Mattel takes the ‘Pink’ route: Barbie’s supply chains are a mix of red and white

Barbie’s popularity has skyrocketed once again globally with the release of Greta Gerwig’s highly anticipated movie, drawing widespread attention in theatres around the world. And we thought it was the right time to jump on the trend and talk about Mattel, one of the world’s largest toymakers, and its remarkable business turnaround in recent years. It is home to iconic brands like Barbie, Hot Wheels, and Fisher-Price, in fact, Fisher-Price (USD 748 million) and Barbie (USD 588 million) were the world’s 3rd and 4th largest toy-making companies in 2022 according to brand value.

Until 2018, Mattel faced significant business challenges, including the loss of key licenses and frequent changes in leadership. However, with the appointment of CEO Ynon Kreiz in the same year, Mattel has implemented a two-pronged supply chain strategy that involves both nearshoring and maintaining global manufacturing operations in Asia. This makes supply chain operations at Mattel truly ‘glocal’ – the organisation follows a strategic approach where it integrates and balances both global and local considerations in its supply chain operations.

The glocal supply chain model recognizes the importance of globalization and the benefits of sourcing materials, components, and products from various countries to take advantage of cost efficiencies, access to specific resources, or specialized expertise. On the other hand, it also acknowledges the significance of catering to local market demands, meeting regulatory requirements, and addressing specific customer preferences in different regions.

To that end, Mattel has embraced nearshoring by bringing production closer to the North American market – to Monterrey (Mexico) which is now its largest in the world. However, the production facility attends to only making Barbie’s flagship product, the Barbie Dreamhouse, which is a three-storey high, heavy, and expensive item with volatile demand – the sort of item that parents splash out on mostly at Christmas time.

Considering the advantages that Mexico offers, including proximity to the US and Canadian markets, competitive labour costs, and free trade agreements, moving The Dreamhouse’s manufacturing closer to home has helped Mattel reduce lead times, and enhance responsiveness to consumer demand. However, Mexico still presents some business risks like the lack of appropriate infrastructure, and the lack of well-developed supply networks unlike Asia

On the other hand, the Barbie Dolls are smaller and less expensive to ship in bulk and, therefore, continue to be manufactured in Asia. The factors considered here include the relatively predictable demand for dolls, the minimal market risk with the long trans-Pacific transport time, and the availability of the intricate craftsmanship required for Barbie Dolls (which is a long tradition in Asian factories since first manufacture in Japan) – all of which make Asia the ideal location for manufacturing Barbie Dolls.

It is safe to say that the rationale behind Mattel’s near-shoring strategy is not solely about decoupling supply chains from China, as some may assume. Instead, it is driven by the need for flexibility in responding to changes in consumer demand. For Mattel, then, near-shoring is still a work in progress as it develops local tooling suppliers to develop fully integrated networks worldwide.

Leave a Reply

Your email address will not be published. Required fields are marked *