Thriving amid supply chain Issues: 4 strategies for toy manufacturers

What do toy companies need to sustain through supply chain issues?

Like most types of consumer goods, the toy industry has experienced its share of ups and downs over the last several years as volatile demand and supply chain disruptions roiled the industry.

Now we’re at a point where inflation, interest rate increases and lower consumer spending power all mean that retailers are seeing demand soften. Supply chain congestion, the threat of labor action on the West Coast ports and a general inefficiency in freight and cargo transportation all mean that manufacturers are finding it difficult to plan ahead.

We recently sat down with 3 executives from Alloy customers Moose Toys, PlayMonster and Bonkers Toys for a webinar. Watch the entire conversation here, but if you’re pressed for time here are the four key takeaways:

#1—Realize that e-commerce is still growing; the movement away from brick-and-mortar is real


When consumers were stuck in their houses, online ordering went through the roof. Yes, this caused supply chain and manufacturing issues that are still being sorted out. Yes, consumers are now out in their communities, spending money on services so they are no longer tethered to e-commerce. But manufacturers need to realize that e-commerce is the future as well as the present, and brick-and-mortar is no longer a growth sector. This new status quo is forcing some changes,” said Scott Flynn, Chief Commercial Officer at PlayMonster, who estimates that the pandemic sped up the growth of e-commerce by five years.

“Companies are going to have to look at their infrastructure to have the ability to ship direct-to-consumer, whether you do it through your own website or whether you support other retailers’ direct-to-consumer,” Flynn said. “E-commerce is a place that retailers are looking for you to prove yourself before they’ll take up shelf space, and having the logistics set up to be able to service those items and SKUs from a B2C standpoint is going to be really important.”

This doesn’t mean, however, that spending growth online remains unchecked. The current economic challenges are having an impact on consumers.

“We are expecting the overall market to trend back towards its pre-pandemic norms,” said Teddie Liu, Vice President of Global S&OP and Analytics at Moose Toys. “For us, that means probably mid- to single-digit declines here over the next two years. We see record levels of inventory against the backdrop of fewer buyers. Each of those buyers is making fewer purchases in stores.”

“Companies need to invest in building out their analytics capabilities to help their partners make smarter, more informed decisions. Alloy is great at cleansing, accessing, visualizing the data and really opening it up to a broader audience.”
-Teddie Liu, Vice President of Global S&OP and Analytics at Moose Toys
#2 – Prepare for the supply chain uncertainty by planning early and embracing new logistics processes


Many manufacturers, not only those in the toy business, are facing the reality sketched out by Rick Abundis, Senior Vice President of S&OP at Bonkers Toys.

“One of the hangover effects from the delays last year — as far as the holidays — is obviously the inventory that carried over into spring of 2022,” he said. “There was a little bit of a bottleneck as the product finally released and got to ports in the US for the holiday, but it didn’t hit the stores until spring of 2022.”

While nothing can be done about past supply chain congestion, history should signal to manufacturers that they need to diversify their freight transportation avenues as soon as possible. Many in the industry have widened the number of ports they service. Making hard decisions about what items to ship ahead of time, and what SKUs might be able to wait a bit longer for transport, is also common.

“You have to prioritize your goods because you might have to make decisions on certain goods leaving China before others based on velocity, profitability, retail programs, etc.,” said Flynn. “It’s about prioritization, it’s about flexibility of ports and being able to expand the scope of where you’re actually bringing goods into the country.”

While COVID shutdowns aren’t to blame for all the supply chain congestion, manufacturers say it’s wise to consider the impact future surges of the virus will have on the domestic supply chain.

“We’re planning early to get that product in our warehouse as quickly as possible just in case there’s some unexpected delays again with supply chain,” Abundis said. “As much as it’s slowed down, there’s still that possibility of certain spots and spurts of COVID. Once COVID happens in a factory or a port, they shut it down.”

#3—Maintain business longevity by anticipating and fulfilling consumer demands, promoting agility in business processes



When so much is unknown about the economic and supply chain climate, retailers are asking for more information from manufacturers as soon as they can get it. This is forcing toy companies to adjust.

“Our production and preview calendars have been creeping up slowly,” Abundis said. “I know it’s hard to say because we’re in a high-trend industry, we are seeing pressure from some retailers to get information to them on product for the following years and seasons sooner.”

Sometimes reacting to customer demand and anticipating trends that will become major differentiators in the future bring near-term business pain. Moose Toys embraced sustainability, moving toward a “plastic-scarce model” while also injecting green thinking into all corners of its operations. It’s what the end-customer wanted, Liu said, citing internal polling that found 64% of Gen Z and Millennial buyers are influenced by sustainability when making purchases.

“Now, all of this comes with a cost, right? In the immediate term, margins are going to be impacted,” he said, “but we know it’s the right thing to do, and it’s what our research actually tells us consumers want.”

#4—Embrace shifting technologies to strengthen bonds with retailers, discover new technology to boost business



Innovative technology always seems to be there to lend a hand when industry-wide challenges arise. But it’s up to each individual company to implement new digitization plans, knowing that any integration hassles in the near term will be vastly outweighed by the long term benefits – benefits for both the individual companies and the industry as a whole.

Flynn said Walmart recently asked suppliers like PlayMonster to implement RFID tags, a move that should be in place by the end of this year or early next year. While he admits the timing could have been better, he sees that this technology initiative will pay huge cost and efficiency dividends for the industry.

“Walmart’s the only one to do it now, but my prediction is you’ll see other retailers begin to follow suit because the technology is brilliant,” he said. “What it does from an efficiency standpoint, managing inventory at store level, etc., creates cost savings, and it’s going to benefit the supply chain on both sides.”

The right technology also helps reduce uncertainty, promoting optimized, efficient processes fueled by data and analytics. Liu uses Alloy to help Moose Toys stay ahead of challenges that stymie competitors.

“The buyers we work with really are becoming more and more averse to taking risks, so companies need to invest in building out their analytics capabilities to help their partners make smarter, more informed decisions,” Liu said. “Alloy is a good one; it’s great at cleansing, accessing, visualizing the data and really opening it up to a broader audience.”

Want to learn more about how these three toy executives are staying ahead of supply chain chaos? Watch the full webinar replay.



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