U.S. Infrastructure, Yet Another Obstacle for the Supply Chain
We hear a great deal about the problems with ocean freight, but we haven’t been paying enough attention to a homegrown problem, the crumbling United States infrastructure. To be specific, until now the United States Congress has done little to supply the money needed to repair bridges, highways, and ports.
A bill, which will provide $550 billion in funding, is currently working its way through the Senate. It will hopefully pass this week and then move on to the House. Let’s hope it passes there and lands on the President’s desk for a signature.
Bloomberg Businessweek poses a very timely question and answer with its headline: “Just-in-Time Manufacturing? Not With Rickety U.S. Infrastructure.” The article by Mike Dorning provides disturbing figures on how much the U.S. invests in its highways and ports compared to other countries:
The U.S. dedicates 1.6% of gross domestic product to infrastructure spending, compared with an average of 2.9% among European nations, 3% by Japan, and 6.1% by China, according to the Group of 20 Global Infrastructure Hub.
He points out that 25% of U.S. bridges need repair and that American highways can not keep up with the increased truck traffic. As a result, “Freight truck delays increased 77% from 2000 to 2019.”
Let’s hope that the Infrastructure bill passes so that the U.S. can catch up with the rest of the developed world with a road system that can get goods from point A to point B with minimal costs in time and money.
Mattel and Hasbro Are Managing Their Ocean Shipping
According to their leadership, Mattel and Hasbro are being effective in managing the supply chain and particularly ocean shipping. They are, according to Hasbro CEO Brian Goldner, adding ports as well as attempting new strategies and tactics. Mattel’s CEO, Ynon Kreiz, points to his company’s decisions to cut SKUs and close factories as keys to their success in managing the current supply chain disruptions.
There is an interesting article on the subject by Edwin Lopez on Supply Chain Drive entitled “Hasbro, Mattel lean on supply chain teams to minimize effects of costly ocean freight, port congestion.” I suggest that you read it in its entirety.
Of note, despite the current challenges, Mr. Lopez reports that both companies have increased their imports over 2019.
Mattel’s ocean imports were up 26% YoY in Q1 and 20% compared to the same period in 2019. Hasbro’s imports rose 10% YoY and 2% compared to 2019, according to figures from S&P Global Market Intelligence’s Panjiva.
Neither Hasbro nor Mattel expects freight prices to come down this year. I think we can all agree with that.
Now Is Mexico’s Moment. Where are they?
At this time of global trade uncertainty, you would think Mexico would be stepping up to the plate. After all, they share a continent with the United States and Canada and are our partners in the USMCA (United States, Mexico, Canada Agreement) free trade agreement.
Yet, I have seen and heard little over the last year and a half about Mexico as an alternative site for toy manufacturing. Bloomberg writer Shannon K. O’Neil blames it on politics. In her article, “U.S. Should Look South for Better Supply Chains,” she writes:
Mexico is already missing much of the industrial switch underway. Misplaced infrastructure investments, the coddling of state-controlled commodity providers, dirtying of electricity grids, and reversal of many market-friendly policies have squeezed a potential wave of relocations down to more of a trickle.
I am not sure if it is politics or bureaucracy, but Mexico’s time is here. Where are they?