from working for Target for eighteen months. It was eventually settled privately, as many such Amazon lawsuits are, after Target agreed to trivial adjustments in Valdez’s contract.
But the damage to a fifteen-year personal friendship was done. After their contentious phone call, Dave Clark never talked to the best man at his wedding again.
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Clark had proven himself a true Amazonian, putting loyalty to the company above personal friendship while pursuing Bezos’s vision of an independent supply chain. But to really accomplish that mandate, he had to do more than put cars and truck trailers on the road; he also had to get planes in the air.
UPS Next Day Air and FedEx Express were key links in the Amazon fulfillment network, whisking less frequently purchased items to Prime customers across the country when they weren’t stocked in nearby fulfillment centers and available for ground delivery. But as the shippers started to view the online retailer warily, Amazon was discovering that it could no longer count on them.
This was manifestly demonstrated at the end of 2014, a year after the Worldport fiasco, when UPS again was rationing access to its network and restricted Amazon cargo on flights into—of all places—Seattle. The company’s last deal-of-the-day of the season, free next-day delivery of Kindles, wouldn’t be available to Seattle residents. Since that was evidently an intolerable outcome, Clark called Logistics VP Mike Indresano and asked if he could get an airplane.
