What began with a simple rod and connector set has led K’NEX Brands to take its place as a leading manufacturer of building and construction toy sets in the world. With headquarters and a manufacturing facility in Hatfield, Pa., the company distributes products in more than 30 countries, as well as Lincoln Logs in North America.

The company operates based on a number of guiding principles. It strives to be a financially successful and socially and environmentally responsible company while producing unique products that are enriching, educational and safe.

“When I look at our business, in one sense it is like we are putting on a show every day,” President and CEO Michael Araten says. “We must always create relevant content for the audience.”

Made in the USA

Founded in 1992, K’NEX has an important relationship with The Rodon Group, which has operated since 1956. The Rodon Group is owned and operated by the Glickman family, and Joel Glickman is the K’NEX chairman, as well as the inventor of the original K’NEX rod and connector building system. Before starting K’NEX, Glickman pitched the original color-coded connection and rod system to many large toy companies, all of which rejected the product.

The Rodon Group works closely with K’NEX and manufactures all bricks, rods and connectors in the United States. It uses state-of-the-art, custom injection molders of high-precision plastic components and holds ISO 9001 certification. The Rodon Group’s commitment to environmental sustainability takes advantage of a manufacturing process that minimizes packaging, transportation costs, waste, water consumption and energy.

“We are big believers in automation and lean principles,” Araten says. “Starting with ISO certification, we have the discipline that allows you to eliminate waste throughout the supply chain. We’ve looked at robotics, 3-D printers and automation, and we’ve made changes to our ERP system. We are able to get an early read on what is happening on retail shelves and have the flexibility to ramp up or down as needed based on product performance.”

The company also places a great deal of emphasis on training, mixing internal and external training opportunities for its employees. Araten says about 80 percent of training is done externally because the company wants to learn what it doesn’t already know.

Innovative and Unique

Over time, K’NEX has continued to develop its products and establish important licensing relationships. Not only has it long since added wheels, pulleys, gears, various color palettes and products that move, it has established relationships with well-known brands such as Sesame Street, NASCAR, Monster Jam and Nintendo’s Mario Kart Wii franchise. The company’s Mario Kart Wii line was named to the Toys R Us 2011 Holiday Hot Toy List.

Already in 2012, the company has introduced four new roller coasters to its thrill ride line, expanded its NASCAR product line and introduced its first series of Mario Kart Wii Figure Packs. K’NEX also made additions to its Monster Jam collection, made five new additions to its K’NEX Classics line, introduced three new building sets to its KID K’NEX collection and unveiled the Energy, Motion & Aeronautics expansion to its K’NEX Education Middle School product line.

Other additions this year include launching two new computer control sets to the K’NEX Education elementary and middle school product lines, and the company expects more product launches and additions in 2012. In fact, the company plans to launch an Angry Birds licensed product line on a global basis, as well as relaunching the classic Tinker Toys as part of a partnership with Hasbro.

“People are looking to interact with Angry Birds in more meaningful ways, and building toys are a great way to interact with the brand,” Araten says. “We are always talking with a lot of people and licensors that will help us continue to build excitement.”

What is important for the company when looking for licensing agreements that make sense is establishing long-term relationships with companies that share its own belief in integrity, value and quality concerns. The company looks to establish relationships with partners who are attracting large audiences in segments of the three-12 age range and can convert their property and characters into great building toys.

Much of the information the company uses when deciding how to develop product lines comes from customers. The company listens to consumers through social media channels such as Facebook, YouTube and user fan sites. K’NEX also constantly talks to all major licensors around the world to see what trends are emerging.

“We have a well-honed internal discipline between our marketing and design teams to see where kids are,” Araten says. “We also look at anecdotal evidence from our own lives.”

This year marks the 20th anniversary for K’NEX. Having spent the last two decades expanding nonstop, the company is building toward many more decades of suc­cess. Araten knows the company must continue to make the right forecasts about where the trends are going and finding the key partners for its category.

“Translating digital properties to the real world made a lot of sense, but now we have look for what is next,” he says. “On the supply chain side, the ever- rising costs of commodities puts a lot of pressure on material pricing, which is challenge for the toy industry as we try to make high-quality toys at reasonable prices. We think the fact that 90 percent of the components in our boxes and two-thirds of our finished goods are made in United States, al­ong with the licensees in our port­folio of products, will help us grow.”