It may be the third decade of the 21st century, but some manufacturers are still battling basic supply chain problems many have long ego solved.
That is certainly one of key takeaway from a recent story in the Wall Street Journal the efforts of Ynon Kreiz, relatively new CEO of giant toymaker Mattel, and chief supply chain officer Roberto Isaias to improve supply chain performance and consistently achieve profitability.
Supply Chain Digest Says... |
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| As with so many companies, Mattel also has a great opportunity to reduce costs through SKU rationalization. |
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Case in point: until recently, toy designers at Mattel had options for some 150 different shades of red to use for toy parts, and similar options for other colors. The number of choices s were further expanded by different finish types (matte or glossy) for most colors.
This alone added much supply chain complexity in terms of paint and tint storage, and the need to clean paint lines even as very similar colors were used consecutively.
"Complexity is really a killer," Isaias told the Journal.
Mattel has reduced the number of reds and other colors by more than one-third with more cuts to come. The paint choice reduction is one of dozens of iniatives expected to reduce supply chain costs by hundreds of millions of dollars annually.The company has lost money in 8 of its last 11 quarters.
Other initiatives reflect the changing times. While Mattel still enjoys a number of mega-products such Barbie and Hot Wheels, it is also seeing more niche or trendy product opportunities that require a more nimble supply chain.
Kreiz wants to close, consolidate or sell off some of Mattel's current 11 factories worldwide, telling the Journal that it plans to keep factories that are "strategically important" or that can make certain products at a better quality and lower cost than a third party could, while consolidating plants that are underused.
As with so many companies, Mattel also has a great opportunity to reduce costs through SKU rationalization. It plans to reduce the number of items it sells by 30%, after realizing that 45% of the items it sells generate just 6% of its revenue.
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 "Supply chain had become one of our handicaps," Kreiz told the Journal, adding that "We used to be criticized for being too big, too slow, too heavy, too costly and not as efficient as you need to be in this day and age."
Mattel is also trying to take a more holistic look at supply chain costs. For example, manufacturing of an expensive doll house was moved a few years ago from Mexico to Vietnam for a rather modest 7% in production costs. But taking the volumes from the Mexican plant meant that factory overhead had to be absorbed by the now fewer products made there, raising their costs.
In Europe, the company also increased the minimum order size to avoid shipping orders valued at just a few hundred dollars that had high pick, pack and ship costs.
The key question for others: does your company have similar opportunities for big savings just from getting some supply chain basics right?
Any reaction to the Mattel story? Do many companies have opportunities for such basic supply chain opportunities? Let us know your thoughts at the Feedback section below.
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