Timothy Aeppel and Xiaoyu Yin

PEMBROKE (Mass.)/DONGGUAN China (Reuters] Fraser Townley looks at two holes on one side of a Pallet that one of his workers pulled from the Hapag-Lloyd shipping box. It arrived in his warehouse from China this morning.

“Clearly a forklift,” he mutters.

It could have been anywhere on the 10.710-mile journey his gaming controllers made from China’s Guangdong Province, where they’re manufactured, to Boston’s warehouse. This is just one of many stops along their route to major retailers such as Best Buy. T2M’s CEO, Townley, says he is happy that the products have arrived.

Global supply chain disruptions in the aftermath of the COVID-19 epidemic led to an abrupt contraction followed by a rebound in demand. Most businesses were caught off-guard. Ports became overwhelmed and manufacturers, retailers and railroads had to scramble to deliver goods on time, especially during the holiday season.

The number of container ships idling off Los Angeles – the nation’s busiest port complex – has hit record highs, while growing piles of empty containers crowd the docks.

This is a dire situation that the White House has created a task force to address it. However, shortages of import goods have been blamed for causing an inflationary spike that puts the Federal Reserve and many consumers at risk.

This pileup is a dark shadow on a globalized system T2M, and other producers, have depended upon to obtain products manufactured in cheap factories far away. Companies built these supply chains and reduced the stock they had on hand to a minimum. This is great for bottom lines, but it can be disastrous when supply chains clog like they are now.

T2M’s Mobile Gaming Controllers (NASDAQ:: iPhone) are sold at Best Buy as well as other major chains, such Walmart (NYSE;) Target (NYSE:) and Amazon (NASDAQ:).

Townley doesn’t own a factory. He designs and orders the products from a Chinese factory, just like many other companies that produce consumer goods. Breeze Feng is a senior structural engineer based in China. He oversees production at Dongguan until goods are loaded into containers that can be transported to Hong Kong to ship to the U.S. West Coast.

Feng stated that the crisis reached a boiling point during June as the team was trying to ship goods to America in time for the end of the year holidays. She said that she had tried three times to collect containers, but was unsuccessful. “They did not have any container for loading our goods. So they couldn’t ship.”

Feng, speaking at the Chinese plant where rows of white-capped workers hunched over their workbenches testing T2M controllers, said that it felt like conditions had improved a little by October.

“But, now that the Omicron new strain has been discovered, we’re still concerned about its ability to return to normal,” she stated.

SOMETHING DOES NOT GO WRONG

T2M’s ability to connect to Chinese factories is limited in the current crisis. Feng said that just a few factories have the ability to make controllers that are Apple certified. She said that if they were to replace their factory quickly, it wouldn’t have been possible. Therefore, the team didn’t try to look for alternatives.

However, they had to figure out new ways to transport containers from Boston to T2M’s Boston warehouse. T2M gets one to two containers per month. Each container can hold up to 40,000. Townley follows their progress closely.

He used to ship the items to Boston by the Panama Canal. This was a direct route, but more expensive, that became increasingly difficult to reach due to congestion in port traffic.

His normal process is to send his goods to Los Angeles. From there, his containers get on trains to Newark (New Jersey), which is the official entry point for U.S. Customs. The truck then transports the boxes to his warehouse in Boston. The warehouse workers then sort the boxes and send them to the distribution centers by truck.

However, nothing is normal these past months.

His September shipment included controllers that he needed to transport to Kentucky to deliver to a retailer. He’d ordered one design, and had set a date to launch a promotion.

They were heading to Los Angeles, but they became stuck on the ship’s dock waiting for their cargo to arrive. This took them three more weeks. To meet the deadline, the controller tried to ship his container straight to Kentucky, instead of first shipping it to Newark then back to his warehouse.

“Unfortunately, everyone but the Customs people could be flexible,” said Townley. He proposed to fly more controllers directly from China via Chicago to Tennessee.

As a result, costs have increased dramatically. Townley pays $18,000 for one container to be shipped from China to his warehouse, compared with $3500 last year. “And last year I was complaining, because we’d been buying them for $2,800.”

Troubles do not end when the controllers arrive at his warehouse. Townley thought about buying his truck. Townley decided against it.

He is a small business owner and has little influence with customers about passing on these costs. Instead, he’s rushed to cut costs. He points at the buttons, which are brightly colored. He notes that he has slashed 50 cents by omitting the colors – now the buttons are just black. Also, he reduced the box’s size slightly and removed the plastic tray that was used to hold the controller.

Townley is well-positioned to take part in these kinds of games. He came to the United States from Britain decades ago to help Circuit City set up sourcing in China, so he’s spent most of his working life thinking about how goods make it from one place to another.

Although no one could have predicted the present crisis, there are techniques to keep profits and products flowing. The punctured pallet is an example. One task assigned to T2M’s factory monitor Feng is to photograph every pallet before it’s loaded into a container in China. That allowed them to quickly determine that the pallet wasn’t damaged before it was loaded.

Townley claims that this container was pulled to be subject to a New Jersey Customs inspection.

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