Monday, 26 January 2015

Toy Supply Chain Management Practices: What are the Characteristics of the Toy Supply Chain?

The nature of toys is extremely volatile and seasonal due to the unpredictable, irregular demands, short product life cycle and specific selling windows. The toy industry can incur high costs of obsolete inventory, lost sales and mark down when compared to other industries; thus, sourcing, production, distribution and retail practices in the toy supply chain can be very different in less volatile industries. In order for the toy industry to survive, they need to provide the right toys at the right quantity at the right stores during the short selling windows and provide creative but price competitive toys.

Characteristics of toy supply chain

Toys are divided into different categories such as traditional toys (action figures, dolls, plush, puzzles, vehicles) to modern video games. While traditional toys have become quite stagnant in recent years, video games have been enjoying a period of steady growth.

Both of the categories share similar characteristics. The supply chain consists of:
  • Suppliers of materials and raw materials
  • Manufacturers of toys
  • Distributors and wholesalers of toys
  • Toy retailers
  • Consumers of toys
The main toys consumers are children but also include parents and grandparents along with gift buyers. Although children usually make the decisions, it is the parents and the grandparents that pay for them. When it comes to buying toys, the traditional methods remain powerful, such as the department stores, supermarkets, specialists and independent toy retailers. According to the Toy Industries Association (2004), new channels such as hypermarkets are also proving to be increasing in popularity while online sales still remain slow.

Toy sellers usually purchase toys from manufacturer or wholesalers and toy manufacturer usually have their own brands and designs.  Toys are made of different raw materials (plastic, woods, tex tile, metal), components (moulded and electronic) and packaging materials (box, can, printed material).  Manufacturing these usually requires a manual assembly process so a common strategy is usually to outsource to low-cost countries.

Toy industries face new trends these days.  According to past studies, the new toy age has been shortened to ten years of age. Kids are getting older younger (KGOY) as children usually grown out of toys by the time they reach double digits. The age between eight to ten called the “tween” demand more sophisticated and fad driven toys and entertainment as they are more fashion-conscious and fad loving.  For toy retailers, sales are increasingly dominated by mass discounters and toy superstores.

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