The delays in the global supply chain are so severe that some of the largest US retailers have resorted to an extreme (and expensive) tactic to try to stock shelves this holiday season: They are renting their own cargo ships. to import goods.
Port delays, Covid-19 outbreaks and a shortage of workers have hampered the flow of goods between Asia and North America, threatening the supply of everything from Christmas decorations and toys to appliances and furniture. Freight transportation across the Pacific is taking about 80 days, or twice as long as before the pandemic, retail and transportation executives said.
Some of America’s largest retailers by revenue are among companies that are paying for their own chartered vessels as part of larger plans to mitigate disruptions, an expensive and unaffordable option for most companies. Some of the chains are passing on these additional costs by raising prices to buyers.
The chartered ships are smaller than those operated by companies like Maersk and move only a small portion of total imports, the executives said. Ships that can hold around 1,000 containers are on average nearly twice as expensive as the cost of moving cargo on a typical 20,000 container vessel, according to freight forwarders.
Walmart is one of the retailers that pays for chartered boats to keep the shelves full during the holiday season.
But the charts offer large retailers a way to avoid bottlenecks in ports like Los Angeles by diverting cargo to less congested docks like Portland, Oregon, Oakland, California or the East Coast. It could also help retailers ensure key products like electronics and decorations arrive for the holiday season.
Shipbrokers said that small vessels chartered for point-to-point trips now earn about $ 140,000 per day, several times more than pre-pandemic levels, when such trips were rare due to high cost. “At least they know the inventory will arrive in time for the Christmas rush,” said Vicky Zervou, sales manager for Athens-based transportation company Aritrans SA.
In May, Home Depot executives were looking for new ways to get goods in a timely manner when they came up with the idea of chartering their own boat, something the company had never done before. “It almost started, I think it’s a joke,” said Sarah Galica, Home Depot vice president of transportation. “Let’s rent a boat.”
Products arriving on chartered ships make up a small percentage of Home Depot’s total import volume, he said, but the change allows the company to have more control over when products arrive in stores and prioritize products with higher demand. . For Home Depot, the freight is plumbing supplies, power tools, Christmas decorations, heaters, and other items.
Cargo ships have been stuck in bottlenecks off the coast of Southern California.
Richard Galanti, Costco’s chief financial officer, said the retailer has chartered three ships, each capable of carrying around 1,000 containers, to transport goods between Asia and North America. Each vessel will make up to 10 deliveries for Costco over the next year. Those ships will account for less than 20% of the retail warehouse’s import volume from Asia next year, he said.
Freight is more expensive than shipping through typical Costco carriers, Galanti said, but give us “an amount of our total that we control.” For example, he said that it provides the possibility of taking a ship to a new port if it faces port congestion and cannot unload its goods. Costco also wants to prioritize seasonal merchandise that has to be sold at a specific time of year, he said.
Walmart, the nation’s largest retailer with more than $ 500 billion in annual revenue, has chartered its own ships earlier this year, having used the strategy during the Port of Los Angeles strikes in 2012.
The ships give Walmart visibility into arrival times and freight prices, a spokesperson said. Due to port congestion in Los Angeles, Houston and Savannah, Georgia, some chartered ships are being diverted to smaller, less crowded ports, such as Mobile, Alabama, the spokesperson said. In recent weeks, Walmart also dispatched its own employees to congested ports to help facilitate landings, he said.
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Boat chartering is a tactic that is out of the financial reach of small retailers, giving large companies a potential advantage in the coming months.
Podzly LLC, a small Papillion, Nebraska party supply retailer that sells online, has about half the inventory it would like due to shipping delays, reducing revenue, founder Jeremy Podliska said. The company is paying about 55% more for the products it receives compared to 2019, he said, often broken up into small quantities that arrive in parts. Renting a dedicated boat or plane is “just not an option for us” as a small business, Podliska said.
Two years ago, the company sold a 12-pack of party hats for about $ 32, Podliska said. Today the same package sells for $ 52, he said, and the price is likely to go up further as it is sold through new inventory arriving with higher shipping costs. Expect buyers to bear the increases, he said.
“I suppose there is a limit to what can be charged for a hat,” he said.
Meanwhile, delays at major US ports continue to mount. More than 60 container ships were waiting to arrive in the ports of Los Angeles and Long Beach recently, according to the Marine Exchange of Southern California, compared to 25 the previous month. Backups are also spreading to ports on the east coast.
At Dollar Tree INC.,
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Regular carriers are meeting about 60% of their commitments to the discount retailer, CEO Michael Witynski said in September.
““I suppose there is a limit to the amount that can be charged for a hat.”“
The 16,000-store company is securing dedicated space on chartered vessels for the first time, Witynski said, including a large vessel chartered for three years. Dollar Tree aims to add more charter flights this year, he said, as well as get more products domestically and internationally that are not dependent on trans-Pacific routes. It’s also adding higher-priced products to its stores, as transportation and other costs rise.
Freight forwarders said Covid-19 outages still haunt the large ports and the large ships that use them. They said it is common for a large container ship carrying empty containers from Europe to be held for a week outside of Shanghai while the crew is tested for the virus.
Capital Maritime Group, which operates 108 vessels of all kinds, had a client who rented a 2,000-container ship to move furniture and sportswear from China to Liverpool, England, said Evangelos Marinakis, president of the Athens-based company.
“‘Using small container ships for point-to-point transoceanic voyages is something we’ve never seen before,” Marinakis said, adding that small container ships offer great benefits to the company. In addition to retailers, large companies that supply stores, such as Coca-Cola Co.
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They also rent boats to avoid interruptions.
Moving a container across the Pacific on a chartered ship costs nearly twice as much as shipping via major cargo ocean liners, which stood at $ 16,750 per 40-foot container last week, up from $ 5,000 in the same. time of last year, according to Freightos Baltic. Index.
Freight rates remain high “but have stabilized and we are not expecting another spike,” said Jonathan Roach, a container shipping analyst at London-based Braemar ACM Shipbroking. “Supply chains are still in turmoil, but when next year rolls around, it may not make sense for Targets and Dollar Trees to continue to use private charters.”
Source : 6park News California
