Shipping slowdowns add to season's stress

Toy companies know what they want for Christmas: an end to crippling shipping delays at West Coast ports.

A combination of labor/management strife, truck shortage and high volume amidst the economic recovery have created logjams at the ports of Los Angeles and Long Beach, Calif. These ports, the biggest on the U.S. West Coast, are awash with imports from Asia. The backlog at these ports is spilling onto other ports as in Tacoma and Seattle, Wash.

“There is definitely a significant impact on the toy industry,” said Rebecca Mond, director of federal government affairs for the Toy Industry Association Inc. of New York, in a phone interview. “More than sales are lost. It also affects relations with retailers.”

About 80 percent of the toys sold in the United States are made in Asia. And about half the industry's $22 billion in annual sales occurs during the holiday season centered on Christmas. Slowdowns at this time of year occur at the industry's most vulnerable season.

“The West Coast port delays have severely impacted our company,” reported Tony Sauers, director of operations for Faber-Castell USA, a supplier of arts and crafts products and writing instruments based in Cleveland.

“These delays have affected our customer order fill rates and have caused us to double handle just about every order due to product being back-ordered to our customers,” Sauers explained.

Faber-Castell USA has been making an end run around the U.S. ports by shipping containers into the port at Prince Rupert, British Columbia. Prince Rupert is about 2,100 miles northwest of Los Angeles, but it is closer to Asia than Los Angeles. Port traffic in Prince Rupert reportedly jumped nearly 50 percent in July.

“This has helped, but we are also seeing delays through that port that range from 7 to 14 days,” Sauers said. “Many people have been trying to ship using this Canadian port to avoid the U.S. West Coast ports, and thus it also has created bottlenecks at Prince Rupert.”

Sauers indicated delays at Prince Rupert, however, are not nearly as long as at U.S. West Coast ports.

Faber-Castell USA is also routing containers that require federal approval through the port of New York rather than in the west.

“We would rather take the longer in-transit time — 38 days from vessel departure date to our facility — via the East Coast rather than suffer the delays we are currently seeing with the U.S. West Coast ports,” he said.

Mond said such contingency plans add significant cost to toy shipping and they are not a good alternative for smaller companies. About 80 percent of toy companies are small, according to TIA, which represents 785 members that account for 85 percent of U.S. toy sales.

Purveyors of high-end merchandise might be able to afford air freighted shipments, but for most companies such costs would be prohibitive. Airfreight is about 10 times more expensive than container shipments, estimates the National Retail Foundation.

“There are monumental costs for contingency plans,” Mond explained. “The costs incurred won't be recovered.”

Mond said she is unaware of any toy companies planning to shift toy production to the United States from Asia.

“But companies might change distribution centers so they do not rely on a single port,” Mond opined.

Retailers, too, are caught up in the West Coast delays, but they might have more freedom to mitigate the effects. Wal-Mart Stores Inc., for example, started bringing in its holiday items early when it sensed port disruptions were looming.

Since May, labor negotiations have been limping along between the International Longshore Warehouse Union and the Pacific Maritime Association. Their previous agreement expired July 1. By August, congestion was a big problem, partly due to work-to-rule tactics of the union.

Congestion would still have been an issue even with labor peace. A perennial shortage of truck chassis that carry containers has been growing steadily worse as container ships become bigger and offload more containers at ports designed 25 years ago for much smaller vessels. Greater cargo complexity and longer turn-around times at terminal gates are adding to the problem. In short, congestion starts at the dock and compounds at the truck loading stage.

“The port [of Los Angeles] is working with stakeholders throughout the supply chain to do whatever we can to improve the situation,” stated Port of Los Angeles spokesman Phillip Sanfield in an email correspondence. One initiative is revising the way chassis become available at terminals. In February, ports will ask three chassis companies to create a chassis pool to make the equipment more readily available. The Port of Long Beach created a chassis depot about a month ago and it has helped a bit, spokesman Michael Gold noted in a phone interview.

Gene Seroka, executive director of the Port of Los Angeles, told Toy Industry Association members in a teleconference that other solutions are also being sought. Waiving fees on daytime cargo movement could cut wait times for trucks. Changes to how containers are stacked on ships could make unloading quicker. Dockside areas could be converted to chassis repair and other services. Railroads could be tweaked to speed up shipments by that mode.

As of press time, negotiations between ILWU and PMA had not led to a settlement.

“We're not directly involved in the negotiations,” stated Gold. “We're on the sidelines like everyone else.”

 “Anyone who had shipments arriving in September, October or November had problems receiving product from the ports,” noted Mary Eubanks, president and founder of Children of America Dolls Inc., a small Pasadena, Calif., producer of culturally diverse dolls.

Eubanks said ocean transit time from China at about two weeks has been unchanged, but after the firm's shipment arrived in Long Beach, “it sat there for two more weeks and a day.” Previously delivery time of the vinyl dolls from the port to Pasadena was only a few days.

Faber-Castell USA's Sauers said just about all the company's seasonal products experienced delays. In August and September, it faced delays of up to 10 days, but by November delays had stretched to up to 30 days.

“Our normal transit time from vessel departure date in China to our facility is 28 days,” Sauers estimated. By November the delays grew to 58 days. Even for shipments rerouted to Prince Rupert, delays of up to 10 days are expected in December.

Mond said congestion on the West Coast is not an entirely new phenomenon, but it is worse this year. A major disruption occurred in 2002 when dock workers were locked out, costing the economy about $1 billion a day. Then President George W. Bush obtained a court order to reopen the ports after a 10-day lockout.

More than 100 trade associations have been pressuring President Obama and Congress to help solve the 2014 ports problems, but most federal officials have been reluctant to wade in.

Underlying problems coming to a head this season could force some TIA members to rethink their supply chains for the long term, said Mond.

Canadian ports have offered some relief for toy and other cargo shipments, but conditions at those locations can also be risky. Canada's biggest West Coast marine terminal, Port Metro Vancouver in British Columbia, recently faced labor problems. A month-long truckers' strike ended in March but truckers have since grumbled about delays in getting wage increases.

Imports of toys in shipping containers amounted to more than 785,000 20-foot-equivalent units last year. About 86 percent came from China and Hong Kong, according to Journal of Commerce estimates. Los Angeles and Long Beach handle more than 50 percent of the toy volume. The next largest toy port complex is New York/New Jersey, with a 10.7 percent share, JOC estimated.