Today, Explained - Out of stock

Episode Date: October 20, 2021

All I want for Christmas is a functional supply chain. Today’s show was produced by Miles Bryan, edited by Matt Collette, engineered by Efim Shapiro, fact-checked by Laura Bullard and hosted by Sean Rameswaram. Transcript at vox.com/todayexplained Support Today, Explained by making a financial contribution to Vox! bit.ly/givepodcasts Learn more about your ad choices. Visit podcastchoices.com/adchoices

Get groceries delivered across the GTA from Real Canadian Superstore with PC Express. Shop online for super prices and super savings. Try it today and get up to $75 in PC Optimum Points. Visit superstore.ca to get started. Remember back when this all started when it was really hard to get toilet paper? I remember biking from grocery store to pharmacy to gas station to bodega in my neighborhood trying to get some, haggling with the guy who was trying to gouge me for individual roles. At the time, it felt like a rare reminder that our supply chains might be a little more fragile than we realized. But now, more than a year later, the reminders are everywhere.

Empty shelves lining more stores nationwide. Some retailers complaining product shortages are becoming as bad as they were at the start of the pandemic. I'm doing my weekly grocery shopping and I want to show you guys these empty shelves. Even stuff that looked stocked, it really wasn't. These days, mechanics, dealerships and consumers nationwide are all dealing with variations of the same theme. No part, no fix. There's a national diaper shortage. I'm going to show you how to make a diaper out of a t-shirt.

We're constantly being told how much it sucks to be a consumer right now. You can't buy this. You can't buy that. What a pain. But think about how hard it must be to run a business. You know, I've been working in the business world for 30 years, basically in this space. And I've never seen anything like this year. Really, there's nothing even comparable. Ed O'Brien runs a company called B4 Adventure. He's got about 30 employees out in Denver, Colorado. We are in the space of sort of backyard adventure, backyard zipline kits and slack lines. Think toys for your little American ninja warrior in training. Tonight's course starts as ever with the quintuple set.

Five two-meter leaps to avoid a premature exit. You know, I created a monkey bar system between two trees. So we took a slack line and we attached accessories to it so you could do, you know, you could mimic what the kids were watching on American Ninja Warrior. Ed told me that when the pandemic first hit, some retailers that sold his stuff canceled their orders. But overall, the B4 adventure business did OK, thanks to parents stuck at home with their kids. The beginning of COVID, we saw, you know, a huge spike in online product, online demand. We ran out of stock in the U.S. last summer, but we did get a fall and holiday orders in,

and so we were able to make up the gap. And so we kind of lived through that all in all, you know, up 20 to 25 percent. So going into this year, it looked like everything was good. But what happened after the spring, inventory started backing up because of the demand, you know, the backlog of inventory that did not get shipped last year in China. All of a sudden, you couldn't get inventory picked up at factories and put on boats to ship to Denver. In the past, being picked up, shipped to LA, then put on a truck to Denver, that all took about 30 days. That's all it took. Now it's taking three to five months to get the product delivered from China. Just think about that. So you place an order, you do not know when the product is going to get here. We have containers that were lost for three months. You couldn't even know

what's happened to them this year. So it's just been chaotic. What has all this meant for your costs? The cost of shipping in the past was $6,500. So you could pay $6,500 to get a boat or container from China to Denver. What's happened is the container fee prices now are $30,000. The cost increases are just drastic. Let's just say for the first half of the year, we imported 100 containers. The additional fees on that were over $20,000. That's $2 million of unexpected expenses. $2 million.

You can just think as a business person, what do you do about that? You were not budgeted. That was not person, what do you do about that? You were not budgeted. That was not planned. What do you do? You know, how do you navigate through that? What do you do? We're passing on 25% price increases at least across every product.

That's part of it. But, you know, the other side is we just can't catch up with that. So from the expense side, how do we cut expenses? How do we slash costs? So that's what I'm facing right now. The things have not gotten better at all and gotten a lot worse. And so we're expecting for Christmas for toy deliveries, you know, we should have 20, 25 containers arriving right now. We don't even know when that product is going to be here. It is so uncertain. You're going to see it through, though? You're not going to throw in the towel?

I keep on wondering what the company is going to look like next year. We were on target to do 25% more growth this year. I'm seriously forecasting 40% loss of sales next year. 40% down as a company because of inventory. It's not the demand. It's not, you know, we have the demand. We just can't get product. Which for a toy maker around Christmas,

when you're usually... Psyched, busy, crazy. And this year... Kind of quiet. And that's kind of sad because 40% of our revenue is in the fourth quarter. Which has left you feeling... Completely stressed out all the time.

I mean, I've never felt stressed like this. So that is the biggest problem, is that really just worry. The roots of Ed's supply chain problems are super complicated, but conservative cable news has found a convenient way to package them for viewers. They even came up with a villain. Everything the Biden administration touches, it burns to the ground. Everything. But is it possible? Possible? could they possibly even screw up Christmas? The White House is saying that you're probably not going to be able to get everything you want for Christmas.

Well, I mean, who's going to save Christmas for Americans? Pete Buttigieg? I mean, please. Now, not only is everything more expensive, but also it might take months to arrive in the mail. In other words, your Christmas presents for your kids may not arrive on time or even at all. Is Joe Biden trying to kill Christmas? In a minute on Today Explained comes from Aura. Thank you. and videos directly from your phone to the frame. When you give an AuraFrame as a gift, you can personalize it, you can preload it with a thoughtful message, maybe your favorite photos. Our colleague Andrew tried an AuraFrame for himself.

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free of charge. BetMGM operates pursuant to an operating agreement with iGaming Ontario. Poopoo to the who's he was grinchily humming. They're finding out now that no, Christmas is Rebecca, hi. Well, you've been writing about our supply chain issues in the United States for recode. Why is President Biden trying to kill Christmas? And it's coming in the form of all these supply chain problems that we've been hearing about. And this has become a talking point on Fox News and, you know, Republican and conservative social media. And despite what we just heard from Ed at B4 Adventure in Colorado, this isn't just about outdoor and indoor toys, right?

No, this is about everything. It's about the tiny little computer chips that go into your refrigerator and laptops and cars. It's about the plastic that's used to make toys. It's about metals that end up in all sorts of things that we use. Basically, every single material component and good that people buy is having a supply chain issue right now. And even if they're not, if you want to try to ship them into the United States, they're running into shipping container shortage problems and shortages of workers, which means they're not getting delivered. So if this isn't Joe Biden's fault, whose fault is it? So it's worth remembering that a lot of these supply chain problems started at the dawn of

the pandemic when Joe Biden was not president. Donald Trump was president. Though I think it's worth remembering that the supply chain is not primarily designed by the U.S. president. It's designed by private companies that over the courses of years and decades have incentives to build a highly optimized way of manufacturing and delivering stuff. So we had this really fragile system for delivering and making goods and bringing them to the United States or elsewhere. And that doesn't work so well when there's a pandemic that shuts down manufacturing and shuts down shipping. One of the easiest ways to explain it is that it starts with a shortage. So say a factory

that makes a component that goes into a toy that you really like gets shut down because of COVID-19. Workers aren't going into that factory. That means that there's a shortage of X number of that component. So the next factory that's supposed to assemble that toy now has a shortage and can't make enough toys to get on its latest shipment to go to the next place, which might package those toys. Those stack up and stack up and stack up, create delays for the shipping process, which means that there aren't enough shipping containers to go back and pick up more stuff. And it just creates this really bad cycle that in a pandemic

where everything's already operating at limited capacity, there's just no room to catch up. So that's what we're seeing now. I think at least in the United States, everyone got an early taste of this during the pandemic with toilet paper. But what's happening now feels distinct from that, right? Yeah, there were certain shortages at the beginning of the pandemic that were a product of people thinking they would need things to get through the pandemic. I think a good example of that might be the N95 mask situation. We have exclusive video tonight of the FBI raiding the home of a man in Borough Park, Brooklyn, a man who allegedly coughed on FBI agents and told them he had coronavirus.

The agents were investigating 43-year-old Baruch Feldman for allegedly hoarding medical supplies, including masks and gowns, and selling them to doctors and nurses at a markup. You know, the world generally did not make enough N95 masks to deal with the pandemic. There was just a certain amount of demand. You may have never heard of them before, but these respirator masks have become one of the most sought after items in the world, all because of the coronavirus. What we're seeing now is a little different, partially because a lot of the stuff that people want are not necessarily personal protective equipment. It's, you know, I want another laptop. I want a new device. I want a new toy. And it's a product of people having the money to spend and the product and part of a recovery from the pandemic and having saved so much during COVID-19 and sort of being able to use that privilege. Why is this all sort of culminating right now?

One big factor is that consumers are looking to buy more stuff during the holidays and have the money to spend on that. And then another sort of thing we're seeing now is all of these shortages and bottlenecks and delays piling up and kind of reaching a tipping point. Off the coast of Los Angeles, the reason you're paying more for everyday items and perhaps struggling to find some in the store? Container ships, mostly from Asia, stretching across the horizon. And that's kind of created a recipe for a lot of delays. Everywhere you look, there's a ship. But to some extent, this is not a new problem. Supply chain problems have been something that's been happening for months and at this point, almost two years.

And this is sort of sounding like a new problem to American consumers who want to buy Christmas gifts because that's what they're thinking about right now. But it's been something that a lot of the companies that make this stuff have been thinking about for quite some time. I think it's pretty clear to people how the pandemic could cause all these supply chain snags. But is there anything outside the pandemic going on here? There are a lot of factors besides the pandemic that are adding to these challenges. So there was extreme weather events that happened in Texas that have impacted chemicals manufacturing, which have created a shortage of a lot of components that end up in things like toys or paint. You know, in China, there have been efforts to reduce the energy intensity. At least nine provinces and regions in China are experiencing power cuts,

including major manufacturing hubs like Zhejiang and Guangdong. Analysts say there's no respite in sight. That's impacted some factories and also caused some delays as well. You know, the pandemic has also brought to light the problems we're seeing with the labor shortage. So even if you're having all these delays on the manufacturing side, if you don't have enough delivery workers to actually ship something from A to B, that creates even more delays and kind of ripples and cycles back through the entire process. For every available truck at the ports of LA and Long Beach, there are more than 13 truckloads waiting to be picked up.

So it really basically brings together all the different problems we're having. Is the system too fragile? Was it too susceptible to all these snags that have led to all these shortages and pain for consumers and retailers, small business owners. Did we have a system that was deeply flawed, or did the pandemic just bring inevitable snags to that system? Some people think that the system was too fragile, and one of those people is Joe Biden. Our goal is not only to get through this immediate bottleneck, but to address the longstanding weaknesses in our transportation supply chain

that this pandemic has exposed. And one of the responses that he's had to that is ordering supply chain reviews of things that are considered especially critical to national security, like, for example, semiconductor chips, batteries, and things like that. One big step that Biden did take was announcing that the White House had worked with a union, several delivery companies like FedEx, some retailers at the Port of Los Angeles, which is one of the biggest ports for imports in the U.S. to bring that port to operate 24-7. By increasing the number of late night hours of operation and opening up for less crowded hours when the goods can move faster, today's announcement has the potential to be a game changer. I think that, you know, there's collaboration with the private sector, which is

this is an example of, but I'm not sure that there's much else that Biden can do to, you know, save Christmas if, you know, if that's what you're worried about at this point. It doesn't sound like you're worried about it. I celebrate Hanukkah. So even though Biden is now putting some eyes on the supply chain snags and trying to alleviate the backlog at the ports, it sounds like Ed the Toymaker isn't going to be able to meet all of his orders this year, and the Turbo Man action figure

I ordered for the producer of this episode, Miles Bryan, still hasn't shipped. I want the Turbo Man action figure with the arms and legs that move, and the boomerang suitor, and the rock and roll jetpack, and the realistic voice activator that says five different phrases,

including it's turbo time. Accessories sold separately, batteries not included. Do we have any idea how long we're going to be living like this? Or is this sort of just the new normal? There are some experts I've spoken to who think this will probably resolve in the next few months, but not before the holidays happen. But there are other people who think that, you know, supply chain problems like this are a new normal. And there are other global crises afoot that are going to affect how global

manufacturing happens. And the pandemic is certainly an example of that. But, you know, we should have our eyes out in the future and see what happens. There's no reason to think that this system is going to not be susceptible in the future to other problems. So, I don't know, like, word to the wise, just, like, be patient when you're ordering stuff on the internet? Yeah, or you can, you know, some people have suggested, you know, looking at a second choice option or even looking at, you know, you can look at gifts that are not products like tickets to events. Another thing that's popped up is this trend of people just buying gift cards because they can use that money later and it's sort of stowing away a gift for the future when these supply chain problems aren't as bad. Or maybe a charitable donation. Yes, that would be good. Isn't that what Christmas is all about anyway Rebecca

I think so sorry I feel bad I don't want to make it seem like I don't like Christmas because now I feel like the bad person Christmas is great I appreciate that it happens Thank you. Bye.