Running head: ROLE OF SUPPLY MANAGEMENT IN TOY INDUSTRY
Role of Supply Management in Toy Industry
Ayush Gupta
University of Wisconsin Madison
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ROLE OF SUPPLY MANAGEMENT IN TOY INDUSTRY
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Abstract
Toy industry is an industry where time to market and product turnover are vital. Most products have a very short life and are sold in limited, well-defined selling seasons. Few products last for two seasons and experience a significant markdown at the end of the product life. While some products suffer from low sales even after heavy discounts as they cannot hold the interest of children some are on the must buy list of people even before they have been launched in the market. In toy industry demands for products can move from low to boiling overnight and then suddenly go down as the next hot product sweeps the market
(Johnson, 2001). Continuous product innovation and short life cycles are highly typical in the toy industry.
Supply management plays a vital role in the toy industry. Starting from early involvement of the supplier/ supply management team to various other aspects such as Total cost of ownership, careful management of outsourcing of services and goods can help the toy industry to handle these problems in a much more efficient manner.
Managing cash, material and information in a supply chain with short lived product is challenging. Toys experience a significant markdown when left on the shelf. Oversupply not only results into markdowns the prices but also kills the demand of fad – sensitive products.
Scarcity could help in increasing the demand in a particular season but large scale shortages can result in a loss of a good opportunity. Making supply just meet demand is an ongoing feat of careful management.
ROLE OF SUPPLY MANAGEMENT IN TOY INDUSTRY
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Role of Supply Management in Toy Industry
Toy makers have spent decades honing their skills on managing demand. However, during that same time period, the challenges of managing supply increased as domestic production of toys in Europe and the U.S. moved swiftly off-shore to low wage rate countries. Thus, toy makers learned that managing supply required new approaches.
The toy industry is divided into to two segments:
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Manufacturing – These are the companies that are involved in the manufacturing of the toys either by their own brand name or are suppliers to bigger players in the market such as Wal-Mart, Toys R Us and Hasbro’s etc.
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Retailing – These are the companies which have a huge market share because of the brand they have successfully established over the time. Most of their manufacturing is outsourced and only a little is done by them.
Both the segments are interdependent and supply management plays a crucial role in both the types. For the first segment the procurement of the raw material is a crucial task and the issues related it should be handled carefully. Whereas for the second the continuous supply of the finished goods in the specified requirements and in specified time is very crucial which would be possible by locating the right supplier who is able to provide the services required in right time and right form.
ROLE OF SUPPLY MANAGEMENT IN TOY INDUSTRY
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Involving the Supplier/ Supply team at early stages of R&D (ESI):
It is very important in this industry to involve the supply management team early the process of developing new products. As the market fluctuates a lot it is very crucial to get the right raw material required for the manufacturing the product at the right time so that there are no problems once the production begin. Therefore early involvement of the supply management team would help design the product whose raw material is easily available.
Another important reason of involving the supplier in early stages of the R&D process is the knowledge that the supplier can provide regarding the latest trends currently in the market. As most of the supplier do not supply to a single customer but are working with
various
