Hasbro continues to reduce ties with China, aiming to source less than 50% of its toys for the U.S. market from there by the end of 2020. By 2023, that should drop to 33%.
Heading Trump’s call to American businesses to leave China, Hasbro continues to seek new opportunities for sourcing toys from Vietnam, India, Mexico, and back home in the U.S. Hasbro’s exit actually began back in 2012, when 90% of its toys for the global market came from China. Today that figure stands at two-thirds.
This post is based on the CNBC article, Hasbro CEO says moving out of China has “gone very well for us”, by Jasmine Kim, August 27, 2019, and the YouTube video, Hasbro CEO on reducing toy production in China below 50% by the end of 2020, by CNBC Television, July 23, 2019. Image source: Design Pics / Don Hammond
1. Why is Hasbro leaving China, a move which predated the Trump tariffs?
Guidance: In addition to the issue of higher costs because of recent tariff increases, other perceived risks and costs in the supply chain led Hasbro to begin reducing its production in China as early as 2012. Increasing labor costs in China, along with new opportunities in countries like Vietnam, which is emphasizing vocational schools to generate large numbers of high-skilled workers, drew Hasbro to explore other opportunities for sourcing its toys. Producing toys closer to home, in Mexico or the U.S., for example, can also reduce delivery lead times and help the company be more responsive to the needs of retailers.
2. How does Hasbro’s practice of not owning any factories increase its nimbleness in the supply chain?
Guidance: Since Hasbro does not own any factories, it is easier for it to strategically change its sourcing. Shifting production from one country to another still involves risks and costs, including competing for factory space with many other U.S. businesses that are seeking less expensive havens as a result of tariff hikes. However, this is still a much more versatile approach than owning factories which would make location planning and changing the supply chain much more difficult.