Some toy factories in China, where around 85% of the world’s toys are made, remain closed and others are operating at a fraction of capacity, either because of worker shortages or difficulties securing raw materials and molds to make their products. The disruption is threatening the carefully orchestrated schedule of manufacturing and shipments that delivers Barbie dolls and Nerf blasters to shelves. Some large retailers are searching for alternative products to fill holes in their inventories and considering delaying setting their shelves for the holiday season by a month.
Many toy companies have convened war rooms with daily calls to their Chinese manufacturers for status updates. Some have said they might see their expected output fall by around 25% in the second quarter of the year. Zuru, which makes X-Shot blasters and Bunch O Balloons water balloons, said its factories have reopened in phases over the past few weeks. Zuru installed dividers between workspaces, added extra sanitation stations and implemented other precautionary measures. But the company is thinly staffed due to restrictions on China travel and is operating at just 20% of capacity.
Some larger companies have worked to reduce their dependence on Chinese factories in recent years, with trade disputes recently creating the need for a more diversified base. Hasbro gets about 2/3 of its products from China and aims to reduce that to 50% over the next few years. Mattel makes less than 2/3 of its products in China and most of its two largest brands, Barbie dolls and Hot Wheels cars, are made elsewhere.
Even if the factories start churning out toys faster soon, another challenge will be getting them out of China, as toys will have to compete with iPhones and other consumer products for transportation.
Classroom discussion questions:
- What model in Supp. 11 (Supply Chain Analytics) did Hasbro and Mattel follow?
- What logistics issues does the article refer to?