Chain reaction
Retailers, shippers look to develop new supply chain links in wake of port labor strife
Karen Thuermer, reporting from Hong Kong -- Gifts and Dec, 1/1/2003 12:00:00 AM
Last month, while visions of sugarplums danced in the heads of some kids, and as others practiced dreidel-spinning, retailers were wringing their hands over inventory—or lack thereof. The reason: work stoppages and slowdowns at two major West Coast ports of entry into the United States from Asia: Los Angeles and Long Beach.
No doubt about it, the strikes that occurred last autumn at U.S. West Coast seaports played havoc with every link in the supply-chain right from manufacturers to ocean carriers, trucks, logistics managers, warehouses, to retailers and consumers.
Considering some 80 percent of toys today are produced in Asia, particularly in China's Pearl River Delta on the heels of Hong Kong, the industry was hit hard by the labor dispute between longshoremen and management at the ports.
With shippers now practicing concepts of 'just-in-time' and 'zero inventory,' the West Coast port shut down came unexpectedly to many shippers and caused disruptions to production schedules and sales arrangements.
"The incident makes shippers reconsider building up buffers in their supply chain and consider diversification of routing arrangements such as more shipments via U.S. East Coast, Mexican or Canadian ports," comments Jeffrey Lam, managing director of Forward Winsome Industries Limited and vice-chairman of the Hong Kong Shippers' Council's Executive Committee.
Forward Winsome is an original equipment manufacturer (OEM) toys manufacturing company with production facilities principally located in the Pearl River Delta area in South China and Thailand.
Reporting from Hong Kong, Lam points to seaport conditions that manufacturers are having to face in China as a result of stoppages on the U.S. West Coast.
"The Yantin port in Shenzhen, China, suffered more than the Hong Kong port from the incident," Lam tells PLAYTHINGS.
The majority of containers handled by Yantin are U.S. West Coast-bound.
"There has been a huge backlog of containers built up there since the port shutdown period," he says. "Shippers that use only the Yantin port have found themselves short of alternatives. The incident prompts shippers to consider greater diversification in routing arrangements. In addition, those ports that have demonstrated ability to cope with crisis better, or recover faster from crisis would be favorably considered."
Tom Conley, president and COO of the Toy Industry Association, says that the industry is still "very concerned," and adds that the stoppage might have further impact, "especially on spring and summer goods that are scheduled to start hitting the docks after the first of the year. One of the things that happened as a result of this work stoppage," he said during a question and answer interview with PLAYTHINGS (see page 56), is that some of the TIA's larger members were very prepared. They were planning on kicking off the season a little earlier anyway.
"Everybody knew the stoppage was a potential," adds Conley. "Those folks that planned for it got their product to retail at the start of the season. We do know that some orders were cancelled because the merchandise hit Hong Kong at the right time but there weren't any containers available so the LC expired. Overall we have our fingers crossed that the holiday season won't be as disastrous as it could have been."
Getting the toys to market is the goal, and everyone in the supply chain suffers when something goes awry. Retailer KB Toys, for example, had been consumed with getting cargoes moved inland and into the company's fulfillment system for the stores. The retailer has implemented new software called GT Nexus to help.
"They also have more timely information on containers and their status with the ocean carriers," comments Gary Frantz, GT Nexus spokesman. "That's helping them plan more effectively for the inbound expedited transportation to get the containers to their distribution centers."
| Acknowledgements | ||
| Dave Gerardi also contributed to this story. | ||
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