From China to Best Buy: Game Controllers Struggle for U.S. Consumers
PEMBROKE, Mass./DONGGUAN, China, December 15 (Reuters) – Fraser Townley sees two gaping holes in one side of a pallet that one of his employees just pulled out of the orange Hapag-Lloyd shipping container that arrived here in his warehouse from China on a recent cold morning.
“Clearly a forklift,” he mumbles.
The damage could have occurred anywhere along his company’s 10,710-mile odyssey from China’s Guangdong province where it is manufactured to its warehouse 30 miles south of Boston, just one stop on the way to major retailers like Best Buy. Still, Townley, CEO of T2M, is grateful that his products are coming.
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A global disruption in supply chains in the wake of the COVID-19 pandemic, which resulted in a sharp contraction and then a surge in demand that caught most businesses on the wrong foot, overwhelmed ports and left manufacturers, retailers, railroads and truckers scrambling to get goods to shelves, especially with the crucial holiday season approaching.
The number of idling container ships off Los Angeles – the nation’s busiest port complex – has reached record highs, as stacks of empty containers increasingly clutter the docks.
The situation is so dire that a White House task force is working to reduce the backlog, while shortages of imported goods are accused of helping fuel an inflationary surge that has put the Federal Reserve together many edgy consumers.
The stacking casts a shadow over a globalized system that T2M and many other producers have relied on for products that are produced cheaply in distant factories. As companies developed these supply chains, they reduced the inventory they kept on hand to an absolute minimum. That’s great for the bottom line, but it’s a disaster when the supply lines get clogged like they are now.
T2M’s mobile game controllers, including the only full-size device designed to work with a hard wire on an Apple iPhone, are sold by Best Buy and other big chains such as Walmart and Target, and on Amazon.
Townley does not own a factory. Instead, like countless other consumer product companies, it designs the devices and has them made by a Chinese factory. It has a China-based employee, Breeze Feng, the company’s senior structural engineer, who oversees production at the Dongguan plant until the goods are packed into containers to be trucked to Hong Kong. for shipment to the west coast of the United States.
Feng said the crisis reached a boiling point in June, as they made efforts to get the goods to the United States in time for the year-end vacation. “We went to retrieve containers three times but we failed,” she said, explaining that they had reserved slots on the ships. “They didn’t have a container to load our goods, so there’s no way” they could ship.
Speaking in the Chinese factory – where rows of workers in blue coats and white caps leaned over workbenches to assemble and test controllers for T2M – Feng said he felt conditions were easing a little in October.
âBut now, after the new strain (Omicron) appears, we’re actually still worried about whether it will return to the situation as before,â she said.
NOTHING IS NORMAL
T2M has limited ability to move to other Chinese factories in this crisis. Feng noted that only a handful of factories are capable of producing controllers that meet the Apple certification required by customers. âIf we had to replace our factory it wouldn’t have been quick,â she said, so they didn’t even try to find alternatives.
However, they had to find new routes to get the containers to their warehouse in Boston. T2M receives one or two containers per month, each holding up to 40,000 controllers, and Townley is closely monitoring their progress.
In the past, it shipped them to Boston via the Panama Canal, a more direct and cheaper route that had become more difficult to access as port traffic boomed.
Now, its normal procedure is to ship cargo to Los Angeles, where its containers are placed on a train to Newark, New Jersey, which is their official port of entry for US Customs. From there, a truck brings its boxes to its warehouse outside Boston. Warehouse workers then separate the items and ship them to distribution centers for large retailers on trucks.
But nothing has been normal in recent months.
In September, he had a shipment of controllers he was trying to get to a Kentucky distribution center for a large retailer that had ordered a specific design and set a launch date for a promotion.
Controllers were on their way to Los Angeles when they got stranded while waiting to be offloaded from a ship for what turned out to be three more weeks. After the container was released, he attempted to ship it directly to Kentucky in order to meet the deadline rather than sending it across the country first to Newark and then to his warehouse, as originally planned.
âUnfortunately, everyone except customs could be flexible,â Townley said. His solution was to send more controllers by plane directly from China to Tennessee, via Chicago.
Costs have skyrocketed as a result. Townley now pays around $ 18,000 to ship a container from China to his warehouse, up from $ 3,500 at the same time last year. âAnd last year I was complaining because we bought them for $ 2,800. “
The problems don’t end once the controllers arrive at his warehouse. Finding truckers to transport the goods to end customers became such a challenge that Townley explored buying his own truck. He decided not to do it.
As a small business, he has no influence on his customers to pass these expenses on. Instead, he rushed to cut costs. He takes one of his levers and points to the brightly colored buttons. Skipping the color – the buttons are now just black – he shaved 50 cents off that coin, he notes. It also slightly reduced the size of each box and eliminated a plastic cradle that held the controller inside.
Townley is well positioned to play these games. He came from Britain to the United States decades ago to help Circuit City source from China. So he spent most of his working life thinking about how goods move from one place to another.
While no one anticipated the current downturn, there are certain techniques that help keep products and profits afloat. Take the perforated pallet. A task assigned to T2M’s factory monitor, Feng, is to photograph each pallet before it is loaded into a container in China. This allowed them to quickly determine that the pallet was not damaged before it was loaded.
In this case, the container was removed for a one-time customs inspection in New Jersey, so Townley is satisfied that the damage occurred there.
âOn this occasion, the damage was limited to two cases. So we are in the $ 1,000 range, but not in the tens of thousands âfor the loss, he noted.
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Reporting by Timothy Aeppel in Pembroke; Additional reporting by Xiaoyu Yin in Dongguan; Editing by Andrea Ricci
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