Walmart, Target and More Charter Private Ships To Combat Great Depression-Level Supply Chain Issues
Supply chain disruptions and shortages are pushing retailers to take matters into their own hands. MarketWatch reported that major retailers like Target and Walmart are chartering private ships to get products on shelves before the holiday shopping season.
Manufacturing shutdowns throughout the pandemic have slowed production, shipping container shortages have pushed up the price 10-fold from a year ago and labor shortages have limited the number of truck drivers or workers to get items to warehouses.
“Supply chain issues are getting continually worse,” Janine Stichter, an analyst for financial services company Jeffries, told Bloomberg. For the rest of the year, “the key success factor will be the ability to supply product on time, or relatively on time.”
Meanwhile, major retailers are using their financial resources to avoid delays for the holiday season, but at a considerable cost.
“If you’re a mid-size retailer or emerging fashion brand, you can’t rent your own ship,” Michael Zimmerman, partner at global consulting firm Kearney, said to MarketWatch. He says leasing ships is a temporary solution.
According to Zimmerman, the cost to lease a ship is $1 million to $2 million per month, plus operating costs. Renting the containers can add on several hundred dollars and the biggest retailers are using between 500 and 1,500 containers per month, MarketWatch noted.
The companies chartering ships now have more flexibility and can avoid congested ports.
“We […] chartered our own container ship to regularly bring Target merchandise from overseas ports to the U.S. As co-managers of the ship, we can avoid delays from additional stops and steer clear of particularly backed-up ports,” the company wrote in a blog post published on its site last month, MarketWatch reports.
Chief financial officers at Walmart and Costco also spoke about chartering ships during their earnings reports. Costco has chartered three ships with several thousand containers to move items to the U.S. and Canada from Asia.
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The world has never seen a supply chain issue like this one before, even when taking the Great Depression into account, Zimmerman added.
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Last updated: October 8, 2021