Mr. Baker races against time to bring the hit Dolls and Little Tykes cars to stores in order to overcome a jammed-up global supply chain
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In June, when new toys usually roll out of factories for cargo ships and stores around the world, hundreds of thousands of MGA dolls, play sets and accessories are in factories and rented warehouses in and around the Chinese port city of Shenzhen. were gathering. The amount of waiting toys would require 1,400 40-foot containers and cargo space on the ships.
Mr. Baker didn’t have good control over containers or transportation.
“It’s very, very, very busy right now,” he said, sweating out his global transportation puzzle on an August day at his office in Southern California’s Mojave Desert. “It’s the nature of the beast.”
Their supply-chain woes are testing leaders across America, from makers of Nike sneakers to Ford pickup trucks to Whirlpool washing machines. “It’s More Dramatic Than I Remember,” Walmart Inc.
Chief Executive Doug McMillan said in September.
Mr Baker had already faced weeks of warnings that sugar factory owners were running out of storage space. If Mr. Baker hadn’t shipped toys from Shenzhen soon enough, he would have stopped making more. MGA’s founder and CEO, his boss, Issac Larion, issued a near daily reminder: “Christmas is on December 25th.”
“I think my team is five points down with 10 seconds on the clock,” said Mr Baker. “We’re just running out of time.”
Since the Covid-19 pandemic, a once finely tuned world-wide assembly line has been rolling along. Workers’ diseases are closing factories and ports in Asia, which was once a reliable source of cheap production. Floods and storms are disrupting the orderly flow of raw materials. The lack of semiconductors has limited the availability of everything from cars to computers to videogame consoles. There is a shortage of cargo containers to transport goods across the ocean and truckers to deliver them. Freight freight has reached record levels.
Nike Inc. warned in September that quarterly sales would decline despite higher demand, as transportation and production problems stifled supply. fedex Corporation
cut its profit forecast for the year, partly because it is paying overtime to meet labor shortages, yet still dealing with persistent delivery delays.
Costco Wholesale of the corporation
Finance chief Richard Galanti recently compiled a familiar list of holiday challenges for investors: freight costs, delays and product shortages. “It’s a lot of fun at the moment,” he said with a sarcastic laugh.
Mr. Baker arranges his operations from an MGA warehouse in Hesperia, Calif., a desert town about 90 minutes northeast of Los Angeles. He starts his day at 5 a.m. in the Redlands near home, scanning emails and reports from teams in Asia and Europe. He makes a 4-mile run before a 45-minute drive to the cavernous warehouse that collects MGA’s inbound shipments.
There, the 62-year-old tries to unravel the most complicated knot of a career that began four decades ago, as a forklift driver moving pallets of Smurf dolls. College came later. He has been working in toy and gift logistics throughout his career and is now the VP for one of the largest toy manufacturers in the world, with annual sales exceeding $2 billion.
The stakes are high this season, and the clock is ticking. Nearly half of all retail toy sales come in the weeks leading up to Christmas. Toys that arrive too late won’t sell until they’re heavily discounted after the holidays.
Mr. Baker has to bring MGA toys out of China and onto retail shelves so parents can buy them and put them under the tree. “Some companies have gone out of business because of not having enough inventory,” Mr Baker said. “But a lot of companies have gone out of business because of having too much inventory.”
The Christmas season in the toy industry begins about 18 months in advance.
In normal times, buyers of retailers MGA, Mattel. Let’s start visiting the California showroom Inc.
and other toy companies around September. They preview toys for next year’s Christmas. In January and February, follow-up meetings take place at the Toy Expo in Hong Kong and New York. Final orders are placed, and retailers bet which toys will be the most popular and how many of each to stock on the shelves.
The pandemic took everything away. Toy companies host Zoom calls and send out product videos to entice buyers. As always, production picked up in March, mostly in China, where 85% of the world’s toys are made.
Around this year, Mr Baker said, the supply chain had its challenges, with shipping capacity at a premium. Yet the situation was no worse than usual. “Space was very tight but it was habitable,” he said. However, he was concerned about July, when an avalanche of seasonal goods typically begins to flow through China.
In late May a wrench hit the gears. A COVID-19 outbreak at Shenzhen’s Yantian port almost brought container traffic to a halt for a few days. Ships containing thousands of empty containers were shipped elsewhere, leaving huge boxes and ships short to ferry them. Factories scrambled to find warehouses to store finished goods. Outbound containers full of goods piled up.
The warnings started pouring in from Chinese manufacturers of MGA in Shenzhen. A nearby warehouse full of toys piled up under the umbrellas outside. Boxes of LOL dolls piled up on the factory floor.
Mr Baker’s team moved some shipping containers filled with toys to alternative ports, including Hong Kong. Epidemic regulations limit which ports trucks can deliver containers. In July, Mr Baker secured space for some toy containers to ride trains from China to Europe, with arrivals expected in early September.
He still had hundreds of thousands of toys stuck in Chinese warehouses. They were sold to customers including Walmart, Amazon.com Inc.
and others on free on board basis, known as FOB. Under that arrangement, retailers in Asia take possession of the toys, ship them to them and then take them to their warehouses. From there they go to shoppers in stores or online. Because buyers assume the costs and liabilities of overseas transportation, FOB contracts are waived.
Those retailers navigated the same rocky road to get the goods, but MGA faced greater risk of delays. Factories will either stop making their toys or they will arrive at stores so late that few of them will be sold.
In late August, Mr. Baker caught a break. The boss, Mr. Larian, persuaded a customer to cancel the transfer to China, and instead created a new contract by Mr. Baker’s team to purchase 100 containers of the goods after the boxes arrived in the US. MGA will get the toys from China, and the retailer will pay a higher price for them.
Logistics staff at MGA’s Hong Kong office got shipping giant AP Möller-Maersk A/S to ferry 20 to 30 empty containers a day over the next week. The boxes were filled with toys and returned to port, where MGA secured space for arrival in late September on eight ships bound for the US.
Moving goods from China was half the problem. Port congestion was the next obstacle in Southern California. The ships waited their turn to disembark at nearby ports of Los Angeles and Long Beach, swelling from 40 in late August to more than 70 floating offshore in mid-September.
The two ports, which handle about a quarter of US imports, are a significant pandemic barrier. Thousands of containers loaded with goods are lined up around the port terminals. Ship owners say a shortage of truck drivers and dockworkers is to blame for the backlog. Truckers say they have to wait long for their turn to take containers from ports. Rail operators complained about the long wait for loading the trains.
The lack of truck transport slowed the movement of toys from MGA’s warehouse to retailers in Hesperia. The company’s three-story facility, the size of 10 football fields, wasn’t big enough to hold all the toys that came in. MGA itself was importing and distributing about 65% of its goods this year, up from about half in a normal year. More than 200 trailers full of toys sat in a parking lot. Other containers were placed on an access road. Some of them got parking tickets.
“We are at about 180% capacity,” said Mr Baker, looking for more storage space. So were hundreds of other companies. About 98% of warehouses in Southern California’s logistics-heavy Inland Empire region, including Hesperia, are fully occupied. He managed to secure an additional 167,000 square feet of storage spread across multiple locations.
Everything from extra cost, warehouse space to high…