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The Covid-19 Shortage that Stole Christmas

As if Covid-19 didn’t bring enough chaos and black swan events to the world, buckle up for another aftershock symptom of the global pandemic: the 2021 holiday toy shortage. That’s right, Mr. Kringle himself can’t even save us from what’s about to happen this holiday season. Not only will there be major shortages across the board for toy manufacturers like Mattel, Hasbro, and Jakks Pacific, but Black Friday inventories will likely take a toll as well. With the holiday season being one of, if not the largest generators of revenue worldwide, this has the potential to get ugly quick. In this blog post I will be talking about the causes and contributors to the current supply and transportation situation, the effects it has had on Mattel, what they plan to do to counter these challenges, and precautions and advice to consumers.

Underlying Causes Disturbing Worldwide Trade

It is easy to blame inflation and big corporations for the price increases we now face and the ones to come, but it is even easier to understand what got us here in the first place. One of the earlier disruptions that is worsening the blow to the holiday season strategy is the Suez Canal blockage that occurred in March 2021. As this is a crucial route for global trade, it has had harsh and lasting effects on worldwide trade that can still be measured present day. The incident lasted for six days and costed $400 million an hour (Russon). Because multinational toy manufacturers forecast and order their inventory up to 6 months before the holiday season, the canal blockage has had major effects on all toy and gaming inventories. Another overarching problem that is contributing to the inventory and price dilemma this holiday season is the shipping container shortage. Not only have ocean container prices risen from $4,000 to as much as $25,000 (Verdon), but the employees and ports in China have been facing on and off temporary Covid-19 shutdowns which has further exhausted this issue (Lopez). This alongside the United States’ truck driver and worker shortage is causing a major cargo ship stand-still off the coast of southern California, which is further exasperating the problem. Now that we have explored the existing global trade situation, we are able to understand what multinational toy manufacturers like Mattel are challenged with this holiday season.

Stressors on Mattel’s Transportation Management System

Mattel is a multinational toy manufacturer whose portfolio consists of many popular toy brands including Barbie, Hot Wheels, Fisher Price, and American Girl. With this being said, Mattel’s supply chain teams have been working around the clock to make sure their toys end up on every shelf despite many setbacks. Leading up to the pandemic, Mattel reduced their global workforce by 2,200 employees due to the bankruptcy of Toys R Us, one of their largest retailers (Green). This put them at a disadvantage prepandemic, although they had no clue at the time. Despite the preexisting stresses of Covid-19 on the global supply chain, imports of dolls, toys, and games are up 50% from 2019. “According to Jason Miller, associate professor of supply chain management at Michigan State University, the first seven months of 2021 are a record for toy imports when checking back to 2002” (Owusu). It will be because of this extremely increased demand and the limited amount of supply that will be cause the 2021 holiday toy shortage.

Mattel’s Response

Although Mattel and other toymakers are faced with trying odds this holiday season, supply chain professionals are doing all they can to turn risks into rewards. We will see a few changes in supply and price this season to account for disruptions so far. Prices will indeed increase not only due to the nature of supply and demand, but to account for the increase in ocean shipping costs. Mattel COO Richard Dickson reports “We now expect a slightly higher negative impact from cost inflation than we previously guided, and that’s due to ocean freight, also, we expect that inflation to impact our second half results much more than the first half” (Lopez). Aside from increasing prices, Mattel decided to streamline their most popular products to avoid critical shortages. Mattel’s CEO Ynon Kreiz says, “We simplified the operation, closed four plants, reduced the number of items that we make, the items that were not productive and overall turned our supply chain to be a real driver” (Salgado). By focusing on their critical components and big ticket items, Mattel just may be able to combat the challenges brought along by Covid-19.

Consumer-Level Effects

With everything reviewed so far, consumers can expect numerous fluctuations in shopping for the holidays this season. First and foremost being prices will increase, and there will be shortages. With this being said, do not expect to see nearly as many discounts and deals as you have in previous years. My recommendations for anybody in the market for children’s toys is to buy early. It will be the hottest and most popular toys experiencing shortages first, so secure those early on. Extra warning to all the last minute shoppers out there: do not wait. Because of the current situation facing the toy industry, retailers may not be able to restock certain toys in December as they have in past years (Verdon). With every kid in the world making their Christmas lists leading up to this joyous season, it will be interesting to see what the hottest toys will be, and what companies will do to come out victorious. First, we discussed how ocean container shortages and Covid-19 restrictions have had an impact on the global supply chain therefore affecting companies like Mattel. Then, we explored ongoing challenges faced by Mattel like workforce shortages and record-high demand despite being amid a global pandemic. After, we got an inside look at how Mattel plans on facing these challenges through price increases and streamlining their products and processes. Finally, recommendations were made on how to combat these uncertainties at the consumer level. We are only at the brink of the holiday season, so be ready for more changes because they will happen. Time will continue to move forward, Santa will come to town, and multinational toy manufacturers will get the job done because they must.

Authored by: Rachel Hamilton

References:

Green, Dennis. “Toys R Ss’ Demise Is Having a Devastating Effect on America’s Largest Toy Companies.” Business Insider, Business Insider, 26 Oct. 2018, https://www.businessinsider.com/habsro-mattel-lay-off-workers-after-toys-r-usliquidation-2018-10.

Lopez, Edwin. “Hasbro, Mattel Lean on Supply Chain Teams to Minimize Effects of Costly Ocean Freight, Port Congestion.” Supply Chain Dive, 2 Aug. 2021, https://www.supplychaindive.com/news/Mattel-Hasbro-credit-supply-chain-oceanshipping-resilience/604264/.

Owusu, Tony. “Toymakers Facing Holiday Challenge Due to Supply-Chain Issues.” TheStreet, TheStreet, 20 Sept. 2021, https://www.thestreet.com/investing/toy-makers-face-holidaysupply-chain-snag.

Russon, Mary-Ann. “The Cost of the Suez Canal Blockage.” BBC News, BBC, 29 Mar. 2021, https://www.bbc.com/news/business-56559073.

Salgado, Alejandra. “Toymakers Worry Congestion Will Lead to Holiday Inventory Troubles.” Supply Chain Dive, 23 Sept. 2021, https://www.supplychaindive.com/news/toys-holidays-supply-chainmanufacturers/606968/.

Verdon, Joan. “Shipping Container Crisis Could Derail Holiday Toy Sales.” Forbes, Forbes Magazine, 3 Aug. 2021, https://www.forbes.com/sites/joanverdon/2021/08/03/shippingcontainer-crisis-could-derail-holiday-toy-sales/?sh=1e5cd4fcf89e.

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