Spin Master Toys (A): Finding a Manufacturer for E-Chargers
1. What is your assessment of the process that Spin Masters has used to get to this point?

2. As Alex Perez, which of the two potential suppliers would you choose? Why?

3. Discuss an implementation plan for your decision.

Summary
Spin Master Toys of Toronto, Ontario, a company who had been successful in creating fad items was about to roll out a new line of airplanes that were going to be powered by electricity called E-Chargers. With a delivery date to the retailers of December 7, 1999, they were now trying to decide from which supplier to purchase the design and production of this rollout. They had investigated a number of suppliers and managed to narrowed it down to two, Wah Shing and Wai Lung. They had to make a choice quickly.

Analysis

Evolution
Anton Rabie, Ronnen Harary and Ben Varadi all graduated from The University of Western Ontario. Varadi and Rabie from the Ivey Business School and Harary from political Science. They all chose not to go into the corporate world and pursued their own dreams by creating successful fad items. Some of those items were Grow-Things, Earth Buddy, Radical Reptiles and many more. In 1996 Spin Master rolled out its Air Hogs line of compressed-air-powered planes which they manufactured in China. Before they decided to do it, it took them time to digest the idea, they thought it was too ambitious.

After their success with Air Hogs, they rolled out some more toys that were driven by compressed air. A water rocket called the Vector, a car named the Road Ripper and another two type of air planes, the V-Wing Avenger and the Renegade. Their revenues went from $525k in 1994 to a projected $45.8M in 1999. They are now ready to go into their next big project; E-Chargers.
E-Chargers was going to be the new airplane toy that would be rolled into the market. Instead of it being powered by compressed air, it will be powered by electricity. Product will come in two parts, a battery pack and the airplane itself. Spin Master Toys had shelf space and they were supposed to deliver by December 7, 1999. Now they are trying to decide what supplier to go with to meet that deliverable and they have narrowed it down to two, Wai Lung and Wah Shing.

Supplier
Harary believed that Spin Master Toys could have more commitment from Wai Lung since he was dealing directly with the owner. Lee Eric, Wai Lung’s owner was eager to close a deal with Spin Master Toys and he reassured Harary that he would provide personal attention to this rollout. Harary had previously worked with Wai Lung on a toy project called Flick Trix Finger Bikes, which were miniature die-cast replicas of BMX bikes will fully funtional parts. It was a successful project in which Wai Lung, delivered very quickly in very little time. From an expected production of 10,000 bikes a day they went to 40,000 bikes a day with good quality.
Harary returned to visit Wai Lung and noticed that he was at about 40% of his capacity, which means that he has the availability. They currently had 2000 employees in a 100,000 aqure foot factory, vs other companies with an average of 600 workers.
Lee, at 48, was still hungry to grow his business, he had recently hired three engineers and was willing to extend favorable credit terms to Spin Master Toys. The only downfall is that their engineering workforce is fairly small and they have no experience in producing toys with electronic components.

Wah Shing employed 3,500 people with six engineers on staff in its 100,000 square foot factory. It was a subsidiary to a toy manufacturer in Hong Kong with annual sales of $40M vs an average of $30M when compared to other similar companies. Perez had some experience with them prior to Spin Master Toys, they have a track record of producing successful electronic toys. In had been 4 years since Perez visited or had done business with Wah Shing, on this visit, he was unable to meet the owner since he was travelling. He also noticed that they were at about 70% of capacity and there seemed to be less communication between upper and lower management. Although he had some concerns, he knew that they still had a good reputation in electronic toys and their costs are comparable to similar companies.
Decision

My decision would be to go with Wah Shing, although Wai Lung could offer more direct relationship and go out of their ways to roll this project out, Wah Shing has the experience and it is known to be successful for toys like this. With that said, time is a big factor since they already have a contract in place with the retailers. I wouldn’t leave Wai Lung out of the loop thou, I would personally talk to him and let him know that we appreciate his offer, but for this particular rollout we are going with another supplier and with time let him take on a smaller rollout to see how it works out.

My big concern about Wah Shing is the communication between their management and the possibility of having a hard time of getting the rollout done since they are at about 70% of capacity. I would make sure to have everything clear in the agreement in case there are some issues. Also looking at the quotes, Wai Lung would have to outsource the motor and capacitor, but just to compare apples to apples, Wah Shing can make the toy at $12.95 (excluding the motor and capacitor) vs Wai Lung at $15.44 per unit. Wah Shing is providing a more complete quote and I believe that there is less risk, I mean granted they probably outsource some parts, but at least they probably have good vendors picked out already.

Conclusion We all want a more personal relationship with the supplier as Wai Lung has to offer, but when time and experience in the industry are two big factors, you have to do what is best for your business. Spin Master Toys needs to go with a supplier that has the experience and has a track record of being successful. As stated before, I would not leave Wai Lung out of the loop and let him know why we went with another supplier and maybe even let him take care of another rollout that time is not a big constraint and if it all works out, both sides can benefit. I am sure that Lee, being the business man that he is, would understand and maybe Spin Master Toys can be the reason why Wai Lung progresses further down the road. Spin Master Toys is a living example of rolling out new projects in which they were doubting themselves, why not give them a chance as well.

Works Cited
Haywood-Farmer, John S. and Mark, Ken. Spin Master Toys (A): Finding a Manufacturer for E-Chargers. Richard Ivey School of Business, The University of Western Ontario. 2001