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

Summary

The video discusses how supply chain chaos, particularly in the U.S., is impacting holiday orders. With record-high container ship congestion and a severe trucker shortage, retailers are facing significant delays and increased costs. Amazon, however, has taken strategic steps to mitigate these issues, including chartering its own cargo ships, producing its own containers, and expanding its logistics network. Despite these efforts, Amazon is not immune to challenges, as out-of-stock items have increased, and prices have risen. The video highlights Amazon's innovative strategies to maintain its supply chain efficiency during the crisis.

Takeaways

• 🚢 Supply chain chaos has led to a record high of 77 container vessels waiting in California's San Pedro Bay, with some ships having no docking appointment.
• 📉 Amazon has been proactive in avoiding supply chain issues by chartering its own cargo ships, making its own containers, and leasing long-haul planes for the first time.
• 💵 Amazon's strategy of controlling more of the shipping process allows it to reduce reliance on third-party shippers like UPS and the U.S. Postal Service, and gather more data to optimize shipping.
• 📈 Amazon's shipping costs increased from under $38 billion in 2019 to over $61 billion in 2020, and they now ship 72% of their own packages.
• 📦 The shortage of shipping containers has driven up prices from about $1,200 to $20,000 to ship a container from China to Los Angeles.
• 🚚 Amazon is addressing the trucker shortage by hiring 150,000 seasonal workers, a 50% increase from the previous year, offering sign-on bonuses, and expanding its warehouse capacity.
• ✈️ Amazon Air is expanding with 85 leased and owned aircraft, and is considering leasing larger long-haul planes to bypass port congestion.
• 🌎 Amazon has increased its ports of entry by 50%, expanded network partnerships, and doubled container processing capacity to alleviate supply chain issues.
• 🏭 The U.S. is experiencing a trucker shortage at an all-time high of 80,000, and Amazon is investing in its logistics infrastructure to mitigate this impact.
• 🌐 The global supply chain remains vulnerable to future disruptions, and Amazon's investments in controlling more of the process could provide a competitive edge.

Q & A

What is causing panic in the supply chain during the holiday season?

Supply chain chaos is caused by a record high of 77 container vessels waiting in California's San Pedro Bay, with some ships having no docking appointment, leading to fines for shipping companies starting November 1st.

How is the trucker shortage in the U.S. affecting the supply chain?

The trucker shortage, currently at an all-time high of 80,000, is exacerbating the supply chain issues, as it limits the transportation capacity for goods from ports to their final destinations.

What steps has Amazon taken to mitigate the impact of supply chain disruptions?

Amazon has chartered its own cargo ships, made its own containers, increased warehouse capacity, and leased long-haul planes for the first time to expedite high-priority goods from China to the U.S.

How has Amazon's strategy of chartering its own cargo ships benefited them?

By chartering its own cargo ships, Amazon can better control the shipping process, reducing reliance on other logistics companies and avoiding some of the delays impacting the industry.

What is the current situation with Amazon's out-of-stock items and pricing?

Amazon has seen a 14% rise in out-of-stock items since the start of the year and an average price increase of 25% on the site.

How much did Amazon spend on shipping in 2020, and how does it compare to 2019?

Amazon spent more than $61 billion on shipping in 2020, which is an increase from just under $38 billion in 2019.

What is the 'first-mile' in the context of supply chain management?

The 'first-mile' refers to the initial step in the supply chain where bulk orders are packed into shipping containers and the best journey across the ocean is orchestrated based on the value and destination of the goods.

Why are shipping containers currently in short supply and what is the impact on costs?

Shipping containers are in short supply due to an imbalance in trade, with more imports than exports. This has led to a significant increase in the cost to ship a container from China to Los Angeles, from about $1,200 pre-pandemic to around $20,000 currently.

What is Amazon's approach to dealing with the shortage of shipping containers?

Amazon is making its own 53-foot containers in China, using a company called CIMC, which allows them to ensure the availability of containers for their use and avoid the need to return them to Asia.

How is Amazon leveraging its Amazon Air cargo fleet to bypass port congestion?

Amazon is reportedly looking to lease at least 10 larger, long-haul planes that can hold more volume and traditionally fly across the North Pacific, allowing them to bypass congested ports and expedite the delivery of goods.

What is the potential environmental impact of the current supply chain situation?

The use of more smaller ships and increased flights by companies like Amazon to bypass port congestion can lead to higher carbon emissions due to less efficient engines and more ships being used.

What is the role of collaboration in addressing supply chain issues?

Collaboration between companies can help optimize the use of resources, such as combining shipments on trucks to reduce the number of vehicles on the road, and could potentially alleviate some of the supply chain bottlenecks.