When “Weird Barbie” became a sleeper hit from the “Barbie” movie last year, Mattel put its new supply chain strategy into action.
The toymaker sped up the doll’s design and manufacturing process to draw attention to the character, and quickly brought to stores a doll that, like her on-screen inspiration, looks like she’s been ‘played with too much’.
It was an example of how one of the world’s largest toy makers has revamped its supply chain, closing some factories, outsourcing production to others and fine-tuning work at some sites to prepare for the expected splash of the Barbie movie.
The idea of the El Segundo, California-based company has been to reset a supply chain long focused on relatively predictable seasonal patterns in the children’s toy market to make it more flexible to respond to rapid changes in demand for the consumers.
The changes have reduced Mattel’s costs and helped boost its profits to $57 million in the quarter ended June 30, from $27 million a year earlier, even as sales declined. The toy industry faces a broader decline as children shift their focus to video games and smartphone apps, and Mattel has seen the boost it received from Barbie merchandise fade a year after the release of the movie.
Roberto Isaías, the company’s supply chain director, said the strategy has helped Mattel better project demand to have products available when customers want them.
‘We’re trying to revitalize brands and have commercial success,’ Isaías said this month at the Council of Supply Chain Management Professionals conference in Nashville, Tennessee. ‘At the same time, we are trying to get to the lowest possible cost.’ .”
The toy market in the United States has been on a roller coaster ride in recent years. Sales surged at the start of the Covid-19 pandemic as families stuck at home asked for more toys, but demand has since fallen. Toy sales in the United States fell 8% in 2023 from the previous year to $28 billion, according to market research firm Circana.
Mattel has faced pressure to take action on the weakest parts of its business. According to FactSet, activist investor Barington Capital Group had acquired a 0.18% stake in Mattel in June. In February, Barington sent a letter to Mattel management recommending that the company seek strategic alternatives for its Fisher-Price and American Girl businesses.
Mattel raised $5.4 billion in its 2023 fiscal year, virtually unchanged from 2022. Its gross margin rose to 47.5% last year from 45.7% in 2022.
The maker of Hot Wheels cars, Fisher-Price toys and American Girl dolls is developing more movies and TV shows starring characters from its brands to boost demand for its toys and replicate the success of the Barbie movie.
To align its supply chain more closely with event-driven sales, the toy maker closed or sold five factories and invested in its most productive sites in Mexico and across Asia. It has reduced the number of products it makes by about 45% since 2018 to get rid of some of its less popular items.
Cutting back on the variety of toys it sells has helped the company better forecast buyer demand, reduce inventory and improve stock levels, Isaias said. The company’s inventories fell to $777 million in the quarter ended June 30, from $972 million a year earlier.
Many retailers and brands have reduced the variety of products they sell since the pandemic to focus on their most popular items, said Brian Gibson, a professor of supply chain management at Auburn University. Cutting out items that don’t sell as quickly means ‘there’s less overall complexity in the supply chain and you don’t have to try to manage so many different items in inventory,’ Gibson said.
In its plants, Mattel has extended the time each line produces a particular toy. Previously, it seemed that as soon as Mattel factory workers got used to making a particular toy, “Boom, we changed it to a different toy,” Isaías said. Now workers have time to master the production of each item, he said.
Isaías, who came to Mattel in 2002 from consumer goods supplier Procter & Gamble, said workers can change manufacturing lines for products like laundry detergent relatively quickly because the difference between a two-pound or five-pound container It is minimal.
Toys come in different sizes, shapes and materials, so it can take an average of two to three hours to change lines, he said.
For items with long lead times made in Asia, Isaias said Mattel found it had time to focus on increasing production and reducing labor costs rather than rushing to get toys onto U.S. shelves.
‘When you are in Asia, two and a half months from your market, if you run for a day, half a day or a day and a half, it makes no difference,’ he said.
The company also took steps to outsource more manufacturing, including for items it makes under movie licensing deals with entertainment companies. Although using contract manufacturers costs more than making the toys in its own factories, Isaías said it can help prevent Mattel from being stuck with unused capacity when demand drops.
Mattel has also adjusted its supply chain to react quickly to unexpected demand when toys go viral online, as it did with ‘Weird Barbie.’ When the company needs to get products to shelves quickly, it either makes some items at its factory in Mexico, close to American customers, and absorbs higher manufacturing costs, or ships products by air to the United States from Asia.
Source: https://www.wsj.com/articles/taking-a-lesson-from-barbie-mattel-builds-a-more-nimble-supply-chain-1539e717?mod=djemlogistics_h
