If you're a toy manufacturer, you're sure to have had your margins squeezed more and more in the past few years. Various factors including the rise of internet selling, the knock on effect of retailers demanding higher margins, and rising costs in the traditional toy manufacturing stronghold of China, has made the toy industry more and more competitive and difficult to maintain margin.
How can we fight back? Certainly renegotiation of as many contracts as possible is always the first port of call. However you may find that Chinese factories are less willing to bend than in the past, for the simple fact that their own margins have been squeezed in recent years also, with rising raw material and labour costs, as well as more hidden ancillary costs like safety and ethical compliance, higher FOB fees, among others being pushed back onto them by customers.
Looking at other factories, particularly those that might be based in a more developing area, or one that is not traditionally in a recognised cluster for toy production might yield results. But of course working with a new factory in an area you're unfamiliar with, particularly if you're not used to dealing direct in China, may prove tricky.
Look at your freight costs. At the time of writing, the global shipping industry is in crisis with costs going through the roof due to a perfect storm of COVID and various other incidents and knock on effects that have been going on for well over a year. But it is still very worth talking to other shipping agents and seeing what they can offer. Some structure their rates quite differently that may suit your particular type of business, and some have access to preferential rates with local agents and shipping lines. It may not be on every job or route, but you may save on certain ones.
Lastly, it is now well worth looking outside China as well. Rising costs and instability in the workforce, as well as the threat of further viral epidemics or pandemics, mean companies are looking to at least diversify their manufacturing locations. You could look at Vietnam, Mexico, Singapore or India, all of which are fast emerging manufacturing hubs.
India in particular has just been named number 2 on the most attractive manufacturing locations in the world, and has various advantages including English being widely spoken, lower trade tarrifs, shorter travel times particularly from Europe, and competitive pricing.
Wherever you look for your toy manufacturing, make sure you look for a trusted partner that can really understand your needs!
