K- Nex – Insourcing

http://online.wsj.com/article/SB10001424127887323293704578334062190251402.html

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. And as wages and transport costs rise in China, the advantages of producing there for the U.S. market 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 Michael Araten, chief executive of K’nex. 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 about three times U.S. exports of such items.

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When the U.S. economy slumped in 2008, demand for products made by Rodon fell so sharply that the company couldn’t keep all its workers busy. To avoid major layoffs, the Glickman family decided to begin moving production of the K’Nex toys back to Hatfield.

The Glickmans were confident that Rodon, whose slogan is "Cheaper Than China," could use its highly automated processes to mold plastic parts at a competitive cost. The challenge was that making K’Nex toys also involves manual labor, which is still much more costly in the U.S.

Toys had to be reimagined in some cases. K’Nex roller-coaster tracks were held together with metal pins, inserted by hand in China. The company redesigned the tracks so they could snap together. A tiny hubcap for K’Nex car wheels used to be attached by workers in a Chinese factory. Now it is included as a separate part in K’Nex kits, and children who get the toy have one more piece to snap into place.

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