Toy manufacturers are racing to get products on shelves amid supply bottlenecks

ANNE D’INNOCENZIO / The Associated Press

Running out of time to get its products to store shelves before the holidays, toy company Basic Fun has made an unprecedented decision: it is leaving a third of its iconic Tonka Mighty Dump Trucks in China for the US.

Why? Given the soaring prices for shipping containers and clogs on the delivery network, the shipping cost to get the bulky yellow toy to U.S. soil is now 40% of the retail price, which is around $ 26. That’s a dramatic increase from 7% a year ago. And it doesn’t even include the cost of shipping the product from US ports to retailers.

“We have never left a product this way,” said Jay Foreman, CEO of Basic Fun. “We really had no choice.”

Toy companies are racing to get their products to retailers as they grapple with a serious supply network crisis that could result in sparse shelves for the holidays. They are trying to find containers to ship their goods while looking for alternative ports. Some are flying in some of the toys instead of shipping them by boat to ensure delivery before December 25th. And in cases like Basic Fun, they leave toys in China and wait for the cost to come down.

Like all manufacturers, toy companies have faced supply chain problems since the pandemic began and temporarily closed factories in China in early 2020. Then US stores temporarily reduced or stopped production during the lockdown. The situation has only deteriorated since the spring, as businesses struggle to meet increasing demand for goods of all kinds from buyers returning to the world.

Manufacturers are grappling with bottlenecks in factories and major ports like Long Beach, California – and everything in between. In addition, labor shortages in the US have made it difficult to unload goods from ships onto trucks.

But for toy makers who rely heavily on Christmas sales, a lot is at stake for the nearly $ 33 billion U.S. industry. The fourth quarter accounts for 70% of annual sales. On average, Christmas sales represent 20% of total retail. And 85% of toys are made in China, estimates Steve Pasierb, CEO of the Toy Association.

The growls are so strong that some retailers are telling companies they don’t want products if they ship after mid-October. That’s because products that typically took four to six weeks from leaving a factory in China to landing at a U.S. distribution center now take 12 to 16 weeks, says Marc Rosenberg, a toy consultant.

The fighting takes place as the U.S. toy industry saw sales jump nearly 17% last year and a 40% increase in the first half of this year as parents wanted to keep their children at home, according to NPD Group, a research firm.

But while analysts expect strong growth in 2021, many toy companies said they will reduce their sales because they cannot fulfill orders for hot items, especially surprise hits. They also have high costs that will force some toy companies to shut down.

Toy managers say they can’t raise prices by more than 10% – although that won’t fully cover the higher costs – because they are concerned about buyer reaction. Mattel Inc., the country’s largest toy maker, warned this summer to raise prices in time for the holiday season to offset the higher shipping costs, though it didn’t say by how much.

The cost of containers on ships has increased more than six-fold from last year, with some brand managers saying it rose from about $ 3,000 last year to $ 20,000. That has forced large retailers like Walmart and Target, among others, to charter their own ships.

Foreman calculates 1,800 Tonka trucks that fit on each 40-foot container. At $ 20,000 per container, that costs him $ 11 each. That’s an average of $ 1.75 a year in a typical year. He says he focuses on shipping smaller items like mash’ems – soft, squishy, ​​water-filled collectibles – on containers to maximize the container’s overall value and profit margins. He estimates he can put $ 150,000 worth of mash-ems in a container while using $ 40,000 worth of Tonka trucks.

Some like MGA Entertainment, the maker of LOL dolls, are speeding up the flight of their toys because it now costs about the same shipping.

Jim Silver, editor-in-chief of TTPM, a toy reviews website, says that because of their clout, large discount stores like Target and Walmart should have healthier ranges of toys than smaller ones. Target says it has worked closely with its suppliers and transportation partners to keep stores well sorted and ready for its customers.

But Melissa McCollum, owner of Learning Express Toys in Birmingham, Alabama, says she only received 25% of Christmas toys in mid-September; it is usually 50%. And The Toy Book, the leading toy industry magazine, promotes a curated list of in-stock products that retailers can get quickly from US warehouses.

Many toy companies like Basic Fun and PlayMonster have reduced advertising.

“We’d be promoting empty shelves,” said Tim Kilpin, president of PlayMonster, who says 15-20% of his Christmas items get mixed up in the supply chain. Koosh, a rubber filament toy ball, was completely sold out in August, and he says he doesn’t think it can be replenished until Christmas. But on Wednesday, Kilpin said he had received news that some of the containers, including shipments from Koosh, were flowing from the west coast.

The bottlenecks are expected to have lingering consequences. Toy manufacturers are facing pressure from retailers to ship the first batch of Christmas goods 2022 in early March instead of late April and the second cycle in June instead of late July, says Andrew Yanofsky, director of marketing and operations at WowWee.

That will force companies to make decisions about how much to produce and reorder without having a full picture of sales data, he says.

Yanofsky said he initially bet on Got2Glow Fairy Finder, a light show in a jar that allows kids to find virtual fairies because he knew he couldn’t replenish production given the growl.

“We took a risk for excess material beyond what we thought possible,” he said.

Even the few toy companies that manufacture goods in the United States are facing labor shortages.

John Gessert is the CEO and President of American Plastic Toys, based in Walled Lake, Michigan, with another facility in Mississippi. He says the company is missing 35 to 40 percent of its frontline staff. Now it is shifting its focus to play kitchens that require six workers to less labor intensive toys like basketball sets that only require three workers.

“I’ve never had such a complicated puzzle to solve,” he said.

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