From the vantage point of a little better than a half century of plodding through it, I want to let the younger readers know that you are not experiencing a ‘circle of life’ so much as you are caught up in a ‘spiral of life’, hurtling downward at an ever increasing rate of speed toward a crash landing in a plot at Forest Lawn and whatever mysteries lie beyond. There is a certain circular quality to it, or any spiral, in that you find yourself suddenly thrust back into situations you thought you had left behind long ago. In just such a startling return to the past, I have found myself the grandfather of the guy pictured to the right, and caught up in the market for toys again. Toy shopping at Christmas is a rough and tumble exercise, clearly a younger person’s game, but the 25th is looming and I have little choice but to give it my best effort.
The picture is not so much to show off the kid (although all grandparents do show them off at every opportunity for the sole purpose of offering proof that some good has come of our time on earth), as it is to give you a look at the hat. I have no idea who Bob The Builder is, or why anyone would want to wear a hardhat with his name on it, but I have loitered around enough factories over the last 30 years to have a pretty good idea how the hat was made. Molding plastic is a straightforward enough proposition, and the keys to the whole thing are in the big hopper full of resins, nylon or whatever chemical compound is being molded, and the design of the tool doing the molding. Get those right and you’ve got yourself a pretty good hat, with the cost and value in about the right proportions.
Smart manufacturers know that the other steps – trimming whatever webbing was left by the molding process, slapping a "Bob the Builder" sticker on, and putting it in a package are mostly opportunities to screw up the good work done in the molding. Mechanizing, or even automating that work is the best way to avoid having such screw ups happen. Fools think that those steps are nothing more than costs, so they scour the globe to find someone who will do that work by hand cheaper than a machine could do it, and much cheaper than an American can do it. Because such fools comprise the management of the retailers and the toy companies, this hat, and just about everything else you can find in just about any toy department is made in China these days. And of course, all of that labor does screw things up quite often, hence the need for liberal store return policies anywhere toys and other molded plastic things from China are sold.
I am amazed at the universal consensus that simple toys must be made in low cost countries. It does not take much thinking to figure out that you could put up a barn near a Walmart distribution center, with a couple of basic machines and crank out Bob the Builder hard hats by the thousands a whole lot cheaper than you can by making them in China and hauling them halfway around the globe – especially since the machines, tools and materials comprise the bulk of the cost and labor has next to nothing to do with the equation.
It is not the garden variety fool that makes these decisions, however, and a couple of articles I came across demonstrate the point. First is an article from Business Week talking about rampant Chinese labor law infractions, in general, and those in toy factories peddling to Walmart, in particular. The folks in Arkansas not only miss the entire toy value proposition completely, they can’t even settle for the 64 cents an hour dictated by Chinese law.
The next article comes from a bunch that deserves credit for truth in advertising – the Motley Fool investment advisers. At least they acknowledge their fundamentally inane nature. In mid-November they sung the praises of Walmart, predicting a grand Christmas season on the strength of the low prices with which Walmart was going to bash the competition. (Resulting from Walmart Chinese manufacturing scheme, no doubt) The telltale sign that these guys are as out of their minds as their name suggests lies in the analytical phrase, "Wal-Mart’s knack for turning over its inventory like a tornado funnel cloud." Walmart has a cost of sales of about $60 billion a year. They carry about $30 billion worth of inventory. By my arithmetic,the Walmart tornado funnel cloud spins inventory at about 2X a year. You can’t slow your DVD player down enough to make the tornado in The Wizard of Oz spin that slowly.
Finally, there is the question of how it all turned out. For Walmart, the answer is, not too good. Their November sales were the worst they have had in a decade, while all of their competitors did quite well. Same store sales at Target, Kohls and even Federated Department Stores were way up, while Walmart was down. It turns out that driving American factories into the ground, working Chinese folks to death and hammering price while remaining oblivious to value – and ignorant of common sense – is not quite the right business model.
In the end, I feel a bit like I am lost in the old song – "Clowns to the left of me, jokers to the right" – as I wander the toy aisles amid one of the dumbest supply chain ever conceived by business thinkers. From Walmart execs to Chinese laborers who spend 100 hours a week making this stuff, everyone in it is nuts. And the biggest fool of all is most certainly me, as I pour a staggering amount of money into fueling this ludicrous supply chain. I have no choice. As I roar through this second crack at the toy aisle I am keenly aware of the fact that I may never pass this way again, and the chance to spoil a grandchild has to be embraced while it is here.