Crayola's Automation Strategy Pays Off With 30% to 40% Growth Since 2019

Crayola, a prominent manufacturer of children's art supplies, made a strategic decision in the early 2000s to invest in automation rather than offshoring its production. This move, led by then-operations executive Pete Ruggiero, has proven to be a significant advantage in today's tariff-driven economy.

In the early 2000s, many U.S. companies were shifting their operations overseas, particularly to China, as it joined the World Trade Organization and enhanced its manufacturing capabilities. This trend was epitomized by General Electric CEO Jack Welch, who advocated for moving operations to countries with favorable economic conditions. However, Crayola chose a different path, focusing on improving efficiency and speed through automation.

Ruggiero, who is now the CEO of Crayola, foresaw the potential challenges of offshoring and advocated for maintaining production close to home. He believed that this strategy would provide the company with greater responsiveness to market demands. This foresight has positioned Crayola to navigate the fluctuating tariffs implemented by the Trump administration more effectively.

Today, Crayola manufactures 70% of its globally sold products in the Lehigh Valley, Pennsylvania. The company has been based in this region since 1902 and currently employs 500 manufacturing workers there. The decision to stay in the U.S. was not just about maintaining local employment but also about enhancing production efficiency.

In 2007, Crayola embarked on a significant self-improvement initiative, investing in high-speed production processes and implementing the Lean Six Sigma method. This approach encouraged employees to identify and address inefficiencies, leading to substantial cost savings and increased production capacity. The company's investment in automation has resulted in highly efficient processes, allowing it to produce 3 billion crayons annually through high-speed rotary molds.

Despite its success, Crayola is not entirely immune to supply-chain issues. The company sources colored pencils from a renewable pine forest in Brazil, a resource not available in the U.S. This dependency adds to the company's costs but does not significantly impact its overall operations.

Crayola's strategic decision to invest in automation has allowed it to focus on expanding its revenue streams. The company is exploring new opportunities in entertainment programming and expanding its Crayola Experience theme parks across the U.S. and globally. This diversification has contributed to a significant increase in the scale of its business, with growth rates of 30% to 40% since 2019.