Report: Home Depot Joins Companies Chartering Private Ships to Circumvent Supply Chain Crisis

Cargo ships filled with containers dock at the Port of Los Angeles on September 28, 2021, in Los Angeles, California. (Frederic J. Brown/AFP via Getty Images)
Frederic J. Brown/AFP via Getty Images

Home Depot on Tuesday is reportedly joining other large companies chartering private ships to circumvent the supply chain crisis.

Walmart, Costco, Target, and Ikea have already hired private vessels to ship goods to smaller ports to avoid the backlog at ports reportedly fueled by a lack of truck drivers, Business Insider reported.

Vice President of transportation at Home Depot, Sarah Galica, told the Wall Street Journal October 10 that such an idea of private shipping started as a joke.

Empty shelves for N95 masks are seen at a Home Depot store in Alhambra, California on February 4, 2020. - As the coronavirus outbreak spreads, fueling rumors and misinformation, a petition to cancel all classes in one US school district for fear of the virus has garnered nearly 14,000 signatures. The online petition posted on urges the Alhambra Unified School District located east of Los Angeles and with a heavily Asian population, to basically shut down until the outbreak is over. School district officials, however, have dismissed the petition as a bid to whip up hysteria over the deadly outbreak that has killed hundreds in China. (Photo by Frederic J. BROWN / AFP) (Photo by FREDERIC J. BROWN/AFP via Getty Images)

Empty shelves for N95 masks are seen at a Home Depot store in Alhambra, California, on February 4, 2020. (Frederic J. Brown/AFP via Getty Images)

“It was almost started I think as a joke,” Galica said. “Let’s just charter a ship.”

While the large chartered vessels only contribute a small amount of Home Depot’s imported goods, Galica told the Journal the method helps the company maintain flexibility to keep certain items in stock. Those items include “plumbing supplies, power tools, holiday decorations, and heaters.”

“Using small boxships for transoceanic point-to-point sailings is something we’ve never seen before,” an Athens-based Capital Maritime Group chairman, Evangelos Marinakis, told the Journal.

Business Insider reports the chartered vessels are not as large as the typical 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.”

Containers stacked high are seen at the Port of Los Angeles on September 28, 2021, in Los Angeles, California. (Frederic J. Brown/AFP via Getty Images)

Containers stacked high are seen at the Port of Los Angeles on September 28, 2021, in Los Angeles, California. (Frederic J. Brown/AFP via Getty Images)

But the smaller ships are not less expensive. Chartering a private ship that can carry 3,000 twenty-foot containers can cost $40,000 per day on average, “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 Business Insider.

The ability of large companies to hire private charters is a huge advantage for the companies, as smaller businesses are unable to compete with large-scale private transit.

Douglas Kent with the Association for Supply Chain Management told Business Insider big companies always win when the supply chain is in crisis.

“Whenever we have a constrained supply like this it’s always the big dogs that win,” Kent said. “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,” Kent added. “As a result, we will likely see the shuttering of more companies due to these ongoing issues.”

In an aerial view, container ships are anchored by the ports of Long Beach and Los Angeles as they wait to offload on September 20, 2021, near Los Angeles, California. (Mario Tama/Getty Images)

The New York Times reported Sunday the supply chain crisis has expanded to ports. For instance, 8,000 shipping containers are stuck at the Port of Savannah – a full 50 percent more than normal. The New York Post reported October 7 there were “70 cargo ships waiting to dock at the Port of Los Angeles,” but the Los Angeles port is already full of containers waiting for drivers to pick up the freight.

Trucking companies are also reportedly struggling to find truck drivers to ease port backlogs. Old Dominion Freight Line will reportedly hire any driver with or without experience, KHQ NBC reported over the weekend. The need is so large, Old Dominion held a job fair Saturday to “hire 10 line drivers who can haul several trailers across the state” while offering to train anyone who wishes to earn a commercial driver’s license.

The truck driver shortage has about 13 percent of the “world’s cargo shipping capacity tied up by delays,” the Times reported.

But even if there were enough truck drivers, there is a shortage of warehouse space to put the freight. According to real estate company Cushman & Wakefield, warehouses are filling up and have scarce availability. Prices for the warehouse spaces are also at an all-time high.

Workers view a conveyor belt system that is under construction at an Amazon fulfillment center on August 10, 2017, in Sacramento, California. (Justin Sullivan/Getty Images)

As a result, the supply chain crisis is increasing prices for consumers. In August, inflation rose 5.3 percent compared to 2020. A Moody’s economist told the Post Friday that inflation is costing American workers and families an additional $175 a month.

“For households earning the US median annual income of about $70,000, the current inflation rate has forced them to spend another $175 a month on food, fuel and housing,” the Post reported on Mark Zandi’s findings.
Follow Wendell Husebø on Twitter @WendellHusebø


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