From China to Best Buy: Game controllers are struggling on their way to US consumers

PEMBROKE, Mass./DONGGUAN, China, Dec 15 (Reuters) – Fraser Townley looks at two gaping holes in one side of a pallet one of his workers has just pulled out of the orange Hapag-Lloyd shipping container that arrived here in its warehouse from China on a recent chilly morning.

“Clearly a forklift,” he mutters.

The damage could have occurred anywhere along the 10,710-mile odyssey his company’s game controllers make from China’s Guangdong province where they’re made in its warehouse 30 miles south of Boston. just one stop on their way to big name retailers like Best Buy. Still, Townley, CEO of T2M, is grateful his products are coming.

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A global disruption of supply chains in the wake of the COVID-19 pandemic, which led to a sharp contraction and then an abrupt return to demand that caught most businesses off guard, 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 container ships idling off Los Angeles – the nation’s busiest port complex – has reached record levels, while growing piles of empty containers crowd 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 blamed for having helped fuel an inflationary surge that worries the Federal Reserve as well as many consumers.

The stacking casts a shadow over a globalized system that T2M and many other producers have relied on to get products made cheaply in distant factories. As companies developed these supply chains, they reduced the inventory they kept on hand to a bare minimum. That’s great for the bottom line, but a disaster when supply lines get clogged like they are now.

T2M’s mobile game controllers, including the only full-size device designed to work with a hardwire on an Apple iPhone, are sold by Best Buy and other major 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 manufactured by a Chinese factory. It has a China-based employee, Breeze Feng, the company’s senior structural engineer, who oversees production at the Dongguan factory until the goods are packed into containers for trucking to Hong Kong. for shipment to the West Coast of the United States.

Feng said the crisis reached a boiling point in June, just as they were scrambling to get goods to the United States in time for the holiday season. “We went for containers three times but failed,” she said, explaining that they had booked slots on ships. “They didn’t have a container to load our goods into, so there’s no way” they could ship.

Speaking at the Chinese factory – where rows of workers in blue smocks and white caps bent over workbenches assembling and testing controllers for T2M – Feng said he felt conditions had eased a bit subsided in October.

“But now, after the new strain (Omicron) came out, we are still worried whether it will return to the situation as before,” she said.

NOTHING IS NORMAL

T2M has limited ability to jump to other Chinese factories in this crisis. Feng noted that only a handful of factories are able to produce controllers that meet the Apple certification required by customers. “If we had to replace our factory, it wouldn’t have been quick,” she said, so they didn’t even try to find alternatives.

However, they had to find new routes to get the containers to their Boston warehouse. T2M receives one or two containers a month, each holding up to 40,000 controllers, and Townley is monitoring their progress.

In the past, he shipped them to Boston via the Panama Canal, a more direct and less expensive route that had become more difficult to access as port traffic grew heavy.

Now, its normal procedure is to ship goods to Los Angeles, where its containers are put on a train bound for Newark, New Jersey, which is their official port of entry for US customs. From there, a truck brings his boxes to his warehouse outside Boston. Warehouse workers then separate the items and ship them to major retailers’ distribution centers by truck.

But nothing has been normal in recent months.

In September, he had a shipment of controllers he was trying to get to a distribution center in Kentucky for a major retailer who had ordered a specific design and set a launch date for a promotion.

Controllers were on their way to Los Angeles when they got stuck waiting to be unloaded from a ship for what turned out to be another three weeks. Once the container was out, he tried to ship it directly to Kentucky to meet the deadline rather than sending it across the country first to Newark and then to his warehouse, as planned at origin.

“Unfortunately everyone except customs could be flexible,” Townley said. His solution was to fly more controllers directly from China to Tennessee, via Chicago.

Costs skyrocketed as a result. Townley now pays about $18,000 to ship a container from China to its warehouse, up from $3,500 this time last year. “And last year I was complaining, because we bought them for $2,800.”

The problems don’t stop once the controllers arrive at its warehouse. Finding truckers to transport goods to end customers became such a challenge that Townley considered purchasing his own truck. He decided not to.

As a small business, it has no leverage with its customers to pass on these expenses. Instead, he rushed to cut costs. He picks up one of his controllers and points to the brightly colored buttons. By ignoring the color – the buttons are now just black – he shaved 50 cents off that piece, he notes. He also slightly reduced the size of each box and eliminated a plastic cradle that held the controller inside.

Townley is well placed to play these matches. He came to the United States from Britain decades ago to help Circuit City set up a supply in China. So he spent most of his working life thinking about how goods get from place to place.

Although no one anticipated the current crisis, there are techniques to keep products and profits flowing. Take the perforated palette. One of the tasks 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 undamaged before being loaded.

In this case, the container was removed for a spot customs inspection in New Jersey, so Townley is confident the damage occurred there.

“On this occasion, the damage was limited to two cases. So we’re in the $1,000 range, but not tens of thousands for 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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