domingo, 1 de mayo de 2022

domingo, mayo 01, 2022

This Is What Happens When Globalization Breaks Down

The story of one shipping container from a factory in China to a warehouse in the United States traces the arc of a global supply chain consumed by trouble.

By Peter S. Goodman

Hagan Walker and his business partner, Anna Barker, scrambled to make sure the plastic toy products made by their company made it to Starkville, Miss., on time.Credit...Whitten Sabbatini for The New York Times

Hagan Walker contemplated the geography of the planet and felt pangs of agitation. 

The vastness of the Pacific Ocean seemed to be stretching wider.

His start-up company, Glo, makes novelty items — plastic cubes that light up when dropped in water. 

He started the business six years ago in the compact town of Starkville, Miss., while relying on factories 8,000 miles away in China to make his products.

That distance suddenly felt unbridgeable.

It was December 2020, nearly a year into the pandemic, and China’s industrial might was sputtering. 

The factory making Glo’s next order in the Chinese city of Ningbo warned him that the costs of key materials like plastic were soaring. 

The shipping industry was straining under an overwhelming flow of goods from Chinese plants to American consumers. 

Booking a shipping container seemed akin to trying to catch a unicorn.

Calm and reserved, Mr. Walker, then 28, was generally comfortable with risk. 

In 2016, fresh from Mississippi State University with an engineering degree, he turned down a job at Tesla that would have paid him $130,000 a year. 

Instead, he opted to remain in Starkville, his college town, to start his own business.

Yet he was increasingly worried that his next order would not make it to his warehouse in Mississippi in time for Christmas — still a year away.

“I was scared,” Mr. Walker said matter-of-factly. 

“I was willing to pay pretty much whatever.”

By now, the disruptions to the supply chain are widely known. 

The still unfolding turmoil has been amplified by Russia’s invasion of Ukraine along with fresh Covid lockdowns imposed in China. 

Yet the story of how a single container made it from coastal China to central Mississippi shows the complexity of the troubles — a condition unlikely to give way to normalcy anytime soon.

The supply chain crisis hit Glo, a start-up, at a critical time in its brief history. Credit...Whitten Sabbatini for The New York Times

Glo forged ties to make light-up toys based on Sesame Street characters like Cookie Monster and Elmo. Credit...Whitten Sabbatini for The New York Times

The largest multinational retailers like Amazon and Walmart have responded to the convulsions in the supply chain by chartering their own container ships, amassing empires of warehouse space and stockpiling products. 

Such options are beyond the reach of small companies like Glo, which employs 27 people. 

Modestly profitable, the company aims for $4 million in revenues this year.

The order that Mr. Walker placed for the Christmas season just past was the most important in Glo’s brief history. 

His light-up cubes had begun as a playful way to garnish a cocktail. 

They had since evolved into the glowing midsection for a variety of children’s bath toys. 

The company had recently forged ties with a giant in children’s education and entertainment — Sesame Street. 

This order represented the debut offerings of this partnership. 

Glo was to produce thousands of light-up dolls in the incarnation of Elmo, the Sesame Street icon, plus thousands more for a new character named Julia.

Mr. Walker contemplated the possibility that the factory in Ningbo might prove unable to procure raw materials. 

He envisioned the port choked with finished products, outstripping the availability of ships. A significant delay or shortage of product courted disaster. 

To amass enough inventory to avoid disappointing Sesame Street, he placed the largest order that Glo could manage — 21,196 Elmo bath toys, and the same number of Julia figures.

The total cost ran $251,000, an amount just manageable without taking on debt. 

The order amounted to one-fourth of Glo’s anticipated sales for the year. 

For the first time, the company was ordering enough products to fill an entire 40-foot shipping container.

This container would carry more than Glo’s usual bath toys. 

It was a vessel of aspiration for his company, a start-up that personified the nation’s entrepreneurial brio.

“I tell people all the time,” Mr. Walker said, “‘Either this company is going to go somewhere, or I’m going to be sleeping on your couch.’”

‘Get This Made in China’

The factory in Ningbo, China, warned Glo that the costs of key materials like plastic were soaring. Credit...Velong Enterprises

A tinkerer by nature, Mr. Walker mastered a power screwdriver when he was 3, shocking his parents by using it to remove the deadbolt from the front door of his family home.

He fashioned his first light-up cubes by inserting basic electronics into a rubber toothbrush cover. 

He sold his wares to local bars that stuck the cubes into cocktail glasses. 

When the light went out, the bartender could tell with a glance that the customer was ready for a refill.

Then Glo heard via Facebook from an unexpected customer, the mother of a 4-year-old boy who was autistic. 

Bath time had been a perpetual nightmare. 

Her son suffered from sensory overload and was terrified by the sound of rushing water. 

When she deposited a Glo cube into the bath, he was transfixed. It diverted him from his fears.

By then, Mr. Walker had been joined by a partner, Anna Barker, another recent Mississippi State graduate. 

She sketched out an idea for what became Glo Pals — friendly characters framing the cubes.

Despite the lure of larger places with more engineering and creative talent, Mr. Walker has kept the business in Starkville (population 25,000), moving last year into a long-vacant movie theater just off Main Street. 

Inside, employees sit between exposed-brick walls, placing products into shipping cartons. 

Dogs roam gleefully through the building, along with the toddler daughter of a woman who works on the design team.

Mr. Walker wanted to make his products in the United States, but soon concluded that this was virtually impossible.

He contacted dozens of American factories. One offered to make the steel plates used to manufacture the cubes for $18,000 — 12 times what he pays in China. 

Another offered a price close to what Glo pays to make cubes in China. 

But this operation, it turned out, was using factories in China while collecting a piece of the action.

In starting a new line of Glo characters, the company sought a promotional box that would open and pop up, like a children’s book. 

It contacted a factory in Georgia.

“Their packaging engineers said, ‘It’s too complex,’” Mr. Walker recalled. 

“‘You should just get this made in China.’”

‘China Now Is Crazy’

The port in Ningbo, on the East China Sea, is one of the world’s busiest. Credit...Imaginechina, via Associated Press

Ningbo, a city of more than nine million people on the East China Sea, had been a trading power for two millenniums, dating back to its days as a hub on the Silk Road. 

In modern times, its factories have proliferated along with China’s industrial reach. Its port is one of the busiest on earth.

Like factories everywhere else in China, plants in Ningbo were severely challenged by the pandemic.

In late January 2020, as the first wave of the pandemic expanded, migrant workers returned home to communities across China to visit their families for the Lunar New Year. 

After the holiday, many opted not to return to their jobs in factory enclaves like Ningbo.

Glo had hired a company called Platform 88 to make its first order of Sesame Street characters. 

Before the pandemic, roughly 300 people had worked at Platform 88’s plant in Ningbo, according to its operations manager, Calvin Zheng. 

By March 2021 — as the factory prepared to bring Elmo and Julia to life — fewer than 200 workers were on hand.

On top of the labor shortage, the Chinese government was limiting the supply of plastic by prioritizing its use for vital goods like medical devices, Mr. Zheng said. 

The electrical grid was buckling in the face of ramped-up factory production.

By May 2021, as the factory in Ningbo made the products, Mr. Walker went online to begin arranging shipping for his order. 

He consulted a website called Freightos — something like Expedia combined with PayPal for companies booking space on container ships.

Glo has 27 employees and is modestly profitable. Credit...Whitten Sabbatini for The New York Times

A year earlier, a container could be shipped from China to the West Coast of the United States for about $2,000.

The same journey was now pushing $20,000.

Behind this surge was a shift in how Americans were consuming. 

Cooped up in their homes, they were avoiding restaurants, hotels and entertainment venues. 

But they were still spending money — on exercise bikes, desk chairs, video game consoles and kitchen appliances.

Some of Platform 88’s customers were stockpiling their finished wares in China, waiting and hoping that shipping prices would decline. 

Mr. Walker dismissed that option. 

He emailed a Chinese shipping agent, ECU Worldwide, and arranged to move a partial container load from Ningbo to Starkville for $5,485.31.

Four days after his booking was confirmed, the shipping agent wrote to tell him that she could not locate a container.

Two months later, in July, with transportation still not secured, Mr. Walker was consumed by worry. 

An agent at a freight company in Indianapolis, Cargo Services, counseled him to forget about shipping out of Ningbo and instead truck his cargo 90 miles up the coast to Shanghai, where he would find more vessels headed across the Pacific.

“Ningbo has zero space lately,” Jefferson Clay wrote. 

“Truthfully, it’s all a mess, and the pricing is out of this world.”

Two days later, Mr. Clay emailed again. 

Shipping carriers were balking at handling a load headed inland, hundreds of miles from a coastal American port. 

With cargo prices exploding and containers scarce, they were intent on returning the boxes to Asia as quickly as possible, maximizing their use on the most lucrative routes — China to the West Coast of the United States.

Mr. Walker contacted another company that brokers freight crossings, Baylink Shipping, based in Queens. 

An agent there, Harry Wang, suggested that Glo consider shipping out of Shenzhen, an enormous industrial city about 1,000 miles south of Ningbo. 

He cautioned that rates were climbing every week.

Packages being readied to ship to customers.Credit...Whitten Sabbatini for The New York Times

“China now is crazy,” Mr. Wang wrote. 

“Carriers are robbing shippers and importers.”

The next month, Baylink offered passage from Shenzhen to Houston for $21,500. 

It came with caveats.

“Honestly,” Mr. Wang wrote, “overseas agents in Shenzhen can barely make bookings for space as most of the ports in China are suffering from terrible congestion.”

Trouble also awaited across the Pacific, Mr. Wang warned. 

“Truckers in Houston are fully booked at this moment. 

We are not sure if they will take such a long haul from Houston to Starkville.”

Mr. Walker was soon reaching out to a third company, Seabay, based in China. 

On Aug. 30, he finally secured a booking: Shenzhen to Long Beach, Calif., for $28,296, with an estimated delivery date of Oct. 30.

Normally, such quotes were good for as long as 30 days. 

This one expired in 24 hours, a sign that prices were continuing to increase. 

Mr. Walker paid immediately.

Then came an alarming text from Sunny Liu, a representative at Seabay. 

Given a shutdown at the Ningbo port after a single dockworker had tested positive for Covid-19, Shenzhen was besieged by diverted cargo, along with the usual crush of products from factories across southern China. 

Mr. Walker had to get his container from the factory in Ningbo to a warehouse in Shenzhen within three days. 

Otherwise, the space on the ship would be given to someone else.

But truck drivers, some of whom were in quarantine, were scarce. 

Somehow, Platform 88 found a driver and arranged to have the container carried to Shenzhen.

A Floating Traffic Jam

Container ships anchored off the Port of Los Angeles, waiting to unload their cargo.Credit...Erin Schaff/The New York Times

Glo’s container — logged in the shipping manifest as MSMU8771295 — was loaded atop the Maersk Emden, one of more than 300 such vessels owned and operated by A.P. Moller-Maersk, the Danish shipping conglomerate.

By itself, Maersk moves about 17 percent of all shipping containers worldwide. 

It is in an alliance with the largest carrier, Mediterranean Shipping, one of three consortia that collectively move 80 percent of all containers.

The Maersk Emden was 1,200 feet long and 158 feet wide, or more than five times the size of the main concourse of Grand Central Terminal.

On Sept. 12, the Emden glided out of the Shenzhen port, carrying some 12,000 containers. 

She stopped at Nansha, near the Chinese city of Guangzhou. 

She docked at Yantian, east of Shenzhen. 

She stopped at the port of Ningbo, by then reopened.

On Sept. 27, she embarked across the unfathomable expanse of the Pacific.

No one could have been surprised by the madness that greeted her on the other side as she arrived off the Port of Long Beach nearly two weeks later, on Oct. 9.

The two ports at Los Angeles and Long Beach handle two-fifths of all imports reaching the United States from Asia via container vessels. 

That flow would increase by more than 17 percent over the second half of 2021 compared with the previous year. 

The surge proved overwhelming.

More than 50 ships were stuck out in the ocean, waiting for a dock to open in the mother of all traffic jams.

For the first six days, the Emden did not even have a place to anchor. 

It ran a slow, looping course in the waters off the port, before anchoring in formation with nine other vessels, roughly three miles off the coast, according to data compiled by AIS Maritime Intelligence, a unit of MarineTraffic. 

There, it sat for another 10 days, having become a floating warehouse.

Any one vessel stuck in the water indicated that a massive quantity of goods was not getting where it was supposed to be. 

The Maersk Emden alone was carrying 474 containers for LG, the South Korean home appliance giant, according to customs data tabulated by ImportGenius, which tracks global shipping. 

Nike had 74 containers on board. 

Mattel, the toy company, had 96. Just as the weather was turning cold in North America, 48 containers shipped by Burlington Coat Factory were stuck on the vessel.

Taken as a whole, the products bobbing on the Pacific — carried to the United States not just from China but from South Korea, Mexico, Australia, the South Pacific and the Middle East — could collectively fill an empire of warehouses and shopping malls.

One ship held enough animal feed to sustain 20,000 cows for a week. 

Five ships collectively carried 13 million pounds of Fiji brand bottled water. 

Others bore enough Heineken beer to slake the thirst of every adult in San Francisco for a year. 

A key element for making synthetic fabrics and plastic bottles was stuck in the queue along with solar panels, chain link fencing, fabric for carpets for Tesla cars and Cornhole game equipment.

Mr. Walker had his sights on a single container stuck in this monumental pileup, one steel box held there by forces entirely beyond his control.

The Last Leg Home

The two ports at Los Angeles and Long Beach handle two-fifths of all imports reaching the United States from Asia via container vessels. Credit...Stella Kalinina for The New York Times

On Oct. 25, after 10 days of purgatory at anchor, a giant crane plucked Glo’s container off the Emden and deposited it on the dock.

Four days later, a so-called drayage driver — the operator of a truck that loads and unloads at ports — picked up the container and hauled it to his company’s yard in Los Angeles. 

There it sat for two days, until another driver ferried the container to a warehouse in Costa Mesa, some 40 miles down the freeway.

Two days after that, on Nov. 3, Mr. Walker received an alarming email from Freightos: 

The previous delivery date of Oct. 30 — now past — had been updated to Dec. 10.

“I said to myself, ‘We’re going to miss Black Friday and Christmas,’” Mr. Walker recalled.

He emailed Seabay, the freight company in China, to try to move the box faster. 

It directed him to its counterpart tasked with managing the final leg of the journey, Israel Cargo Logistics. 

Its American operations were housed in a low-slung office complex in the Rosedale section of Queens, on a street dotted by a used-car dealer, a diner and a bodega.

Inside the complex, many of the suites were vacant. 

The offices of Israel Cargo Logistics were on the ground floor, down a long hallway off another long hallway lined with stained carpets. 

There, Michael Horan, the ocean manager, sat in a cubicle in an oddly silent room, the walls white and devoid of decoration.

He read a plaintive cry for help from Mississippi.

“Hi Michael, I know you’re probably hearing this from every client,” Mr. Walker had written. 

“This container has ALL of our packaging for ALL Christmas products that we intended to sell this year, so we’re in a tough position.”

“Please let me know if there’s anything we can do to expedite the process,” he continued. 

“And I truly mean we. I appreciate your help.”

Mr. Walker figured that Mr. Horan was besieged by angry shippers issuing rude threats, and he bet on the power of polite discourse. 

He allowed himself to imagine that a truck might be secured to haul his container perhaps as far as Memphis or Dallas. 

Then, he would scramble to line up transport for the rest of the journey.

He was astonished by the email he received only 21 minutes later.

“Hi Hagan,” Mr. Horan replied. “I have a truck picking up tomorrow from Los Angeles and will deliver to you on Tuesday 11/9.” 

This, for an extra cost of $1,100.

“Yes!” Mr. Walker wrote back immediately. 

“Let’s do it!”

Just before 8 a.m. on Nov. 9, Mr. Walker arrived at his warehouse, a failed furniture showroom on the outskirts of Starkville. 

The tractor-trailer was already there, backed up to the loading dock. 

The driver was resting inside the cab after his four-day, 1,900-mile drive.

As the driver lifted his rear gate, Mr. Walker peered in excitedly. 

There sat 1,595 brown cartons atop 24 pallets.

Mr. Walker and three employees wielded electric pallet jacks to move the goods into the warehouse. 

An hour later, a Glo truck began collecting some of the cargo to take it to the old movie theater downtown, where employees began preparing shipments for customers across the United States and around the world — in Belgium, Dubai, Singapore.

Watching this process unfold, Mr. Walker felt an overwhelming sense of relief.

But before the day was done, anxiety had returned. 

Given what he had endured, he was already looking ahead to the 2022 Christmas season, readying ever larger orders as a hedge against new troubles emerging somewhere on the pathway between China and Mississippi.

“It’s the whole cycle all over again,” he said.

Peter S. Goodman is a global economics correspondent, based in New York. He was previously London-based European economics correspondent and national economics correspondent during the Great Recession. He has also worked at The Washington Post as Shanghai bureau chief.


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