How Amazon Beat Supply Chain Chaos With Ships, Containers And Planes

Introduction

As online holiday orders surge, the global supply chain chaos has caused significant panic. A record-high 77 container vessels are currently waiting off California's San Pedro Bay, with many of these ships being unscheduled charters without docking appointments. The ports of Los Angeles and Long Beach have announced fines for shipping companies that leave their containers on the dock, starting November 1st. Meanwhile, the U.S. faces an all-time high trucker shortage of 80,000 drivers. Amidst this turmoil, Amazon has implemented several innovative strategies to mitigate the impact of these disruptions.

Amazon's Strategic Moves

Amazon's Preemptive Actions

To stay ahead of supply chain issues, Amazon started taking steps as early as 2020. The company has chartered its own cargo ships and created its containers, doubled down on workers and warehouses, and even leased long-haul planes to expedite high-priority goods from China to the U.S. Despite a 14% rise in out-of-stock items and a 25% increase in prices, consumers have felt the impact minimally due to Amazon's extensive preparations.

Investments and Control

Amazon has invested tens of billions to control much of its supply chain process, reducing its dependency on third-party services like UPS and the U.S. Postal Service. These investments also minimize vulnerabilities to industry-wide delays, with Amazon shipping 72% of its packages in 2020, up from 47% in 2019.

The Complex Supply Chain Journey

First Mile to Last Mile

Amazon's supply chain journey begins with predictive ordering of items from China, packing bulk orders into shipping containers, and orchestrating optimal routes based on value and destination. The journey typically involves several stages:

First Mile: Loading containers onto massive cargo vessels.
Port to Warehouse: Unloading at ports and transporting to fulfillment centers.
Last Mile: Finally fulfilling customer orders through its network of drivers or partners like UPS and the Postal Service.

Container Shortage and Solutions

Increased demand has led to a significant container shortage, driving the cost of shipping containers from $ 1,200 pre-pandemic to $ 20,000 today. Amazon has responded by manufacturing its own containers in China and using chartered vessels to minimize reliance on congested ports. This strategy also avoids the need to return containers to Asia, unlike other companies.

Creative Workarounds

Chartering Ships and Ports

Amazon and other major retailers like Walmart, Home Depot, and Target have started chartering smaller ships and using less congested ports. Smaller freighters, although more expensive, can quickly unload at ports like Everett, Washington, or Houston.

Amazon Air Fleet

Since 2016, Amazon has built an air cargo fleet of 85 aircraft, leasing 10 larger planes recently to bypass the busiest ports altogether. Although air transport is costly, for high-margin goods, it represents a viable alternative.

Addressing Workforce Shortages

To combat workforce shortages, Amazon heightened its seasonal hiring, offering $ 3,000 sign-on bonuses to 150,000 employees. The addition of 250 new facilities in 2021 also indicates Amazon's long-term strategy to buffer against supply chain disruptions.

Future Vulnerabilities and Solutions

Despite Amazon's robust strategies, the global supply chain remains susceptible to backlogs and shortages. The recent $ 1.2 trillion infrastructure law signed by President Biden aims to alleviate some of these pressures.

According to Lauren Beegan, a former Federal Maritime Commission official, collaboration among industry players could provide a long-term solution to the crises. Efficiently sharing transportation resources could significantly reduce redundancies and emissions.

Keywords

Keywords:

Amazon
Supply Chain
Logistics
Containers
Cargo Ships
Air Fleet
Trucking Shortage
Capacity Management
Predictive Ordering
Ports of Los Angeles and Long Beach

FAQ

FAQ:

Q: How has Amazon mitigated the impact of supply chain disruptions? A: Amazon has chartered its own cargo ships, created its containers, expanded worker and warehouse capacity, and leased long-haul planes to expedite high-priority goods.

Q: What steps has Amazon taken to reduce dependency on third-party shipping? A: Amazon has invested tens of billions to control much of its supply chain, reducing its dependency on services like UPS and the Postal Service, and increasing its shipping capacity to 72%.

Q: How does Amazon's predictive ordering process work? A: Amazon uses data to predict what items will sell and where, ordering these items early at bulk prices, often from China, and orchestrating the best routes for their delivery.

Q: What challenges have arisen in shipping containers during the pandemic? A: A significant shortage of shipping containers has driven up costs dramatically, from $ 1,200 pre-pandemic to $ 20,000 today.

Q: What innovative measures is Amazon taking with its air fleet? A: Amazon has built an air cargo fleet, leasing larger planes capable of holding more volume to bypass congested ports and ensure faster deliveries.

Q: How is Amazon addressing workforce shortages? A: Amazon is offering up to $ 3,000 sign-on bonuses and has hired 150,000 seasonal workers to manage increased demand and streamline fulfillment processes.