Home Depot executive says chartering ships to sidestep the supply-chain crisis ‘started as a joke.’ Now it’s a critical lifeline for decorations, plumbing supplies, heaters, and more
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- A Home Depot manager said the idea of chartering ships started out as something of a hoax.
- Since then, the dealer has been flying in power tools and buying goods on the spot market.
- Home Depot is one of many companies looking for creative ways to overcome historical shipping delays.
Large companies are looking for ways to overcome historical shipping delays. For Home Depot, an idea that started as a kind of hoax has helped the company meet consumer demand.
Sarah Galica, vice president of transportation for the chain, told the Wall Street Journal that executives were looking for new ways to get goods in faster in May when the idea of charter private vessels was abandoned.
“I think it almost started out as a joke,” said Galica. “Let’s just charter a ship.”
In June, Home Depot not only chartered its own ships, but also flew in items like power tools and snapped goods on the spot market – an option to buy that can cost up to four times the contract rates previously set.
While the chartered ships make up only a small fraction of Home Depot’s imported goods, Galica told the Journal the practice has helped the company prioritize goods and keep in-demand items in stock. According to Galica, the chartered ships will help transport plumbing supplies, power tools, Christmas decorations, and heaters, as well as several other items.
Home Depot is one of many major retailers turning to ship chartering. Walmart, Costco, Target and Ikea have also taken over the practice. Recently, Coca-Cola announced that it has begun chartered bulk containers, usually reserved for the transportation of raw materials like coal, iron, and grain.
The chartered ships are significantly smaller than conventional container ships. For comparison: They move an average of around 1,000 containers compared to typical ships that transport up to 22,000 20-foot containers. In August, Walmart said the smaller ships were part of its plan to avoid major highways like the one in Southern California for smaller ports with fewer delays.
Although the ships are smaller, they come at a high price. Chartering a ship can cost an average of $ 40,000 per day for a ship with 3,000 20-foot containers – a rate that can be even higher than the record rates of over $ 20,000 for a 20-foot container shipping from Asia to the USA. according to the Drewry World Container Index.
Vicky Zervou, a sales manager at Athens freight forwarder Aritrans, told The Journal that the companies’ maneuvers will likely help them get their stocks in time for the holiday shopping season. However, experts have said in the past that consumer spending could result in a more expensive shopping season. Several companies have already started raising prices to offset the additional transportation costs.
Ultimately, supply chain hackiness is likely to give big retailers dominance and exclude smaller businesses that don’t have the extra funds to charter their own ships or ship them on cargo planes.
“Whenever we have such a tight supply, the big dogs always win,” Douglas Kent of the Association for Supply Chain Management told Insider last month. “The smaller companies just don’t have the capital to keep up. You are already in survival mode. You have to pass those costs on to customers and risk losing to large retailers who can bear the costs. “As a result, we are likely to close more businesses because of these ongoing problems.”
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