Tag: toy maker

OM in the News: Where Will the Toys Come From?

Toy companies are delaying shipments and new product launches and struggling to fill retail orders as the coronavirus epidemic disrupts the industry’s supply chain, reports The Wall Street Journal (Mar. 2, 2020).

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:

  1. What model in Supp. 11 (Supply Chain Analytics) did Hasbro and Mattel follow?
  2. What logistics issues does the article refer to?

OM in the News: A Toy Maker Comes Home to the U.S.

knex toyAs every American child knows, toys come from the North Pole or—more likely—China. But as The Wall Street Journal (March 11, 2013) writes, Philadelphia’s K’Nex Brands is trying to prove they can still be made in America. Over the past few years, K’Nex has brought most of the production of its plastic building toys back to its U.S. factory  from subcontractors in China. To make that possible, the company has redesigned some of the toys and even handed over to kids a bit of the assembly formerly performed by hand in China.

“In the long-term, it’s much better for us to manufacture here,” says the chairman of K’Nex. By moving production closer to U.S. retailers, K’Nex said it can react faster to the fickle shifts in toy demand and deliver hot-selling items to stores faster. It also has greater control over quality and materials, often a crucial safety issue for toys (see the Ethical Dilemma box in Chapter 5). And as wages and transport costs rise in China, the advantages of producing there for the U.S. markets are waning.

But K’Nex has found it impossible so far to produce 100% U.S.-made toys, the firm’s goal. The K’Nex experience shows both the attractions of “reshoring” production and the difficulties of making that happen in a country whose manufacturing infrastructure has atrophied. Lining up suppliers has been a complicated chore in the U.S., where toy-making skills have faded. China, by contrast, has a vast, efficient network of suppliers and skilled labor. “In China, you can go over with just a drawing and say, ‘I need a million of these,'” says K’nex CEO. That helps account for a huge U.S. deficit in the toy trade. In 2012, U.S. imports of toys, games and sporting goods, mostly from China, totaled $33.5 billion, or 3 times U.S. exports of such items.

Discussion questions:

1. Why is reshoring difficult?

2. What re-engineering changes were needed to make it more feasible to manufacture here?