Opinion: The Lego story: why we need a better welcome mat
BY jack healy
The recent "Lego Sends Work to Mexico" headline in a local paper awakened a host of personal memories as I spent several years of my life organizing and developing the Greenfield facilities that Lego is now closing, 26 years after its start.
Lego’s decision to open that plant was actually counter to what was happening within the industry. At that time, US-based toy manufacturers, already driven by the need for low costs because of a price sensitive market, were starting to source production through Taiwan and Hong Kong suppliers. But Lego’s marketing approach was different. It viewed its product line as construction sets that would be virtually the same from year to year, which had to be available to consumers on a year-round basis.Other US toy manufacturers were locked into a perpetual cycle of new product introductions. They calculated what their sales would be for each product in the early part of the year. If products sold out in the fourth quarter, when 80 percent of the toys were sold, they couldn’t respond quickly to market demand because of limitations of their offshore suppliers.
Anyone who tried to buy a Cabbage Patch or an Elmo doll in certain years knows what I am talking about. To avoid this and to maximize the fourth quarter market opportunity, Lego invested millions of dollars in plant and equipment to directly support its US market. It has established a very recognizable global brand. Last year, Lego’s construction set sales increased 16 percent, an indication that their market franchise is still very much intact.
The loss of Lego’s U.S.-based manufacturing is an example of manufacturers, whether foreign- or US-based, making investment decisions based on the belief that moving to a low cost country will provide them with financial and competitive advantages. Such foreign-based involvement in New England includes mobile manufacturing investments that are a significant part of our manufacturing community. And they will only remain in New England as long as it makes sense.
Whether or not a company is foreign-based, the region benefits from its investments. Figures show approximately 330,000 manufacturing and non-manufacturing jobs throughout New England attributable to direct foreign investment, something which you think would be encouraged.
This is now starting to change due to security concerns post- 9/11. This must give any investor pause. Who wants to make investments that could be viewed as being unfavorable because of some subsequent political event?
Any investments, mergers, or acquisitions that raise legitimate security concerns have to be addressed. However, such concerns can, hopefully, be addressed in a manner that does not remove our historical "Welcome Mat." The fast-growing, low-cost markets of China and India now offer investors viable investment opportunities. As of 2004, India displaced the United States as the second most attractive Foreign Direct Investment destination among manufacturing investors. Third place is the lowest ranking the US has ever had among investors in this sector. It is time that we should start thinking of putting out a better welcome mat by demonstrating that this is the most innovative manufacturing community in the world.
Low cost manufacturing is no longer present in New England –- but "Innovation" is. Manufacturers working with the Maine and Massachusetts MEP’s over the past three years have trained close to 2000 engineers in new processes and methods as they repositioned their companies and product lines and entered new markets. Companies in Massachusetts, who may be interested in learning more can do so by contacting Greg King at 508-831-7020 or e-mail gregoryk@massmep.org.
Jack Healy is director of the Manufacturing Advancement Center in Worcester. He can be reached at 508-831-7020 or via e-mail at jackh@massmep.org
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