The article (written by Christina Binkley and Nick Wingfeld published in Wall Street Journal on Nov. 20, 2006) put together the issue of global sourcing and
supply chain glitches quite nicely.
Several of the toy’s that were ordered during the
holiday season are expected to be in short supply because of; (i) cautious
retail strategies, (ii) unexpected consumer demand, and (iii) power and labor
shortages in
Much of the supply chain glitches during this holiday season are due to the
cautious ordering by retailers for this season as a result of the lackluster
sales last year. Manufacturers in turn also acted cautiously with placing
orders for the raw materials of the toys.
Walt Disney
struggled to convince the retailers about the potential demand for its gizmo-laden
Mickey’s clubhouse. Now, Disney is spending to air freight these toys from
attempt to reduce 3 weeks of lead time. Such expenditures are expected to cause
a dent on its profit margins.
Viewing
from a global context, the socio-economic changes in
concern. Toy makers have been working around growing labor shortages in China, since
Chinese workers are choosing to work in high-tech factories. The problem is
compounded by the occasional blackouts that plague southern
many toy factories are located. Mattel incurred the expenses of backup
generators for all of its factories in
Meanwhile,
in
earlier than usual. Mattel had to take some severe steps as a response to the
surprising trend they observed a day after the recent launch of TMX Elmo. The
first day’s sales results came in far ahead of expectations and the company had
to device a quick strategy for the expected demand. They planned to build more
factory tools to add production lines and decided to fly the completed toys
across the ocean. The company managed to increase production by 30%; still the
lead time of 90 days from the production of the raw materials to the delivery
of toys to stores created shortages in the holiday season. Some interesting
“eBay entrepreneurs” emerged in the midst of these shortages. For example
several of these “entrepreneurs” were selling for $3 to $5 leads on where to
find the toy! A Web site TMX-tracker.com claims to sweep Internet sourced for
inventory.
For Sony’s
Playstation 3S the shortages was even more severe. These game consoles vanished
from retail shelves as quickly as they landed on them at midnight Thursday. While
scarcity is typically common in the event of a new game launch, since
manufacturing slowly ramps up production to meet demand, with PS 3 the
shortages were acute. The resulting average marked up price of these consoles on
eBay and Craigslist was more than three times its regular price of $500 and
$600 in retail stores.