Amazon Emerging as Top ‘Ocean Vendor’ as it Skirts Supply Chain Using Private Vessels

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

The online behemoth Amazon is trying to bypass the supply chain crisis by hiring private shipping vessels to transport products to customers from around the world, a move that reflects the retailer’s increasing global influence.

Ocean freight analyst Steve Ferreira said in a CNBC report:

They are doing over 10,000 containers per month of the small- and medium-sized Chinese exporters. Amazon’s volume as an ocean vendor — that’s right, you heard me correct, they’re considered an ocean vendor — would rank them in the top five transportation companies in the Trans Pacific.

This isn’t the first time the retailer has hired private ships to transport goods, according to CNBC. But Amazon has expanded its plan, which has cut waiting times in ports from more than a month to just days.

“Los Angeles, there’s 79 vessels sitting out there up to 45 days waiting to come into the harbor,” Ferreira said. “Amazon’s latest venture that I’ve been tracking in the last two days, it waited two days in the harbor.” Ferreira said:

Who else would think of putting something going into an obscure port in Washington, and then trucking it down to L.A.? Most people are thinking, well, just bring the ship into L.A. But then you’re experiencing those two-week and three-weeks delay. So Amazon’s really taken advantage of some of the niche strategies I believe that the market needs to employ.

Amazon has produced probably 5,000 to 10,000 of these containers over the last two years I’ve been tracking it. Ferreira said. When they bring these containers onto U.S. soil, once they unload them, guess what? They get to be used in the domestic system and the rail system. They don’t have to return them to Asia like everyone else does.

Even so, Amazon is still feeling the pinch like other retailers because of the supply chain crisis, including a 14 percent rise in out-of-stock items and an average price increase of 25 percent since January 2021, according to the e-commerce management platform CommerceIQ.

CNBC reported on Amazon’s move:

Amazon has been on a spending spree to control as much of the shipping process as possible. It spent more than $61 billion on shipping in 2020, up from just under $38 billion in 2019. Now, Amazon is shipping 72% of its own packages, up from less than 47% in 2019 according to SJ Consulting Group.

It’s even taking control at the first step of the shipping journey by making its own 53-foot cargo containers in China. Containers are in short supply, with long wait times and prices surging from less than $2,000 before the pandemic to $20,000 today. A cargo vessel called the Star Lygra called at the Port of Houston on October 5, 2021, filled with Amazon containers.

Then in 2017, Amazon started quietly operating as a global freight forwarder through a Chinese subsidiary, helping move goods across the ocean for its Chinese sellers who pay to be part of the Fulfilled by Amazon program. Internally, Amazon dubbed this project “Dragon Boat.”

Amazon is also using long-haul aircraft to transport its “highest-margin goods,” which can get smaller amounts of cargo from China to the U.S. much faster.

A handful of other major retailers are also chartering vessels, including Walmart, Costco, Home Depot, Ikea, and Target, according to CNBC.

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