At a time when the coronavirus outbreak is disrupting global supply chains, a toy maker committed to manufacturing in the United States finds itself with an advantage over those who depend on production in China.
From day one of its founding in 2016 by former US Navy Tom Murdough, Simplay3 was a “Made in America” company. In fact, the company represents its third startup – hence its name – to engage in uniquely domestic production. Murdough’s previous businesses were the popular Little Tikes, later acquired by Rubbermaid, and Step2, which were sold to private capital.
The three companies have several other traits in common. All of them were founded in Ohio, make toys and make plastic products, using a manufacturing technique called rotational molding.
Brian McDonald joined Step2 straight out of college and worked there for 20 years. When Murdough decided to start a third company at the age of 78, he recalled key members of the old team, including McDonald, who is now Vice President of Marketing and Sales at Simplay3.
McDonald remembers when it seemed like every other manufacturer was rushing to China in search of cheaper labor and production costs. Today, at least 80% of the world’s toys are made in China. Murdough, on the other hand, “was entirely dedicated to the American workforce.”
Part of that feeling had a practical basis. Production in China takes long lead times, and the wages of Chinese factory workers have increased in recent years, narrowing the gap between Asian and American manufacturing costs. And now, with the coronavirus forcing factories to temporarily shut down across Asia, the distances involved in offshore production have become even more of a problem.
As demand increased, Murdough’s companies added factories outside Ohio, but not beyond the U.S. borders. The company was able to compete with cheaper overseas-made products by focusing on “bringing something new and different” to the market, McDonald says.
“When something starts to become more of a commodity, we try to innovate – to continue to deliver value to the consumer instead of going into a price war,” he says. Plus, the products Simplay3 chose to make are mostly bulky and bulky – playhouses, carts, outdoor toys, and swings – so shipping across the ocean can get expensive. (The company also offers a line of home and garden products.)
As of mid-March, Simplay3’s factories were still operational, despite nationwide business closures mandated by authorities working to control the spread of the coronavirus. In fact, customer demand was on the rise. “More and more people are now at home with their children and we have seen a significant increase in orders for our play products,” says McDonald. “We have added staff and shifts, and we will include work on weekends to catch up with demand. “
The rotational molding technique is an unusual technique to apply to toys. Incorporating thick and high quality plastic, it is mainly used for industrial products such as road barriers and large water jugs. This involves filling a mold with powdered resin, rotating the mold in an oven while the resin melts, transferring it to a cooling chamber, and then peeling off the product inside. .
It’s a slow process, but the molds tend to be cheaper than those used for blowing or injection processes, McDonald explains. And rotational molding allows the manufacturer to take more risks – to try new products before consumers, focus groups and retailers at toy shows, before committing to long production runs.
The road to business success has not been without obstacles. One of the first large retailers to place a large order was Toys “R” Us – at least until it went bankrupt and cut the plug. Looking back, McDonald says this loss of business has forced the company to adjust to market realities – “to stay lean and nimble.” She has notably worked on the development of online sales and direct-to-consumer shipments, which today represent the majority of her activity.
As China stagnates as a source of products for other manufacturers, McDonald’s can’t help but feel somewhat justified by Simplay3’s strong “Made in America” stance. In fact, he sought to make this philosophy a market differentiator. “We tried to live that way, not to create products with bells and buzzers and lights,” says McDonald. “Children need to have the game they have created.”
With the economic recovery – which may still be a long way off – Simplay3 will face new challenges from rivals who benefit from cheap labor outside the United States (the company itself, despite its commitment to domestic sourcing, gets its resin from Canada.) Additionally, the ever-growing coronavirus crisis is already having an impact on US production.
McDonald’s doesn’t expect to see a wave of manufacturers adopting the Simplay3 business model, even as consumer goods producers move some supplies out of China in the coming years. “Due to the demand to have inventory close to the market, we may see a 10-20% return of the product to the United States,” says McDonald. As for Simplay3, it does not move.