Walmart, Target and more private chartered ships to tackle depression-level supply chain issues
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Supply chain disruptions and shortages are pushing retailers to take matters into their own hands. MarketWatch reported that big retailers like Target and Walmart are chartering private ships to put products on shelves ahead of the holiday shopping season.
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Manufacturing shutdowns throughout the pandemic have slowed production, shipping container shortages have increased prices 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 problems are continually getting worse,” Janine Stichter, analyst for financial services firm Jeffries, told Bloomberg. For the remainder of the year, “the key success factor will be the ability to deliver the product on time, or relatively on time.”
Meanwhile, large 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 an emerging fashion brand, you can’t charter your own ship,” Michael Zimmerman, partner at global consulting firm Kearney, told MarketWatch. He says the rental of ships is a temporary solution.
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According to Zimmerman, the cost of renting a vessel is $ 1 million to $ 2 million per month, plus operating costs. Renting containers can cost several hundred dollars and the largest retailers use between 500 and 1,500 containers per month, MarketWatch noted.
Ship charter companies now have more flexibility and can avoid congested ports.
“We […] chartered our own container ship to regularly move Target cargo from overseas ports to the United States As co-managers of the vessel, we can avoid delays due to additional stops and avoid particularly safeguarded ports, ”wrote the company in a blog post posted on its site last month, MarketWatch reports.
The chief financial officers of Walmart and Costco have also spoken about chartering vessels during their earnings reports. Costco chartered three ships with several thousand containers to transport items from Asia to the United States and Canada.
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The world has never seen a supply chain problem like this before, even with the Great Depression in mind, Zimmerman added.
Last updated: October 8, 2021