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US Toymaker Now Considers The Risk Of Gluts, Beyond Port Delays

US Toymaker Now Considers The Risk Of Gluts, Beyond Port Delays
Ryan Gunnigle, the United States based toymaker, is worried about gluts, even while the rest of the industry is worried about the supply-chain issues - from jammed ports to empty store shelves.
"Customers are just flinging crazy orders right now, so it's hard to determine the real level of demand," said the chief executive of Kids2, the Atlanta-based toy company. It is best known as the maker of Baby Einstein and other baby-oriented brands.
The Covid-19 pandemic has turned the holiday sales on their head even though this is that time of the year when there is a surge in business.
He is of the opinion that companies will end up purchasing too many things, when firms rush to fulfill orders, particularly in the build-up to the holiday season, resulting quickly in heaps of unsold electronic baby books and high chairs being left in the inventory once the crisis is over.
Demand is expected to peak in the coming months, according to some experts, which is expected to ease inflationary pressures.
Spending on items such as furniture and computers, demand for which rose during the Covid-19 pandemic, has already peaked, and there will be a drop in demand for many consumer goods next year, predicted Nancy Lazar, the chief of economic research at Cornerstone Macro, in a presentation recently.
She said that there will be a drop in demand with the clearing of supply chain bottlenecks, and "both will place downward pressure on pricing."
The same scenario is faced by all global producers as well.
Since they are concerned about running out of items before they can be supplied, there is a natural tendency among retailers and other companies that depend on faraway manufacturers, such as Kids2, which manufactures in China, to increase orders.
The difficulty is exacerbated by the fact that the rush generates an even greater surge of orders from far-away factories, a phenomenon called the bullwhip effect. The scenario is made much more critical because of the epidemic and China's energy crisis.
According to Gunnigle, there is evidence that there is an improvement in the supply situation, such as a little decrease in the cost of arranging shipping containers and fewer "blank sailings," which occur when one of their cargo boxes is not able to get loaded on a ship leaving China.
"We're starting to see things flow a little bit easier," he said.
However, the curve balls continue to arrive, making it tough to prepare in the face of so much unpredictability.
The case in point is the factories in China being roiled by the power outages in various parts of the country. For example, Gunnigle just discovered that the Chinese manufacturer that makes Baby2's infant teethers have paused manufacturing till such time that the energy issue is resolved. That manufacturer utilizes a type of plastic whose price has risen, making it uneconomical to produce, he added, due to rising energy expenses.
"We've really padded our lead times," he said. "Not just in manufacturing - but in our estimates of the time it takes to get to the port, get things on boats, time to unload the boats."
China was facing a bottleneck earlier this year. He was able to immediately shift production to the items that were experiencing the most bottlenecks because he had his own plant in China and a close relationship with his joint-venture partner. In order to optimize the delivery of the most in-demand commodities, the firm prioritized which things it put into its containers.
The issue has now moved on to the United States, with a particular focus on Southern California, where more than 100 ships were awaiting entrance to the ports of Los Angeles and Long Beach earlier this month.

Christopher J. Mitchell

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