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ASCM Insights

Supply Chain Trouble in Toyland

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If you’re thinking that you’ll wait until Black Friday to start your holiday shopping, think again. Already, the 2021 season is shaping up to be worse than last year. Seemingly unending supply chain complications have both manufacturers and retailers fearing toys won’t make it to store shelves in time. And those that do are likely to take up a bigger portion of gift-givers’ holiday budgets.

In a normal year, holiday toys manufactured in Asia ship in July, arrive in the United States in August and are placed on store shelves by October. As I mentioned last week, the current COVID-19-related port disruptions are delaying shipments by weeks and even months. In addition, recent flooding in Western Europe and China’s Henan province has damaged many facilities, machines, warehouses and railways used to deliver goods.

Plus, raw material and labor costs are climbing earlier in the supply chain, causing manufacturers to also raise their prices — sometimes by 20% or more. Many toy companies are in the process of renegotiating their holiday prices with retailers, which usually are set 6-12 months in advance.

“Black Friday and the holiday season, for which products are being staged, will face the brunt of the impact,” Pawan Joshi, executive vice president of supply chain software firm E2open, told CNBC.

Meanwhile, shipping rates have gone past “skyrocketing” and hit the cosmos. The daily spot rate to ship a 40-foot container from China to the U.S. West Coast was $18,346 last week, compared with $2,680 in July 2020 and $1,550 in July 2019, according to the Freightos Baltic Index.  

Of course, toy supply chains will find it impossible to recover these costs if items don’t make it to store shelves in time for holiday shoppers. Hasbro and Mattel report that they are sourcing their toys from various other locations and using different shipping ports to try to avoid some of the challenges, as well as new ones that haven’t even happened yet, but are sure to surface sometime — an unfortunate trait of the past year.

“It’s hard to tell what the future may hold,” Mattel CEO Ynon Kreiz said on a conference call with investors.

Expert elves needed

Resilience and agility are what make supply chains of all kinds thrive in this uncertain and changing world. Prepare yourself and your team to effectively manage disruption, demand variation and supply chain risk with the APICS Certified in Planning and Inventory Management (CPIM) designation. Today is the final day of ASCM’s CPIM summer sale. Use code CPIMSUMMER to save 15% on a learning system, bundle or exam.

I hope you’ll treat yourself to this early holiday gift or let your employer know it’s on your wish list. Santa’s going to need a lot of help from supply chain professionals this year.

About the Author

Abe Eshkenazi, CSCP, CPA, CAE CEO, ASCM

Abe Eshkenazi is chief executive officer at ASCM, the largest nonprofit association for supply chain and the global leader in supply chain organizational transformation and innovation. Prior to this, he was the managing director for the Operations Consulting Group of American Express Tax and Business Services. His leadership roles have included project management, business process redesign, and individual and organizational alignment. Eshkenazi may be contacted through editorial@ascm.org.

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