With the shipping crisis now in full bloom, retailers like Walmart and Home Depot are taking matters into their own hands. Retail companies are now chartering cargo vessels themselves. The move aims to get imports moving faster and get them to store shelves.
Shipping Crisis Pushes Retailers to Charter Ships
“Chartering vessels is just one example of investments we’ve made to move products as quickly as possible,” said Joe Metzger, U.S. executive vice president of supply-chain operations at Walmart, which has hired a number of vessels this year.
Walmart recently hired a dry bulk cargo ship to help with the retail chain’s supply chain woes. The company began chartering cargo vessels as it tries to get its orders to the US as soon as possible. Disruptions in the delivery of goods are currently threatening supplies for the upcoming holiday season.
Editor's Inflation Warning: "Investors are woefully unprepared for what may be a once-in-a-generation shift in the market"
By getting their own vessels, retailers hope to bypass cargo terminal ports. This will also help them get precious cargo space needed for their many imported products.
The current shipping crisis is dealing with many problems simultaneously. This includes COVID outbreaks, US-China trade skirmishes, container shortages, and extreme weather.
As a result of the above, global shipping is crawling to a halt in overbooked terminal ports. In fact, more than 60 container ships lie anchored near the Los Angeles and Long Beach terminals.
Each one is waiting for approval to approach the pier to unload. Before COVID-19, one ship waiting to dock was already an aberration. Now, a waiting time of three weeks while docked near the port is standard.
Retailers Now Hiring Their Own Cargo Vessels
Aside from Walmart, other retail giants such as Target, Home Depot, Costco, and Dollar Tree are now chartering ships. At this point, some of the contingency measures are already too late.
Burt Flickinger, managing director at Strategic Resource Group, said not everybody won’t make it in time for the lucrative holiday season.
He said that around 20-25% won’t make it to store shelves by Black Friday. The start of the Holiday season often earns retailers around a third of all holiday sales.
As a result, the retail giants decided to take the wheel. Chartered ships not only provide valuable cargo space. It can also bypass container terminals that add a few days to the delay.
A few days can spell the difference for time-sensitive goods like Christmas sweaters to reach shelves on time.
Exchanging 40-footers to 53-footers
Retailers are also looking to change the delivery layout to maximize travel by sea. For example, Walmart eliminated the problem of a shortage of 40-foot containers.
They did so by switching to bigger 53-foot containers. These are cargo holds used almost exclusively to move goods by truck and train within the United States.
Meanwhile, Home Depot sought to find alternative means of getting its cargo on time. The company was “creatively working to obtain additional capacity”. Instead of Los Angeles or Long Beach, the retailer sent its cargo by docking at San Diego, where the traffic is smaller.
Limit to Workarounds
While the workarounds do work, there are limits to their effectiveness. San Diego can handle much less cargo at around 500 containers from one or two ships per month. This is according to Greg Borossay, the port’s maritime business development principal.
In addition, San Diego doesn’t have the giant gantry cranes used to transport shipments from vessels to port and vice versa. The railway system can only accommodate automobiles and specialty cargo.
Finally, the roads surrounding the port are not set for the fleets of trucks needed to whisk thousands of containers to other parts of the country. “We’d have a very unhappy community if we had 3,000 (boxes) coming off a ship,” Borossay added.
Watch the TODAY show video reporting that cargo ships are backed up along US shores, causing shortages:
Do you agree with the retailers’ decision to charter their own cargo ships in order for products to make it in time for the holiday season? Or, do you foresee increased chaos and confusion as more ships and more cargo compete for the passage?
Tell us what you think about the current shipping crisis? Share your comments below.
Attention ALL Capitalist Subscribers: Elon Musk, Mark Cuban, and Richard Branson reveal how $25 gets you into one technology set to grow 2,000X BIGGER than Bitcoin.