OM in the News: A Toy Maker Comes Home to the U.S.

As every American child knows, toys come from the North Pole or—more likely—China. But as The Wall Street Journal (March 11, 2013) writes, Philadelphia’s K’Nex Brands is trying to prove they can still be made in America. Over the past few years, K’Nex has brought most of the production of its plastic building toys back to its U.S. factory  from subcontractors in China. To make that possible, the company has redesigned some of the toys and even handed over to kids a bit of the assembly formerly performed by hand in China.

“In the long-term, it’s much better for us to manufacture here,” says the chairman of K’Nex. By moving production closer to U.S. retailers, K’Nex said it can react faster to the fickle shifts in toy demand and deliver hot-selling items to stores faster. It also has greater control over quality and materials, often a crucial safety issue for toys (see the Ethical Dilemma box in Chapter 5). And as wages and transport costs rise in China, the advantages of producing there for the U.S. markets are waning.

But K’Nex has found it impossible so far to produce 100% U.S.-made toys, the firm’s goal. The K’Nex experience shows both the attractions of “reshoring” production and the difficulties of making that happen in a country whose manufacturing infrastructure has atrophied. Lining up suppliers has been a complicated chore in the U.S., where toy-making skills have faded. China, by contrast, has a vast, efficient network of suppliers and skilled labor. “In China, you can go over with just a drawing and say, ‘I need a million of these,'” says K’nex CEO. That helps account for a huge U.S. deficit in the toy trade. In 2012, U.S. imports of toys, games and sporting goods, mostly from China, totaled $33.5 billion, or 3 times U.S. exports of such items.

Discussion questions:

1. Why is reshoring difficult?

2. What re-engineering changes were needed to make it more feasible to manufacture here?