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Jeffrey Lam is in the business of making people happy: he makes toys, and toys make him happy, he says.

Most of us can probably recollect many a happy hour spent playing with toys his company has made under the world's leading toy brands, from Corgi vehicles, to GI Joe, to teddy bears.

Founded by his father Mr L. T. Lam some 50 years ago, Forward Winsome Industries Limited originally manufactured basic household items such as soap boxes and plastic toys before it diversified into specialised manufacturing processes for plastics, die-cast, electronics, wood and sewing, among others.

Jeffrey Lam, 50, who is managing director of the company, said Forward Winsome helped pioneer toy and plastic products manufacturing in Hong Kong. This long history has enabled it to build up solid relations with many well-known toy companies.

"In the old days, we were among the first to produce plastic dolls, which was about the same time Barbie was born," he said. "One of the dolls we produced at that time resembled a mannequin made in Germany, which was displayed in cigar shops and gift stores windows.

Mr Lam believes traditional toys, like dolls, will continue to be popular with children, despite the barrage of gadgets now flooding the market.

"Good as some of the latest toys can be, I think toys that stimulate children's imagination and create a land of make belief only like traditional toys can do will still be around for many, many more years to come," he said.

Nevertheless, more technology is finding its way into toy cars, dolls and activity centres, and toys are being designed to include more value-added functions. Despite this, toys are cheaper today than they were 20 years ago, he said.

Deng Xiaoping's economic reforms in the late 1970s played an important role in helping manufacturers reduce their costs and thereby boost Hong Kong's competitiveness, he said.

"If we turn the clock back to the '60s and '70s, Hong Kong had a limited supply of labour and property, which drove real estate prices up. But with the opening of China, people started moving their factories there, so suddenly high rental costs and labour problems were no longer major concerns," he said.

Mr Lam rejects claims that this migration has hollowed out Hong Kong's toy industry. Manufacturing facilities are moving to the Mainland, but the core functions such as R&D and finance remain firmly rooted in Hong Kong, he said.

"Most of our manufacturing facilities have been moved to China - we have some small-scale operations here - but even so I wouldn't say the industry here is dis-appearing. Many of the 'Made in China' toys that we see are actually made by Hong Kong companies in China," he said.

Changing times

Hong Kong companies have taken the lead in manufacturing in the Mainland. This, despite the economic crisis which forced many countries to devalue their currencies, has helped their businesses remain competitive.

Changing business trends and the slowing of the economy in the United States, however, are expected to bite into exports.

"I think the U.S. economy is undergoing a correction period, but definitely I don't see it as a recession. This is forcing buyers to take a wait and see approach, which is reflected in the drop in exports in the first and second quarter," he said.

"But I think the situation is not too bad. Buyers just want to be sure that they have the right product at the right price and that they do not over order, so they are waiting until the last minute to order."

He said exports in the third quarter should start to pick up as buyers start shipping orders in time for Christmas. Waiting to order until the last minute, however, will stretch manufacturers' abilities to the limit as they try to meet orders.

Supply chain management and just-in-time delivery are among the business trends that are making buyers feel they can hold out until the last minute before ordering, but for manufacturers, it is not so simple.

Of course a retailer could say, "I need to start selling this product in my stores next week, if you cannot deliver then I will go to another company" because it is a buyer's market. But can a manufacturer do that? he asks.

"Some parts need a long lead time. For example ICs take so many days to make and deliver, not to mention getting an import licence to bring them into China. So now the burden is on the manufacturer. If we want to be a part of this supply chain manage-ment, we need to stock up on raw materials. With this pattern, I see more manufacturers being put under greater pressure and their cash-flow will also be a lot tighter," he said.

"So just in time delivery may be cheaper for the number one buyer, but for the manufacturer it definitely is not."

Too many manufacturers competing for a piece of the same pie has sparked this buyer's market, which will ultimately separate the good companies from the bad ones, he said.

The challenge is not just about quoting the lowest price, it is also about quality and providing added value to customers, including R&D, design, improved manufacturing processes, etc.

"We really have to upgrade ourselves every day. Those who do not catch up with the technology and market trends will not survive," Mr Lam said.
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