Toy Maker Survives By Moving an Icon From Ohio to China
Until three years ago, Larry Killgallon, president of Ohio Art Co., used to stroll from his office at One Toy Street in Bryan, Ohio, to the plant next door to chat with workers assembling the company's most famous toy, the Etch A Sketch.
Those workers are gone now, the assembly line closed, and much of its equipment installed in Chinese factories where the toy icon, along with Ohio Art's Betty Spaghetty doll, water gun and other toys are made. All that's left at the Ohio company are about 190 employees who work in executive and office jobs, or making metal lithography products for the photography and other industries.
Ending all U.S.-based toy production was a grueling decision for Mr. Killgallon and his brother William, company chairman and CEO. Some of the very same employees who made the first Etch A Sketch toys in 1960 were still there when the layoffs were announced in 2000. "They were like family," Larry Killgallon says. "It was a necessary financial decision we saw coming for some time, and we did it gradually, product by product. But that doesn't mean it's emotionally easy."
Nor has it been easy operationally. The move overseas has cost Ohio Arts its flexibility in production and triggered new management challenges. Like many U.S. manufacturers, Ohio Art finds itself trying to run a business from thousands of miles away: bridging cultural divides, negotiating with suppliers and shippers, handling product development, and devising new ways to achieve just-in-time inventory management.
But because Ohio Art is a big business in a small town (pop. 8,000), Mr. Killgallon must face the ramifications of moving his U.S. manufacturing overseas far more directly than most executives in his position. He used to run into his employees in church and at the grocery store, and tell them when he needed to rush out an order. Now, the logistics of getting out a Christmas order have become daunting.
"When there was a Christmas rush of orders, Larry would be down at the plant alongside workers, counting toys as they came off the assembly line," says Art Clark, Ohio Art's vice president of manufacturing. "Now we have to plan for Christmas months before we have all our orders."
Harder still is the fact that unlike most toys, which have a two-year cycle, the Etch A Sketch is still popular after 43 years. It has been the pride of both the company and the community. In all, about 100 employees, many retirement age, lost their jobs when Etch A Sketch moved overseas. Some transferred to the shipping department or to the company's two manufacturing plants.
Typically, the rationale for outsourcing is avoiding the high cost of U.S. labor. In the case of Ohio Art, unionized workers were replaced by Chinese factory workers, who make an average of $75 a month. Still, Ohio Art's biggest savings came from eliminating overhead costs for plant maintenance, electricity and back-office tasks such as payroll, Larry Killgallon says. Expenses for fiscal 2003, ended Jan. 31, were cut by some $941,000 and offset the decline in sales during the downturn. "Without the savings we got from outsourcing, we would have been in terrible shape in recent years," Mr. Killgallon says.
The manufacturing executives now focus on establishing close relationships with a variety of suppliers. "Knowing which supplier to go to for what and having trusting relationships is key," says Mr. Clark, who makes quarterly visits to China.
Ohio Art currently uses a supplier that specializes in high volumes to make the Betty Spaghetty dolls for fast-food promotions; another makes dolls sold to retailers; yet another assembles its water gun. And the company is working with a new supplier to develop an electronics toy.
The Etch A Sketch line is made by Kin Ka Co., which Ohio Art began doing business with more than a decade ago when it first outsourced pocket-size Etch A Sketch toys. The U.S. company works closely with the supplier to ensure high standards. When it shut its last Etch A Sketch assembly line, it shipped Kin Ka some of its best equipment and continues to send it raw materials, such as aluminum powder, which are difficult to get in China. Kin Ka was originally based in Hong Kong, but also moved to mainland China about eight years ago to cut its costs.
The hardest challenge remains managing production and shipment schedules between China and the U.S. in an industry that is highly seasonal. Ohio Art's biggest customers, which include Toys "R" Us and Wal-Mart, order and want delivery of products close to when they sell them.
Manufacturing time takes about six weeks, and Ohio Art must add an additional 3? weeks for shipping time from China. "All the toys we need for Christmas have to be booked right now; and while we don't want to be caught short, we don't want inventory that can't be sold," Mr. Clark says.
Last week, Ohio Art executives were nervously figuring how many more Etch A Sketch products to order. A new movie called "Elf" that features an Etch A Sketch is opening next month. The company hopes it can boost sales the way "Toy Story" did after it gave Etch A Sketch a role. Mr. Killgallon figures that if sales surge, Ohio Art could place last-minute orders with Kin Ka and air ship the finished products. But the cost of air freight would wipe out the savings of manufacturing overseas.
美国名牌玩具中国制造
直到3年前，Ohio Art Co.的总裁莱瑞?科尔盖伦(Larry Killgallon)还常常从他位于俄亥俄州布莱恩One Toy街的办公室漫步至旁边的工厂，与组装该公司最著名的玩具Etch A Sketch的工人攀谈。
现在工厂已经人去楼空，装配线也已关闭，许多设备被安装在了中国的工厂中，在那里生产Etch A Sketch、Betty Spaghetty娃娃、水枪及该公司其他种类的玩具。Ohio Art在俄亥俄只留下了大约190名员工，他们从事管理工作，或者为摄影和其他行业制造一些印刷产品。
对科尔盖伦及他的兄弟威廉(William)－－该公司董事长兼首席执行长--来说，关闭美国所有生产线是一个残酷的决定。该公司2000年宣布裁员，而1960年为其生产了第一个Etch A Sketch玩具的员工当时仍在工厂。科尔盖伦说，“他们就像是一个家庭。从财务方面看，这是一个必须要作的决定，我们逐步完成这个决定，产品线每次只转移一条，但是在感情上终非易事。”
在经营上也并不容易。将工厂迁往海外令该公司失去了生产的灵活性，并在管理上带来的新挑战。与许多美国制造商一样，Ohio Art发现自己开始在数千英里之外经营业务：弥合文化差异、与供应商和运货商谈判、产品开发、设计出及时库存管理的新办法。
但由于Ohio Art是坐落于一个小镇（共8,000人口）的大公司，与大多数将制造业务迁往海外的公司总裁相比较，科尔盖伦不得不更直接地面对此举动产生的影响。过去，当他接到一笔紧急订单时，他常常跑到教堂和食品店里告诉他的员工。现在圣诞节订单的物流工作变得极其复杂。
Ohio Art副总裁阿特?克拉克(Art Clark)称，“当圣诞节订单涌入时，莱瑞通常会来到工厂的工人中间，清点从生产线上下来的玩具。现在，我们必须在获得所有圣诞节订单前数月将开始做准备工作。”
与大多数玩具通常具有两年生命周期不同，Etch A Sketch在诞生43年后仍广受欢迎。这款玩具是公司和当地社区的骄傲。当Etch A Sketch生产转移到海外后，总共有大约100名工人失去了工作，其中有许多人已经达到了退休年龄。工人一部分被转移到运输部门，或者被转移到该公司的两个制造工厂。
一般来说，外包可以省去美国劳动力的高成本。对Ohio Art而言，月薪平均为75美元中国工人取代了工会组织的美国工人。但是科尔盖伦说，Ohio Art最大的节约来自工厂维护、电力、和诸如发放工资等后勤工作的高昂成本。截至1月31日2003财年，该公司支出降低了大约941,000美元，抵消了销售额的下滑。科尔盖伦称，“如果没有外包所带来的成本节约，公司最近几年将处于很糟糕的境地。”
这家制造商的高层人士现在专注于和众多供应商建立紧密的联系。克拉克说，“知道哪个供应商提供哪种材料以及拥有可信任的关系至关重要。”克拉克每个季度都前往中国一次。
目前，Ohio Art的一家供应商就专门大量生产供快餐店促销用的Betty Spaghetty娃娃；另外一家供应商则专为零售商制造该玩具；还有一家供应商装配水枪玩具。该公司目前正与一个新的供应商合作，开发一种电动玩具。
Etch A Sketch当前由Kin Ka Co.制造，Ohio Art在10多年以前首次外包Etch A Sketch玩具时就与该公司合作。Ohio Art与供应商密切合作以确保产品的高质量。当它关闭美国Etch A Sketch最后一条组装线后，它向Kin Ka运送了一些最好的设备，并继续向其供应原材料，比如在中国很难得到的铝粉。Kin Ka原先位于香港，但是在8年前为节约成本也搬到了中国大陆。
在这样一个受季节性因素高度影响的公司，最大的挑战是控制生产和安排中国与美国之间的货运。玩具反斗城(Toys 'R' Us)和沃尔玛(Wal-Mart)都是Ohio Art的大客户，他们下订单和要求交付的时间通常距离销售时间很近。
生产通常耗费大约6周的时间，Ohio Art必须留出额外3周半的时间将玩具从中国运送到美国。克拉克说，“所有为圣诞节准备的玩具都必须现在下订单；我们既不希望出现缺货，也不希望库存过剩。
上周，Ohio Art管理人士紧张的计算还需要生产多少Etch A Sketch。一部名为《Elf》的新电影将于下月上映，Etch A Sketch在这部电影中有一定戏份。公司希望这部电影能够像《玩具总动员》那样提振公司的销售，Etch A Sketch在那部电影中也担当了一角。科尔盖伦认为，如果销售大增，Ohio Art将向Kin Ka紧急下单并将产品空运回美国。但是空运成本将抵消外包节约的成本。
