Crayola’s now-CEO leaned in to automation when everyone else was offshoring and now he’s reaping the rewards

Retail·ManufacturingCrayola’s now-CEO leaned in to automation when everyone else was offshoring and now he’s reaping the rewardsBY Irina IvanovaBY Irina IvanovaDeputy US News EditorIrina IvanovaDeputy US News EditorIrina Ivanova is the deputy U

News editor at Fortune

CEO Pete Ruggiero explains why that cess was the right choice for today’s tariff economy

Two decades ago, the name of the game in U

Manufacturing was offshoring

Just as China was entering the World Trade Organization and ramping up its capabilities, it seemed every U

Company from General Motors to Dell was racing to move its operations outside the country

The ethos was exemplified by General Electric CEO Jack Welch, a ruthless cost-cutter who led “supplier migration” conferences and once quipped that, in an ideal world, a company would “have every plant you own on a barge to move with currencies and changes in the economy. ” Against this backdrop, though, Crayola—maker of the world’s most widely sold crayon—took a different tack

Pete Ruggiero, at the time an operations executive, thought the children’s art supply maker could be more efficient by staying close to. “I kind of saw the writing on the wall that was coming,” CEO Peter Ruggiero told Fortune. “In 2007 when so many people were making decisions to offshore, I kind of strategically said to our CEO at the time, this close-to-market responsiveness is a critical capability. ” Ruggiero, who was then the company’s executive vice president for global operations and nology, turned out to be right—leaving Crayola well-positioned to ride out the on-again, off-again tariffs when President Donald Trump announced them last spring

It moved to the area when founders Edward Binney and Harold Smith built a small facility there to take advantage of the region’s water power and its abundant slate. (Before Crayola made crayons, it was known for slate pencils and the first “dustless chalk,” with teachers. ) But the cess wasn’t as simple as sitting back and watching the money roll in: Crayola wanted to become more efficient and more fitable

This included in new high-speed duction cesses and ferreting out waste through the Lean Six Sigma method, a corporate philosophy where workers are encouraged to bring up blems. “We’ve invested in the people with Lean Six Sigma training, and we’ve invested in nology

So we have very highly automated cesses, and we have the scale,” Ruggiero told Fortune

He wasn’t sure it would immediately work. “I was envisioning, when we did it, that old I Love Lucy episode where she’s trying to pack chocolates, and I’m saying, there’s no way that our employees can ever do all of this work,” Ruggiero joked

An employee works a high speed Crayola crayon labeling machine at Binney & Smith in Easton, Pennsylvania, on Jan

Rick Smith—AP Photo But the cess worked, increasing capacity and creating better ducts

The first wave d the company $1. 5 million, according to software vider Minitab, a Crayola vendor

The company isn’t completely immune to supply-chain woes

By necessity, it sources colored pencils from a renewable pine forest in Brazil—something that can’t be replicated in the U. , because no such forest exists here. “There’s really nothing we can do

It’s just additional cost for us,” Ruggiero told Forbes recently

But its relative insulation means that, rather than scrambling to find new sources for ducts, the CEO can focus on building out other revenue s—moving into entertainment gramming and expanding the Crayola Experience theme parks across the U

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