09/16/96 IF THEY CAN MAKE IT THERE...

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IF THEY CAN MAKE IT THERE...
How Alexander Doll thrives in New York, New York
Twenty-five years after peers began moving offshore, the Alexander Doll Co. continues making dolls--and dollars--where it has for 73 years: New York City's West Harlem section. Patricia Lewis, a former executive with Tyco, Tonka, and Mattel, was appointed chief executive in June, 1995, when the $60 million company was acquired by Kaizen Breakthrough Partnership, a private capital fund. How does a manufacturer employing 400 people survive in one of the most expensive cities in the world? Lewis lays it out for BUSINESS WEEK Small-Business Editor I. Jeanne Dugan.

Q: How have you managed to keep producing here?
A: First we implemented just-in-time manufacturing, which means we put on the floor only what we need to meet demand. We cross-trained employees. We ship everything that's produced. If we had continued the old way, we would not have been able to do it in the U.S.

Q: What was ``the old way?''
A: The two lawyers who bought the company from Madame Alexander in 1986 used large batch manufacturing. They cut the fabrics in large batches. They made the parts in large batches. Then everything sat. Seven hundred wigs of poor quality wouldn't be caught until months later when it came time to assemble the doll. Now, if there's a defect in a single piece, the whole line stops, the defect is corrected and what's causing it is changed.

Q: Have you downsized?
A: The first thing I told the staff was there'd be no layoffs. Then I raised an American flag out front and painted the factory pink and blue to mark the beginning of the new process. At first, there was a drop in productivity as everyone learned new jobs, but the rebound more than offset it.

Q: You are the biggest employer in Harlem. What do your employees earn?
A: They average more than $7 an hour. But remember: They've been here 15 years on average.

Q: How do you boost profits with the same number of employees?
A: You increase output and quality. This year, we're producing a million dolls--18% more than last year.

Q: How much would you save by moving products overseas?
A: It's hard to measure, because our costs are offset by the benefits of producing here. Number one is that we are on hand every day to oversee and control the quality of the product. We can respond quickly to customers' needs.

Q: Does ``made in the U.S.A.'' give you a marketing edge?
A: We hope so. But I don't think our clients--F.A.O. Schwartz, Disney, Saks--are buying our dolls because they're made in America. They're buying the quality it creates.

Q: How big is the collectors' doll market and who are your competitors?
A: In the last five years, the collectible doll business has been stimulated by QVC and direct marketing companies like the Franklin Mint. Now it's about $400 million. Barbie's new collectible line is a major, major force. But it is mass-produced in the Orient.

Q: How much do your dolls cost?
A: They begin at $50 retail and go up to $700. But they appreciate. An 8-inch doll went for $52,000 at auction recently.

Q: Do you need that kind of price tag to produce in the U.S.A.?
A: No. Any company can do it if they use just-in-time manufacturing and increase productivity. We are demonstrating that ``Made in America'' can work.