Shipping problems and model train shortages

[markfj]

A friend just forwarded this letter from the president of Heartland Hobby Wholesale. It summarizes the current situations model train manufacturers are dealing with as the world comes out of the pandemic. I’ve also included a link to a recent article that is forecasting even more delays in international shipping do to an outbreak of the virus in China.

There really isn’t much we can do other than be patient and expect longer lead times on both regular and preordered items.


"Dear valued customer,

Please, at best, expect challenges to our industry that haven't been experienced since 1945. Shortages will exist, some product may be allocated, and some shelves may remain empty. Please be patient with us as we are doing our best to get product stocked.

1. The dollar continues to decline making imports more expensive

2. Cargo rates have, at best, doubled and even tripled. Also, ocean shippers have requested premium pricing... A container from China last year was $4,500.00, and today we have seen $15,000.00

The large box retailers and Amazon are bidding up the price on containers for the fourth quarter. Big tech has reserved most air cargo shipments in the fourth quarter. Our air cargo rates are up over 400% from last year.

3. There is a chip shortage that will affect many companies. That is, chips may not be available for model train engines and transformers.

4. Price increases of major proportion are starting to be announced. China's producer price index increased 9% in May alone.

5. The ports are clogged. On June 7th, China closed a major port for 21 days which represents one fourth of all goods exported.

6. There are severe labor shortages at the ports once the ship has landed.

The American philosophy of purchasing is, "Just in Time."
The Chinese philosophy of purchasing is, "Just in Case."

In mid-January of this year, Heartland Hobby began major purchases for the fourth quarter. We ordered $500,000 more track than needed. We have done this with other lines to help avoid shortages.

Our industry is very small, and we have no influence on shipping when competing with Amazon, Walmart, Target and Costco for shipping containers.

If you can, order early, as of today, it looks very challenging.

Sincerely,

Allen Dayton
President
Heartland Hobby Wholesale"


Link to article on pending shipping delays:

Another shipping crisis looms on Covid fears in southern China


Thanks, Mark

[riogrande]

Read: Dear valued customers - brace yourselves for even higher prices and don't blame me, the vendor!

Yep, this has been in the daily news so most of us are aware of these things already, unless we live in a man cave and don't read the daily bad news. I've been reading about shipping container costs being triple in recent months. There have been reports blaming US consumers loaded with money buying all kinds of crap and causing this problem. In other words you greedy btards, this is all your fault, at least according to one report I just read (in a nutshell). Oh yeah, and also don't forget to blame the pandemic.

And it's not new news that there have been shortages of some model railroading products, such as flex track and turnouts during the past year when hobbyists have been stuck at home and buying items for layouts.

Looking at Athearn's announced product prices from the past several months, they are jumping up. The HO 45' TOFC trailers MRSP $39.98 each primed for grime represent a marked increase which makes me glad I picked up what I needed back when they were sold in 2-packs for around $26. There are very few items on Athearns list of new products that I need so that's a plus for me. I'm just patiently waiting for a few Genesis D&RGW cabooses to be announced; otherwise there seems to be mostly re-runs or models that are too modern or too old. There are rumors of Genesis SD9's which would be nice but if it becomes a budget issue, my Walthers SD9's may be "good enough". And of course Tangent keeps whacking us with nice models nearly every month. Shakes fist at Tangent!

It hasn't escaped me that prices are surging on our toys. I have a number of things on my want list that are coming in the next 12 months, but have plenty of trains so if I need to scale back, I'll have plenty to work with. As costs go up and my pay doesn't ... as in the past, I buy less and sell some surplus models. Heck, if China follows through on their bellicose threats... who knows.

[edwardsutorik]

Hmmm. Maybe I'll have to open up some of those resin kits I bought years ago and start working on them. To while away the time until OTHER stuff finally arrives.


Ed

[jonklein611]

Rapido touched on this in their latest newsletter:

Production and Shipping Delays In Our Industry

by Jason Shron

In comparison to many industries such as tourism and restaurants, model railroading has been largely spared the negative effects of COVID. Apart from an extended shutdown in February/March 2020, production of model trains was almost normal for most of last year. In fact, our hobby has received a boost in interest and sales as many people rediscovered their love of model trains during the various lockdowns.

However, COVID has had a knock-on effect which is now hurting us in a big way. It started late last year. Normally, factory workers go home a couple of weeks before Chinese New Year and return a couple of weeks after. This past year, a number of provinces in China advised their citizens to come home early or risk not coming home at all. Many workers at model train factories in Guangdong province thus went home early and this caused many model train deliveries to be delayed. Our HO Scale SW1200 was one victim of this delay.

The next hurdle has been a global microchip shortage. Most of the world's microchips are produced in one massive complex in Taiwan. The demand for microchips has far exceeded supply, and every industry is affected. For Rapido, this meant that our B36-7s sat in the factory for three weeks - mostly assembled! - waiting for circuit boards. Decoder manufacturers are in the same crunch, and model train companies around the world are not able to get the decoders we need for our models.

Now we have another hurdle - kick us when we're down! - in the way of a global shipping container shortage and congestion at ports. In the almost 17 years I've been in this business, I have never seen anything like this.

The cost to ship a container has gone from about $5000 to $15000. Because model trains are relatively small for their value, most of our shipments go LCL, or less-than-container load. The normal time from pickup at our factory to delivery at Rapido HQ is about five weeks. To give you an idea of shipping times now, our second SW1200 shipment left the factory on May 14th. All going well, it will arrive here around July 15th.

The delays are caused by the aforementioned container shortage, exacerbated by a COVID outbreak at the port that almost model train manufacturers use: Yantian, in Shenzhen. When the shipments arrive at the west coast, they normally get on a train within three days. Now it's taking two weeks. Our HO scale Meat Reefers are in Prince Rupert, British Columbia now. Every day we get the same message: "Container Waiting to be Loaded Onto Carriage for Inland Movement."

Why am I telling you all this? Well, for two reasons. Firstly, we at Rapido like to keep our customers informed. When something goes wrong, we tell you. We're not big on spin at Rapido. Back in 2012 I was looking at the future financing of the company. At a meeting with my uncle and a financial adviser, the adviser said "You don't want shareholders. You don't want to have to report to them." To which my uncle - a corporate lawyer - replied, "Have you see Jason's newsletters? He tells his customers more information than most CEOs tell their shareholders."

Obviously, when shipments are delayed this has an impact on cash flow. I recommend you pick up the July issue of Railroad Model Craftsman as my column explains the ins and outs of cash flow for the model train industry. And for other reasons, too! It's a great magazine.

The second reason I am telling you is so you know why there will be some delays in deliveries in the coming months. I know we are all eager to get the latest models in, but please have patience and bear with us. Stuff is going to take a bit longer to get here.

Rapido will get through this slowdown, as we've got through many tougher periods in the past. In 2007 our entire production was put on the back burner because the factory owner got a huge contract to make plastic plates and cutlery! Even with the current headaches, things are a lot better than they used to be...

[riogrande]

It does suck for the importer/model train company. The positive knock-on effect for me the consumer, is that the relentless arrival of new toys will slow somewhat giving my budget a break.

[santafe49]

Locomotive and freight/passenger cars are one thing, but track work? If i were Atlas, i start back up making mine in NJ. Comparing costs, it has to be an even shake when you consider shipping and political/health problems with importing from China.

[riogrande]

Only Atlas knows for sure. But IIRC, MicroEngineering makes their on track in their US facility so maybe it could be done?

[markfj]

Just thought of this; isn’t there a truck driver shortage in the US too?

[riogrande]

reportedly there is a truck driver shortage. It's been mentioned in the news in relation to delivering fuel to gas stations.

[fr8kar]

Jun 16, 2021 7:06:28 GMT -8 riogrande said:

It does suck for the importer/model train company. The positive knock-on effect for me the consumer, is that the relentless arrival of new toys will slow somewhat giving my budget a break.

Me too. I've got a few things on order that I'm hoping don't all arrive at once! A slower delivery pace could really help me.

[Deleted]

I have things on order that I'm really counting on for my railroad, but I've also been able to make a few good ebay purchases so I'm ok with enough rolling stock and motive power.

[valenciajim]

For the last year or so, I have been reading several academic papers about the historical economic consequences of pandemics and there seems to be a common theme. Shortages causing inflation for a period of time, tax increases to pay for the cost of the pandemic and a wealth redistribution. Economies do not begin to stabilize until some period after herd immunity is obtained. In a global economy, that probably means establishing herd immunity in all of the critical places in the supply chain.

I had to purchase some office supplies today and I was astounded at the price of paper. My wife's car was in the shop for several weeks because they could not get the part. It turns out that the part was defective, so the car has been in the shop for over a week, while the dealer waits to get a replacement part which hopefully won't be defective.

About the only thing that has gone down in price is hand sanitizer.

[ncrc5315]

In the commodity world, there is a saying, "The cure for high prices, is high prices". At triple the "normal" freight rates, new containers will be built, more ships will be built, somebody will either build new, or expand an existing chip plant, and eventually the pendulum will swing the other way. For some it will be exciting, for others it will be painful, but one thing is for sure, with uncertainty, there comes opportunity.

[bnsf971]

Jun 16, 2021 21:13:39 GMT -8 valenciajim said:

.

I had to purchase some office supplies today and I was astounded at the price of paper. My wife's car was in the shop for several weeks because they could not get the part. It turns out that the part was defective, so the car has been in the shop for over a week, while the dealer waits to get a replacement part which hopefully won't be defective.

About the only thing that has gone down in price is hand sanitizer.

Where I work, there is a travel trailer with a defective refrigerator. The customer won’t accept it until everything is working properly, and I wouldn’t expect somebody to plunk down $150k unless it does. The problem is, shipping date for the refrigerator is SEPTEMBER 24th!
As for model trains, I’ve been waiting for two months for a replacement decoder, with no ship date.

[riogrande]

Here is an interesting report on the container shortage:

www.msn.com/en-us/money/other/heres-whats-behind-the-container-ship-traffic-jam-causing-delays-around-the-world/vi-AALI1BN