At a time when the coronavirus outbreak is disrupting global supply lines, a maker of toys that’s committed to manufacturing in the U.S. finds itself with an advantage over those that rely on production in China.
From day one of its founding in 2016 by former U.S. Marine Tom Murdough, Simplay3 was a “Made in America” undertaking. In fact, the company represents his third startup — hence the name — to commit to domestic-only production. Murdough’s previous ventures were the popular Little Tikes, later bought by Rubbermaid, and Step2, sold to private equity.
The three companies have several other traits in common. All were founded in Ohio, make toys, and build products out of plastics, employing a manufacturing technique called rotational molding.
Brian McDonald joined Step2 straight out of college and worked there for 20 years. When Murdough decided to found a third company at the age of 78, he called back key members of the old team, including McDonald, who today is vice president of marketing and sales with Simplay3.
McDonald recalls 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 produced in China. Murdough, by contrast, “was completely dedicated to the American workforce.”
Part of that sentiment had a basis in practicality. Production in China requires long lead times, and the wages of Chinese factory workers have been on the rise in recent years, narrowing the gap between Asian and U.S. manufacturing costs. And now, with the coronavirus forcing the temporary shutdown of plants throughout Asia, the distances involved in offshore production have become even more problematic.
As demand increased, Murdough’s businesses added factories outside Ohio, but not beyond U.S. borders. The company was able to compete with cheaper foreign-made goods by concentrating 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 keep bringing value to the consumer instead of getting in a price war,” he says. What’s more, the products Simplay3 has chosen to make are mostly big and bulky — playhouses, wagons, outdoor toys and swing sets — so shipping across the ocean can get expensive. (The company also has a line of home and garden products.)
As of mid-March, Simplay3’s factories were still up and running, despite nationwide business closures mandated by authorities working to check the spread of the coronavirus. In fact, customer demand was on the rise. “More people are home now with their kids, and we’ve seen a large increase in orders for our play products,” McDonald says. “We’ve been adding staff and shifts, and will include weekend work to catch up with demand.”
The technique of rotational molding is an unusual one to be applied to toys. Incorporating thick, high-quality plastic, it’s mostly used for industrial products such as roadside barriers and large water jugs. It involves filling a mold with powdered resin, rotating the mold in an oven as the resin melts, transferring it to a cooling chamber, then peeling off the product that’s inside.
It’s a slow process, but the molds tend to be less expensive than those used for blow or injection processes, McDonald says. And rotational molding allows the manufacturer to take more risks — to try out new products before consumers, focus groups and retailers at toy fairs, prior to committing to long production runs.
The company’s path to success hasn’t been without obstacles. One of the first major retailers to place a large order was Toys “R” Us — at least until it went bankrupt and pulled the plug. Looking back, McDonald says that lost piece of business forced the company to adapt to market realities — “to stay lean and nimble.” In particular, it worked on expanding online sales and direct-to-consumer shipments, which today account for a majority of its business.
With China stalling as a source of product for other manufacturers, McDonald can’t help feeling somewhat vindicated by Simplay3’s staunch “Made in America” stance. In fact, it has sought to spin that philosophy as a market differentiator. “We’ve tried to live that way, not create product with bells, buzzers and lights,” McDonald says. “Children need to have play that they created.”
With economic recovery — which might yet be a long ways off — Simplay3 will face fresh challenges from rivals that benefit from cheap labor outside the U.S. (The company itself, notwithstanding its commitment to domestic sourcing, gets its resin from Canada.) Moreover, the still-growing coronavirus crisis is already having an impact on U.S. production as well.
McDonald doesn’t expect to see a groundswell of manufacturers embracing the Simplay3 business model, even as consumer-goods producers shift some sourcing out of China in years to come. “Because of the demand to have inventory close to the market, we’ll maybe see a 10% to 20% movement of product back to the U.S.,” McDonald says. As for Simplay3, it isn’t budging.
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