Novelty manufacturer bringing production back to the Shoals

LEXINGTON - "Happy Halloween," croaks the witch's broom as it skates across the floor.

An unseen voice cackles and laughs over spooky piano music.

The novelty toy is called the "Broomba" - a play on the Roomba robot that vacuums as it bumps around the floor - and includes a mop of recycled paper, a break-apart plastic broom on wheels.

"These were really popular this year," said Francisco Guerra, owner of Snow Masters, a special effects shop, that had the broom manufactured in China. It sold 30,000 to U.S. customers. Clutching the only one left - a prototype - Gurerra said the Chinese factory he used in Qingdao, Shandong, about 400 miles from Bejing, has closed.

Guerra pulled out of the Chinese sector and plans to put his entire manufacturing operation in Lexington, a move he estimated could add hundreds of jobs in the future.

The "Made in China" label came under fire in the past few years after discoveries of contamination in some products manufactured in China - from diethylene glycol in toothpaste to melamine in pet food to lead in children's toys.

In addition, the logistics of making orders a year in advance - especially tricky in an economy reeling from the recession - also has persuaded Guerra to move in shore.

"Shortening the supply chain is a relatively new concept in the last few years," said George VanHorn, senior analyst for IBISWorld, a Los Angeles-based industry research firm. "It's really representative of companies that want more control and timing of the production process."

Snow Masters started 20 years ago and though the name suggests a single product, Guerra has created a cornucopia of novelty special effects including floating foam logos or Flogos, flavored soap bubbles - under development as Tasty Bubbles - and scent distributors - under Eco-Scent.

Because of the number of different products, Guerra subscribes to "manufacturing on demand," the latest industry buzzword. Instead of filled warehouses, products are made to order in smaller batches that ship out almost immediately. On demand production can be difficult when the manufacturing facility is 13 time zones ahead, as was the case with Snow Masters.

"For someone that might have a product that is constantly changing or constantly updating or constantly being reinvented, the motivation to have production closer makes a lot of sense," VanHorn said.

Toy and novelty manufacturing overall is still crossing over to China.

From 2005 to 2009, toy imports to the U.S. increased from $17.9 billion to $22.9 billion, according to IBISWorld research.

In comparison, during the same time period, Chinese exports rose from $7 billion to $8.8 billion.

For the most part, manufacturers that are bringing back their work force stateside come from niche companies that manufacture high technology or high value products.

In June, Tesla Motors, manufacturer of high-performance electric cars, announced it would build a powertrain assembly plant in northern California, according to Reuters.

In 2008, Tesla Motors scrapped plans to build its $20,000-plus batteries in Thailand and will instead assemble the batteries in the U.S. because of currency values, according to the Wall Street Journal.

VanHorn said three factors are bringing some of the highly specialized manufacturing back stateside.

First, transportation costs have dramatically increased because of fuel costs, which are expected to remain high or increase. Second, the timeliness involved in having a product sourced overseas because of the niche markets or the technological nature of the products. Third, small-batch manufacturing overseas can be a management challenge for businesses who want to handle their operations in-house.

Guerra paid Chinese workers $1 an hour and said that one trained American was the equivalent to four of the Chinese workers. After shipping costs, any difference between U.S. and Chinese production costs wasn't that far off, he said.

On a recent Monday, one worker, Bernard Konig, soldered diodes onto a monitoring device for snow machines. One of the last components of the in-house production was a plastic injection mold machine, which may come on board in 2010. The manufacturing was slated to be in-house by this year, but Guerra said the slowed economy held off the switch.

Guerra, in a nondescript research and development facility across from a soybean field, said most of his buyers asked whether he had domestic-made products.

"They want something made in good ole America," Guerra said.

Trevor Stokes can be reached at 740-5728 or trevor.stokes@TimesDaily.com.