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Pandemic Supply Chain Concerns Cause Retailers to Charter Cargo Transport

November 15, 2021

By Christopher Sirota

Key Takeaway: Delays in the retail supply chain caused by the pandemic have prompted some retailers to seek expensive workarounds such as chartering cargo ships and containers; in addition, a West Coast dock worker contract will expire mid-2022 which could potentially continue to further delays.

 The Wall Street Journal reports that delays in transpacific supply chains—such as the doubling of shipping times from Asia to the U.S.—have prompted some companies, including Home Depot, Costco, Walmart and even Coca-Cola, to seek alternatives as extreme as chartering cargo transport.

The Journal explains that these companies are ensuring more timely deliveries of their goods at a high cost: by chartering smaller cargo vessels—carrying only about 1,000 containers, compared to typical freight vessels that transport about 20,000 containers—they are likely paying twice as much as usual, and often raising some prices for consumers. The article explains that smaller vessels can reportedly increase the chance of timely delivery—especially important for seasonal demands—since they can dock at less congested ports and be rerouted to the East Coast.

Of concern, the Journal highlights that congestion at the huge Los Angeles and Long Beach ports has increased from about 25 ships monthly to up to 60 ships, and East Coast ports were also experiencing increased congestion.

The article notes that the chartered shipping alternative for some of these companies generally still represents a small percentage of their total shipping needs.

West Coast Port Concerns in 2022?

The Journal of Commerce reports that many U.S. dock workers on the West Coast operate under a contract that is set to expire on July 1, 2022. Industry experts are reportedly concerned that related negotiations may cause shipping delays since their contract negotiations since the 1990s have generally prompted such delays.

The article explains that one of the key items of contention is likely the issue of the rights of employers to implement automation of dock operations using, for example, various forms of robotics.

Of interest, the article notes how soaring cargo shipping rates, which have reportedly benefited ocean carriers during the pandemic, may play a part the negotiations, explaining as follows:

the [ocean] carriers [that negotiate with the International Longshore and Warehouse Union (ILWU)] may face a union more emboldened to seek concessions. That same factor on the other hand could prompt the carriers to more quickly seek a peaceful, even if costly, settlement if freight rates and vessel charter rates remain at lofty levels next year, given that any delays to ships or cargo would be especially costly.

Related Post:

Pandemic Shopping Logjams Shipping Ports (January 2021)

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