07 August 2019 ~ 0 Comments

The Future Of Toys – Part 4, Toy Manufacturing Evolution

In the final part of our series looking at ‘The Future Of Toys’, we move onto the potentially dull, but nevertheless essential topic of manufacturing.

There are a number of disruptive factors/trends relating to toy manufacturing whiich are discussed below:

FACTORS DISRUPTING TOY MANUFACTURING

China’s Rapidly Advancing Economy – toy business old timers can tell you of the pre-China era of toy manufacturing, but for most of us in the business, the major source of manufacturing has been China for decades. The reason why China originally attracted toy manufacturing was low labour costs. In recent years, China has maintained the bulk of toy manufacturing due to relative ease of doing business, reliability and capacity. Labour costs in China have been rising constantly though, and today we are reaching a point where the living wage in toy manufacturing hubs in China is moving beyond what is viable for cost effective manufacturing. Our prediction is that China will keep a substantial share of toy manufacturing long term, because a). Evergreen items which can be automated will reduce the need for labour b). China will retain a large amount of tech heavy/high end toy manufacturing which supports higher labour costs c). China will retain manufacturing for the Chinese domestic market which is now the 2nd biggest in the world & growing. However, most toy companies need to start to look outside China for low labour cost manufacturing on standard toy items which aren’t suitable for automation/robots on the production line.

Environmental Concerns – The current plastic backlash we are seeing around the world is a major disruptive threat to the toy business and to toy manufacturing. There are tens of millions of jobs if not more in the manufacturing of plastic products globally. It is likely that we will see either a). Reduction in demand for plastic items and/or b). A move towards more sustainable materials for toys. Lego for instance now has some products featuring materials sourced from sugar cane, but the toy business is likely to need to seriously ramp up utilisation of materials which are bio degradable. The other environmental factor to consider is the carbon footprint of the supply chain, manufacturing at home may be more expensive but clearly transportation of goods from Asia has a negative impact from an environmental perspective and this will push some to ‘nearshore’ manufacturing.

Automation, Robotisation and Artifical Intelligence – One of the biggest disruptors of the coming 2 decades as far as the human species is concerned will be the loss of low end jobs to automation, robots and artifical intelligence. Automation has always been a part of toy manufacturing, but what has prevented automated production lines as standard is the uncertainty of the toy business. With around two thirds of all toy items on shelf each year being ‘new’, that means we have a huge product churn each year, and automation tends to need long term production to be justifiable. It is much easier and more cost effective to throw cheap human labour at toy production lines for products which may fail after a brief 3 month production run. Going forward while it is inevitable some parts of the factory will be taken over by non human labour, it is at this point hard to see the end of humans on the production line for toys when the demand is so variable and potentially short term! The implication of this is that we will still need low cost human labour at the core of toy manufacturing for the foreseeable future.

Trade Wars – the current friction between the USA & China over unbalanced goods shipments and trading practises has definitely accelerated North American toy companies moving some production away from China to other countries. We run a company which helps toy brands find contract manufacturing in India – www.ToyTeamIndia.com and every time there is a new announcement/new threat to shipping toys from China, new customers approach us for help moving production. Longer term though, it seems likely that this issue and the confrontational approach to addressing it is mostly driven by the incumbent President of the USA. Once he moves on, we suspect the focus will shift elsewhere, but in the meantime there is no doubt that the current situation is accelerating some toy production moving elsewhere.

The Growth Of India & Vietnam As Toy Manufacturing Hubs – we have written elsewhere extensively about the growth of Vietnam & India for toy manufacturing. In summary, Vietnam is the easier place for Chinese factory owners to set up new factories for cultural and geographical reasons, and as such many of the major China based manufacturing groups have set up plants in Vietnam. India however, has far more scale potential, in fact it is the only country in the world with similiar population to China, and is currently around 1/3 the labour cost on average. This combined with the existing industrial capacity, especially for plastics manufacturing means that India is likely to become the 2nd biggest toy manufacturing hub in the world in the next 5 years.

Technology has revolutionised business in general in the past decade or more. Currently though the majority of toys are still manufactured with human labour using similiar if evolved injection moulded plastic machines as have been used for a long time. The next wave of technology and the next evolution of toy manufacturing looks set to be an interesting journey for all of us!

For more information on how to find toy manufacturing in India, please refer to our Toy Team India website: www.ToyTeamIndia.com, or feel free to get in touch via the Contact page.

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