Yay or nay? After the stock split, are you getting more?
Managing hundreds of thousands of employees during a pandemic adds significant costs to the bottom line. Well-publicized supply-chain bottlenecks also caused prices to rise faster than the company passed them to consumers.
In addition, we saw inflationary pressures in raw materials and services, as I mentioned, particularly in steel and third-party trucking. We also saw over $1 billion of cost tied to lost productivity and disruption in our operations. In Q3, labor became our primary capacity constraint, not storage space or fulfillment capacity. As a result, inventory placement was frequently redirected to fulfillment centers to have the labor to receive the products.
This resulted in less optimal placement, which leads to longer and more expensive transportation routes. In short, our operations are normally well-staffed and optimized to be in-stock and to deliver to customers in one to two days. Labor shortages in supply chain disruptions upset this balance and resulted in additional costs to ensure that we continue to maintain our service levels to customers.
- Brian Olsavsky – Chief Financial Officer
From these comments, it is clear to see where the operating profits for the North America and International segments went. In Q1 2021, the segments accounted for $4.7 billion in operating profits, and by Q3 2021, the segments were running at a combined loss due to the above. There is a silver lining here, however. All of these issues are temporary. Even in Q1, when the segments were profitable, COVID-19 mitigation efforts added costs. As these headwinds subside, the segments should quickly snap back to profitability.
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