Emergic: Rajesh Jain's Blog

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Toy Story

December 19th, 2003 · No Comments

WSJ writes about how the global supply chain helps a toy company, LeapFrog, meet the Christmas surge in demand:

Early in the morning of Monday, Aug. 11, toy executive Kevin Carlson checked his nationwide weekend sales numbers and got a surprising glimpse of Christmas future.

Stores had sold 360 of his company’s LittleTouch LeapPads in the product’s introductory weekend. Parents hunting for an educational toy for infants and toddlers were reaching for the new gadget, which makes noises when a child touches parts of an illustrated book.

That small number had huge implications. Forecasting software told Mr. Carlson that he would need about 700,000 units to meet projected holiday demand — twice as many as he had planned to ship.

So his company, LeapFrog Enterprises Inc., did something unusual. At a time when other toy companies were unloading their final Christmas shipments from cargo ships out of China, LeapFrog began placing what would turn into a huge new order for LeapPads. Its factory, privately held Capable Toys Ltd. of Zhongshan, China, scrambled for extra plastic molds, custom-designed electronics and scarce baby-drool-proof paper, and pumped out LeapPads around the clock.

The LeapPad’s frantic race against the holiday deadline shows how technology and global supply chains are transforming a great business challenge. For years, toy makers would place their entire holiday orders in January and February, blindly betting on demand for their products. By Christmas, they’d have shortages of their hit products and huge stockpiles of their duds.

The shift that let LeapFrog make its August forecast came just a few years ago with the Internet, as major retailers including Wal-Mart, Target, Kmart and Toys “R” Us — which sell two-thirds of LeapFrog’s toys — became less guarded about their market data and allowed suppliers real-time access to their sales databases. These days, a LittleTouch sale at any U.S. Wal-Mart appears in LeapFrog’s databases overnight. With new data-tracking systems, manufacturers know which stores sold the most products and the buyers’ demographics, including whether the shopper is more likely to speak English or Spanish.

With this data, Mr. Carlson can make various extrapolations even from sales as small as 360 units. In his small cubicle in LeapFrog’s California headquarters, Mr. Carlson crunched the LittleTouch sales numbers through four computer models. They are designed to weed out unusual explanations for sales spikes, everything from discounts and TV advertising to where in stores the product was displayed. In the case of LittleTouch, he couldn’t find an anomaly: It was a genuine hit.

This is an example of the intelligent, real-time enterprise in action.

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