THE REALITIES OF NEARSHORING TOY MANUFACTURING IN EUROPE & MEXICO
We’re seeing a lot of media buzz about ‘Nearshoring’ these days with regards to toy manufacturing. For decades we took it for granted that we would send all our POs off to China or other Asian countries and three months later our product would arrive neatly packed into a container. The ongoing container crisis caused by the pandemic has eroded all cost advantages of manufacturing in Asia by the time product is landed and in our warehouses. As a result, toy companies are increasingly looking for ‘NEARSHORE’ solutions.
The issue with NEARSHORING for toy manufacturing though is that the products are typically between 25-35% more expensive on an ex-factory basis, which historically has meant that there has been very limited demand for local manufacturing due to the cost advantages of working with far lower labour costs in Asia.
There are a number of factors pushing toy manufacturing closer to home, and these are only going to increase over time – environmental concerns in terms of carbon footprint, increased robotisation and artificial intelligence driven production management will remove much of the labour element of toys production over time. But these factors are a long way away from making local manufacturing cost competitive once you remove the shipping cost inflation. So, if shipping costs reduce significantly in the next 2 to 3 years, which is highly likely, it is unlikely that sufficient capacity will have been built up close to market.
We have Consulted with several of the world’s biggest toy companies on NEARSHORING toy production, and there are some options, but they are very limited and in demand, which means they are not as hungry for new business as Asian factories tend to be. We have used relationship leverage to secure local capacity with toy factories in Europe and toy factories in Mexico, but it is not a magic solution.
If you would like to find out more about how we help toy companies with nearshoring, risk diversification, delivering cost savings and finding reliable new vendors please feel free to get in touch.