![]() ![]() The only way that this works is if a smaller number of shipping companies are serving a larger number of customers, and doing so on a set schedule such that those customers can easily coordinate their logistics (which means that all of those capex and opex numbers have be multiplied by 7, to guarantee a sailing-per-week). This means that the ship has to be as fully loaded as possible. More than that, the marginal costs per trip - it takes around seven weeks to do a trans-Pacific round trip in normal times - is significant as well, around $5 million. Right off the bat you can see that shipping has a massive fixed cost component that dictates that the asset in question be utilized as much as possible. While container ships can range as high as 18,000 TEUs, a typical trans-Pacific ship is about 8,000 TEUs (which is around 6,500 fully loaded containers), and costs around $100 million. This vertical integration, though, stops at the ocean, for reasons that are obvious once you think through the economics of shipping. This investment is vast: Amazon is also leasing planes, just opened a new Air Hub in Cincinnati (Amazon was previously leasing DHL’s package hub during off hours), built (or is building) over 400 distribution and sortation centers in the United States alone, and has farmed out a huge delivery fleet to independent operators who exist only to serve Amazon, all with the goal of cost efficiently getting orders to customers within two days, and eventually one. In other words, yes, Amazon has been making a whole bunch of containers, but those containers are not and can not be used for shipping they are an investment into Amazon’s domestic delivery capability. Guess, by the way, how long those trailers are? 53 feet. This isn’t simply a matter of will what made containers so revolutionary was their standardization, which not only extends to ships but also the gantry cranes used to load and unload them, the truck chassis used to move them around ports, and the storage racks that hold them until they can be unloaded and their contents transferred onto semi tractor-trailers. 1 TEU - twenty-foot equivalent unit) and 40 foot (2 TEUs) there are a small number of 45 foot containers, but there is one number that does not exist - 53 foot containers. ![]() Start with those containers the vast majority of shipping containers come in two sizes: 20 foot (i.e. I’ll get to who the intended target for this message is in a moment, but there is an important question that needs to be asked first: is this even true? Shipping and the Supply Chain The intended takeaway of this article - which originated as a digital special report - is clear: Amazon is better and smarter and richer than any other retailers, and isn’t suffering the same sort of supply chain challenges that everyone else is this Christmas. Containers are in short supply, with long wait times and prices surging from less than $2,000 before the pandemic to $20,000 today. It’s even taking control at the first step of the shipping journey by making its own 53-foot cargo containers in China. Now, Amazon is shipping 72% of its own packages, up from less than 47% in 2019 according to SJ Consulting Group. It spent more than $61 billion on shipping in 2020, up from just under $38 billion in 2019. Still, Amazon has seen a 14% rise in out-of-stock items and an average price increase of 25% since January 2021, according to e-commerce management platform CommerceIQ…Īmazon has been on a spending spree to control as much of the shipping process as possible. Now, as many retailers panic over supply chain chaos, Amazon’s costly early moves are helping it avoid the long wait times for available dock space and workers at the country’s busiest ports of Long Beach and Los Angeles…īy chartering private cargo vessels to carry its goods, Amazon can control where its goods go, avoiding the most congested ports. ![]() From CNBC:įor years, Amazon has been quietly chartering private cargo ships, making its own containers, and leasing planes to better control the complicated shipping journey of an online order.
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