Target and Home Depot chartering OWN ships amid supply chain crisis
Will THIS save Christmas? Target and Home Depot are chartering their OWN cargo ships to beat the US supply chain crunch as global crisis rages
- The decision comes as bottlenecks along the country’s East and West coasts continue to hinder the transportation of products from overseas
- As the holidays rapidly approach, the demand for consumer goods is at an all-time high – the US’ supply-chain is still snarled amid fallout from the pandemic
- Price hikes and wait times of up to four weeks have spurred retailers like Target, Home Depot, and Walmart to hire their own ships to deliver goods from overseas
- These retailers hope to steer clear of traffic-jams seen at a slew of popular ports across the country – like those at the ports of Los Angeles and Long Beach
- However, bottlenecks have since spread to a slew of backup ports along both the Pacific and Atlantic coasts, amid the US’ unprecedented supply-chain crisis
Published: 20:16, 6 October 2021 | Updated: 20:17, 6 October 2021
Major retailers Target and Home Depot have elected to charter their own ships to deliver billions of dollars worth of goods in time for the holiday season, amid an unprecedented supply-chain crisis in the US.
‘As co-managers of the ship, we can avoid delays from additional stops and steer clear of particularly backed-up ports,’ Target – the second largest U.S. importer behind Walmart – said in a statement released in September.
Similarly, Home Depot Inc.’s Chief Operating Officer Ted Decker said the company came up with a ‘creative solution’ to its problems with getting goods back in August.
‘Our supply chain teams recently leveraged our scale and flexibility to arrange for several container vessels for our exclusive use,’ he said during the company’s second-quarter earnings report.
The decision comes as bottlenecks along the country’s East and West coasts continue to hinder the transportation of products from overseas to countless stores across the nation, causing a backlog of billions of dollars of toys, clothing, electronics, vehicles, and furniture.
Home Depot Inc.’s Chief Operating Officer Ted Decker said the company came up with a ‘creative solution’ to its problems with getting goods back in August, deciding to charter their own ships to transport thousands of tons of products prior to the holidays
Target – the second largest U.S. importer behind Walmart – said in a statement released in September of their decision to employ their own fleet: ‘As co-managers of the ship, we can avoid delays from additional stops and steer clear of particularly backed-up ports’
As the holidays rapidly approach, the demand for consumer goods is at an all-time high – with ships often facing shocking wait times of up to four weeks to unload their all-important hauls.
With demand increasing at such a rate, ports are not able to handle the stream of goods coming in, especially with reduced manpower caused by regulation constraints put on them and losses experienced during the pandemic.
These back-ups at the ports then inevitably affect the intricate network of railways and trucking routes that transport these products, creating unprecedented levels of congestion.
Complications that have arisen since the pandemic have also spurred manufacturing shutdowns overseas and incurred other high costs related to transporting merchandise.
Dollar Tree Inc., a discount store chain based in Virginia, for example, said that one ship carrying the company’s cargo recently was delayed for two months after a crew member tested positive.
Now, a host of these fed-up big-box retailers – including Target, Home Depot, Walmart, and Costco – are taking matters into their own hands, utilizing their deep pockets to charter their own private ships to transport goods in a more timely fashion.
Dozens of cargo vessels are seen anchored offshore on Wednesday, sharing space with about a half dozen oil platforms, before heading into the ports of Los Angeles Long Beach
Walmart’s chief financial officer recently spoke on similar decisions to charter their own container ships during talks surrounding their earnings reports
Both Walmart’s and Costco Wholesale Corp.’s COST chief financial officers recently spoke on similar decisions to charter their own container ships during their earnings reports.
Costco has chartered three ships to move items to the U.S. and Canada from Asia in several thousand containers.
‘Every ship can carry 800 to 1,000 containers at a time and will make approximately 10 deliveries during the course of the next year,’ said Richard Galanti, Costco’s chief financial officer, on the fiscal fourth-quarter earnings call in late September.
Ports in Los Angeles and Long Beach – the two most popular shipping destinations in the US – are currently housing dozens of vessels that have been left anchored for weeks.
Ports in Los Angeles and Long Beach – the two most popular shipping destinations in the US – are currently housing dozens of vessels that have been left anchored for weeks
However, even if these privately contracted ships avoid the US’ most popular ports of call – like those in Long Beach and Los Angeles, which currently house dozens of vessels that have been left anchored for weeks – they will likely encounter similar congestion at a slew of seaports across the country, as countless container ships also flock to backup destination’s along the nation’s West Coast, in cities like Seattle and Tacoma, or along the East Coast, to compensate.
These contingency stations littering the coast also face similar wait times.
‘Goods have been shifting to other ports, with imports through the ports of Seattle and Tacoma up 40.6% versus 2019 and imports through East Coast ports up 36.1% in the same period,’ said Panjiva, the supply chain research unit of S&P Global Market Intelligence, in a recent report.
A multitude of ocean ports along the Pacific and Southern Atlantic coast, as well as those in New York and New Jersey, are also experiencing backlogs because of a new influx of traffic.
Ships in the New York Bight on Wednesday as supply-chain chaos continues to spread to seaports across the country
Goods have been shifting to other ports like those in the cities of Tacoma and Seattle, with imports through the now-popular ports of call up more than 40 percent since 2019
Off the Port of Savannah, another popular ship destination on the East Coast, dozens of ships sit anchored waiting to unload
Footage obtained by DailyMail.com shows the scale of the problem on the seas with more than a dozen cargo ships and oil tankers anchored outside New York’s harbor, waiting to unload their goods.
Aerial images for DailyMail.com shot last week show rows of giant cargo ships waiting to unload in the Atlantic.
In Savannah, another popular port on the East Coast, dozens of ships sit anchored just off the coast waiting to unload.
And with demand at an all-time high as consumers elect to stay home instead of spending money on travel and entertainment amid the pandemic, and with the holiday season on the horizon, it is likely that these bottlenecks will only get worse at these back-up ports.
What’s more, the cost of employing these ships is also a great deal more expensive than the commonplace practice of sharing the cost of a cargo trip with other retailers.
A ship lease can run retailers roughly £1 million to £2 million per month – not including operating costs and the rents for hundreds, and for larger retailers like Target, Walmart and Home Depot, thousands, of shipping containers – and leases commonly run for two to three years.
And as pandemic-related hurdles and delays have caused an already evident surge in prices of products shipped from overseas and increased container costs, which contributes inflation, once can expect products’ prices to soar as the holidays approach.
Pre-Covid, the cost of shipping a container from China to the US’s West Coast via a shared-cargo ship was roughly £1,300. Today, that cost has risen exponentially, with the cost of transporting one container by these means being roughly £35,000.
And the right to use these containers goes the highest bidder, hurting a host of retailers, especially small ones.
What’s more, these small retailers cannot hope to compete in bidding battles with giants like Target and Walmart, who can shell out millions to stock their shelves.
These retailers of course cannot follow these corporations’ new business models, not can they afford the ever-increasing cost to transport their inventory – and many have gone out of business as a result.
Dozens of container ships sit anchored by the ports of Long Beach and Los Angeles as they wait to offload last month
Aerial images for DailyMail.com shot last week show rows of giant cargo ships waiting to unload in the Atlantic, with many being forced to wait weeks due to intense bottlenecks at docks in New York and New Jersey
‘This is a very expensive thing,’ said Michael Zimmerman, partner at global consulting firm Kearney, who says leasing ships is a temporary solution for a select, privileged few. ‘If you’re a mid-size retailer or emerging fashion brand, you can’t rent your own ship.’
‘We’re currently in the midst of red-hot freight and charter markets,’ Global Ship Lease Executive Chairman George Youroukos said in August.
Youroukos has signed more than 40 new charter agreements this year alone.
However, for companies like Target, Walmart, Home Depot, and Costco, leasing their own ships actually does incur some savings, considering the sudden surge of container prices – as they are essentially buying space with these ships wholesale, and are often spending thousands per container as opposed to tens of thousands.
‘The most important aspect of this is the capacity play rather than the savings play,’ Zimmerman said.
‘Yes, there is savings, but you are leasing the ship for two-to-three years, so it is a significant commitment that you will need to stick to or later sublet at a loss if the market for shipping containers crashes back down.’
Due to the backup, many retailers are resorting to air freighters to transport their good, which in turn increases the cost that comes with the safe transportation of their products.
The amount of retailers who have stopped shipping their products by sea and have settled for the increased costs of air travel have created congestion there as well as airports cannot keep up with the increased traffic – forcing retailers to charter planes to transport goods.
The cost of chartering an aircraft from Asia to the US is roughly £2.5 million.
Going forward, Kearney’s Zimmerman believes that more mega companies will follow Target and Home Depot’s example, and reexamine and adapt their approach to navigating the US’ snarled supply chain.
‘The experience that shippers have been through means there will be more contingency planning’ from these companies, he told Marketwatch.
‘The supply chain has been optimized for very efficient movements.
All of this has been blown up.’
Target is poised to get head-start to the holiday season next week, with Target Deal Days starting on October 10.
Home Depot’s ‘Fall Sales’ are set to kick off next month.
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