So …. Golden Bear Ltd gets the contract to produce the official mascot for the 2012 British Olymic Team, and decides labor costs – excuse me, labour costs – are way too high in England to make them there. So they make them in China and, as a result of 26p per hour Chinese labor is able to sell this thing for $20 (12.99 pounds).
Meanwhile, West Paw Design in Montana makes something called a Spring Chicken – 2" bigger and filled with recycled material (instead of God knows what Golden Bear's Chinese friends put in the Lion), pays something like $15 an hour and sells it for $14. West Paw is a profitable, rapidly growing, enterprise.
Maybe the difference is that British accountants are mostly a serious, professional bunch who would not be caught dead working without a suit and tie, and just maybe those ties are choking the flow of oxygen to their brains, while the last West Paw accountant I saw was wearing blue jeans and a sweat shirt to work.
Maybe the problem is that Golden Bear has to factor the cost of their "Hong Kong office which, co-ordinates production and oversees quality in the manufacture of product.", while West Paw "coordinates production and oversees quality" through kanbans and hiring the best people Bozeman has to offer.
Or maybe the problem is that I have never seen Golden Bear – or any other British company for that matter – at the Lean Accounting Summit while West Paw sent a small army last year. West Paw seems to have 'labour' in a bit better perspective.
In all seriousness, there is no excuse for a manufacturer in England, the USA or anywhere else, making critical decisions based on traditional accounting.
As per the lion toy, you have to include the licensing fee exacted by the Olympic committee -no small thing.
Another cost consideration is safety compliance and testing costs -the dog toy faces no such requirements. Were the chicken a child’s toy, its cost would be on the order of at least 25% more expensive and that’s assuming it would pass testing. I suspect it would not. Those eyes pose a choking hazard.
Lastly, materials and processing differs substantively between the two. The short pile plush of the lion is more costly as are the cost of materials and additional processing associated with the embroidery.
I agree lean is optimal as is production as close to the point of sale as is possible but other issues have bearing in this example. I realize the two samples seem similar in that they are relatively small sewn product toys (one presumably for a child, the other for a dog) but that’s where the similarities end. The whole licensing industry is a mess with draconian policies and exacting costs. It’s why college students have become activists with respect to collegiate licensing. Hopefully this awareness will spread.
Dave Velzy says
Just so we are making valid comparisons. What is the bid price from West Paw for the Lion? And what is the bid price from Golden Bear for the Chicken?
They don’t have the same level of detail or finish. Rants are one thing, but you have to satisfy the customer and if the two were side by side in London I’d go for the Golden Bear Lion.
If West Paw made a Lion that looked like their chicken, I’d go for the Golden Bear Lion.
Next up is meeting the volume. How many toys can South Paw deliver? When the games are over, the demand is gone. Heijunka that.
Competition is head to head, not dog toy vs olympic souvenir. It’s a tough world and this comparison is not worthy.
Bill Waddell says
Dave, not sure where you are going with the volumes or heijunka. Both are high enough volume that economy of scale is irrelevant and the defined life of the British toy is another reason to make it locally rather than long lead times away. No basis I can see for your comment on workmanship
Kathleen, the royalty is $2 – 10% – and the short ply material would add just over a dollar. The cost of child-safe eyes could not possibly account for the remaining $3 gap. The important point is the labor content between the two is virtually the same.
The cost of testing to meet child safety standards can’t be minimized. I know that at least 30% of children’s products manufacturers in the US have gone out of business due to inordinate cost and tracking burdens since CPSIA was enacted. The dog toy doesn’t meet those tests but the lion does.
Additional labor for the lion: embroidery is consequential; it’s also flow disrupting. Hand needle work for the sculpting of the hands and face etc. The mane is a laminate requiring a two step die cutting process plus it requires careful handling for alignment.
Squander Two says
As an aside, we should add to this the fact that a large part of how the British Government has sold the horrific cost of the Olympics to us cynical British taxpayers is that they will apparently help our economy by creating loads of British jobs. And then they allow the manufacturing of the mascots to be outsourced.