Dive Brief:
- Toy maker Mattel is closing its New York office as part of a $650 million cost savings plan, laying off 100 employees in the process, CNBC reported.
- RapidRatings data indicates Mattel's financial health is at a low rating of 27 (out of 100), and that the company has been taking 84 days to collect payments from customers while paying suppliers in 62.
- That Mattel should be struggling after the Toys R Us liquidation is no surprise, but Mattel's suppliers must tread carefully.
Dive Insight:
Mattel's financial health rating (FHR) tanked in 2017, dropping from 65 to 27 YoY, suggesting an over-reliance on Toys R Us (whose woes came to a head in 2017). Regardless, the toy maker's struggle warns other companies against single sourcing or become too codependent on certain links in the supply chain.
According to RapidRatings' analysis, Mattel poses a high risk of default in the next few years. Granted, the toy maker is trying to get back on track — hence the $650 million cost savings plan.
Mattel CFO Joe Euteneuer said in February the plan will be implemented "primarily through process simplification and the optimization of SG&A, cost of goods sold and advertising, while the larger more structural changes like our manufacturing footprint and investment in IP will drive most of the remaining savings in 2019."
Closing the New York office is likely part of "process simplification," but such vague statements leave Mattel open to pull all kinds of punches without its customers really knowing what to expect.
As RapidRatings report notes, Mattel's net profitability and operating profitability are very poor and its cash flow was negative in 2017, so maybe shuttering offices and slimming operations is what the toy maker needs to do to stay afloat.
Vivek Soneja, head of the global supply chain for Anaplan, said retailers across the board are struggling with balancing all their omnichannel offerings, including their e-commerce presence and their brick-and-mortar presence. Lacking supply chain visibility and transparency can make or a break a retailer.
"You need inventory visibility, planning systems, financial planning, demand planning, and the ability to connect all these," he told Supply Chain Dive. "The need to connect these plans is super important, and these plans will always change on you because of the fickle nature of consumers and the market in general. So you need to be able to adjust to demand very rapidly and respond in a way that is profitable."
With regard to retailers, connecting different departments' plans can be especially tricky when managing fulfillment.
"On the fulfillment side — and this is a common problem — what is happening is every retailer now has got an e-commerce channel and a direct store channel and they allocate inventory to these channels in the distribution center, and no one’s really got a good handle on whether one channel is cannibalizing on the sales of another channel," Soneja said. "You need deep planning capability to get a good handle on that."
