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Home Depot executive said that the idea to charter ships started as a sort of joke. - Since then, the retailer has begun flying in power tools and buying goods on the spot market.
Major companies are scrambling to find ways to overcome historic shipping delays. For Home Depot, an idea that started as a sort of joke has helped the company meet consumer demand.
Sarah Galica, the chain's vice president of
"It was almost started I think as a joke," Galica said. "Let's just charter a ship."
By June, Home Depot was not only chartering its own ships but also flying in items like power tools and snatching up goods on the spot market - a buying option that can cost as much as four times pre-established contract rates.
While the chartered ships only make up a small portion of Home Depot's imported goods, Galica told the Journal the practice has helped the company prioritize goods and keep in-demand products in stock. The chartered ships help move plumbing supplies, power tools, holiday decorations, and heaters, as well as several other items, according to Galica.
Home Depot is one of many major retailers to turn toward chartering ships. Walmart, Costco, Target, and Ikea have also taken up the practice. More recently, Coca-Cola revealed it has begun chartering bulk containers that are usually reserved for hauling raw materials like coal, iron, and grain.
The chartered ships are significantly smaller than traditional container ships. For comparison, they move an average of about 1,000 containers, as compared to typical vessels that haul as much as 22,000 20-foot containers. In August, Walmart said the smaller vessels were part of its plan to avoid main thoroughfares like those in Southern California for smaller ports with fewer delays.
Though the ships are smaller, they come with a hefty price tag. Chartering a vessel can cost an average of $40,000 per day for a vessel carrying 3,000 20-foot containers - a rate which can add up to be even higher than record rates of over $20,000 to ship a 20-foot container from Asia to the US, according to the Drewry World Container Index.
Vicky Zervou, a sales manager at Athens-based freight forwarder Aritrans, told The Journal the companies' maneuvering will likely help them bring in inventory in time for the holiday shopping season. But, experts have said in the past that the expenditures might make for a more expensive shopping season for consumers. Several companies have already begun raising prices to offset the additional transportation costs.
Ultimately, supply-chain snags are likely to add dominance to big-box retailers, while cutting out smaller companies that don't have the extra funds to charter their own vessels or ship via cargo planes.
"Whenever we have a constrained supply like this it's always the big dogs that win," the Association for Supply Chain Management's Douglas Kent told Insider last month. "The smaller businesses just don't have the capital to keep up. They're already in survival mode. They're going to have to pass these costs on to customers and risk losing out to big-box retailers that can absorb the costs themselves. As a result, we will likely see the shuttering of more companies due to these ongoing issues."
Do you work in the shipping industry? Reach out to the reporter from a non-work email at gkay@insider.com