Strategic sourcing in the Hong Kong toy industry

Abstract

Since the 1980s many Hong Kong toy companies have transferred their manufacturing operations to China in order to take advantage of not only low labour and land costs, but also a sufficient labour force, a situation which is difficult to obtain in Hong Kong. Nowadays, many indigenous Chinese toy companies are well developed which can pose a threat to Hong Kong toy companies, particularly in price. In spite of this, Hong Kong toy companies are still competitive in design capability, product quality, responsiveness, customer services and delivery. Many Hong Kong toy manufacturing activities are sourced to tier suppliers. Through Strategic Sourcing, with an aim to improving the sourcing performance in terms of product quality, price and delivery, Hong Kong toy companies can compete with Chinese toy companies and satisfy customers' needs. In contrast to traditional procurement that is only related to commercial activities between a buyer and a supplier, Strategic Sourcing involves proactively integrating supply-related activities. It is composed of a set of value added processes for an organization to create requirements, develop sourcing strategies, and manage suppliers. This research explores the development of Strategic Sourcing in the Hong Kong Toy Industry and aims to improve sourcing performance for the Hong Kong Toy Industry. The research comprises four stages, namely, "Hierarchical Strategic Sourcing Model", "Strategic Sourcing in the Hong Kong Toy Industry", "The relative importance of Strategic Sourcing categories and key success factors for the Hong Kong Toy Industry" and "Self-assessment System in Strategic Sourcing for the Hong Kong Toy Industry". The first stage is the "Hierarchical Strategic Sourcing Model". A Hierarchical Strategic Sourcing Model with hierarchies of criteria (three Strategic Sourcing categories) and sub-criteria (fourteen key success Strategic Sourcing factors) in Strategic Sourcing has been developed through the literature review. The second stage is the "Strategic Sourcing in the Hong Kong Toy Industry". The Hierarchical Strategic Sourcing Model with the criteria (three Strategic Sourcing categories) and sub-criteria (fourteen key success Strategic Sourcing factors) has been examined through a questionnaire survey that has been conducted in the Hong Kong Toy Industry. The empirical data for this study have been drawn from a survey of 205 companies in the Hong Kong Toy Industry. The findings indicate that three Strategic Sourcing categories (SSC) and fourteen key success Strategic Sourcing factors (KSF) are important; however, the extents of implementation of fourteen KSF are lagging. In addition, the extents of implementation of fourteen KSF are positively related to the sourcing performance. Moreover, the extents of implementation of three SSC have contributed to Strategic Sourcing. Thus, the results provide evidence for the Hong Kong Toy Industry to improve the sourcing performance by implementing three SSC and fourteen KSF. The third stage is the "The relative importance of Strategic Sourcing categories and key success factors for the Hong Kong Toy Industry". The priority rankings of relative importance of the three SSC and fourteen KSF have been identified by employing the Analytic Hierarchy Process (AHP) approach. Twenty Hong Kong toy industrial experts in Strategic Sourcing have been interviewed and have assigned pairwise comparison judgments on the proposed AHP model. The results suggest Hong Kong toy companies to utilize limited resources on the most important factors in priorities for improving Strategic Sourcing to obtain immediate beneficial results. The last stage is the "Self-assessment System in Strategic Sourcing for the Hong Kong Toy Industry." A self-assessment system in Strategic Sourcing has been developed for the Hong Kong Toy Industry to self-assess their Strategic Sourcing. The Self-assessment System has been validated by six Hong Kong toy companies and the results provide information including scores, current performance status, and a strength and weakness profile. By interpreting the results, Hong Kong toy companies can develop an improvement plan by utilizing the self-assessment system as a tool and guideline to formulate appropriate strategies to improve themselves in Strategic Sourcing which, in turn, helps to improve the product quality, price and delivery in order to compete in the toy manufacturing sector.