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Big Retailers Try to Save Christmas by Chartering Ships

Home Depot, Costco, Walmart, Target, and Dollar Tree have turned to private ship charters in an effort to stock shelves for the holiday season.
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Container ships waiting

The Wall Street Journal reports Biggest U.S. Retailers Charter Private Cargo Ships to Sail Around Port Delays

Global supply-chain delays are so severe that some of the biggest U.S. retailers have resorted to an extreme—and expensive—tactic to try to stock shelves this holiday season: They are chartering their own cargo ships to import goods.

The chartered ships are smaller than those that companies like Maersk operate and move just a small slice of total imports, the executives said. Ships that can hold around 1,000 containers are on average nearly twice as expensive as the cost of moving cargo on a typical 20,000-container vessel, according to freight forwarders.

Shipbrokers said small vessels chartered for point-to-point voyages now earn around $140,000 a day, multiple times more than levels before the pandemic, when such sailings were rare because of the high cost. “They at least know that the inventory will arrive in time for the Christmas rush,” said Vicky Zervou, a sales manager at Athens-based freight forwarder Aritrans SA.

Chartering ships is a tactic that is out of financial reach for small retailers, giving large companies a potential advantage in the coming months.

At Dollar Tree Inc.regular shipping carriers are fulfilling around 60% of their contracted commitments with the discount retailer, Chief Executive Michael Witynski said in September. The 16,000-store company is securing dedicated space on chartered vessels for the first time

Port Bottlenecks

The advantage of smaller ships is more ports are able to handle the merchandise. 

Although many smaller ports are backed up, the congestion is not as big as at the larger ports.

Manufacturing and Service Disruptions 

The latest ISM Reports were interesting, not so much for the numbers, but for the observations. 

ISM Manufacturing Observations

  • “Business Survey Committee panelists reported that their companies and suppliers continue to deal with an unprecedented number of hurdles to meet increasing demand. 
  • All segments of the manufacturing economy are impacted by record-long raw materials lead times, continued shortages of critical materials, rising commodities prices and difficulties in transporting products.
  • Global pandemic-related issues — worker absenteeism, short-term shutdowns due to parts shortages, difficulties in filling open positions and overseas supply chain problems — continue to limit manufacturing growth potential."

ISM Service Comments 

  • “Transportation bottlenecks are increasing, resulting in longer lead times and missed appointments.” [Accommodation & Food Services]
  • “Constraints on logistics from a cost and availability standpoint continue to be an issue.” [Construction]
  • “Lead times on electronics and computer chips have greatly increased. Outlook for higher education remains flat for most colleges, not including elite and Ivy League institutions.” [Educational Services]
  • “The semiconductor (shortage is) impacting server delivery. Alternate parts and engineering efforts are being used to create workaround solutions.” [Information]
  • “Both domestic and international logistics are increasing lead times about six weeks for ocean freight and two weeks for domestic freight.” [Management of Companies & Support Services]
  • “Inventories shrinking due to global shipping logistics being a seller’s/provider’s market, with primary focus on yield versus market expansion.” [Professional, Scientific & Technical Services]
  • “Demand far outweighs supply for goods and services.” [Transportation & Warehousing]
  • “We continue to deal with extended delivery lead times and high costs. Stress on the supply chain beginning to be reflected in the quality of products offered and delivered. Current buying strategy is to wait — except with equipment, as (price) increases are expected.” [Utilities]

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L.O.L. Dolls Stuck in the Chain

LOL Dolls

Finally, please consider L.O.L. Dolls Are Stuck in the Supply Chain. John Baker Must Free Them Before Christmas.

A toy traffic jam is threatening to ruin Christmas. John Baker’s job is to save the day. Mr. Baker is the logistics boss at MGA Entertainment Inc., the company behind L.O.L. Surprise dolls, Little Tikes cars and other popular toys. His job is simple only in description: Retrieve the items in time for the holidays by overcoming a jammed-up global supply chain that is holding them hostage.

Mr. Baker had already faced weeks of warnings that Chinese factory owners were running out of storage space. If Mr. Baker couldn’t get the toys shipped out of Shenzhen soon, they would stop making any more. His boss, Issac Larian, founder and chief executive of MGA, issued near daily reminders: “Christmas is on December 25.”

“I feel like my team is down by five points with 10 seconds left on the clock,” Mr. Baker said. “We’re just running out of time.”

His supply-chain problem is testing leaders across America, from the makers of Nike sneakers to Ford pickup trucks to Whirlpool washing machines. “It’s more dramatic than what I can remember,” Walmart Inc. Chief Executive Doug McMillon said in September.

Truck transport shortages slowed the movement of toys from MGA’s warehouse in Hesperia to retailers. The company’s three-story facility, the size of 10 football fields, wasn’t big enough to hold all of the arriving toys. 

More than 200 trailers full of toys sat in a parking lot. Other containers were put on an access road. A few of them got parking tickets.

The extra costs, everything from warehouse space to higher freight rates, were adding up. MGA had to notify customers that prices would be going up. L.O.L. Dolls that cost $10 would sell for $12; larger dolls in the line would go up to $35 from $29.

The effort by big retailers to save Christmas despite major bottlenecks is on. Some of these efforts are more than a bit amusing, at least to bystanders. But that effort is expensive. 

Prices seem certain to rise and smaller merchants might not get key goods in time.

Assuming the goods show up on time, here's the key question: Will shoppers even show up? 

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