Costco Charters Smaller Containerships to Combat Ocean Supply Chain Issues

Costco has chartered three container ships and leased thousands of containers as the membership-based wholesale retailer looks to secure the delivery of products from Asia amid port congestion and container shortages in ocean shipping, Chief Financial Officer Richard Galanti said in a Q4 2021 earnings call with analysts.

Costco joins other retailers including Home Depot, Walmart and Ikea who are taking matters into their own hands by chartering their own containerships.

Each ship can carry between 800 and 1,000 containers and will make approximately 10 deliveries in 2022, Galanti said, adding that leasing the ships and containers is a cost-effective alternative to third-party shippers that would cost six times more.

“Containers, trucks and drivers all are impacting the timing of deliveries and higher freight costs. Despite all these issues, we continue to work to mitigate cost increases in a variety of different ways and hold down and/or mitigate our price increases passed on to the members. We’ve also chartered three ocean vessels for the next year to transport containers between Asia and the U.S. and Canada,” said Galanti.

“And we’ve leased several thousand containers for use on these ships. Every ship can carry 800 to 1,000 containers at a time, and we’ll make approximately 10 deliveries during the course of the next year. Moving to inflation. Again, there have been many — there have been a variety of inflationary pressures that we and others are seeing, and more of it.

“As I discussed on last quarter’s call, inflationary factors abound: higher labor costs, higher freight costs, higher transportation demand, along with container shortages and port delays, increased demand in certain product categories, various shortages of everything from computer chips to oils and chemicals, higher commodities prices. It’s a lot of fun right now. Some inflationary soundbites, if you will. Price increases on items shipped across the oceans, some suppliers or us paying to six times for containers and shipping,” Galanti said.

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