For several years, Amazon has quietly chartered private cargo ships, built its own containers and chartered planes to better control the complex shipping journey of an online order. Now, as many retailers panic over supply chain chaos, Amazon’s costly initial moves are helping them avoid long wait times for parking and labor at Long Beach ports. and Los Angeles is the country’s busiest.
“Los Angeles, there’s 79 ships sitting out there for up to 45 days waiting to dock,” shipping analyst Steve Ferreira told CNBC in November. “Amazon’s newest venture I’ve been following for the past two days. , it waited two days in the harbor.”
By hiring private cargo ships to transport its goods, Amazon can control where its goods go, avoiding the most congested ports.
“Who else would think of putting something in a little-known port in Washington, and then shipping it down to LA? Most people think, let’s get the ship into LA,” Ferreira said.
However, Amazon has seen a 14% increase in out-of-stock items and an average price increase of 25% since January 2021, according to the e-commerce management platform. CommerceIQ.
“Consumers feel prices go up for everything they buy,” said Margaret Kidd, program director of Logistics & Supply Chain Technology at the University of Houston. “Ultimately, when there’s an increase in the cost of shipping, it goes to the consumer.”
Amazon has spent heavily to control as much of the shipping process as possible. It spent more $61 billion for shipping in 2020, up from just under $38 billion in 2019. Now, Amazon is shipping 72% of its own packages, up from less than 47% in 2019 based on SJ . Consulting Group.
It even took control at the first step of its shipping journey by manufacturing its own 53-foot cargo containers in China. Containers are in short supply, with long wait times and prices rising from under $2,000 before the pandemic to $20,000 today.
“Amazon has produced about 5,000 to 10,000 of these containers over the past two years,” Ferreira said. “When they bring these containers onto American soil, once they unload them, guess what? They’ll be used in the domestic system and the rail system. They don’t have to return them to Asia like everyone else. .”
A cargo ship called the Star Lygra has called in Port of Houston on October 5, 2021, filled with Amazon containers.
Amazon containers will arrive at the Port of Houston aboard the Star Lygra cargo ship on October 5, 2021
Port of Houston
Lauren Beagen, maritime attorney and founder of Squall’s Strategy. She worked at Federal Maritime Commission when Amazon first registered with the agency in 2015, the first sign it was exploring its own ocean freight business.
Then in 2017, Amazon began quietly operating as a global freight forwarder through a Chinese subsidiary, helping to ship goods across oceans for their Chinese sellers, people who pay to be part of Made by Amazon program. Internally, Amazon calls the project “Dragon Boat”.
“They’re making over 10,000 containers a month for China’s small and medium-sized exporters. Amazon’s volume as a seaborne supplier – yes, you heard me correctly, they are considered to be a seaborne supplier – would rank them in the top five Ferreira said.
This season, some other major retailers – Walmart, Costco, Home Depot, Ikea and Target – also charter their own ship Ships pass through the busiest ports and unload earlier.
“The real purpose of these ships when they were built was not a container. It was really wood, chemicals, grain, agricultural products. But for the sake of ingenuity and creativity and without space, Amazon and many other smart people quickly figured out how Ferreira spoke.
For some of the items with the highest margins, Amazon is avoiding ports altogether by reported chartering at least ten long-haul aircraft can transport smaller volumes directly from China to the US much faster. One of the converted Boeing 777 planes can carry 220,000 pounds of merchandise. According to the power estimate from Ocean Audit, 1,000-container small cargo ships chartered by Amazon and others can hold 180 times as much as the largest cargo ships that can carry 3,600 times what planes can hold.
Another strain on the supply chain is manpower.
Judy Whipple said: “We’ve heard a lot about big resignations, with a lot of jobs left open and unfilled. So I think companies are looking for more creative ways to attract attention. It could be signing bonuses, paying higher wages,” said a professor of supply chain management at Michigan State University.
To combat worker shortages – and a reputation for relentless workloads and breakneck speeds – Amazon says it’s offering up to $3,000 in sign-in bonuses to all 150,000 seasonal workers it’s recruiting this year. Last year, it rented 100,000 seasonal workers.
“The 50,000 increase in staff this year compared to last year is probably the people doing the loading and unloading. They’ve got these containers coming in at the last second, man, they want to unload those goods and get them on board. shelves in fulfillment centers as quickly as possible,” said John Esborn, who used to run logistics for Wayfair and is now head of international shipping for general company Amazon Perch.
Seasonal workers are loading and unloading, picking and packing at more than 250 new facilities Amazon says it’s opening in the US in 2021 – a clear sign it’s planned a lot ahead for the final bottleneck in the supply chain backlog: warehouse capacity.
Watch the video to learn more about all the bold and expensive ways Amazon is avoiding the worst of the supply chain crisis this holiday season.
