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What Barbie Taught Me About Nearshoring

C.Huckle But Schumpeter is looking forward to the first live-action Barbie movie, due out in July. The director is Greta Gerwig, who has created strong characters in her two films, Lady Bird and Little Women. That trailer is a parody of 2001: A Space Odyssey, suggesting whether you love or hate Barbie, she’ll be treated with a knowing wink.

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It is also a story of business revitalization. If the movie hits, it could mark the comeback of Mattel, one of the world’s biggest toy makers, with brands like Barbie, Hot Wheels and Fisher Price in their toy boxes. 5 years ago I lost 3 in funk CEOIn four years, the decades-old license to manufacture Disney dolls was transferred to rival Hasbro. CEO Since 2018, its cost base, balance sheet, manufacturing footprint, and morale have all improved. Last year, to the joy of our staff, we were able to get our contract back with Disney. Barbie Red His carpet blockbuster adds icing to the cake.

So it was a Ken-like spring gait when your columnist traveled to Monterrey, northern Mexico, this month to witness first-hand how Mattel is consolidating its North American manufacturing operations into the world’s largest single Mexican plant. He wanted the Barbie doll to not only be a star on the silver screen, but also a symbol of the industry’s hot new trend: near-shoring. However, there was no appearance of Barbie. All that was on display were props from one of his factory flagships, Barbie his Dream House, a Tinseltown-like mansion. In fact, Barbie is not made in Mexico. She is still made in Indonesia and China (the first blonde doll she was made in Japan in 1959).

As such, Barbie perfectly represents another element of today’s supply chain paradox. Mattel not only keeps some production closer to home, but also maintains global manufacturing operations in Asia. In a business environment of increasingly unpredictable demand, a fragile environment and geopolitical instability, this is the new reality for multinational manufacturers. Even as supply chains become more complex, they need to be global and local at the same time.

Regardless of what American politicians have you believe, the most important rationale for nearshoring is not to disconnect the supply chain from China, as Mattel’s supply chain chief Roberto Isaias says. Secondly, it is to provide flexibility. In some cases, It stands to reason Shorten supply chains to respond more quickly to changing consumer demand. In other countries, it is better to prioritize low-cost production, even if the factories are far away.

To understand Mattel’s two strategies, consider Mexico’s strengths and weaknesses. On the plus side, it is adjacent to the world’s largest market. It has free trade agreements with the United States and Canada, facilitating the cross-border flow of goods and services. Labor costs are becoming more competitive with Southeast Asia (China’s labor force has been expensive for years). Their workers may not be as goal-oriented as their Asian counterparts, but they tend to be more supportive.Mexicans treat their hospitable employers and co-workers like family, keeping things flowing more smoothly. He pitches ideas for efficiency, reports Isaias, himself Mexican. Mexico is also more or less immune to the rising US-China tensions that pose an element of risk throughout her chain of supply in Asia.

But Mexico also presents some business risks. Mattel and its biggest Danish rival Lego have been making inroads in the Monterrey area for years, but the toy industry has yet to cultivate an ecosystem of competing low-tier suppliers across the Pacific. For example, the plastic resins used at Mattel’s Monterrey plant are shipped by rail from the United States and Canada. Hot plastic pouring toy molds come from China. The infrastructure in Asia is also stronger than in Mexico. In Monterrey, Mattel has no complaints about electricity and water supplies, but their reliability can be spotty. But Roberto Durán Fernández, of the Monterrey Institute of Technology, a university, said the flood of recent investments in Monterrey’s home state of Nuevo Leon by automakers such as Tesla has caused all kinds of damage, including roads and housing. He said it could exacerbate the strain on infrastructure.

Mattel’s Barbie supply chain illustrates these tradeoffs. Her dream house is her three stories high, heavy and expensive. It’s the sort of thing her parents would splurge on at Christmas time. Manufacturing in northern Mexico means it can ship to Amazon, Target, Walmart and other U.S. retailers within 48 hours of hers, with Mattel gauging the strength of demand until relatively late in the run up to Christmas. can wait for Proximity to markets also reduces transportation-related costs and emissions.

Doll Barbie is different. Her height is only 11.5 inches (29 cm) and she is famous for her slim figure. As such, it is considerably cheaper to ship large quantities from Asia to America.Since demand for the dolls is relatively predictable, there is less market risk due to long transit times across the Pacific. And she’s finely crafted, complete with well-knit locks and tailored clothing. It benefits from a handicraft tradition built over generations in Asian mills. If demand for a particular doll spikes, Mattel can have Chinese subcontractors make dolls quickly while increasing its own production capacity.

dream solution

Therefore, nearshoring is still a work in progress for Mattel. We are trying to develop local tool suppliers to reduce our dependence on China. To become a near-shoring powerhouse, Mexico needs it too. Over time, industries from car manufacturing to toy manufacturing are expected to deploy fully integrated supplier networks across the country to alleviate congestion near borders. When it comes to Barbie, the optimal supply chain strategy is to manufacture Barbie as close as possible to perhaps the largest market in order to meet consumer demand quickly, as long as costs are kept reasonable. Mr Kreis, CEO, no longer consider them consumers. He considers them fans.

Read the article by Schumpeter, a columnist on global business.
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Also: How does Schumpeter’s column got that name

https://www.economist.com/business/2023/03/23/what-barbie-tells-you-about-near-shoring What Barbie Taught Me About Nearshoring

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