AAt a toy factory in southeast China, boxes of plastic dart guns are stacked on the floor. Sometimes so many packages pile up that they stretch out across the production area, slowing down the work of making more toys.
What to do with all the blaster pistols, which have been sold to retailers in the UK but can’t find a place on the ships to get them there, is a problem for Nick Mowbray, the co-founder of Zuru Toys. The company expects to generate around $ 1.1 billion (Â£ 815 million) in revenue this year from growing demand for products like 5 brands Mini Surprise, Rainbocorns and X-Shot blasters.
But Mowbray says there will be toy shortages this Christmas. Shipping constraints, power outages, and a lack of manpower to sew the lint hampers production. Mowbray says stress points in the “tricky” manufacturing ecosystem mean some toys will cost consumers more, and some won’t under the tree at all.
Too many factories
The problems start in China. Zuru Toys manufactures around 600,000 toys every day at 20 factories across China. Manufacturers have flocked to the country from places such as India and Vietnam over the past year as outbreaks of Covid-19 have left factories in trouble and China has brought disease under control. Mowbray says that âa whole bunch of manufacturers have gone back to Chinaâ because he handled the virus well. But the second largest economic and manufacturing power in the world has a big challenge: not enough power.
The electricity crisis
The influx of production has depleted power supplies and China continues to face severe energy shortages. It’s driven in part by a huge hunger for goods as the world reopens after the pandemic. Restricted coal supplies and tighter emissions standards have also led to blackouts, halting production at some factories. Mowbray says that in addition to these pressures, cryptocurrency miners – although technically banned in China – continue to operate and “use a ton of electricity.”
âSo now we have the electricity crisis in China,â he said. âIt’s a huge constraint. In response, Beijing rationed power and imposed energy limits. Mowbray says restrictions at factories in Guangdong province – where some of Zuru’s most popular toys are made – would have cut capacity in half. Zuru created a workaround – build “mini-plants”, lay concrete, construct new buildings and equip sites with generators – to keep production at these factories at 100%.
Mowbray says that so far, the generators have solved the electricity issues, but the company faces other production issues. Some factory workers are scarce in China, and the growing appetite for consumer goods has exacerbated labor shortages. Finding workers who can sew is “a nightmare right now” and it has taken a heavy toll on the lint market, he says. âWe have huge constraints in our plush productsâ¦ all of China is facing this. This means that any toy with a soft component – from a cuddly teddy bear to a plastic dollhouse equipped with fabric bedspreads – will be more difficult to obtain.
By far the biggest problem, according to Mowbray, is shipping. The world is in the throes of a supply chain crisis stretching from Asia to the United States and Europe. This was caused by a series of related issues, including the increased demand for goods and the lack of workers to distribute them. Maritime commerce collapsed at the start of the pandemic, and then as the world began to reopen, demand for energy, labor and transportation surged. This has resulted in backlogs at the world’s busiest container ports, including the UK’s largest at Felixstowe. Shortages of field workers have further tightened bottlenecks.
âEvery week is a battle for us trying to get the product to the ships,â says Mowbray, and container prices have skyrocketed. He says a container from China to the UK would previously have cost around $ 2,000 to $ 3,000 (Â£ 1,480 to Â£ 2,200) – it now costs over $ 20,000. This means that Zuru is struggling to get the toys he has already sold to UK customers like The Entertainer, Tesco and Argos out of the factory gate.
Competition for space on ships is so tight that some retailers have waited up to four months to get Zuru toys on a container ship. During this time, its factories fill up with stock that has already been sold. âIn some cases, we have to stop production because there is no more room to store the products,â explains Mowbray.
With its warehouse already full, stocks of X-Shot blasters poured into the production area at one point. “It’s a huge factory, 70,000 square meters of spaceâ¦ we had to take up space outside, down the road.” He says Zuru held up to $ 70 million in inventory that retailers had purchased. It’s now about $ 18 million, still in the factory warehouse.
Shortage of drivers
Once the toys finally arrive in the UK, the challenge is to find a truck to deliver them to the retailer. In major ports in the UK and US, large backlogs prevented ships from docking and unloading. There is also a problem with the lack of workers – namely truck drivers in Britain – to handle all of these goods. In the transport and warehousing sectors, Brexit and Covid-19 are blamed for chronic labor shortages. The government has blamed the coronavirus – at least in part – for the driver shortage, saying the pandemic has delayed 40,000 heavy truck driving tests. At the same time, some industry bosses argue that Brexit has cut off the supply of Europe’s long-dependent labor force.
Gary Grant, chairman of The Entertainer, says there are issues with deliveries from UK ports to his chain of 172 toy stores due to the shortage of delivery drivers. He warns that there could be difficulties restocking popular items once the festive shopping season kicks off in November.
Price hikes and Christmas nervousness
Mowbray says pressure points throughout the toy supply chain – particularly rising shipping costs – will leave retailers “no choice” but to raise prices. For the X-Shot blaster range, he says, prices in the UK have increased by 10-15% on toys that sell for between Â£ 10 and Â£ 30. âInflation is fast approaching,â he says. âThere won’t be one of our brands that won’t have a Christmas shortage.
The Entertainer, meanwhile, believes the challenges in China won’t affect Christmas but could affect toy supplies before the school holiday period. âWe’ll never run out of toys, but some toys may not be on the market as soon as they would have been,â Grant said.
Additional reporting by Sarah Butler