Retailer Purchasing and Order Cycle An intermediary's purchasing cycle is driven by seasonality, with the decision-making process being initiated as much as 18 months before a product appears in-store. So in preparing for Christmas 2014, for example, buying teams will have spent summer/early autumn 2013 visiting trade fairs around the world in search of ideas, trends and new toy products that might have sales potential in national European markets. As well as attending trade fairs, buying teams will review products offered by existing suppliers. For toy producers such as Simba-Dickie, this may include the following. Buying teams from the principal intermediaries in key geographic markets visit the company's head office in Frth in autumn 2013 to view product proposals for Christmas 2014. Discussions also include a review of existing products and which of those will be carried forward to the next season, as well as others that the retailer is likely to delete, with reasons for their removal. Based on the business meeting held at the company's head office, 'photo-quotations' are sent to the retailer for every item viewed by the buying team and for which the retailer signalled interest and desire to evaluate the product further. For each item, the supplier sends a one-page quotation to the retailer. Information sent includes: cost price; a photographic image; size (disassembled and assembled); size of packaging; size of outer packaging; weight of product; country of origin; battery needs; and accessories that can accompany the product. Among other things, such detail enables the retailer to calculate handling and storage costs. Evaluations using the photo-quotations lead to sample requests for some of those items by early December. Samples are used by larger retailers in their 'dummy stores', allowing in-store planograms to be used for further product evaluation. The combined photo-quotations and presentation of the samples in the retailer's 'dummy stores' contribute to the retailer's internal approval process. Buying teams evaluate competing products and present this evaluation, along with recommended product selections, to merchandise managers/ directors for approval. During this internal evaluation process, discussions between buyers and the supplier are ongoing. Areas might include scope for price reductions, changes to the product specification, or own-label options. If successful, the toy producer receives confirmation of final product selection by March 2014; this then leads to the onset of negotiations regarding price/product contribution and volumes for product delivery in July 2014, with in-store availability by autumn 2014. Retailers select from the entire product range offered by a supplier. Criteria used for product selection might include: profitability; communication campaigns planned by suppliers to drive customer demand; dealer support provided by a supplier, such as tag advertising, pricing promotion and funding of instore displays and catalogues; and exit plans for product supplies (previously known as sale-or-return). Toy producers typically do not receive orders before shipping products; rather a retailer will confirm items that have been selected from the supplier's product range. Once an item has been selected the toy company provides product and packing details and requests a supplier order number. The dealer then advises order number and volume requirements, which both allows companies such as Simba-Dickie to calculate the delivery schedule and results in it requesting appointments for delivery of products to retailer warehouses. Only after an item has been purchased by a consumer and its details have gone through the retailer's electronic point of sale system, does the toy supplier actually receive order confirmation from the retailer. Larger retailers expect toy producers to manage supply logistics on their behalf. For example, in the UK, Simba-Dickie would be required to use Argos's extranet facility to key in product information, generate order numbers and invoices and trigger payment on the retailer's behalf for the group's products that have been sold through Argos channels. SAGE Ross Brennan, Louise Canning and Raymond McDowell 2014 Business Cases Page 5 of 6 Routes to Market in the Toys and Games Industry 1. 2. 3. Relationship Management The principal points of contact between toy producers and retailers are the sales representatives and purchasing managers. However, other managers would regularly deal with each other (including the pointof-sale personnel, display managers, marketing communications staff, and warehouse and quality control managers) to facilitate relationship administration. In addition to this, senior managers from both the supplier and retailers (such as sales and purchasing/merchandise directors) meet periodically to reinforce the relationship. Face-to-face meetings normally occur every two to three months, principally to review ongoing contracts, negotiate future contracts and present product ideas for future business. These meetings would normally involve the category buyer and possibly senior buyers/purchasing directors. As well as meeting with the purchasing team, the supplier would also make a point of seeing other managers in the retailer's business centre. Toy producers who deal with retailers on a regular basis are subject to periodic reviews of their 'serviceability'. The review would typically feature as part of the supplier-retailer meetings, and consists of the following. Profit performance. This assesses the extent to which a supplier is contributing to targets set by the buying team in terms of profit return per linear metre. Delivery performance. Contracts are agreed using an initial estimated figure that the retail business believes it can sell during a season. Once the product has gone to a store, sales are monitored, and estimated volume requirements are adjusted on a weekly basis. Supplier delivery performance is evaluated in terms of the accuracy of information provided on lead times (which is used by the retailer for forecasting and order fulfilment) and accuracy of completed deliveries (in terms of volume and timing). Quality of contact. In a broad sense the administration of a relationship is helped when both the supplier and dealer have a good understanding of each other's business and this contributes to the dealer's evaluation of the quality of contact with a supplier. More specifically, the retailer will use comments/feedback from managers across the business to evaluate the supplier in terms of flexibility, responsiveness and problem-solving abilities

. Discussion Questions

Based on the information in the case study, outline the structure of the supply chain of which SimbaDickie is a part, identifying key parties and their role in the supply of products to end-consumers.

Describe what you consider to be the main elements of the logistics service programme that retailers expect of Simba-Dickie. Do the locations of the toy producer's activities present it with any difficulties in meeting these expectations?

Using the case study, and additional internet research, identify the principal differences in the distribution structure of the toy industry in France, Germany and the UK. What are the key implications of these differences for toy producers wanting to sell their products in these countries? Sources: Simba-Dickie Group, 2010; Tyler, 2012.