Supply Chain Analysis of Mattel

Topics: Supply chain management, Inventory, Supply chain Pages: 22 (7216 words) Published: November 12, 2008
Executive Summary

Team 2 has researched and completed a comparative analysis of Mattel’s supply chain design and related costs with that of its major competitor Hasbro and the toy industry. What follows, is a brief background of Mattel’s traditional (non-electronic game) sector, its key competitors and Mattel’s use of supply chain management concepts in addressing the competitive landscape to gain a competitive advantage. The global toy and game market grew by 7.2% in 2007 with a value of $106.1 billion and by 2012, is forecasted to have a value of $126.2 billion, an increase of 18.9% over 2007. The toy market is divided into three primary sectors, namely game consoles, game software and traditional toys and games. Traditional toys and games remain the largest segment, generating total revenues of $61.8 billion, equivalent to 58.2% of the market's overall value. Mattel recorded revenues of $ 5.65 billion in 2006 and $ 5.97 billion in 2007. Mattel’s key competitors in the traditional toy industry include Hasbro, Bandai, Lego, The Middleton Doll Company, Atari, Electronic Arts, Blitz Games, Leapfrog Enterprises, Inc. and several others (Datamonitor). Mattel is a designer, manufacturer, and marketer of traditional toy products. Mattel's products are sold directly to retailers and wholesalers in 150 countries in North America, Europe, Asia and Latin America. The average age of a Mattel product is six months before it is replaced (ALLBUSINESS). Mattel manufactures toy products in both company-owned facilities and through independent contractors. Mattel also purchases products from third parties which design, develop and manufacture those products. Mattel's principal manufacturing facilities are located in China, Indonesia, Malaysia, Mexico and Thailand while the independent contractors manufacture products primarily in Southern China, and increasingly in the northern provinces of China. Mattel also has distribution centers in 32 countries. Its market segments are separately managed business units and are further divided into domestic and international business units. The U.S. domestic segment of Mattel is further sub-divided into Mattel Girls & Boys, Fisher- Price, and American Girl brands. The Mattel Girls & Boys division offers brands such as Barbie fashion dolls and accessories, My Scene, Barbie Collector and Polly Pocket. Mattel’s other product offerings include Hot Wheels, Matchbox, and Tyco R/C. The entertainment products include Nickelodeon, Harry Potter, Yu-Gi-Oh!, Mega-Man and Superman, Radica and Justice League products, as well as games and puzzles. The company's Fisher-Price segment includes Fisher-Price, Power Wheels, Sesame Street, Little People, Winnie the Pooh, Rescue Heroes, See 'N Say and Dora the Explorer (Datamonitor).

Mattel has balanced the need for a responsive supply chain with the ability to source its toys from low cost labor countries in Asia. While Mattel uses Point of Sale (POS) data, the long distances between manufacturer and consumer are quite large and transportation times can be upwards of three weeks. As a result, the cycle time between ordering and delivery can be quite long. In order to provide a buffer to prevent stock outs, Mattel uses distribution centers to hold some inventory. Holding inventory is not risk free as Mattel writes off approximately $50 million per year of inventory obsolescence. However, the ability to produce toys cheaply in countries like China, Indonesia and Thailand provides cost benefits over and above the cost of inventory obsolescence. The clockspeed of the toy business has been accelerating as kids have been getting older younger (KGOY) (Garner). This has effectively shortened the product lifecycle as children move from one stage to another more quickly. In addition, many toys are tied to media launches such as movies and television shows, which are frequently one off production runs. The faster clockspeed of the toy industry would, in theory,...
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