Supply Chain Weekly Wrap-Up: 02/14/20 – 02/20/20

China’s shipping nears a standstill

Shipping volumes out of China are rapidly falling as the impact of the coronavirus outbreak continues to take its toll on industrial production. Ocean carriers are bracing for financial blows from the diminished output, with senior executives at five European and Asian container shipping operators saying that they are preparing profit warnings for the first half year or in some cases the full year.

This news comes alongside reports from executives that large shipping containers are leaving Chinese ports as little as 10% full and sailings are being cancelled. Lars Jensen, head of Denmark-based maritime research group Sea-Intelligence, said that “less cargo is being moved between China and the rest of the world” and as a result they had to cancel an additional 30 sailings last week with the total now topping 50 since late January. This won’t just affect the shipping industry. Due to delayed or reduced shipments, retailers may begin to see a slowdown in their traditional restocking of inventories for the spring.

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Mattel to reduce SKUs by 30%

Mattel, which has struggled to recover from the fall of Toys R Us in 2018, has undergone a two-year supply chain simplification process, which company executives say is the reason for Mattel returning to profitability. As part of this process, the company will reduce its SKU-count by 30% by the end of 2020. In addition to the plans to reduce the number of SKUs, the company is also simplifying its supply chain at a more granular level, reportedly cutting down on the color options toy designers have to choose from when it comes to Barbie dolls and Hot Wheels cars.

Mattel has already introduced an automated online wholesale ordering system and predictive algorithms to improve supply and demand forecasting, which according to the company’s CEO, Ynon Kreiz, were significant parts of the supply chain streamlining work. The supply chain simplification process has, so far, resulted in in $797 million in cost savings in 2019 with an additional $92 million in cost savings predicted in 2020.

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Coronavirus threatens Apple supply chain

Apple has warned of global iPhone supply shortages which “will temporarily affect revenues worldwide” as a result of its Chinese factories being shut due to the coronavirus outbreak. The Californian company also told investors on Monday that it would fail to meet its quarterly revenue targets due to the outbreak causing a “temporarily constrained” supply of iPhones and a dramatic fall in Chinese customers.

Apple currently produces most of their iPhones and other products in China. As a result of the virus outbreak the company had to temporally halt production in China. While the majority of its Chinese iPhone factories have reopened except those within the Hubei province, the center of the Coronavirus outbreak, a company statement said: “We are experiencing a slower return to normal conditions than we had anticipated”.

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Have a great weekend!