How Amazon can defeat supply chain disruptions on ships and long-haul planes

For years, Amazon has quietly chartered commercial cargo ships, created its own containers, leased planes, and better managed the complex routes of online orders. As many retailers are now in a hurry in supply chain disruptions, Amazon’s costly early move is the longest waiting time for workers and dock space available at the country’s busiest Long Beach and Los Angeles ports. Helps to avoid.

“Los Angeles has 79 vessels waiting to arrive at the port for up to 45 days,” maritime cargo analyst Steve Ferreira told CNBC in November. “Amazon’s latest venture I’ve been tracking for the past two days has been waiting at the port for two days.”

By chartering a private freighter to carry cargo, Amazon can avoid the busiest ports and manage the destination of its goods.

“Who else thinks of putting something in an ambiguous port in Washington and trucking it to Los Angeles? Most people think they’ll just ship the ship to Los Angeles, but for two weeks. I have three weeks of experience-Amazon is actually taking advantage of some of the niche strategies I believe the market needs to adopt. “

Still, according to the e-commerce management platform CommerceIQ, Amazon has seen a 14% increase in out-of-stock items and a 25% increase in average price since January 2021.

Margaret Kidd, Director of Supply Chain & Logistics Technology Program at the University of Houston, said: “Ultimately, when shipping costs are high, they are passed on to consumers.”

Amazon has been spending to manage as many shipping processes as possible. According to the SJ Consulting Group, Amazon spent more than $ 61 billion on shipments in 2019, up from just under $ 38 billion in 2019. Currently, Amazon ships 72% of its packages, up from less than 47% in 2019.

By manufacturing its own 53-foot freight container in China, it controls even the first steps of its transportation journey. Containers are scarce, with long wait times and prices skyrocketing from less than $ 2,000 before the pandemic to $ 20,000 today.

“Amazon has probably produced 5,000 to 10,000 of these containers in the last two years I’ve been tracking,” Ferreira said. “When you bring these containers into US soil, what do you guess if you unload them? They will be used in domestic and rail systems. You don’t have to return them to Asia like everyone else. “

A cargo ship called Star Ligra called at the Port of Houston on October 5, 2021 and was filled with Amazon containers.

Amazon containers arrive at Houston Port on October 5, 2021 by Star Ligra cargo ship

Port Houston

“Creating your own container basically guarantees that your equipment will be available,” said Lauren Beagen, a maritime lawyer and founder of Squall Strategies. She worked for the Federal Maritime Commission when Amazon first registered with the agency in 2015. This is the first sign that Amazon was investigating its own marine freight business.

Then, in 2017, Amazon quietly began operating as a global freight carrier through its Chinese subsidiary, helping Chinese sellers pay as part of the Fulfilled by Amazon program to move goods across the ocean. Did. Internally, Amazon calls this project a “dragon boat.”

“They handle more than 10,000 small and medium-sized Chinese exporters’ containers a month. Amazon’s quantity as a marine vendor — yes, I heard it’s right, but they are considered marine vendors. — We will rank them in the top five Transpacific shipping companies. “

This season, several other major retailers such as Wal-Mart, Costco, The Home Depot, IKEA and Target are also berthing their vessels to bypass the busiest ports and unload goods faster. increase.

“The real purpose when these ships were built was not the container. It was really timber, chemicals, grain, produce. But due to ingenuity and creativity, and lack of space, the Amazon and Many other wise people quickly figured out how to do that, to turn some of these multipurpose vessels into containers, “Fereira said.

For some of the highest-margin products, Amazon has completely avoided the port by leasing at least 10 long-haul planes that can carry small cargoes much faster directly from China to the United States. I am. One of the modified Boeing 777s can carry a cargo of £ 220,000. According to the estimated capacity of Ocean Audit, a 1,000-container small cargo ship chartered by Amazon and others can hold 180 times the capacity, and the largest cargo ship can hold more than 3,600 times the capacity of an airplane.

Another burden on the supply chain is human resources.

“I’ve heard a lot about the mass resignations that many jobs are open and unfilled, so companies want to be very creative in attracting workers,” said Judy Whipple. I think I’m a professor of supply chain management at Michigan State University.

Amazon has a sign-on bonus of up to $ 3,000 for all 150,000 seasonal workers hired this year to combat labor shortages, and because of its constant workload and reputation at incredible speed. Says it offers. Last year it hired 100,000 seasonal workers.

“The increase of 50,000 employees this year compared to last year is probably the unloading people. They are receiving these containers in the last second, man, they are unloading their goods. I want to put it on the shelf of the fulfillment center as soon as possible. ” John Esborn, formerly responsible for Wayfair’s logistics operations and now head of the international transportation division of Amazon aggregator Perch.

Amazon states that it opened in the United States in 2021. This clearly shows that we are planning the warehouse capacity, which is the last bottleneck in the supply chain backlog, much ahead of schedule.

Watch the video to learn more about Amazon’s bold and costly ways to avoid the worst supply chain crisis of this holiday season.

How Amazon can defeat supply chain disruptions on ships and long-haul planes

Source link How Amazon can defeat supply chain disruptions on ships and long-haul planes

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