How To Find The Right Toy & Game Factories

How To Find The Right Toy & Game Factories

Toy and game companies generally have no bigger expense than manufacturing costs. Even for companies buying directly from factories in China total spend on manufacturing costs will be a very significant cost – in fact even for profitable toy companies cost of goods will still be c. 3-5 times profit. When you think about sourcing & manufacturing in those terms, it’s easy to see the direct link between dollars spent.

Because of these stats/ratios, many toy companies have a lowest cost mentality when it comes to sourcing which can at best be missing the point and at worst disastrous! There is little that will damage a toy company’s ongoing prospects more than supply/quality/safety standard/recall infractions. Aside from the weighty fines your company would most likely get slapped with by your customers in the case of any issues (especially if you deal with the mass market), reputation and future business can easily be jeopardised by letting the wrong kind of supplier into your supply chain.

Therefore, supplier selection criteria should include more than just who is the cheapest. For sure you want competitive costings, but there is a whole host of other factors you need to look for. The following list goes through several of the required factors in detail, and highlights how we approach factory finding for our clients. Please note that this is how we approach it, we’re not saying this will work for you in every case/remove all risk, so please pursue your own due diligence:

1.       Costings – let’s get this one out of the way first! Any sourcing person can supply a request for quote (RFQ), but the trick is to get quotes for several different type/specs of products to ensure that new vendors have the same cost effectiveness across all the product types you may want them to supply. Processes, material sources and machinery can vary between different toy categories quite significantly. Also be aware that many factories will underquote on first orders to win the business, because they know that ordering from proven, trusted suppliers eventually becomes a habit, so watch for price creep on future orders!

2.       Audit compliance – this not very exciting but nevertheless critical area can be as important as any other factor if you work with big brands and mass market retailers. Corporate brand owners and corporate retailers have a reputation to protect, so will want independent audits to satisfy them that your products are sourced from factories which will not damage their reputations i.e. safe, ethical etc. ALWAYS make sure you get copies of audit certificates, and make sure the certificates match the company name of the people you are in contact with!

3.       Location visit – it could be risky to allow a new supplier into your supply chain without having visited their manufacturing location. We always recommend a visit to each new factory location to insure against any obvious issues/defects in the approach/production of your potential new suppliers.

4.       The well-trodden path – there are some people and companies who delight in finding that one hitherto unknown little gem of a supplier, but that’s not the approach we tend to recommend to clients – why take the risk of working with a supplier who doesn’t have an established reputation in the toy business to protect when there are so many that do? We would nearly always seek to look at suppliers who have existing business with other established and reputable toy companies, especially those with long standing supply relationships. Where you have relationships/contacts within other companies we find it very useful to validate our thoughts/interest in a potential new supplier with people who already have experience of working with the vendor in question. The analogy we tend to use is that people (companies) can be different when you are dating them versus living with them on a daily basis! So why not get the inside scoop from people already working with that vendor? Recommendations are easily given at the various bars, coffee shops and cafes around the numerous toy trade shows we all frequent.

5.       Due diligence – as a general point, bearing in mind what is at stake, we recommend using the same approach to bringing on a new vendor as you would when buying another company – comb through everything you can in as much detail as you can. If a vendor claims to supply a particular company find out for sure that’s the case! If they claim to have been audited by a particular retailer/licensor, make sure you get documentation to prove that. Cutting corners can increase the risk.

6.       Use ‘Expert’ services – there are a whole host of individuals and companies that can help you find the right toy and game factories, whether in HK, China or at home (my company is just one example). If you are in any doubt there seems little harm and potentially much to gain from seeking professional help. Most businesses that can help you in this area are paid via the supplier, so the cost is built into the price you pay, if the price is not right, you don’t proceed with that person/company. Often times factory finding services will pay for themselves, and often save you costs by opening up access to a broader vendor base or due to the volume of business they point towards certain vendors.

Two practical examples of how this can work: our company was asked to help find a new board games supplier for a leading games company which had far too great a workload for far too few staff members! We met with the potential candidates, got quotes and helped the company to choose the new supplier. Aside from reducing the stress and ‘leg work’ for the client, we also saved them an average 14% per product in costs, all of which went straight back to their bottom line. On another project a client was an owner managed multi-category toy company needing to secure new supply for several different product categories at short notice due to a supplier audit failure. We introduced them to five or six leading factories (with ‘squeaky clean’ audit bills of health), with two being chosen and now supplying and hitting all the required standards.

Finally, be aware that there is a generally held view that China as a toy manufacturing base has lost a certain degree of its price competitiveness in recent years, with a general trend towards opening additional manufacturing facilities where labour costs remain lower i.e. further inland in China and also in other Asian countries such as Vietnam, India & Indonesia.