00:29 - Well, welcome to Crayola.

00:30 - My name is Pete Rose.

00:32 - I am president and chief executive officer of this company.

00:35 - We have 2000 employees worldwide here in the Lehigh Valley.

00:39 - We have about 1200 of those employees and 500

00:43 - work in manufacturing and logistics.

00:46 - We are the world's leading producer in the creative expression category.

00:51 - And our products, of course, are memorable

00:54 - to to children and adults alike.

00:57 - It's an interesting point here.

00:59 - When I tell people I work at Crayola, the immediate point is

01:02 - you get a smile and then there's always a story.

01:05 - And invariably the story relates to the 64 box with the built in sharpener.

01:10 - And we will see that in our production tour today as we walk through production.

01:15 - You won't be able to smell this on camera, but we will be smelling

01:19 - the iconic scent of the Crayola crayon and we'll actually see.

01:24 - Crayola crayon manufacturing.

01:26 - I will give the history of crayon manufacturing

01:29 - and how it is that we produce them here in forks Township.

01:34 - Our fourth Township facility is a 550,000 square foot facility.

01:38 - We manufacture 3 billion Crayola crayons here every year.

01:42 - Today, we're making 12.5 million Crayola crayons in our plant.

01:47 - We also manufacture 750 million broad line

01:51 - and 200 million fine line markers in this facility.

01:55 - In our business today, we manufacture two thirds

01:59 - of what we sell globally here in the Lehigh Valley of Pennsylvania.

02:02 - And that is three manufacturing plants, two on this campus in Forks

02:06 - Township and one in Bethlehem Township, where we make paints,

02:11 - modeling compounds, silly putty, watercolor trees, and kits.

02:16 - Finally, a point I'll make is that on this,

02:19 - our business is 100% powered by renewable energy.

02:23 - The linchpin of that is on this campus is a

02:26 - is a three megawatt, 33,000 panel solar farm

02:29 - that we installed in 2009 and 2010, and we're very proud of that fact.

02:34 - By the way, our colored pencils come from from Brazil.

02:38 - And there we we purchased 1 billion colored pencils a year, all of our colored

02:43 - pencils come from a renewable tropical pine plantation.

02:46 - And we believe we generate we manufacture

02:49 - the finest quality children's art products on the planet.

02:52 - And I'm very excited to give you a tour into our crayon manufacturing facility.

02:57 - Let's go.

03:08 - We manufacture our

03:09 - 3 billion crayons a year here in in eastern Pennsylvania, Forks Township

03:15 - in this 550,000 square foot plant, we also make 750 million markers,

03:20 - broad line markers, and another 200 million, fine line markers.

03:25 - So that's, coloring markers and drawing markers.

03:28 - Today's tour will really be about the crayon manufacturing 3 billion crayons

03:33 - a year is by a factor of 30,

03:37 - the largest crayon manufacturing plant on the planet.

03:41 - And why are we here in eastern Pennsylvania?

03:43 - There's some history about the company.

03:46 - The company was originally, founded as Binney

03:50 - and Smith, Inc., but before that, it was the Peekskill Chemical Company.

03:54 - A gentleman named Joseph Binney was in charge of the Light Brigade.

03:58 - And after that was over, he said, I'm getting out of here

04:00 - and I'm moving to the United States.

04:02 - And he's moved and settled in Peekskill, New York,

04:05 - and he founded the Peekskill Chemical Works.

04:08 - His main products were carbon black and red iron oxide paint.

04:13 - Red iron oxide is used in barn paint, so most of the barns

04:18 - in the Mid-Atlantic states in the Midwest that were painted

04:21 - came from products from the Peekskill Chemical Company.

04:25 - Carbon black.

04:26 - The major product that was used there was was black tires.

04:30 - So so the pigment was used in tires.

04:33 - As the automotive industry grew to strengthen and build

04:36 - the longevity of tires.

04:38 - So as Joseph Benny began to grow

04:41 - his business, his son Edwin and his nephew

04:45 - Harold Smith took over the business and they renamed the business.

04:49 - In 1885, Binney and Smith, Inc.,

04:53 - See Harold Smith was was Joseph's Benny's nephew.

04:57 - He was a salesman.

04:58 - He traveled the world selling our products.

05:01 - And Edwin Benny, well, he was the innovator.

05:03 - He was the operator.

05:05 - He was the one that led the people.

05:07 - He was the purveyor of the culture of the company.

05:10 - And they were a wonderful combination as cousins.

05:13 - And they made a lot of money through that period of time and decided

05:19 - at the turn of the of the century that they wanted to give back to society.

05:24 - And the way that they decided to give back to society was to get into

05:27 - the children's arts and crafts, business.

05:32 - And originally

05:34 - their products were

05:35 - chalk and slate pencils and slate chalkboards.

05:39 - So why are we in eastern Pennsylvania?

05:42 - Well, really, it's three factors.

05:43 - The first factor is in the town of Penn.

05:47 - Ten miles up the road is supply of slate.

05:50 - So that was used for the slate chalk or the slate pencils on the slate

05:54 - chalk boards.

05:55 - And just to the west is the town of Nazareth,

05:58 - where all the limestone came for the chalk.

06:01 - And the third point was they found a plant location

06:04 - on the Bush Creek that they could power the manufacturing process with hydropower.

06:10 - So those are the three reasons why we originally located here.

06:13 - So those first products, chalk, slate pencils

06:17 - and chalk boards were manufactured until 1902

06:22 - when the first consumer understanding for this company

06:26 - was that chalk as children in classrooms are raised from their

06:30 - from their slate chalkboards created dust.

06:34 - Edwin Binney and his first innovation combine

06:37 - small dust particles from the slate

06:40 - with the calcium carbonate.

06:43 - The chalk that it was a race was then heavy enough

06:46 - that the children were breathing chalk dust,

06:49 - and that was a wonderful invention that he had.

06:52 - And as a result, he won an award at the 1902 Saint Louis World's Fair.

06:57 - Well, his wife then said it would be wonderful.

07:00 - You could add some color to this product range,

07:04 - and instead of just doing colored chalk, he took a product called Stay on All,

07:09 - which was used in manufacturing of steel in Bethlehem to mark the steel beams.

07:15 - And he took the impurities out.

07:17 - And he created in 1903 the first box of eight count crayons.

07:22 - And because he did that, his wife Alice,

07:25 - who was a British schoolteacher, had immigrated and married him.

07:29 - Here. She was fluent in French.

07:31 - She named the product Crayola, meaning oily chalk.

07:37 - So we progressed through manufacturing and in 1968 we built this

07:42 - plant here in Forks Township, moving off of the Bush Kill Creek.

07:46 - The great advantage

07:47 - that we have as a business right now with all of this scale, I mean, 750

07:52 - million broad line markers, 200 million fine line markers, 3 billion crayons.

07:57 - The scale of that operation is substantial.

07:59 - So let's start with the raw materials that go into our process.

08:03 - We're not talking about markers today, but behind me is a very high silo.

08:09 - And that contains

08:11 - polypropylene pellets that go into our marker manufacture.

08:15 - And we buy 25 million pounds of polypropylene a year.

08:20 - To give you a sense of the scale of this thing

08:22 - and a very integrated supply base for that raw material.

08:26 - We have what gas coming from western Pennsylvania, west Virginia

08:29 - into Marcus Hook coming here by truck, 2 to 3 deliveries a week.

08:34 - We're able to sustain our production.

08:36 - Here are ten blend tanks behind me.

08:38 - So it comes in by by by rail tanker car.

08:42 - And we get deliveries 2 to 3 times a week into here.

08:45 - We buy 25 million pounds

08:48 - of our our paraffin cran blend a year.

08:53 - The source of that some comes from the Gulf Coast.

08:57 - Most of it comes from Western Pennsylvania.

08:59 - So we have we have de-risked ourselves from from impact

09:03 - from from hurricanes or other natural disasters.

09:07 - The product comes in in a solid form.

09:09 - It's melted, it's pumped into the tanks, and it's stored there

09:12 - at the optimal temperature, which is a trade secret for us.

09:16 - And inside, as we progress inside here for manufacturing,

09:20 - you'll see that a button is pushed in our manufacturing process

09:23 - that feeds a blend kettle and manufacturing.

09:27 - As I look at manufacturing of cranes around the world,

09:30 - generally speaking, the paraffin wax is in a pellet form.

09:34 - It's dropped into a kettle, and we wait for it to our advantage,

09:38 - because we have this kind of scale, is we were immediately able

09:42 - to jump into the manufacturing and blending process

09:45 - and the speed to be able to service our customers in a better way.

09:51 - Because

09:53 - we're just inside manufacturing.

09:55 - We just covered the the paraffin blend, our proprietary formula outside.

10:00 - So that's in those blend tanks.

10:01 - We're about to go in manufacturing.

10:03 - But I did want to talk about the components of the Crayola crayon.

10:07 - First of all we have the proprietary blend.

10:10 - Secondly, we have pigment.

10:11 - So this is a this is a bag of white dry color.

10:15 - And you'll see the 52 item number that that that denotes our cran.

10:19 - So the art our dry color

10:22 - comes in from around pigments from around the world 300 over

10:26 - 350 colors of Crayola crayons coming from around the world.

10:30 - And their process at a plant now in Ohio and and come in to us.

10:36 - So our processes are able to drop this bag and total into the kettle

10:40 - that I'm about to show you.

10:43 - The the next part of a Crayola crayon is, is clay.

10:46 - And we have two sources of clay.

10:48 - Interestingly,

10:50 - two different processes, two different suppliers

10:53 - on the same, pit in Georgia where the where they're mined from.

10:58 - So it comes in in two forms.

10:59 - One is in a 75 pound bag, but we've migrated away from that.

11:04 - And most of our dry color, most of our crayons

11:07 - are manufactured from clay coming in a super sack.

11:11 - And it is it is blown from this area here overhead and into the kettles.

11:17 - And we'll show that to you in a minute.

11:19 - The last component of a Crayola crayon, of course, is is the label.

11:23 - And at Crayola we label our crayons twice every Crayola

11:27 - crayon, all 3.1 billion of them are labeled, are wrapped twice for strength.

11:32 - And that's a very important part.

11:34 - By the way, all of our Crayola crayons have are trilingual to enable education

11:40 - of the French language is Spanish language and the English language.

11:44 - We're going to proceed now into manufacturing

11:46 - to show you how the Crayola crayons are first blended,

11:51 - and then how they form into a crayon and then how they're labeled.

11:54 - And as part of that, I'm going to give you a great history lesson on on

11:58 - how the Crayola crayon that as evolved over the last century.

12:06 - We moved in from outside

12:08 - and we're picking up the strong scent of the Crayola crayon.

12:12 - Just so we're clear, it's the number 18 most

12:16 - recognizable scent on the planet.

12:19 - Coffee is number one.

12:21 - Crayola crayons are number 18.

12:23 - That distinct smell brings back

12:26 - memories of childhood and

12:29 - we've actually patented that smell.

12:32 - And we have plans to further encourage our shoppers to buy Crayola crayons.

12:38 - I wanted to spend a moment to give a bit of a history of the Crayola crayon.

12:42 - I mentioned outside that we started manufacturing them in 1903,

12:47 - and this was kind of a sideshow for Edwin Binney and Harold Smith.

12:52 - And then the first pandemic happened and World War One happened,

12:56 - and the demand shot off the charts.

12:59 - So we innovated as a company with the first flatbed mode.

13:04 - And the flatbed mode was simply a bucket

13:07 - of paraffin wax and pigment and clay,

13:12 - and we dumped it over a mold,

13:15 - allowed gravity to feed it down, and the crayon hardened over time.

13:20 - We tossed the crayon out,

13:22 - and then we would send the crayon out to local firms of customers.

13:27 - No road was the green farm.

13:29 - Down your road was the Red farm.

13:32 - Over in Nazareth we had the blue farm.

13:35 - The people sustain themselves

13:39 - through the Great Depression by labeling our crafts,

13:43 - and then we would sell them to

13:46 - to our consumers.

13:48 - In 1946, of course, post-World War Two,

13:53 - our demand shot up again, and the flatbed mold

13:56 - was no longer sufficient to meet the demand of our shoppers.

14:02 - So we had to innovate with, with, to a manufacturing transformation.

14:07 - One was the Cotton Stack Labeler, which I'm going to show you in a minute.

14:11 - The second was the completed packing process.

14:15 - What I'll show you in a few a few minutes after we get through molding and labeling

14:20 - the processes for making a crayon

14:23 - our first, we blend in a kettle and we're going to show you that first.

14:28 - And then from the kettle we process into

14:31 - what's now a rotary mold.

14:34 - And then that feeds from robotics into the labeling operation.

14:38 - So in 1973.

14:42 - Post-Vietnam War,

14:44 - we then had to innovate again with a rotary mold,

14:47 - 1980 crayons,

14:51 - injected paraffin wax, pigment

14:54 - clay blend down into the rotary mold,

14:57 - chilled water rotating around the label around the cran,

15:02 - and a robot pulling it out into manufacturing.

15:06 - So it would be good to go ahead and take you back to the blend

15:10 - kettles, show you what we're doing, and then you show you a rotary mold,

15:14 - and then I'll show you the two different types of

15:17 - of labeling operation.

15:23 - We had outside

15:24 - we had the the print blend and the blend tanks.

15:29 - And here we're pushing our processes of pressing an operation button

15:34 - that it then pumps the wax blend into this kettle.

15:40 - And our processor is also adding,

15:42 - you see a bag of pigment here and that's blue the color blue green.

15:47 - And Patrick has dropped

15:51 - this into this blend into the blend kettle.

15:54 - And it's blending.

15:55 - Now when it's ready it then pumps over

15:58 - here to the processed kettle.

16:03 - So we're still blending and mixing

16:05 - but it's pumping out of here into the rotary mold.

16:09 - It pumps overhead to the rotary mold.

16:12 - And here is the rotary mold.

16:16 - And if we come over here, we'll see.

16:19 - As the rotary mold comes around, it's about to rotate.

16:23 - And we're going to inject

16:26 - the blend, the liquid blend down into the mold.

16:29 - That's a sapper. Now

16:32 - chilled water is rotating around

16:34 - those crayons inside those 1980 Kranz

16:39 - 76% of the cooling from the chilled water

16:42 - comes from self-contained groundwater wells.

16:47 - As it progresses around

16:48 - the crannies harden, the cap is scraped off the top

16:53 - and that is melted into a kettle.

16:55 - Put back into the process and reuse.

16:58 - With the cost of materials today, we can't afford to waste

17:01 - any part of our ingredients, so every part is then reused and then pumped back in.

17:08 - So these rotary molds were developed

17:11 - in 1973 with for 1973.

17:15 - While these robots look archaic, they were fairly state of the art at the time.

17:22 - The the robot from 1973 is feeding to a 1946

17:28 - cutting stack labeler, which runs each one runs at 200 a minute.

17:33 - So this rotary mold is feeding two cutting stack labelers.

17:37 - And we're going to go look at that process now.

17:40 - Currently, less than 30% of

17:42 - our friends are manufactured on the 1946 technology.

17:47 - We've upgraded to a high speed technology that I'm going to show you in a minute,

17:51 - but we'll look at the 46 cut and stack label technology. Now.

17:58 - About 25% of our trends

17:59 - are manufactured on this cutting stack technology.

18:02 - Again, this is highly innovative.

18:04 - 1946 technology.

18:07 - 2007 we upgraded our speeds,

18:10 - but we have one operator on two machines, is making 400 trans in a minute.

18:15 - And it is a label like this.

18:17 - Again, we're wrapping our prints twice for spring.

18:20 - You'll notice that blue green is in

18:24 - is trilingual French, Spanish and English.

18:27 - And in here is an adhesive part where we are.

18:33 - The adhesive is being applied on the drum, to the label, to the crayon.

18:38 - And we have finished prints coming out the other side.

18:44 - Now on these friends, our operators are physically scooping them

18:48 - with their hands, inspecting every trim

18:51 - and placing them in a magazine.

18:54 - Now make the point on a magazine.

18:57 - Historically, we use a soft, soft,

19:00 - soft, glossy 3400 trans in it.

19:04 - The soft box was.

19:05 - This crayon was scooped out, put into the stock box.

19:08 - Stock markets taken to the warehouse for three days

19:12 - and then taking the crayon packing to go into the packaging operation.

19:16 - Several years ago, we converted to a magazine, a thousand crayons,

19:21 - and that would become evident in the in the near and the near term.

19:24 - Here, when you see the automation process for packaging.

19:29 - So these brands are now done produce,

19:33 - they will go into the magazine, they'll be stacked onto a pallet,

19:36 - they'll be taken to the warehouse

19:38 - and stored for three days so they can be packed into cartons

19:42 - and then delivered to our customers to sell to our shoppers.

19:49 - As our business continued to grow in 93,

19:53 - we did the next great innovation in the crayon manufacturing

19:57 - and that was moving to a high speed labeling operation.

20:01 - In the high speed labeling operation, you see, it's a much more modern robot.

20:05 - It's the same rotary mold.

20:08 - It still makes

20:10 - 1980 friends every three minutes.

20:14 - But now, instead of one rotary mold feeding, two cutting stack labels,

20:18 - we have one rotary mold for feeding, one high speed label.

20:23 - And it's the same operation, but it's pulling off.

20:27 - And as we as we ran this operation

20:29 - from 93 until 2014, we still had the operators

20:35 - scooping the crane and inspecting the crane.

20:39 - And we had it was about 30% of our production

20:42 - at that time was on the high speed label of.

20:45 - As we move through to 2013, 2014, we replicated the process

20:53 - of the 93 labeler for one on the other side, side by side.

20:59 - I put robotics on the end, optimizing

21:02 - the entire process with Six Sigma capabilities

21:06 - so that one operator could run one

21:09 - that could run 1300 prints every minute.

21:12 - So we went from 400 cranes a minute per operator on the cutting stack

21:17 - to 650 on one high speed to leveraging robotics.

21:22 - We're able to run 1300 prints every minute there.

21:26 - I was always concerned in that process about the quality capabilities

21:31 - because we weren't scooping any more.

21:33 - Robotics would do it.

21:34 - But as you go through the process,

21:36 - there's a you're going to see there's quality checks at every step.

21:40 - We are checking for naked careers, that is, there's no label.

21:44 - We're checking for fishhooks,

21:45 - which is basically a missing part of the tip of the crib.

21:50 - And we're checking for holes.

21:52 - Every one of these high speed prints

21:54 - has the adhesive applied on the label.

21:57 - So the allowed to set, we spray the crane with a miss,

22:01 - and it still goes to the warehouse

22:04 - to sit for three days before we can pack it.

22:08 - For the labeling operation, the crane is fed into into a robotic operation

22:15 - where the crane is taken off of the belt and placed into a magazine.

22:20 - That magazine off of these high speed labelers allows for very efficient

22:25 - pack out of our friends in the factory operation.

22:27 - I was concerned that we would increase our quality defect

22:33 - once we automated and actually the opposite has happened.

22:36 - The complaints for a million units shipped dropped to the floor

22:40 - after we put automation in one other wrapper.

22:43 - Our our observation on our automation.

22:45 - So we did this for safety.

22:47 - So we had less scooping of brands.

22:50 - We did this for quality.

22:52 - We did this for cost. Of course.

22:55 - But the one point

22:56 - that this has enabled, this manufacturing process, enabled,

23:00 - it's enabled us to service the customer in a very efficient way.

23:04 - So surges in demand, we're able

23:07 - to with the capacity and the speed of these machines

23:10 - and the skill of our workforce, we're able to respond on forecasted

23:14 - demand in key seasons like back to school, where the peak is very violent

23:19 - and the forecasted demand is unpredictable.

23:25 - I mentioned earlier,

23:26 - we manufacture 3 billion, what we still call eight sized cranes.

23:30 - That's the original crane from 1903.

23:34 - That's the one that's on the school list.

23:35 - That's the most popular of our cranes that we make, of course.

23:39 - But interestingly here we make a 33, 33 sized crane,

23:43 - which is a larger trend for smaller hands.

23:47 - And we also for the most for the youngest of our consumers,

23:51 - we now make a what we call the egg crane for our preschool line.

23:56 - Interestingly,

23:59 - this took off in in Europe and UK.

24:02 - So we had built one machine as a prototype to be able to do this.

24:06 - And it's rotates around.

24:08 - And we've now had to triple our capacity

24:11 - because the demand for this product has taken off.

24:13 - You can find this in any major retailer in the US.

24:17 - And we're very proud about this.

24:19 - It's gets our consumers, it meets their hands.

24:22 - And it allows them to use and experience the color of Crayola

24:26 - at an earlier age before they're ready to use the regular

24:29 - Crayola crayons.

24:35 - I think it's

24:35 - worthwhile mentioning for our Pennsylvania residents

24:39 - as this industry trade formed and Crayola

24:42 - opinion Smith Crayola grew its crayon footprint.

24:46 - We had manufacturing initially here in eastern

24:49 - Pennsylvania, down along the Bush Creek.

24:52 - Our initial expansion was not here to Forks Township,

24:56 - but rather to southeastern Kansas, to Winfield, Kansas.

25:00 - We build a plant where we manufactured crayons initially and paints

25:06 - and then markers, and it was actually the service point

25:09 - for our education distributor, for our school districts.

25:12 - And this plant was the manufacturing point for our U.S.

25:18 - retail customers.

25:19 - And then for our Canadian business.

25:22 - And when I lived in the UK for my for my plant in Bedford, England,

25:26 - we had crayon manufacturing in Lindsay, Ontario, and in Bedford, England.

25:32 - Over the

25:32 - period of the of the late 90s through the mid 2000.

25:36 - We consolidated all of that production here into Pennsylvania, and we did that

25:42 - to leverage the tremendous scale we had with raw materials.

25:46 - And there I think more importantly, as we got 2007, 2008,

25:50 - we introduced concepts and training and capabilities for our employees

25:55 - in Six Sigma initially and then in lean manufacturing, and we were able

26:00 - to concentrate that education in that training of that skill into here.

26:05 - And then further the automation you're seeing now,

26:09 - that was all applied from the 2008

26:12 - to 2020 timeframe.

26:15 - And we were able to apply that that automation to maximize the cost benefit

26:21 - and the impact on that on our business and our ability to service our customers.

26:26 - This equipment that's in here is principally manufacturing equipment

26:31 - that came from Winfield, Kansas and Bedford, England.

26:40 - In any business in Crayola, is is the same in any business.

26:43 - Enterprise inventory plays a critical role

26:46 - in the success of the enterprise.

26:50 - If you have too much inventory, then that's a problem because you're tying up

26:54 - your cash and and it's inefficient and it takes up too much space.

26:57 - If you don't have enough inventory, then you're unable to service your customers.

27:01 - I would say during the pandemic, particularly in 2000,

27:06 - it was a very difficult time.

27:08 - And then there were some additional disruptions that happened with the Texas

27:12 - deep freeze during the pandemic,

27:13 - where we didn't have enough inventory to service our customers because our

27:17 - demand in some cases was three times what it had been in normal,

27:21 - and we didn't have enough.

27:22 - But we've gotten fairly good with our forecasting capabilities

27:26 - and our in our inventory planning capabilities of servicing the customer,

27:31 - even when the customer orders is well beyond what we expect.

27:34 - So we are in the raw material working process warehouse of Crayola.

27:39 - So what happens is, is the inventory flows in and this is clay various clay.

27:44 - And we've got packaging and corrugated on the other side of the rack.

27:48 - There.

27:49 - So that feeds into here from our suppliers and that feeds then into manufacturing.

27:54 - After we're done manufacturing our crayons, we then store them

27:58 - as I mentioned in manufacturing for three days,

28:01 - allowing them to dry so that they can be adequately packed.

28:04 - So here is in our work in process.

28:07 - We're a little lower now because

28:09 - we're on the backside of back to school, but at the peak of back to school,

28:12 - we have 150 million crayons in here in a working process state.

28:17 - And then you know, generally right now we're at about 120 million

28:21 - stick range.

28:22 - So we're producing on a level load throughout the year at a 12 to 12.5 million,

28:29 - crayons per day kind of level,

28:31 - so that we're able to support our customers in the peak seasons.

28:35 - So we have demand throughout the year.

28:37 - Of course, but that back to school peak,

28:39 - just to give to give our viewers a sense here during back to school.

28:44 - So from July 4th until Labor Day

28:48 - Crayola sells at retail.

28:49 - Our customer sell, our customers sell 17 units per second.

28:55 - At retail.

28:56 - We sold last year.

28:57 - This past year, 40 million boxes of 24 count crayons

29:01 - at retail in the United States alone.

29:03 - And that doesn't count the demand that we shipped from our warehouse.

29:07 - So to that point, I'm going to take you into packing next.

29:10 - But I want to just as we're in the warehouse now, I'll cover this now

29:14 - after we produce in packing, it goes to the loading dock,

29:18 - and it ships from the loading dock to our 800,000 square foot

29:22 - warehouse in and in the city of Bethlehem.

29:26 - And at that warehouse, we bring containers in from suppliers around the world,

29:31 - which represents about a third of our of our global supply

29:34 - chain, comes into that warehouse, is married up

29:38 - with production that we do here in the Lehigh Valley.

29:41 - We are our partner.

29:44 - Fedex picks those orders, aggregates those orders

29:48 - and ships them to our customers, whether it's it's

29:50 - here in the United States, if it's in our warehouse in Canada,

29:54 - our operation in Mexico, or our operations in customers around the world.

29:59 - So we're going to proceed now on to packing, and I'm

30:01 - going to give you a sense of how we take all of those 3 billion cranes.

30:05 - I just showed you cranes being manufactured on, on cut

30:08 - and stack and on high speed labeling technology.

30:11 - How does that go from a work in process?

30:14 - Stick into a finished package so that our

30:17 - our customers can enjoy that and enjoy the color of Crayola?

30:27 - Just with our

30:28 - our work in process warehouse and now we're in the in

30:31 - the 60s is actually the 64 line I mentioned at the start of the program.

30:36 - So the built in sharpener that we launched in

30:39 - 1958, is still one of our most popular products.

30:43 - So what's happening here is we've got four different sleeves of 16 colors,

30:48 - and they're coming down the belt after being packed by our operators.

30:52 - And a robot is aggregating them so that they can be inserted into the carton.

30:57 - If we keep coming down here, you'll see the robot.

31:02 - Putting the right mix of sleeves together.

31:05 - And then

31:06 - stacking them.

31:09 - And then as we come down, you'll see the carton being inserted into the carton

31:14 - and then the built in sharpener being installed.

31:17 - So this is the built in sharpener.

31:18 - We injection mold this at four two.

31:20 - And I say this line was was one of our first packing

31:23 - automation lines with robotics.

31:26 - And we put this in in 1993.

31:29 - So impressive that we're still leveraging the technology we have.

31:33 - We have the best engineers on the planet here at Crayola.

31:36 - So not only are they able to keep one sanding equipment running,

31:40 - but there have also been very innovative in their deployment of new technology.

31:50 - One of our newest

31:51 - crayon packing automations is is in the class pack.

31:55 - This happens to be an 800 crayon class pack.

31:58 - So 50 crayons of 16 different colors.

32:04 - Some of the technology that we deployed in 2016,

32:07 - we've applied to this, where we're placing a magazine up top.

32:11 - So Nate's up top placing the magazine in, and we have four different

32:16 - collaborative robots who are dropped, are dropping the crayons into the box.

32:21 - So our normal crewing on this was a crew of eight.

32:25 - We were getting about 300 of these class packs, a shift.

32:29 - We now have a crew of three and we we get 500 class packs, a shift.

32:34 - So very efficient.

32:36 - And as I mentioned earlier, the grade point is right now,

32:39 - this time of year, we're shipping to all of our education distributors.

32:44 - And this is this is a major product for them and teachers are replenishing

32:49 - from various.com customers, their stock from,

32:53 - from when they came back to school to get to the second half of the year.

32:57 - So it's a very busy time for this product.

32:59 - And I would say historically, we struggled to stay in stock.

33:02 - And I just had a production meeting today

33:05 - where we had no back orders on this product.

33:07 - And this is the point of you combine tremendous engineering with technology,

33:13 - with skilled employees, and we're able to service our customers

33:17 - much better than through the old manual processes that we deployed.

33:26 - I mentioned 1946.

33:28 - We had this great increase in demand and we automated

33:31 - with a collated packing equipment.

33:34 - This is a great example of it.

33:36 - So we scoop out of the magazine on a manual basis,

33:40 - not like you just saw in the class back machine where we're putting

33:43 - a thousand cranes in at a time.

33:45 - It was very difficult to do this, but our operators are able

33:48 - to scoop out and fill this later.

33:51 - And this happens to be a Paxil machine.

33:54 - So this is a slow rap that's going to restaurants

33:58 - and food service, but we're able to scoop out pretty soon.

34:03 - And then the machine pushes four colors at a time

34:08 - into the into the packing operation.

34:10 - Then it's wrapped in the.

34:12 - So we love when restaurants buy Crayola crayons.

34:15 - We think that buying Crayola crayons improves the dining experience

34:20 - when the child has the safety and quality of the Crayola crayon

34:24 - being used at the table, and this is the wrapper that will then go

34:28 - around the crayons and we have a finished pack on the other side.

34:34 - And this is the finished pack.

34:39 - So this manufacturing line

34:42 - makes four count, eight count and 16 count crayon.

34:47 - So a bit of a history here.

34:49 - As we proceeded down an automation

34:52 - path, I just showed the Paxil line.

34:55 - We had all of our 24 count crayons.

34:58 - 24 count crayon is on the school list.

35:01 - As I mentioned, 40 million boxes this past back to school.

35:05 - And it is.

35:06 - It is the number one skew

35:10 - across the office channel all year long.

35:13 - And if you include grocery and everything else at retail,

35:16 - it's the number ten skew across American retail.

35:19 - The 24 count crayon.

35:21 - So we knew if we wanted to do automation and get the most out of it,

35:26 - we needed to automate the 24 count crayon production.

35:29 - So as we began the automation process, we were making 20 fours on 27 on

35:35 - seven wheels of production, similar to that process

35:39 - that I showed you in the yellow wrap, where you're scooping out and putting in,

35:44 - and it's running at about a 30 per minute cycle.

35:47 - So we knew we had to automate with the 24 count crayon,

35:51 - but we knew that that capital investment would be significant

35:54 - and we needed to prove the technology.

35:56 - So what we did was we started with this line, this is the four and eight line.

36:02 - And we've

36:03 - this was actually developed internally.

36:06 - We had a bit of a competition at the time.

36:08 - The labeling technology was led by a Lehigh engineer,

36:12 - and the packaging technology was led by a Lafayette engineer,

36:15 - actually a Lafayette former offensive lineman.

36:19 - We built this technology in our own building,

36:22 - and we bought off the shelf the packing technology and the conveyors.

36:27 - So we did it for an eight count.

36:29 - And this is test and learn and improvement over time.

36:33 - And then we expanded to the 16.

36:36 - And we're now able to manufacture 16 crayons at a time

36:40 - at a very high rate of speed, 165 a minute.

36:44 - We told our parent company and by the way, we are owned by Hallmark Cards.

36:47 - Since 1984, Hallmark Cards purchased Binney and Smith.

36:53 - It is a is a wonderful collaborative relationship with Hallmark Cards.

36:57 - Of course we know them from greeting cards, rep

37:00 - keepsakes and and the hallmark movies.

37:04 - But it's a very collaborative relationship

37:06 - and they're very supportive of what we try to do here.

37:10 - Hallmark, when we were able to prove the technology here at 165

37:14 - a minute, they they gave us the capital to invest in the 24 count line,

37:18 - which is where we're going next.

37:20 - One other point I'll make on this is the investment in the 16 count crown.

37:28 - The next largest manufacturing plant for Crayola

37:31 - crayons in the world was in the Philippines and in Manila.

37:36 - Of course, when the GIS came ashore

37:39 - in, in, in World War two, they just didn't hand out Hershey bars.

37:43 - They also handed out Crayola crayons.

37:45 - So the demand for Crayola crayons in the Philippines is off the charts.

37:51 - So for years, for for 70 years, we manufactured under a licensing

37:57 - franchise arrangement with a partner in the Philippines.

38:01 - With all of this investment in technology that we did,

38:04 - it made more sense for us to consolidate the production for the Philippines

38:09 - and manufacture it here and give the great Kuala

38:13 - the and and variability and innovation

38:16 - of our crayon manufacturing to the people of the Philippines.

38:19 - So this 16 count crayon is the most popular skew in the Philippines.

38:25 - And it's manufacturer on this line.

38:31 - The old way of of packing crayons.

38:33 - So again 50% of the Crayola crayons

38:36 - that we manufacture here go into the 24 count box.

38:40 - The old way was on on these wheels.

38:42 - So this is 1946 technology scooping out of the box, putting into a coal.

38:48 - Later manufacturing 24 count crayon.

38:50 - So we make our specialty crayons on these wheels.

38:54 - We make our washable crayons on these wheels.

38:57 - We make, during back to school when the peak is so significant,

39:02 - we're making the core 24 count crayon for school.

39:05 - This on these wheels as well, but the rest of the year

39:09 - we're manufacturing all of our 24 count crayons on this high speed equipment.

39:14 - Now the high speed equipment again, we're dropping magazines

39:17 - of a thousand crayons at a time into the machine.

39:21 - And this only makes 24 count.

39:24 - The 24 count core crayon.

39:26 - Well, during the launch of colors of the world, we put that on here.

39:30 - But generally, we never change over from the 24 count crayon core product.

39:36 - Each one of these is dropping a color

39:38 - onto a tool, and it's proceeding down through.

39:42 - So we're going to go up here and watch the process

39:44 - by which they drop the the magazines into the machine.

39:53 - So we put a full magazine in

39:54 - and we pull an empty one out.

40:00 - And the machine is actually

40:02 - loading into into the, into the process

40:05 - and dropping down onto the, onto the belt down below.

40:22 - What are the same?

40:22 - My favorite parts of this process is when we initially designed the machine,

40:27 - we didn't think about what do you do with the empty magazine?

40:31 - And our engineers developed this great process.

40:33 - So the magazine then feeds down.

40:38 - And then we're able to take that magazine back to Crane

40:40 - Packing to be our crane molding and labeling to be used again.

40:45 - The standard for this line is about 75,024 count cranes per shift.

40:50 - We're running this three shifts a day,

40:55 - typically five days a week.

40:57 - Several weekends a year, several Sundays a year.

41:00 - We're running this, so it comes here,

41:04 - and the 24 cranes are inserted into the folding carton

41:11 - before the finished product goes through

41:14 - a metal detection process around the corner here.

41:19 - And then it's deployed into various

41:22 - pack out operations,

41:25 - today because we're

41:27 - we're later in the year, it's going into what we call a 3024 box.

41:31 - And there's a palletizing operation on the other side.

41:35 - At times during back to school, it feeds over here

41:39 - so that we can do the bulk dump bins for manufacturing.

41:45 - For some of our customers

41:47 - in their back to school sets.

41:56 - One other interesting piece of technology that we've used in the past

41:59 - is to balance this line, because the capacity is so critical,

42:04 - we don't want to shut down the packed out operation, the quality operation,

42:09 - or this machine.

42:10 - If the finish palletizing is slower

42:13 - and we don't want to shut down the Palletizing operation,

42:19 - if there's a problem in the in the initial pack out of the boxes.

42:23 - So this machine will balance the inventory

42:27 - and it actually allows

42:29 - us to run with less inventory throughout the year,

42:33 - and at year end, because we're able to manage

42:37 - the inventory flows, it's increased our capacity that we have

42:41 - to do.

42:47 - When we built this building in 68,

42:51 - we were shipping product from this, this building as well.

42:54 - And then as the business grew and grew and grew, we initially,

42:59 - we initially shipped out of, out of Allentown

43:03 - and then went through a migration of third party logistics companies.

43:07 - And then ultimately we settled into our 800,000 square foot warehouse

43:12 - in Bethlehem.

43:13 - This what was the warehouse got converted into?

43:16 - Into a conference center.

43:17 - So the conference center is our 64 and more store.

43:21 - So our employees are able to buy keepsakes, ornaments and hallmark

43:25 - greeting cards and wrapping paper and all of our wonderful products.

43:29 - And this is a very busy time for that.

43:32 - We have an employee credit union here.

43:35 - And on this site here, this we are in our a,

43:39 - we are in our customer presentation theater or our conference center.

43:43 - So when we bring customers here to Crayola, imagine in our category,

43:49 - most production in our category is not US based.

43:53 - So the fact that we manufacture here and they catch that again,

43:58 - that Crayola smell, it's a strategic competitive advantage for us.

44:02 - And by the way, we do manufacture here

44:05 - because we've got 500 highly skilled workers

44:09 - who are extremely dedicated to the success of our enterprise.

44:13 - And we're able to manufacture here in season.

44:17 - The demand, as I mentioned, is very high at at critical seasons.

44:22 - And forecasting is difficult.

44:24 - One never knows.

44:25 - We particularly now with the disruptions that have happened because of the

44:29 - the distractions that have happened because of the election, one

44:32 - never knows what the season's going to be.

44:34 - And the beautiful point here is, with so much of our supply chain domestic,

44:38 - when demand shoots up, we're able to respond.

44:42 - When our competition is manufacturing overseas,

44:46 - they have to make their decisions in in December

44:49 - and, and January and ship all the product by February.

44:53 - They cannot respond in season.

44:55 - So there's a strategic competitive advantage for the fact

44:58 - that we can manufacture here in Pennsylvania, compounded by the fact

45:02 - that everything that we produce is manufactured with the power of the sun.

45:07 - It's a beautiful sunny day outside today.

45:09 - We're running the two plants here

45:11 - in Forks Township and our corporate and our corporate headquarters

45:14 - with the 33,000 solar panel farm up on the hill here,

45:18 - I would say here in this presentation theater that the color equity is evident.

45:24 - So we have a selection of our colors on this wall.

45:27 - I have I have two favorite colors, not just one.

45:31 - My two colors are, cadet blue and purple mountains.

45:35 - Majesty. And a great story.

45:37 - The current CEO of Hallmark Cards is is, is Mike Perry, and he was our CEO

45:43 - from from 2008 until 2015.

45:46 - And that was a time that we did the solar farm.

45:49 - And and my team was so dedicated and

45:53 - and engaged in ensuring that we put that solar farm in.

45:57 - And Mike gave me a chance to name this the road going up to the solar farm.

46:02 - And I named it Purple Mountain. Majesty Lane.

46:04 - So very proud about about our various colors.

46:08 - We are called Crayola ins at Crayola.

46:11 - And I would say from a cultural perspective,

46:14 - there's a couple elements that that really run true for us.

46:17 - First of all, we're very collaborative.

46:20 - We celebrate our successes, but we also celebrate our problems.

46:24 - And by celebrating problems, we can fix our problems

46:27 - and make our company a little better each day.

46:29 - And finally, I would say we're perpetually optimistic about the future

46:33 - of not just our world, but of our company.

46:36 - We see a future where our Crayola products

46:39 - can be omnipresent in the hands of children around the world.

46:43 - We've tried very hard at this over the years, and I don't think

46:45 - we've been as successful as we should have been.

46:48 - But going back to the acquisition by Hallmark of Crayola,

46:52 - there were really two elements that Don Hall senior

46:55 - who recently passed away, that Don Hall senior had

46:58 - when he made the decision to acquire Binney and Smith in 1984.

47:04 - And one very clearly was that

47:07 - there was an innovative mindset here, and he saw innovation

47:11 - as something that would allow for growth of our business.

47:14 - And clearly we've invested in that.

47:16 - In that magic hour secret lab down along the bush,

47:19 - Gill Creek provides a competitive advantage for us.

47:23 - And the Wow technology that comes out of our chemical engineers,

47:26 - mechanical engineers and electrical engineers,

47:29 - they're making coming mechatronic products.

47:32 - The second major opportunity that Don Hall senior

47:34 - saw was our ability to expand this business from being U.S.

47:38 - and Canada only to being a global business.

47:42 - And right now, there's

47:44 - 97% of the world's kids live outside of the US and Canada,

47:49 - and we're not nearly capturing the opportunity there.

47:52 - So the focus right now among our, our people at Crayola is, is

47:57 - how do we maximize the, the, the distribution of our products

48:01 - to reach as many kids as we can in the US?

48:05 - And in Canada, of course, so that that we can help

48:09 - so we can help parents and educators raise creatively live kids.

48:12 - But there's parents and educators around the world.

48:15 - So how do we reach them,

48:16 - share our products with with those children around the world,

48:20 - and help those parents and teachers to make the world a better place?

48:24 - By the way, we help parents and educators raise creativity with kids because we

48:28 - we believe that the kids of today will become the leaders of tomorrow,

48:32 - and they will help to transform the world into a better place.

48:43 - Well, thank you for visiting us site Crayola today.

48:45 - We hope you we gave you a look into the colorful world of Crayola manufacturing.

48:51 - We're very proud of the impact we have on the world.

48:54 - As I said during the tour, we help parents and educators raise

48:57 - creatively live kids and kids of all ages.

49:01 - We welcome you to use our products and experience the color

49:04 - and the joy and the fun that

49:06 - that we have making those products for consumers around the world.

49:09 - Here in Forks Township, Pennsylvania. You.