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Kinks in the Chinese supply chain may mean change is ahead
November 5, 2007

The current toy inspections in China are closing factories and as a result impeding the flow of toys into the US. Late last week we were told that the Chinese government did a snap inspection of 1726 toy factories and as a result was closing 764 and cautioned another 690 that they had to renovate and improve product quality.  This meant that a total of 1454 out of the 1726 or 85% of the factories were inadequate. 

This is good news for everyone who cares about Chinese toy quality. It unfortunately has the potential for a negative short term impact on toy importers and retailers. To illustrate this point, I am including portions of an email that one of my clients, a toy importer, sent out to his retail customers (I have blanked out the name of his company to maintain his privacy):

The government in China [has] implemented some new rules for toy factories that export. The rules . . .stipulate that all toy factories [be] inspected. In addition, production in every factory has to be suspended until they are. . .given an approval certificate. . The shear size of the numbers to be inspected and complexity of Chinese bureaucracy means that inspection dates are unknown. The overall result is that production of ___________ has been delayed until the factory has been inspected. ..The bottom line is that it could be December before any new production of ___________ can restart. The lead-time is 90 days and therefore delivery could be as late as March 2008. . .

He is of course not the only importer having these problems. It is hoped that the Chinese government will pick up the pace of inspections so that toys can start flowing again. Some manufacturers may, however, may be getting impatient.  We have just learned from Forbes that Tomy is shifting 30 % of its toy manufacturing to other countries over the next three years.  Are other toy manufacturers getting the same idea?  

 

Posted by Richard Gottlieb on November 5, 2007 | Comments (1)