Tag: toys

OM in the News: Taking Nerf Guns Away From China

The Nerf N-Strike Elite Hyperfire

Nerf guns. Monopoly board games. G.I. Joes. Some of Hasbro’s  bestselling toys are getting pricier as the U.S. implements stiff tariffs on Chinese imports. So Hasbro, and others like Barbie maker Mattel, are negotiating with suppliers and considering design changes. The threat of new taxes on toy imports comes amid a long-term shift in the industry away from China, spurred by rising labor costs in that country. Manufacturers have spent years trying to make fewer toys and games in China by relocating to factories in other countries, including Vietnam and India.

Across industries, U.S. companies have been diversifying their supply chains, prodded in part by tariffs implemented during both the Trump and Biden administrations, writes The Wall Street Journal (Nov. 18, 2024). Makers of everything from steel and semiconductors to auto parts are rejiggering supply lines to source components from other countries. Sharpie and Yankee Candle maker Newell Brands, for example, is moving more factory work to the U.S.—the desired result of the tariffs.

Hasbro’s current target is for roughly 20% of its U.S. sales to come from China-made products within four years, down from about 40% today. The challenges the company has faced in achieving a long-held goal underline the pressure facing toy makers. While lower-cost locations are easy to find, switching to a new factory with similar product-quality and safety standards can be a challenge in the toy industry.

Unlike in some industries, automation has yet to make major strides in parts of the toy-making process. Assembly for many toys still relies on skilled workers to put together the latest action figure or hand-paint details. Shifting to a different country requires training a new generation of craftspeople. Smaller factories in South and Southeast Asian countries also might not produce enough units to easily replace Chinese facilities.

Hasbro’s shift away from China is part of a $750 million cost-cutting push that includes negotiating lower prices from suppliers or changing designs to make them cheaper to build, such as Jenga blocks that now use a single type of wood. The change lowered costs and had the added benefit of making the pieces slide more smoothly out of a Jenga tower. Meanwhile, the Chinese government has been pushing for the country to graduate from being a hub for lower-cost work, such as toy making.

Classroom discussion questions:

  1. What other products have been moving away from China?
  2. Have the tariffs been successful?

OM in the News: A Logistics Manager Tries to Save Christmas

MGA toys awaiting shipment fill up a rented warehouse in Shenzhen, China.

A toy traffic jam is threatening to ruin Christmas. John Baker’s job is to save the day. Baker is the logistics boss at MGA Entertainment, the company behind L.O.L. Surprise dolls, Little Tikes cars and other popular toys. His job: Retrieve the items in time for the holidays by overcoming a jammed-up global supply chain that is holding them hostage. In June, when new toys typically exit factories for cargo ships and stores world-wide, hundreds of thousands of MGA dolls, play sets and accessories were piling up in factories and rented warehouse space in and around China’s port city of Shenzhen. The waiting toys would require 1,400 40-foot containers and cargo space aboard vessels.

Baker had already faced warnings that Chinese factory owners were running out of storage space. If he couldn’t get the toys shipped out of Shenzhen soon, they would stop making any more. His supply-chain problem is testing leaders across America, from the makers of Nike sneakers to Ford pickup trucks to Whirlpool washing machines. “It’s more dramatic than what I can remember,” says Walmart’s CEO.

Since the Covid-19 pandemic, the once finely tuned world-wide assembly line has limped along, writes The Wall Street Journal (Oct. 13, 2021). Worker illnesses are shutting factories and ports in Asia, a once reliable source of inexpensive manufacturing. Floods and hurricanes are disrupting the orderly flow of raw materials. The shortage of semiconductors has limited availability of everything from cars to computers to videogame consoles. There is a shortage of cargo containers to ferry goods across seas and truck drivers to deliver them. Freight rates have hit record levels.

In a dessert town outside Los Angeles, the 62-year-old Baker tries to unravel the most complex knot of a career that began 4 decades ago, as a forklift driver moving pallets of Smurf dolls. He has been working in toy logistics his entire career and is now a VP for one of the world’s largest toy makers, which tallies more than $2 billion in annual sales.

The stakes are high this season, and the clock is ticking. Half of all retail toy sales come in the weeks leading up to Christmas. Toys that arrive too late won’t sell until they are heavily discounted after the holidays. Baker has to get MGA toys out of China and onto retail shelves with enough time for parents to buy them and put them under the tree.

This is a great story of the importance of one particular topic in Chapter 11 in your Heizer/Render/Munson text–logistics. Baker has used ships, trucks, and trains to try to get the toys to shelves. Will he succeed?

Classroom discussion questions:

  1. Why has the global supply chain weakened?
  2. What can Baker do to move toys from China to MGA’s European customers?

OM in the News: 150 Shades of Red Drown Mattel’s Supply Chain

Mattel has gotten to the heart of one of its problems: Too many reds aren’t a good thing. The company’s designers until recently could choose from about 150 types of red when making Barbie dolls, Hot Wheels cars or other toys in its stable. Each variation added storage costs and downtime at factories for cleaning equipment to swap out shades.

“Complexity is really a killer,” said Mattel’s chief supply-chain officer. Mattel has chopped the choices of reds by more than 1/3 and is doing the same for other colors, part of a broad edict to simplify the company’s supply chain. The goal is to improve, modernize and ultimately tame a sprawling supply chain that operates 13 factories, employs  35,000 people and delivers toys to 375,000 retail locations world-wide, reports The Wall Street Journal (Jan. 2, 2020). “Supply chain had become one of our handicaps,” adds the CEO.

Mattel says it plans to keep factories that are “strategically important” or that can make certain products at a better quality and lower cost than a third party could, while consolidating plants that are underused. The company already changed how it sells and fulfills orders to retailers. In Europe, Mattel implemented an automated, online ordering system for wholesale orders, eliminating the need for its sales team to manually process orders. It also increased the minimum order size so that it wasn’t shipping orders valued at just a few hundred dollars into a fragmented retail market.

More broadly, Mattel is using new algorithms to tie its manufacturing output more closely to demand, helping the toy maker to gauge the right number of toys for the holidays. Mattel also will be making fewer products. The company is planning to cut the number of items it sells by 30%, targeting the 45% of the items it sells that only make up 6% of its revenue.

Classroom discussion questions:

  1.  Why does Mattel have so many plants? So many colors?
  2.  What inventory strategy is Mattel using to cut SKUs (see Ch. 12 of your Heizer/Render/Munson text)?

OM in the News: It’s No Fun Making Toys in the USA

Raymond Beaver, Marshmallow's CEO, has not been able to move manufacturing from China to the U.S.
Raymond Beaver, Marshmallow’s CEO, has not been able to move manufacturing from China to the U.S.

Marshmallow Fun Co. designs and markets toy guns that shoot sweet, spongy projectiles 30 feet or more. So far, though, the Dallas-based company has been unable to hit one of its targets: Making at least some of its “blasters” in the U.S. rather than relying exclusively on contract manufacturers in China. “I salute anybody who’s making goods in the U.S.A.,” says the firm’s CEO in The Wall Street Journal (Feb. 10, 2015), “but it isn’t so easy.”   

American entrepreneurs eager to bring manufacturing back to the U.S. often run up against an obstacle: Unlike China, the U.S. has few contract manufacturers geared up to make consumer products on a large scale. Contract manufacturers make products for other companies that prefer to focus on product design and marketing. “In China, you can find a specialist in any product. You want a toaster oven? There are a dozen contract manufacturers that make toaster ovens. That kind of contract manufacturing just doesn’t exist anyplace else,” adds a China-based consultant.

A search for contract manufacturing services on the Chinese website Alibaba.com brings up more than 2,000 entries. China and Taiwan have huge contract manufacturers like Hon Hai Precision Industry, known as Foxconn, which makes iPhones for Apple Inc. China also has thousands of smaller ones bidding to make products for the likes of Mr. Raymond. In the U.S., contract manufacturers generally make parts, as opposed to finished products. Some make expensive items sold in fairly small volumes to industrial or military customers. In terms of expertise and production capacity, “we let so much leave the country that you can’t find what you need,” says a Rhode Island product designer.

Classroom discussion questions:

1. What are contract manufacturers and what do they do?

2. Why is it hard for many firms to “reshore” manufacturing?