Behind Hit Toy,
A Race to Tap
Seasonal Surge
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.
In 1984, parents camped outside stores for Cabbage Patch Dolls, followed by Teenage Mutant Ninja Turtles in 1988 and the Little Mermaid in 1989. In 1993, executives at Bandai Inc. were slow to react to the popularity of Mighty Morphin Power Rangers. Only 600,000 of an estimated demand for 12 million made it to stores by Christmas. In 1996, Tyco Toys Inc. was also caught short on Tickle Me Elmo. The company rolled out about one million units of the giggly plush toy but could have sold almost a million more.
Despite the industry's better forecasting and factory-response systems today there are still a few shortages this holiday season. Among the hard-to-find are certain items in Mattel Inc.'s Swan Lake Barbie and Bandai Ltd.'s Strawberry Shortcake lines. LeapFrog, too, it seems, could sell lots more of its newly introduced Leapster, a $80 portable learning system that plays like a video game.
Mr. Carlson, 44 years old, is LeapFrog's director of sales and systems analysis. He worked for Mattel Inc. in the 1980s, when the biggest U.S. toy company would send staffers into stores each week to manually count the number of toys on the shelves -- even though they couldn't know how many had been moved out from stockrooms. Mattel was considered cutting-edge at sales forecasts because it had persuaded one big retailer to provide monthly sales figures.
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.
During the next five weeks, LittleTouch sales took off, surpassing those of LeapFrog's other top sellers during their own introductory periods. Started in 1995, the Emeryville, Calif., company is mostly owned by Knowledge Universe Inc., a loose confederation of education-related companies put together by former junk-bond king Michael Milken, his brother Lowell, and Oracle Corp. head Larry Ellison. Its LeapPad products appeal to parents looking for electronic ways to teach spelling, reading and phonics.
The company went public in July last year at $14 a share and hit a high of $47.30 in October. Since the company missed analysts' forecasts for third-quarter revenue and profit, LeapFrog's stock price has tumbled in recent weeks and has been trading around $25.
After six weeks on the market, LittleTouch retail sales reached 5,000 units at LeapFrog's four major accounts. Based on that rate, forecast models were predicting sales of more than 700,000 in 2003, double LeapFrog's initial projections.
Even before retailers began boosting their orders, Mr. Carlson's forecasts had already persuaded Tim Bender, LeapFrog's global retail president, to mobilize for dramatically increased production. It took 12 months to produce the first 350,000 LittleTouch toys. LeapFrog eventually would want to make the same number again in just four months.
In Zhongshan, an industrial town 60 miles north of Hong Kong, managers at the Capable Toys factory had expected to wrap up production of LittleTouch for the year in early fall. But soon after the sale projections emerged in August, "every day the LeapFrog marketing people said to us, 'Can we have a few more?' " says Capable's chief executive, Kenneth So, 51. As the requests grew larger, Mr. So set up a special task force that met daily to prepare for an all-out LittleTouch emergency.
There was very little Capable could do immediately to increase production. The molds that make the plastic parts of the toy can pump out only about one piece every 40 seconds. The factory needed to find more raw materials and custom-made parts, such as microchips and special paper. The plant needed to hire more workers. Not long ago, these issues would have made a last-minute request to increase production hopeless, Mr. So says.
But Mr. So's factory isn't like the simple sweatshops that first sprouted up in China in the 1980s. To compete against low-cost, low-end competitors today, he markets his factory as a specialist in design and supply-chain efficiencies that can dramatically speed up manufacturing processes. "I studied toy making in the U.S. system," says Mr. So, who spent two decades working as a manufacturer for U.S. companies such as Hasbro and Mattel.
The showpiece of his 14-acre, five-building campus is the mechanical-design studio where abut 50 uniformed technicians and engineers use computer-automated-design software to create and improve toy parts and manufacturing processes.
Here, engineering supervisor Huang Hengbin, 32, made a breakthrough on the molds for the toy's plastic parts. The LittleTouch's 41 metal molds, also called tools, are a critical part of the production process. The factory runs the tools 24 hours a day, in three eight-hour shifts, to produce enough plastic parts to keep the assembly line running during regular hours.
"When we design the product from the ground up, we know the limitations," says Mr. Huang. "So with the LittleTouch, we knew immediately that the limit was the tools," he says. One set could produce a maximum of 1,750 toys per day.
WAAAH!
Major toy-supply shortages in recent history:
1983: Cabbage Patch Dolls
1988: Teenage Mutant Ninja Turtles
1989: Little Mermaid
1993: Mighty Morphin Power Rangers
1996: Tickle Me Elmo
The factory, which had two sets of tools running around the clock, got the OK from LeapFrog for a third set of tools in late August when Mr. Bender was sure that LittleTouch was a bona fide hit. A week later, Leapfrog approved the making of a fourth set of tools. Work on those was started in mid-October, when the third set was ready.
Mr. Huang's contribution was not only to produce the extra sets, which take weeks to make and cost hundreds of thousands of dollars -- but to ensure that each new set was more than a mere duplicate. "Every single part can be improved to save time," he says. He did just that: The original two sets of molds produced 3,500 toys a day; the third improved output to 6,300.
Mr. Huang dissects a LittleTouch to show the many tiny tool-design changes he made to improve efficiency and reduce defects. Instead of attaching the handle with four screws, he made it a snap-in form, shaving a minute off production of each unit. He added tracks to hold the wiring and avoid damage when the unit's top was screwed on. His design improvements reduced the toys' fail rate to just 0.3% today from an initial 5%. That means hundreds more finished LittleTouch toys in the same amount of time.
In the building next to Mr. Huang's office, robots carve his designs into the metal tools. Until about 10 years ago, Chinese factories' tools were mostly hand-made by master artisans -- some in the U.S. -- and then shipped later to the factory. For human workers, Mr. So can hire 500 in a matter of days just by posting signs around town and tapping labor agencies.
LeapFrog and Capable also had to hustle to find the specialized materials and parts they needed. Each toy is equipped with a mini-speaker and three microchips, as well as a specially designed electronic membrane that translates a child's touch into a signal for the toy's brain.
The Capable Toys factory initially had trouble finding a supplier for touch-sensitive membranes, but then Mr. So's staff tapped its network of suppliers to hunt down a second vendor. Another material that caused headaches was the clothlike paper called Tyvek used in the LittleTouch books and made by DuPont Co. Homebuilders use the material as part of the insulation process because it is water-resistant and still breathes. LeapFrog needed something that would be drool-resistant and still absorb ink.
The only way to get the material was through a third-party supplier -- a bookprinting firm -- in the U.S., says Andy Murer, LeapFrog's vice president of operations. That meant hiring the U.S. company to do the printing as well. That decision added 50 cents to 60 cents per book in production costs, but it was worth it to preserve the company's long-term image, Mr. Murer says.
The toughest and most costly decision for LeapFrog was using air freight to respond to shortages. That happened around Sept. 21, when retail sales of the $35 LittleTouch began to flatten because of scarce inventory. After Mr. Bender started air-shipping the toys, sales picked up again. But at $10 to $15 per lightweight but bulky toy, air shipping sliced the company's profit on those LittleTouch shipments to almost nothing.
Today retailers again are lean on LittleTouch products. The day after Thanksgiving, about 30% of retailers were out of stock. The toy is still being either flown in or put on special fast boats, which take 14 days from Hong Kong to Los Angeles without standard stopovers elsewhere.
玩具公司不再“雾里看花”
8月11日（周一）清晨，玩具公司的管理人士凯文?卡尔森(Kevin Carlson)查看了公司前一个周末全球的销售数据后，预测出公司在圣诞节期间将有惊人的供货量。
在公司推出LittleTouch LeapPads的第一个周末，旗下各家商店就销售了360件该产品。这种益智玩具像是一本带有插图的书，但与插图书不同的是，一旦孩子触及上面的插图，它就会发出声音。
虽然起初的销售量还不大，但从中可以看出这种产品未来的市场前景。卡尔森根据预测软件得知，他应该准备大约70万件存货以供圣诞节期间的销售之需。这是他原计划的两倍。
他所在的公司LeapFrog Enterprises Inc.正在从事非凡之举。正当其他玩具公司从来自中国的货船上卸下全部圣诞节存货的时候，LeapFrog却开始搜集原材料准备生产大量LeapPads。该公司在中国中山市的私人控股工厂Capable Toys Ltd.正在大批购买塑料模具、定制设计的电子产品和稀缺的婴儿用纸，以便昼夜不停地生产LeapPads产品。
LeapPads争分夺秒抢假日销售时间的事例说明了科技和全球供应链正在改变玩具业所面临的巨大挑战。多年以来，玩具制造商一直是在1月份和2月份下全年节日期间的订单，盲目地估计产品的需求状况。等到了圣诞节，他们会出现热销产品短缺和滞销产品大量积压的状况。
在1984年，父母们争相抢购Cabbage Patch Dolls玩具，1988年热销的是忍者神龟(Teenage Mutant Ninja Turtles)，1989年是小美人鱼(Little Mermaid)。而在1993年，Bandai Inc.的管理人士对恐龙战队(Mighty Morphin Power Rangers)的流行反应迟缓──到圣诞节前，对这种玩具的市场需求大约于1,200万，但商店里的存货仅有60万。 在1996年，Tyco Toys Inc.也没有能满足对Tickle Me Elmo玩具的需求，公司生产了大约一百万件玩具，但市场的实际需求量大约是其产量的两倍。
尽管如今玩具行业有了很不错的市场预测和工厂反应系统，但今年的圣诞节销售期仍有一些货物短缺的现象。紧俏的玩具包括Mattel Inc.生产的天鹅湖芭比(Swan Lake Barbie)，Bandai Ltd.生产的草莓蛋糕(Strawberry Shortcake)系列玩具等。LeapFrog新推出的Leapster本来也有可能销售更多。Leapster是一种像电子游戏那样的便携式学习系统，售价80美元。
44岁的卡尔森是LeapFrog的销售兼系统分析主管。他曾在80年代供职于Mattel Inc.，当时这家美国最大的玩具公司曾派职员每周到商店里手工清点货架上的玩具数量，尽管他们无法得知还有多少放在仓库里。Mattel被认为是在销售预测方面很前卫的企业，因为它曾经说服一家大型零售商向它提供每月的销售数据。
LeapFrog能够从8月份就开始进行销售预测，这还是几年前刚有的事，这是伴随国际互联网的发展应用而生的。包括沃尔玛(Wal-Mart)、Target、Kmart和Toys 'R' Us在内的多家零售商（他们销售大约三分之二的LeapFrog产品）逐渐对销售数据不再那么保密，允许供应商即时查询他们的销售数据库。如今，在任何一家沃尔玛商店内销售LittleTouch的记录都会在一夜间出现在LeapFrog的数据库中。应用了新的数据跟踪系统，制造商将能够知道哪家商店销量最大，以及购买者的人口信息，甚至知道顾客是更擅长英语还是西班牙语。
有了销售数据，卡尔森就能够进行各种推断，甚至以区区360件玩具的销量就可以预测未来的市场需求。卡尔森用4个电脑模型推算出了LittleTouch的销售数据。这些模型必须剔除造成销售高峰的异常因素，比如折扣、电视广告促销、商品在商店的摆放位置等。在LittleTouch的分析中，卡尔森没有发现任何异常：这是真正的热销。
在随后的5周中，LittleTouch的销量激增，超过了LeapFrog其他热销产品在新品促销期的销量。LeapFrog创建于1995年，大部份股权属于Knowledge Universe Inc.，而后者是一个教育相关企业的松散联盟。LeapFrog去年7月份上市，当时股价14美元，10月份创下47.30美元的高点。公司在今年第三季度的收入和利润未达到分析师的预期，因此最近几周股价暴跌，目前维持在大约25美元左右。
投放市场6周后，LittleTouch在LeapFrog四大零售商的商店内销量达到5,000件。根据这个数据，预测模型推算出2003年LittleTouch的销量将超过70万件，是最初预测值的两倍。
甚至在零售商增加订单之前，卡尔森的预测结果就已经说服公司的全球零售总裁蒂姆?本德尔(Tim Bender)为大幅增产做好准备。公司最终决定在4个月内生产出35万件玩具。
在中国中山市，Capable Toys工厂的经理们原本希望在秋季初完成全年的LittleTouch生产任务。但公司首席执行长肯尼斯?苏(Kenneth So)表示，自从8月份销售预测做出以后，LeapFrog的销售人员几乎每天都在督促他们增加产量。随著产量要求的增加，肯尼斯?苏成立了一个专门小组，每天碰面以应付LittleTouch生产可能出现的紧急情况。
能让Capable立即增加产量的措施并不多。生产LittleTouch塑料部件的模具每40秒才完成一个。因此，Capable工厂需要买进更多原材料和定制零件，比如微晶片和专用纸张。工厂还需要雇用更多工人。肯尼斯?苏表示，不久前，这些问题还有可能导致增产的要求变得渺无希望。
但苏的工厂并不像中国80年代涌现的那些简易作坊。为了和低成本、低端市场的竞争者竞争，他把自己的工厂建设成一个在设计和供应链效率上有专长的企业，能够大大加快制造过程。苏表示，他曾经研究过美国的玩具制造系统。苏为Hasbro和Mattel等美国公司作制造商已经有20多年了。
在公司的机械设计工作间内，工程主管黄恒斌(Huang Hengbin, 音译)在改进生产塑料部件的模具方面取得了突破。LittleTouch的41个金属模具是整个生产流程的重要组成部份。工厂通过换班制24小时操作这些模具，以生产出足够多的塑料部件确保生产流水线的正常运转。
黄恒斌表示，他们在生产LittleTouch过程中最大的瓶颈就是模具。一套模具每天最多可生产1,750个玩具。
工厂原有两套模具，都是全天操作。当本德尔确信LittleTouch真的热销后，LeapFrog在8月底批准工厂使用第三套模具。一周后，Leapfrog批准制造第四套模具，制造工作从10月中旬开始。
黄恒斌的贡献不仅仅在于制造新的模具（这可能需要数周时间，耗资数10万美元），而且在于让新模具得到改进。他说，每个模具的零件都为节约时间而进行了改进。原来的两套模具每天生产3,500个玩具；第三套模具改进到每天生产6,300个。
黄恒斌在设计上的改进让玩具的废品率从最初的5%下降到0.3%，这意味著在同样的时间内可以生产更多合格的LittleTouch玩具。
在与黄恒斌的工作间相邻的另一座楼上，机器人把黄恒斌的设计安装到金属模具上。而在大约10年前，中国工厂的模具还主要是由熟练工人手工制作，有时是在美国制造，然后运到工厂来。
另外，LeapFrog和Capable还要竭力获得他们所需的专门材料和零件。每只玩具上都装有一个微型扬声器和3个微晶片，以及一种专门设计的电子膜，用于传输孩子的触摸信号。
最初，Capable Toys在寻找这种触摸敏感式电子膜的供应商方面遇到一些困难，但后来他们利用供应商网络找到了一家二级销售商。另外一种带来麻烦的材料是Tyvek，这是用在LittleTouch书中、像布一样的防水纸张，由杜邦公司(DuPont Co.)生产。
LeapFrog 的营运副总裁安迪?穆勒(Andy Murer)表示，获取这种材料的唯一途径就是通过第三方供应商，一家美国的书本印刷公司。这就意味著他们同时需要雇用美国公司进行印刷。穆勒表示，这个决定使他们每本书的制作成本增加50到60美分，但为了保证公司长期的信誉，这是值得的。
对于LeapFrog而言，最艰难也是最昂贵的决定是：使用空运来解决货物短缺问题。这发生在9月21日左右，当时由于库存紧缺，每个售价35美元的LittleTouch销量开始下降。在本德尔决定空运玩具后，销量重新上扬。但每只玩具的空运成本是10到15美元，这使那批空运的LittleTouch利润几乎降为零。
如今，零售商又开始对LittleTouch产品寄予厚望。感恩节次日，大约30%的零售商都脱销。目前，这种玩具仍然是或者空运，或者用特殊的快船运输，中途不作停留，从香港到洛杉矶只要14天。
