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How Spin Master gets hottest toys to market

In 2005, children's entertainment firm Spin Master risked becoming a victim of its own success. Business had never been more brisk for the Toronto-based toy maker, whose products include Air Hogs and Bakugan Battle Brawlers. Founded in 1994, Spin Master supplied some of the world's biggest retailers. With 300 employees and annual sales nudging $300-million, the company was expanding rapidly. It had offices in Hong Kong, London and Paris, plus the southern Chinese city of Dongguan and Bentonville, Ark.

But as COO Iain Kennedy recalls, Spin Master had outgrown its IT infrastructure along the way. To realize its potential, it needed to get smarter about managing sales, inventory and other crucial data.

Confined largely to spreadsheets, this information on Spin Master's thousands of products was fractured and inconsistent. As a result, Mr. Kennedy says, the company couldn't make effective decisions. That was poison in the toy business, which he compares to the fashion industry. Its two seasons - spring/summer and fall - call for quick reaction as merchandise goes from hot to not.

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"We weren't able to keep pace with the market dynamics," Mr. Kennedy says. "Our growth was inhibited because of the lack of process discipline and accurate, clear information in real time."

So Spin Master launched a two-phase program that would transform the way it gathered and leveraged business intelligence. It started by searching for an enterprise resource planning (ERP) solution to support its global expansion. After looking at many providers, Spin Master chose SAP's R/3 software, which has since been upgraded to SAP Business Suite.

"They deal with the Wal-Marts and Toys R Us and so on - some of the most demanding customers globally," says Greg Swift, SAP Canada's vice-president, central region. "They wanted to show that they were a Tier 1 company and that they were serious about performance improvement."

Mr. Kennedy says phase one was about stabilizing company data into what he calls a single version of the truth. That way, a manager in Toronto and a sales rep in Paris would both be looking at the same numbers. Combined with SAP's supply-chain management tools, this move made Spin Master more responsive to retailers. "We knew precisely where the inventory was, and we could give them a specific date when we'd be available to ship it," Mr. Kennedy says.

Completing phase one took 18 months, and Spin Master let things settle for almost a year. Then in 2008, it embarked on phase two by using SAP Business Warehouse V7 to manage consumer-level information. The payoff: Every morning, Spin Master's team of sales analysts knows exactly what products sold the previous day at each of its retailers worldwide.

Mr. Kennedy says having such detailed intelligence allows Spin Master to predict buying patterns - and therefore replenish stock before a retailer has to ask. The company's in-stock performance - its ability to keep an item on store shelves - is up more than 25 per cent. On-time delivery has jumped from 60 per cent to 98 per cent. And from a low of 40 per cent, Spin Master has pushed its average forecast accuracy above 80 per cent.

Out in the field, meanwhile, a North American merchandising team visits retail stores. If a product needs restocking, members can place an order with a Motorola handheld computer running Quofore mobile software. "They have the power of what we have worldwide walking around with them in a handheld device," Mr. Kennedy says.

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All of this leaves retailers and consumers happy, he explains. "The customer satisfaction that plays through is that you're always in stock, and you have the hottest product available at the right time."

When it comes to consumer feedback, Spin Master is equally methodical. The company compiles customer suggestions and its own market research, crunches the data and uses it to inform product design. "That's part of the reason why some of our products have become so successful," Mr. Kennedy says.

Spin Master's business intelligence also helps drive marketing. For example, the firm examines the link between a toy's sell-through and TV commercials that were airing at the time. Making this connection lets Spin Master calculate a return on investment for advertising, Mr. Kennedy says. "There are so many elements of the marketing aspect of how we manage our business that are tied directly to the same source of information."

Since making these changes, Spin Master has become North America's third-largest toy manufacturer - more than doubling in size to 700 staff and some $750-million in sales. It sells its products in 56 countries and has opened additional offices in Mexico City and Los Angeles, where it runs a Web game studio.

Mr. Kennedy says Spin Master has automated so many business processes that it could double again without adding many more employees. He also thinks it did the right thing by taking action when it was relatively small. "It's given us the ability to maintain our agility and speed and flexibility. Even though we're a large company now, we act and behave as if we're still a small company."

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