Jay Foreman, the chief executive of toymaker Basic Fun, was in a bind over the summer.The end-of-year holiday shopping rush was quickly approaching, but Foreman was struggling to book shipping containers to ferry the company's toys, which include Tonka trucks, Care Bears and Cutetitos. And when he did find some, the costs were exorbitant.In a normal year, Basic Fun, based in Boca Raton, Florida, can export everything its customers order from its factories in China. "It's automatic," Foreman said. The company can "set it and forget it."But not this year. Not in a year in which 20-foot and 40-foot shipping containers became scarce and more expensive to deliver goods from factories overseas to U.S. ports and back. The spot rate of booking a 40-foot container from Shanghai to Los Angeles hit $10,229 the first week of August, up 238% from the same time a year prior, according to Drewry, a maritime research consultancy.So Foreman had to make a decision about which toys Basic Fun would focus on sending stores for the holidays. And he had to make it by September, so the goods would arrive in time.He found an easy answer to a complicated problem: small, squishy toys.About 85% of the toys sold in the United States are made in China, according to the Toy Association, an industry trade group. Shipping containers in short supply, limited cargo space on ocean vessels, and spiraling costs have forced toy manufacturers to make numerous trade-offs about which merchandise makes the most economic sense to ship this holiday.One solution to the container constraints, say toy manufacturers, stores and analysts: exporting additional smaller units and pulling back on larger-sized ones."Companies have to think about how they make the most of each cube of space in a container," said David Garfield, head of the consumer products practice at consulting firm AlixPartners. Toy manufacturers have retooled packaging to optimize space and ship more products per container, he said. In some cases, that has meant shrinking the actual packaging sizes. In others, it involves limiting extra accessories in the box to keep packages lighter.Basic Fun can fit $150,000 worth of Mash'ems — soft, squishy, water-filled collectibles with characters like Spider Man, Disney Princess and Harry Potter — into a container and $100,000 worth of Cutetitos, little furry stuffed animals wrapped in a burrito-like blanket."It's a simple case of how much sales volume fits in the container when containers are hard to come by," Foreman said, adding that with these smaller toys, "the packages are the size of a golf ball."On the flip side, Basic Fun can only pile $40,000 worth of Tonka Trucks and $80,000 worth of Care Bears into containers. So Basic Fun limited the amount of Tonka Trucks and Care Bear animals it shipped, instead of raising prices to offset its higher costs."I'd rather sell fewer trucks and not have to raise the price exponentially because I'll sell trucks again next year," he said.Fidget balls and tiny animals get priorityOther toymakers are making similar decisions.Yogibo, which sells toys, home decor and bedding, decided to prioritize shipping small items like Squeezibo, a gel fidget ball, and Mates — small, cuddly stuffed animals — instead of blankets and pillows "as they take up much less space and offer a higher value for the same amount of volume," said CEO Eyal Levy.In a 40-foot container, Yogibo can fit 200,000 Squeezibo units — $1.6 million worth of sales—and 15,000 Mates worth $400,000. But just 2,500 blankets worth $200,000 in sales fit in a container.The company, which is based in Nashua, New Hampshire, and sells at its own retail stores, Amazon and specialty retailers, made the decision to focus on shipping these smaller items in mid-September, after struggling to procure containers."Once we realized containers were getting delayed week after week, we started the prioritization process," Levy said. "We were running out of time."This year, toymaker WowWee sent more of its My Squishy Little Dumplings — bite-sized dumplings that make popping sounds that kids can squeeze and toss around— and its Got2Glow Fairy Finder, a jar with 30 virtual fairies, to retailers such as Amazon, Walmart and Target."Cargo and containers are at a premium, so we're going to prioritize high-velocity, small items," said Andrew Yanofsky, head of marketing and operations at the Hong Kong-based company. He estimates that $245,000 worth of the dumplings go in a 40-foot container and $535,000 worth of Got2Glow jars can be shipped.The company pulled back on shipping Pop2Play, a pop-up playset slide. Only $61,000 worth of slides can fit in a container, Yanofsky said."It's a great toy and it's selling well, but the problem is only a couple thousand fit," he said. "When the margins are low and the footprint is large, items like that are going to get pushed aside."The decisions by manufacturers to prioritize smaller toys are trickling down to holiday inventory that's available for some toy stores.Rick Derr, owner of Learning Express Toys in Lake Zurich, Illinois, said he began noticing in the spring that smaller, lighter items were in more abundant supply. He has been tapping alternate suppliers to try to fill in gaps on bigger items such as dollhouses, play sets and mazes."We're going to pivot to smaller items" this holiday, he said. "If you sell enough of them you can make up the that we lose not having the bigger items." Specifically, Derr expects to be able to sell more small fidget toys, silicone Pop It! toys, small arts and crafts kits, puzzles and card games."These are going to be in much better shape this year," he said. What will be scarcer at his store this holiday: "The bigger items."

SAN DIEGO, Calif. — While they won't play Christmas music until after Thanksgiving, the Southern California business City Lights celebrates all year round.

"They have everything you think you want: cars, foods, snowman, and toilet paper!" said longtime customer Maureen Downey, pointing to an ornament.

Located in San Diego, City Lights Year Round Collectibles Emporium has built a cult following over three decades.

"Its toys for adults," said owner Brian Young. "It started off in a very small space, but it hit a niche and has been growing ever since."

A destination for customers like Downey, who come for collectibles and nostalgia.

"This type of place is getting harder to find, which means the item itself harder to find," said Young.

But nearly two years into the pandemic, Young isn't expecting a Christmas miracle this season.

"The cost of shipping and the cost of labor is making business very, very difficult."

He's among retailers nationwide gripped by a broken supply chain. Goods we rely on are stuck at sea as container ships wait in record numbers to deliver products to U.S. ports.

"There were 72 ships offshore waiting to be offloaded. Some of those have merchandise we're waiting for, unfortunately," said Young.

The Southern California ports of Los Angeles and Long Beach are together the nation's busiest container port complex. The primary gateway for waterborne trade between the U.S. and Asia, they handle more than one-third of U.S. goods.

The backlog has grown at a record pace in recent weeks.

"Going into the holiday season, this thing is going to get worse. We haven't fixed our supply chain problems yet," said Hitendra Chaturvedi, an expert in supply chain management and professor of practice at the W.P. Carey School of Business at Arizona State University.

Teaching the next generation of supply chain leaders, Chaturvedi says the once-obscure profession is now under a global microscope.

"One of the feedback I got was, now, I don't have to tell my grandma what supply chain management is. When I tell her that I'm going to be getting a degree in supply chain, she knows what I'm talking about," said Chaturvedi.

With the delta variant spreading, toilet paper, cleaning supplies, and paper towels are once again in high demand. So much so that Costco is reinstating limits on how much you can buy. And with shipping delays, experts urge consumers to get their holiday shopping done now.

"I talk to a lot of CEOs of large transportation and logistics companies. They don't see this thing improving till the end of 2022," said Chaturvedi.

The system has been crippled by high demand and wide-scale labor shortages.

"And then the third, I call it the dark unbalance of supply chain. When there is an imbalance of supply and demand, you have hoarders, who've got nothing to do with this business; they would start to buy out capacity," said Chaturvedi. "There were people who started buying out shipping capacity, sit on it, jack up the prices and then sell."

To curb demand, Chaturvedi says interest rates could go up. He says some of the standards used to teach supply chain are being thrown out the window.

"An example, this whole idea of extremely lean operation, where there's no inventory storage, is something that is being questioned. The whole idea of risk management across supply chain has taken a new meaning altogether."

More vulnerable to volatility, Chaturvedi encourages consumers to support small businesses.

"We're a long way from out of the woods," said Young.

But with loyal customers in-store and online, the supply chain isn't stealing their holiday cheer.

"There's an old saying if you can't change it do the best you can and live with it," said Young. "We'll muddle through."

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The vast network of ports, container vessels and trucking companies that moves goods around the world is badly tangled, and the cost of shipping is skyrocketing. That's troubling news for retailers and holiday shoppers.

More than 18 months into the pandemic, the disruption to global supply chains is getting worse, spurring shortages of consumer products and making it more expensive for companies to ship products where they're needed.

Unresolved snags, and the emergence of new problems including the delta variant, mean shoppers are likely to face higher prices and fewer choices this holiday season. Companies such as Adidas, Crocs and Hasbro are already warning of disruptions as they prepare for the crucial year-end period.

"The pressures on global supply chains have not eased, and we do not expect them to any time soon," said Bob Biesterfeld, the CEO of C.H. Robinson, one of the world's largest logistics firms.

The latest obstacle is in China, where a terminal at the Ningbo-Zhoushan Port south of Shanghai has been shut since Aug. 11 after a dock worker tested positive for COVID-19. Major international shipping lines, including Maersk, Hapag-Lloyd and CMA CGM have adjusted schedules to avoid the port and are warning customers of delays.

The partial closure of the world's third busiest container port is disrupting other ports in China, stretching supply chains that were already suffering from recent problems at Yantian port, ongoing container shortages, coronavirus-related factory shutdowns in Vietnam and the lingering effects of the Suez Canal blockage in March.

Shipping companies expect the global crunch to continue. That's massively increasing the cost of moving cargo and could add to the upward pressure on consumer prices.

"We currently expect the market situation only to ease in the first quarter of 2022 at the earliest," Hapag-Lloyd chief executive Rolf Habben Jansen said in a recent statement.

The cost of shipping goods from China to North America and Europe has continued to climb over the past few months, following a spike earlier in the year, according to data from London-based Drewry Shipping.

The company's World Container Index shows that the composite cost of shipping a 40-foot container on eight major East-West routes hit $9,613 in the week to Aug. 19, up 360% from a year ago.

The biggest price jump was along the route from Shanghai to Rotterdam in the Netherlands, with the cost of a 40-foot container soaring 659% to $13,698. Container shipping prices on routes from Shanghai to Los Angeles and New York have also jumped.

"The current historically high freight rates are caused by the fact that there is unmet demand," Soren Skou, CEO of container shipping giant Maersk, said on an earnings call this month. "There's simply not enough capacity," he added.

Port congestion

The terminal shutdown in Ningbo will add to bottlenecks arising from the closure in June of Yantian, a port about 50 miles north of Hong Kong, after coronavirus infections were detected among dock workers.

While a partial reopening of Yantian took only a few days, a return to normal services took nearly a month to achieve, according to S&P Global Market Intelligence Panjiva, as the congestion spilled over to other ports.

That spells trouble for retailers and consumer goods companies trying to restock inventories heading into the crucial year-end holiday shopping season. "The closure at Ningbo is now particularly sensitive as it may hold up exports for the peak season of deliveries into the U.S. and Europe which typically arrive from September through November," S&P Global Panjiva said in a research note on Aug. 12.

Drewry Shipping said Friday that congestion at nearby ports Shanghai and Hong Kong is "spiking" and spreading elsewhere in Asia, as well as in Europe and North America, "particularly the West coast" of the United States.

Some 36 container ships are anchored off the adjacent ports of Los Angeles and Long Beach, according to a report Thursday from the Marine Exchange of Southern California.

That's the highest number since February, when 40 container ships were waiting to enter. Ordinarily, there would be just one or zero container ships at anchor, according to the Marine Exchange.

The congestion in California is starting to spread to "pretty much every port in the [United States]," according to Biesterfeld of C.H. Robinson. "The chances of your vessel arriving on time are about 40%, when it was 80% this time last year," he told CNN Business.

The backlog at ports will have a ripple effect on already jammed warehouses and stretched road and rail capacity. Logistics networks have been running at maximum capacity for months, thanks to stimulus-fueled demand led by U.S. consumers and a pickup in manufacturing. Truck driver shortages in the United States and United Kingdom have only exacerbated supply disruptions.

U.S. imports in March and May exceeded levels seen in October 2020, typically the peak of the shipping season, said Eric Oak, supply chain research analyst at S&P Global Panjiva.

"This means that logistics facilities have been running flat out for most of the summer," he added.

It's not just ports that are under pressure. Air terminals are receiving increasingly large amounts of freight as companies turn to alternative methods to transport their goods. At some of the larger U.S. airports such as Chicago, there are delays of up to two weeks to claim cargo, according to Biesterfeld.

Efforts to contain COVID-19 outbreaks have recently disrupted traffic at Shanghai Pudong and Nanjing airports in China.

Retailers brace for impact

"Name almost anything and it seems like there's a shortage of it somewhere," Biesterfeld added. "Retailers are struggling to replenish inventory as fast as they're selling, let alone prepare for holiday demand."

Supply chains were discussed on nearly two thirds of some 7,000 company earnings calls globally in July, up from 59% in the same month last year, according to an analysis by S&P Global Panjiva.

Consumer goods producers are taking drastic steps to meet demand — such as changing where products are made and moving them by plane instead of boat — but companies such as shoemaker Steve Madden say they're already missing out on sales because they simply don't have enough goods.

The company has moved half the production of its women's range to Mexico and Brazil from China in an attempt to shorten delivery times.

"In terms of the supply chain ... we could talk about this all day. There are challenges throughout the globe," CEO Edward Rosenfeld said on an earnings call last month. "There is port congestion, both in the U.S. and China. There are Covid outbreaks at factories. There are challenges getting containers. We could go on and on."

It's one of several major apparel brands hit by factory shutdowns in Vietnam over the past month. Data from S&P Global Panjiva shows that nearly 40% of the volume of goods imported into the United States by sea over the 12 months to July came from the Southeast Asian country.

Adidas CEO Kasper Rorsted said the sportswear company will be unable to fully meet the "strong demand" for its products in the second half of the year due to the shutdowns, despite switching production to other regions.

Supply chain difficulties have been "leading [to] significant delays and additional logistics costs, particularly as we have been making more use of airfreight," he said on a recent earnings call.

Andrew Rees, the CEO of Crocs, said that transit times from Asia to most of the company's leading markets are approximately double what they were historically. "That's been the case for some time, and we're expecting [to] live with that," he told investors last month.

To ensure product availability during the holiday season, Hasbro, which makes Monopoly and My Little Pony, said it is increasing the number of ocean carriers it works with, utilizing more ports to expedite deliveries and sourcing more products earlier from multiple countries.

For consumers, the supply chain crunch is likely to mean higher prices. Hasbro, for example, is increasing prices to offset rising freight and commodities costs. The company is projecting that its ocean freight expenses will be on average 4 four times higher this year than last, according to chief financial officer Deborah Thomas.

Shoppers should also brace for longer than normal delivery times and may need to have several different gift ideas up their sleeves.

"As we've been forecasting for months, shoppers are going to see some bare shelves at the holidays," said Biesterfeld. "And if you buy most of your presents online, get it done early. Delivery time may be four to six weeks."

A coronavirus outbreak in southern China has clogged ports critical to global trade, causing a shipping backlog that could take months to clear and lead to shortages during the year-end holiday shopping season.

The chaos began unfolding last month when authorities in the southern Chinese province of Guangdong — home to some of the world's busiest container ports — canceled flights, locked down communities and suspended trade along its coastline to bring a rapid spike in COVID-19 cases under control.

The rate of infections has since improved, and many operations have restarted.

But the damage has been done. Yantian, a port about 50 miles north of Hong Kong which handles goods that would fill 36,000 20-foot containers every day, was shut down for nearly a week late last month after infections were found among dock workers. While it has reopened, the port is still operating below capacity, creating a huge backlog of containers waiting to leave and ships waiting to dock.

The congestion in Yantian has spilled over to other container ports in Guangdong, including Shekou, Chiwan, and Nansha. All of them are located either in Shenzhen or Guangzhou, the fourth and fifth largest comprehensive container ports in the world. The domino effect is creating a huge problem for the world's shipping industry.

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The Yantian backlog "is adding extra disruption on an already stressed out global supply chain, including the significant seaborne leg of it," said Peter Sand, chief shipping analyst for Bimco, an association of shipowners. People "may not find all they were looking for on the shelves when shopping for Christmas presents later in the year," he added.

As of Thursday, more than 50 container vessels were waiting to dock in Guangdong's Outer Pearl River Delta, according to Refinitiv data. That's the biggest backlog since 2019.

The snag in operations in Yantian alone is concerning. The port has been unable to handle some 357,000 20-foot container loads since late May, according to a recent estimate by Lars Jensen, CEO of Danish consultancy Vespucci Maritime. That's more than the total volume of freight impacted by the six-day closure of the Suez Canal in March.

Yantian port operations have recovered to about 70% of normal levels. But it isn't expecting to return to full capacity until the end of June.

Surging shipping costs

The congestion in southern China has led major shipping companies to warn clients of delays, changes to vessel routes and destinations and spikes in fees.

Maersk — the world's largest container shipping line and vessel operator — told clients last week that ships could be delayed at Yantian for at least 16 days.

While the company said it would divert some carriers to alternative ports, that won't necessarily solve the problem. Maersk warned that the waiting time in places like other ports in Shenzhen, Guangzhou and Hong Kong could rise as even more ships flood in.

Shipping giants Hapag-Lloyd, MSC, and Cosco Shipping, meanwhile, have all hiked freight rates for cargo between Asia and North America or Europe. MSC, for example, said this month that it would increase shipping fees from Asia to North America by as much as $3,798 per 45-foot container.

It's a global trend. Rates for eight major East-West routes have all surged from the same period a year ago, according to London-based Drewry Shipping. The biggest price jump was along the route from Shanghai to Rotterdam in the Netherlands, which soared 534% from a year ago to more than $11,000 for a 40-foot container.

Average container freight rates from China to Europe, meanwhile, recently hit $11,352.33, the highest level since at least 2017, according to Refinitiv.