Amazon has been chartering private cargo ships, making its own containers, and leasing planes to better control the shipping journey of online orders for years. As many retailers panic over supply chain chaos, Amazon has spent a lot of money to avoid long wait times for dock space and workers at the country's busiest ports of Long Beach and Los Angeles.
In November, ocean freight analyst Steve Ferreira told CNBC that there were up to 45 days of vessels sitting out there in Los Angeles.
Amazon can control where its goods go by chartering private cargo vessels.
Someone would think of putting something in an obscure port in Washington and then trucking it to L.A. Most people think that they can bring the ship into L.A., but then they have to wait two weeks and three weeks. The market needs to employ some of the niche strategies that Amazon has taken advantage of.
The average price increase at Amazon has been 25% since January 2021, according to the e- commerce management platform CommerceIQ.
Margaret Kidd is the Supply Chain & Logistics Technology program director at the University of Houston. When the cost of transportation goes up, it gets passed on to the consumer.
Amazon has been spending a lot to control the shipping process. It spent more than $60 billion on shipping in 2020, up from $38 billion in 2019. The number of Amazon's own packages is up from less than half in 2019.
It is taking control of the first step of the shipping journey by making its own 53-foot cargo containers in China. Prices have more than doubled from less than $2,000 before the epidemic to $20,000 today, as containers are in short supply.
Over the last two years, I have been tracking the production of these containers by Amazon. Once they unload them, guess what? They can be used in the domestic system and the rail system. They don't have to return them to Asia like everyone else.
On October 5, 2021, a cargo vessel called the Star Lygra called at the Port of Houston filled with Amazon containers.
On October 5, 2021, Amazon containers arrive at the Port of Houston.
Lauren Beagen, maritime lawyer and founder of Squall Strategies, said that by creating their own containers, they are guaranteeing that equipment will be available for them. She was working at the Federal Maritime Commission when Amazon first registered with the agency in 2015.
Amazon quietly began operating as a global freight forwarder through a Chinese subsidiary in 2017, helping move goods across the ocean for its Chinese sellers who pay to be part of the Fulfilled by Amazon program. The project was dubbed "Dragon Boat" by Amazon.
They are doing over 10,000 containers a month for Chinese small and medium-sized businesses. Amazon is considered an ocean vendor and would rank in the top five transportation companies in the Trans Pacific.
Walmart, Home Depot, Ikea and Target are among the retailers who are chartering their own vessels to get their goods unloaded sooner.
The purpose of the vessels when they were built was not containers. It was agricultural products. Because of the ingenuity and creativity and lack of space, Amazon and many other smart people have quickly figured out how to convert some of these vessels to container.
For some of the highest-margin goods, Amazon is avoiding ports altogether by reportedly leasing at least ten long-haul planes that can get smaller amounts of cargo directly from China to the U.S. 220,000 pounds of cargo can be carried on one of the converted Boeing 777 planes. According to estimates from Ocean Audit, the small 1,000-container freighters being chartered by Amazon and others can hold 180 times that, with the biggest cargo ships carrying more than 3,600 times what the planes can hold.
The supply chain has a strain on it.
A lot of jobs went open and unfilled after the great resignation. I think companies are trying to get more creative in attracting labor. Judy Whipple, professor of supply chain management at Michigan State University, said it might be signing bonuses.
Amazon is offering sign-on bonuses of up to $3,000 to all the 150,000 seasonal workers it is hiring this year to fight the worker shortage. 100,000 seasonal workers were hired last year.
The 50,000 increase in employees this year is probably because people are doing the unloads. John Esborn, the head of international transportation for Amazon, said that they want to get the goods on the shelves in the fulfillment centers as quickly as possible.
The seasonal workers are unloading and loading, picking and packing at more than 250 new facilities that Amazon says it opened in the U.S. just in 2021.
In the video, you'll learn how Amazon is avoiding the worst of the supply chain crisis this holiday season.
