Tag Archives: toy sourcing

Supply Chain Diversification – The Second Biggest Toy Industry Trend

Supply Chain Diversification – The Second Biggest Toy Industry Trend

Aside from (the hopefully) short-term of impacts there are two massive trends having a massive effect on the toy business now and probably for the next decade. The first is sustainability. If your company isn’t in a sustainable product category or if your products are primarily made of plastic materials, then sustainable initiatives are becoming more and more important to keep consumer onside and buying toys.

Aside from sustainability though there is one major shift happening which does not get the headlines but is nevertheless throwing up massive challenges for toy companies. The shift is coming in terms of manufacturing hubs. Whereas we once relied primarily, or often completely on China for manufacturing at affordable costs and with good efficiency, the situation has changed significantly in that a proportion of production is seeping away from China into other countries.

There are a number of drivers of this, which we have covered in detail in other articles, but perhaps the best way to share that with you is to watch this YouTube video explainer we published a year or so back:

This video explains why China is not going to remain the same primary source for toys as it once was.

The point of this article though is to discuss how toy companies can manage the ongoing change.

There have been ongoing problems in toy supply recently – from the initial shutdowns in China due to Covid-19 through to shipping problems, and before that Trump’s tariffs on China, rising costs and much more.

The bottom line here is that toy companies are going to move from a model of having a relatively easy and efficient sole manufacturing hub to needing to diversify their risk across more regions. We have been advising our clients to set up multi-hub capability.

This comes with some pain though – because there is no perfect solution to replacing what China has become. Despite occasional pain points, China has been very reliable and the easy option compared with many other manufacturing hubs. But what happens for companies who don’t set up the multi-hub set up is that when issues hit like they have in the last 18 months or so, supply gets threatened. By having at least small production already set up with vendors to diversify risk, companies can ramp up more quickly than those starting from scratch.

The reality toy companies need to accept though is that these hubs are not necessarily going to be easier. Moving from China’s vastly experienced factories to lesser experienced companies in areas with less mature supply chain can be painful & take a lot of work. But this is where the trend is heading to whether we like it or not. As per our video presentation above, we believe China will keep around half of the toy production they had at the start of this decade, but the rest is going to dissipate further afield with India, Vietnam, other Asian countries and ‘Near shoring’ taking up some of the slack.

The multi-hub sourcing strategy is going to be an ongoing major factor in the toy business for the next decade.

 

Do you need help to understand the toy & game business? We help people from all around the world to understand and successfully enter the toy business. For more information on how we do this, check out our services here: www.KidsBrandInsight.com/services

 

Have you listened to our Playing At Business podcast? We talk about selling toys & games, interview successful people from across the toy business & we look at key trends in the toy & game business: https://playingatbusiness.libsyn.com/

 

5 Must Haves For Toy Factories

Toy manufacturing is a critical part of what we do in the toy business, but because it is boring compared to new product development or less glamorous than glitzy awards and agency lunches, many toy companies fail to pay manufacturing enough attention.

We came up with 5 must haves for any toy factory your company works with:

Certifications – it should go without saying that many retailers will insist on ethical audit certification for factories e.g. ICTI, SEDEX etc. Other certifications which may be needed/which show a certain level of standards attained in the toy business would include Walmart or Disney certification. Normally most established toy factories will have an ISO certification also.

Established customer base – why would you ever want to be a factory’s first customer? New factories have to set up and then refine a bewildering array of processes, procedures and staff training. Why would you ever choose to take on such an unproven supplier, when there is no shortage of established toy factories out there? Unless your business model is to set up captive factories to focus on only your business (in which case, you would tend to start from scratch so you can set things up the way you are used to working) there is a lot of risk in working with an untried supplier. The first question asked should be which toy companies are you already supplying? If the answer doesn’t include a number of long standing established toy companies, then you are likely to be taking the factory on a learning curve at the expense of efficient and trouble free supply!

Matching Core Competence – if your main product lines are small metal cars, why would you work with a factory that supplies primarily large plastic items? Will they have the skills and capability to be a reliable and cost effective supplier? Possibly not! Your factory may be sub contracting production somewhere else, which is all well and good, but they will be adding a margin to the price you pay, so beware of over paying to a factory that has no core competence in the product area you are concerned with.

Competitive and Future Proofed Pricing – pricing is such a factor normally in toy companies moving production from one factory to another. Pricing is of course really important – when c. 30-35% of your sales value is in manufacturing, a few %age points saved can soon add up to big amounts of money. The challenge though is that many toy companies are attracted by ‘golden hello’ pricing, which then creeps up, either on the initial product lines or on subsequent product lines, due to either cut-throat pricing upfront to start the trading relationship or because of genuine cost inflation. If you are considering moving production at the time of writing, the best approach to future proofing pricing for toys is to consider alternative manufacturing regions with lower labour costs for your toy sourcing vs China e.g. Vietnam or India.

Matching Volume Aspirations – factories vary from huge plants set up to churn out massive volumes to smaller plants supplying lower quantities of really high quality products. One of the key considerations for a toy or board game company looking for new manufacturing is matching likely demand with the level of supply which is motivating for the factory. If your business is too small for a larger factory, focus will go elsewhere and you will be unsatisfied with the level of service/focus you get. If you take big volume business to a factory not set up to handle your volume you can run short of supply if they cannot meet demand.

Finding and selecting new toy and board game factories can be very time consuming and risky. We can help, via www.KidsBrandInsight.com/services we work with toy and board game companies to find cost effective factories. We also work on a consultancy retainer basis with a limited number of tried and trusted factories to help them grow their businesses, for more information on how we can help, just drop us a line.

How To Find Toy Factories Outside China

How To Find Toy Factories Outside China

There has been plenty of talk of late about rising labour costs in China. Bearing in mind the bulk of the world’s toys are manufactured in China, and that some types of toys are very heavy on labour in the manufacturing process, this has unsurprisingly set the alarm bells ringing for many toy companies. There is no doubt that the toy industry will continue to source the majority of manufacturing from China for the foreseeable future, but there is a definite trend away from China after a year in which European companies struggled to justify ordering in $USD as the €uro became so weak against it, and in a year when China’s seemingly perpetual growth cycle (primarily driven by manufacturing) appears to have faltered to a degree.

As is so often the case, there are those who have a bit of a whinge about the problem of supply chain cost pressure, and there are those who try to do something about it! So here’s some tips on how to go about doing something about it:

  1. Observe What Others Do – the saying goes that ‘pioneers take all the arrows’ i.e. those who go first walk into the unexpected hazards and dangers, so it’s not necessarily a case of trailblazing, more a case of seeing what others do, and once they’ve tested the waters, jumping on board!
  2. Ask Around – blindingly obvious, but much too easily ignored – the toy business is a comparatively small club. Your friends, colleagues and even competitors will have valuable information that they will be willing to share with you (sometimes) if you ask.
  3. Walk The Floors – to break the habit of going to the same region/country for production when viable alternatives exist elsewhere, why not consider countries you haven’t considered before? Every year at Nuremberg for the Spielwarenmesse (world’s largest toy trade show) we walk past companies who could be our solution, and we don’t consider them because our minds are closed. So this time round, why not set aside time to look at exhibitors from other countries for once?
  4. Use LinkedIn To Search – not everyone in Asian countries embraces LinkedIn like most Western business people do, but nevertheless your future suppliers will be on there somewhere, you just need to take the time to search.
  5. Focus on these countries – Indonesia, Thailand, Vietnam and India are the most viable alternatives to China, although to be clear there is nowhere enough capacity in these countries at reputable factories to meet global toy manufacturing demand. This situation is slowly changing, but you probably want to get in early to ensure capacity.
  6. Use Agents/Sourcing Companies – via our Consultancy company www.kidsbrandinsight.com we offer a Factory finding service. We’ve worked with massive corporate companies down to one man bands to help match them with the right factories outside the traditional toy manufacturing heartland. We’ve traveled around and done significant leg work to conduct due diligence on factories in emerging countries. We’d be happy to help save you time and wasted effort by hooking you up with vetted suppliers in these countries. Of course there are plenty of other agents/sourcing companies out there you can talk to, but if you want us to help, just drop us a line via ‘Contact Us’ above, or go to www.kidsbrandinsight.com