THE OUTLOOK FOR LOGISTICS & SOURCING FOR TOYS IN 2022
For decades now the essential, but dull areas of logistics and sourcing have played second fiddle to the more exciting and high profile creative and commercial functions in the toy and game business. All this changed though in 2020 and 2021 with the COVID-19 pandemic. Massive counter seasonal consumer purchasing dislocated shipping containers, putting the entire container shipping industry out of sync. The result was a). massive container shipping increases and b). shortage of containers leading to issues shipping stock out of China and other Asian toy manufacturing hubs.
This pandemic caused disruption came about alongside another significant trend – that being the ebbing away of some toy manufacturing from China to other toy manufacturing locations. Vietnam, India and Indonesia have all benefited as China’s labour force no longer seem to want low paid production line jobs to the same mass extent they once did, and the resulting cost increases are making it hard to stay in the toy production business in China.
So now that we have (nearly!) got through the turbulent year that was 2021, what next? How will things pan out in 2022? Needless to say, there is a fair degree of unpredictability about things right now, with more covid waves rolling out, and yet another new variant. But despite this we do know that the shipping container issue has not been fully resolved. While demand has cooled as it always does post peak shipping across June to September, and while we have therefore seen a drop in container shipping prices, the outlook for 2022 is for a continuation of the shipping issues, but potentially (& hopefully!) to a lesser extent.
We do have Chinese New Year coming up of course, as well as some ongoing covid outbreaks in manufacturing hubs in China, which will reduce production and therefore also reduce demand for shipping during that period. So, there is a good chance that we will see some slack in the system. We also look unlikely to see full lockdowns around the world for an extended period as we had previously, which means the initial counter seasonal buying patterns are unlikely to be repeated on the same scale. In short, issues will continue but should lessen, at least a little.
On the Sourcing side, the medium-term trend for relocation of toy & game production away from China looks set to continue. If you want to know more about what is driving this, you can watch our presentation on YouTube: ‘Toy Sourcing: The Next 10 Years (Why Nearly Everything We Know Is Going To Change’ – https://www.youtube.com/watch?v=IR3kBOd12ss
Nearshoring is going to grow significantly over the next 10 years but starts from a very limited base, so is unlikely to pick up a lot of slack in 2022. Vietnam is somewhat bursting at the seams but will continue to grow nevertheless. India is the county with the largest latent industrial base and cheap labour in abundant quantity, and is also set to be part of the answer going forward – we are seeing more production move there for 2022 from major toy companies. Overall, as the toy business moves from a single-hub sourcing approach (i.e. China) to a multi-hub approach (including China) we’re going from a fairly smooth and relatively easy to manage sourcing function to a more fragmented and management intensive sourcing situation.
In conclusion, we expect toy companies will have to continue putting more onus on logistics and sourcing functions in 2022 and quite possibly beyond. It might not be quite as crazy in 2022 as it was in 2021, but it will be far from what we used to know as normal!
We run a Consultancy business helping toy & games companies get ahead. For more information, check out www.KidsBrandInsight.com/services
We also run a Strategic Sourcing Consultancy advising toy & game companies around the world on their Sourcing strategies, reviewing their vendor base & suggesting improvements. To date our Sourcing services have saved our clients $tens of millions. For more information on how we can help, just go to: www.ToyTeamAsia.com