MG 640 Spin Master Toys (A): Finding A Manufacturer for E-Chargers 1. ) Executive Summary: • Spin Master Toys core competencies are marketing and bringing creative toys to market. • Alex Perez should choose Wah Shing and utilize their core competencies of manufacturing electronic toys. • Electronic components can be difficult to acquire therefore Wah Shing’s relationships with suppliers will be beneficial. Speed to market is key, therefore Wah Shing has the best capabilities to meet Spin Master delivery commits • Building long-term supplier relationship with Wah Shing is imperative if Spin Masters decides to stay in the electronic toy industry. 2. ) My assessment of the process Spin Masters has used to get to this point is, they are really good at developing good relationships with retailers, investors and have in-depth knowledge of research and development of various toys. Spin Masters has expertise in developing low technology “fad” toys and distributing them to retailers quickly.
Spin Masters lacks engineering and manufacturing capabilities and therefore it’s necessary to outsource both. The company used their own “grassroots marketing” campaigns to stimulate interest in their toys. Spin Master’s has a “botched” process when it comes to the manufacturing and delivery of their toys. This end process appears to always be a “scramble” especially as they enter the electronic toys market. Since electronic toys are new to Spin Master, they should have utilized an early supplier involvement strategy.
A company like Wah Shing early on could help them with the engineering and development from an early stage and then manufacture the plane for Spin Master Toys. Spin masters is good at marketing and bringing creative toys to market, whereas a company like Wah Shing has expertise in engineering and manufacturing of electronic toys. In short, it’s best to take one company’s weaknesses and mate them up with another company’s core competencies. 3. ) As Alex Perez, of the two potential suppliers, I would choose Wah Shing. Wah Shing’s core competencies include the engineering and manufacturing of various electronic toys.
Spin Masters needs to find a manufacturer who is capable of providing high quality products in a short time span. Wah Shing has a very large facility which includes 6 engineers, 3,500 total employees and is the preferred electronic toy manufacturer for some of the largest companies in the toy industry. With that said, Wah Shing has a reputation for the manufacturing of high quality electronic toys. One of the biggest obstacles I currently face is getting E-Chargers to market on time to obtain the first mover advantage. Wah Shing has only 20% of its manufacturing capacity available but that is still a lot of freed up space for E-Chargers.
The company could possibly devote a total of 700 employees (20% of 3,500 employees) to focus only on the manufacturing of E-Chargers. Currently, Spin Master needs a total of 20,000 units therefore each employee would be responsible for a total of 29 E-Chargers. Since many of the smaller components are sourced from other companies, this appears to be an achievable milestone to meet for the December deadline. In considering Wah Shing as a supplier for E-Chargers, cost and financial risk needs to be taken into account. Wah Shing has annual revenues of nearly $40 million, which is over $10 million more than other Hong Kong competitors.
Without knowing any further details, it is safe to assume Wah Shing is in good financial health due to their proven track record with Hasbro and Tiger. There does not appear to be any indicators that Wah Shing has or will have any financial burdens in the near future. In terms of cost, Wah Shing appears to be slightly more expensive than Wai Lung. The per unit difference is about $. 32-$. 37 (HK$2. 45-HK$2. 83) depending on the container load. Wah Shing also includes critical components such as the motor and the capacitor in their pricing quote where Wai Lung does not.
This can be due to the fact that Wai Lung does not have a reliable supply base in line for electronic components. I am faced with stringent time constraints and therefore I cannot risk any possible supply disruptions. As for Wah Shing they have developed good supplier relationships with electrical component suppliers. This is crucial as the components used in E-Chargers are not always readily available. Wah Shing has minimal financial risk, competitive pricing and more knowledge of the componentry that E-Chargers entail.
Wah Shing has produced other complex electronic toys and therefore would have the processes and technological capabilities to produce an E-Charger within the stringent tolerances. It would be hard for me to change Wai Lung’s core competencies of die-casting and plastic toys. I do not think with the time I’m allotted I would be able to overcome the knowledge gap they have for electronic toys. Wah Shing’s engineers have the ability to closely monitor the production of E-Chargers and correct any problems that may arise in the manufacturing process.
It is imperative to have engineers readily available who can help prevent any potential work stoppages as Spin Masters does not have a lot of time to get E-Charges to market. Lastly, after careful consideration I noticed Hasbro does have relationships with both Wai Lung and Wah Shing. Hasbro has contracted less complex toys to Wai Lung as that’s their core business and more complex electronic toys to Wah Shing. This has further imbedded that knowledge is power especially when it comes to more complex toys.
Lastly, after careful consideration Spin Master Toys has invested heavily in E-Chargers and it’s my responsibility to ensure the correct supplier is chosen. Another determining factor that I had noticed is Wai Lung is only at 40% capacity whereas Wah Shing is at 80% capacity. If E-Chargers really take off as planned, I need to engage in a longer-term supplier relationship. This is especially true since Spin Master is aligned with introducing a full line of E-Chargers. While Harary was visiting Wai Lung, he mentioned that they had “lost a significant portion” of their business due to a “disagreement with a large toy company”.
I realized that Wai Lung may not be our best option as they don’t have a proven track record especially with a large toy company. This could possibly be the result of so much capacity becoming available. Harary also advised that Wai Lung may not be in a position to take on new projects in the short term. Spin Master’s E-Charger does not appear to be a good fit for Wai Lung as they need as much attention as possible to expedite their products through the manufacturing process. 4. ) In implementing my decision to have Wah Shing be the supplier of choice for E-Chargers, I would first have to close the loop of management communication.
My main focus is to be the first to market with E-Chargers and in doing so I need to communicate with senior leadership at Wah Shing. I believe messages and priorities are best delivered from the top down, so I need to get my message to the top. Wah Shing currently has a lot of work in house, so even if Spin Masters has to pay expedite charges it will be well worth it if we get to market first. Also, not only would I like to meet senior leadership personally I would like to have our two project managers based in Hong Kong meet them as well. This is a starting point in creating a personal relationship with key contacts of Wah Shing.
The ideal relationship I would like to see develop would be to have these two managers visit Wah Shing on a regular basis as it’s only 5 hours away. The next step in implementing my decision would be to understand how Wah Shing communicates with their customers. I would like to know if they have any electronic data interchange (EDI) capabilities so Spin Master can have daily updates in real-time as to the status of their products. Wah Shing delivers quality products, but anything can happen with a newly developed product in the manufacturing process, for example a batch of E-Chargers could possibly weight too much and not fly.
Real-time production updates can better align myself and Spin Master Toys to help Wah Shing overcome such issues. Also with the use of such real-time information we can update our customers and provide current status on their orders. Over the next six months I have to ensure many tasks are carried out in a timely manner. These tasks include, making sure the quote package is completed by July 1st, vendor quotes are expedited to meet our July 10th date, and the final design release is on schedule as well. I will be a busy guy and will have to utilize my project management skills.
Once all of my preliminary tasks are complete, I will be traveling to Wah Shing frequently to ensure our E-Chargers are on track for our shipment deadline to retailers. I will have to monitor and address the 35-day lead-time for tooling, as this could be an opportunity for us to take some time out of the process. While visiting Wah Shing I will also be addressing key issues such as capacity. I want to ensure that Wah Shing is utilizing the right people to our products as we cannot afford to lose any more time.
Capacity is very important at this time as we’re only forecasting 20,000 units right now but we need room to increase our capacity as we ramp up. In the month of November I will be closely monitoring our ramp-up schedule as I do not want any E-charger stock-outs. E-Chargers will be on an end-cap; therefore our product will have a lot of visibility to customers. As I said before as Spin Masters and I develop a good working relationship with Wah Shing a lot of the bottlenecks we face with E-Chargers may not occur in the future if we stay in the electronic toys market. Word count: 1,647