Hasbro CEO Chris Cocks on diversifying manufacturing away from China

Toy Industry Supply Chain Diversification: Key Considerations and Strategies

Key Concepts: Supply chain optimization, labor intensity, specialized labor, diversification, global sourcing, SKUs, manufacturing partners, country-specific manufacturing strengths.

China's Dominance and Specialization

The toy industry supply chain has been optimized in China over the past 3-4 decades. Toys are labor-intensive and require specialized labor. China excels in specific areas:

• High-end action figures: China is particularly skilled in producing high-end action figures that require detailed decoration ("Deco") and specialized painting.
• Foam swords: The production of foam swords is heavily concentrated in China.
• Lower-end electronics: China maintains a strong position in manufacturing lower-end electronics for toys.

Diversification Efforts and Targets

The company aims to reduce its reliance on China for global sourcing.

• Target: Achieve 40% of global sourcing outside of China by the end of 2026.
• Progress: The company is on track to reach this target much earlier than anticipated.
• 2025 Initiatives: Several hundred SKUs (Stock Keeping Units) for the US market have already been moved from China to alternative locations.

Alternative Sourcing Locations

The company is actively diversifying its sourcing to other countries:

• Turkey: Mentioned as a viable alternative location.
• United States: Some manufacturing is being brought back to the US.
• Vietnam: A key diversification location.
• India: Another important alternative sourcing destination.

Emerging Markets and Capabilities

Other countries like Vietnam and India are gradually developing their manufacturing capabilities.

• Vietnam and India: These countries haven't fully caught up with China in all areas, but are maturing as alternative sources of supply.
• Potential for Growth: Over time, these countries are expected to diversify their capabilities and handle a wider range of toy manufacturing.

Partner Engagement and Adaptation

The company is actively engaging with manufacturers in various countries.

• Proactive Outreach: Countries like Turkey and Vietnam are actively trying to attract the company's business by developing specialized capabilities (e.g., high deco painting, foam production).
• Openness to New Partnerships: The company is open to working with new partners in different countries.
• Long-Term Relationships: The company has established relationships with manufacturing partners in Vietnam (15 years), India (10 years), and Turkey (10 years).

Multi-Country Manufacturers

The company often works with manufacturers that have operations in multiple countries.

• Existing Partnerships: The company is not necessarily abandoning Chinese manufacturers.
• Global Presence: Many large Vietnamese and Indonesian manufacturers have established home bases.

Conclusion

The toy industry is undergoing a significant shift in its supply chain, with companies actively diversifying away from China. While China remains a crucial manufacturing hub for specific types of toys, alternative locations like Vietnam, India, Turkey, and even the US are emerging as viable options. This diversification is driven by a combination of factors, including the desire to reduce reliance on a single source, the development of manufacturing capabilities in other countries, and proactive efforts by these countries to attract toy manufacturing business. The company is actively engaging with partners in these countries and adapting its sourcing strategies to take advantage of these emerging opportunities.