Sorting out a puzzling problem- Part 2

Welcome back to our series on the puzzle industry. In part 1, I shared some of the history of the puzzle industry, and its enduring popularity. I also shared more about artisan wood puzzles, and the potential impact of tariffs on small wood puzzle manufacturers. You can read that article here:

Sorting out a puzzling problem- Part 1 

In this article, I want to continue the dialog about how small puzzle manufacturers are approaching their manufacturing processes. But more importantly, I want to share why this is an important part of the conversation. Let’s add more pieces to our puzzle and talk with Oakland Puzzle company and Le Puzz.

Oakland Puzzle Company

I talked with DeAnna Tibbs of Oakland Puzzle Company to learn more about this unique, young, artisan puzzle company. She shared:

“We started our business in May of 2023. We make high quality puzzles with local themes and are working to disrupt the industry in our own way. We are a mission driven puzzle company. Our slogan is ‘Have Fun. Do Good.’

Our puzzles are made of 100% recycled material made in a zero-waste facility with strict labor standards. Our packaging and image prints are produced by Community Printers, a Santa Cruz-based Union shop and Worker Cooperative. Puzzle cutting, packing, and distribution for 300 and 500-piece puzzles is all done right in our Oakland warehouse. We have utilized as many American made products and processes as we can.

We purchased a press so that we can do some local manufacturing. We are in a 800 square foot facility. The press served us well as we got started. But we ran into a problem when we expanded into 1000 piece puzzles. The press we purchased is not strong enough to make 1000 piece puzzles. It also is a different size of chipboard as well as different size of printed material.” 

As a newer entrant in the puzzle industry, I asked DeAnna how they are approaching building their business.

“When we first started a friend said, you will figure out the puzzle you need to make to figure out the ones you love to make.”

I thought that was such a great statement of reality for small businesses. Most small business make a variety of products as they are testing the market and figuring out what the market wants. And at the same time, you have to make enough money to keep the doors open as well as reinvest in the business.

DeAnna had a dilemma. She needed a manufacturing processes for their 1000 piece puzzles. She also needed a manufacturer that could take on custom puzzle work for custom orders too large to be handled in-house.

“In addition to making our own puzzles, I also serve as a puzzle consultant for custom projects. I know what to look for in die cuts and where there might be quality issues. This all comes from my experience in the industry making puzzles. These projects give our company a little extra margin and are profitable.

In early 2025, in order to better serve my customers looking for 1000 piece puzzles, I started manufacturing in China. Manufacturing in China allowed me to have much smaller order minimums of 100 puzzles, so I could continue testing the market for what would be most popular.

During our research process, we discovered that the cost of the Chinese-made puzzles is less than our material cost alone, plus we would have to account for much higher US labor costs. It made sense for us to have them manufactured in China.”

She is looking for puzzle market fit just like others that manufacture products. In the early days of the a business, you try a lot of things and figure out what sticks. Then you focus on that. Having higher order minimums means there are less different puzzles she can create, and higher risk for the company if they don’t sell. She has to manage that inventory. For the US puzzle manufacturers, the order minimums are substantially higher.

When I asked DeAnna what she wished would come out of this situation, she shared:

“I wish we would address the root problems. Our plan is to grow to where we can expand and afford to manufacture in the US. Our first orders of Chinese-made puzzles were intended to expand our production to help us make the turn to profitability, but the rug has been pulled out from under us.

In the long-term, the tariffs could allow us to be competitive with overseas manufacturers, which is the business model that we want, but in the short-term, it is impacting the "Plan B" business model that we were pivoting to out of necessity.

We would love it if the City or Government would step in and help you build. There aren’t enough resources to help us build. We have received some support from SF Made and from the state of California. But we could use so much more support to genuinely address our supply chain and manufacturing gaps here.”

It is very difficult for small businesses to secure resources to build that are not debt. Some might say that there is the SBA and loans. But these loans are often personally guaranteed by the entrepreneur. A down economic cycle or a few small missteps by a small business could financially devastate them. Remember the EIDL loans of the pandemic? Check out the statistics on the percentage of EIDL loans that have gone sour from the pandemic to demonstrate my point. Anyone trying to do smaller manufacturing faces significant hurdles. We need better, more collaborative solutions.

I asked DeAnna to share what it would take to expand the business to bring the 1000 piece puzzle manufacturing to Oakland. She shared:

“Ultimately, expanding to manufacture it here is our goal. But right now the numbers don’t work. There are substantial cost differences in order for us to do this. From a capital investment perspective, here’s a rough breakdown of the costs prior to any tariff costs:

• New machine that can make 1000 piece puzzles = $70,000-$120,000.

• Chipboard with 8000 sheet minimum= $6,500.

• Rent for larger space = $12,000-24,000 per year.

• Moving to a larger space = $10,000.

So we are looking at a minimum investment of between $98,500 -$160,500 in order for to start manufacturing our 1000 piece puzzles in house (prior to any tariffs). It’s simply too much for us to pay. We are still trying to recoup the initial investment we put in to start the company. Plus we would have much higher labor costs that would also have to be factored in.”

What Oakland puzzle company faces is a challenge many small businesses have when they start to grow. Our next company Le Puzz has a different challenge- an engineering one.

Le Puzz Interview

How exactly would you describe the unique character that is Brooklyn based Le Puzz? I think their website says it best. “Welcome to the Wonderfully Whimsical Weirdo Wigsaw Wuzzle Wumpany. You're gonna love it to pieces.” They are punny, they are lighthearted, and I dare you not to smile when you look at their products. Who isn’t laughing when they see this?

Why yes, that is a cat in a bathtub! Even more clever is the photo-shoot they used as part of this idea- yes, they did a real photo-shoot with a cat named Paisley! The only AI they use is their Active Imaginations. And doesn’t Paisley just look delighted? To get the full flavor, go and read the description about the puzzle.

Friends Alistair Matthews and Michael Hunter created the whimsy and brand behind Le Puzz. I asked them to share more about what makes the process and their product different. They shared:

“For Le Puzz it is important and part of our brand that to have our puzzle pieces be random cut. That means every piece is different. We base them off old vintage designs. We hand draw them and then work with the factory. They look at the twists of the die lines and collaborate with us to create the final design. Then it takes 6 weeks for the die to be hand made out of steel. Those die lines are specific to their machines. They can be used for 100,000 puzzles.

For people that have standard die lines, outsourcing puzzle manufacturing is more straightforward. We have a specific aesthetic tied to our brand. The US manufacturers simply can’t do it in a way that is affordable. We know this because we tried to use US manufacturing.

Our experience in the US has been - you get what you get. Customization is a non-starter. When we explored manufacturing in the US, we were quoted a die price that is 10 times more expensive than what we could do in China. It’s simply far too expensive for a small company.

Additionally, most manufacturers couldn’t do anything because our local systems were at capacity. We can’t scale the way we need to. It would take at least a year of lead time to work on something. We didn’t want to wait that long. Would you wait that long?”

As we continued to talk, it struck me that we need both a capacity and willingness to rebuild here. You get what you get? That’s not good enough. With so much of our manufacturing outsourced years ago, much of the skill set has been lost. Technical skills are built from experience, and this is not easy to replace. We’ve had a relentless focus on removing cost from the system. Has it cost us something even more important- our ingenuity and collaborative spirit? I wanted to learn more about how the collaboration in the manufacturing process is working for Le Puzz.

“Our relationship with our manufacturer is truly a collaborative one. There is a true spirit of engineering, ingenuity to this process. It is more than know how. It’s easy for people to be dismissive and simplify the complexity of the engineering. Yes, it requires engineering skills.

We might see that the die mold is not working. We can’t glaze an item a certain way. Our manufacturer has access to a depth of knowledge and a spirit of collaboration and expertise. They can solve problems that we can’t. And when they don’t know something, they go up the road to talk to others doing something similar to collaborate and figure it out.”

As a small and growing company, I also wanted to explore what it would take for Le Puzz to move their manufacturing to another country or build their own manufacturing here.

“We have been looking at both these options. There is complexity to this. Right now, the dies we are using would be a sunk cost. They are specifically made by hand to work with the machines in China.

We explored if we could have the puzzles made in Poland. We would have to spend at least $35000 just to set up the die lines. Plus then the raw material and manufacturing costs.

We have already been weakened by large tariff bills on our existing products. It’s hard to have to both pay the tariff bill and pay to build the dies again in another country. And then pay to manufacture.

The other option is to build a factory in the US from the ground up and start up manufacturing ourselves. Knowing what we know about the machines, manufacturing, labor, etc, this cost is likely substantial. Our best guess is that it is a 3 year $1 million project. We simply can’t afford it.”

Impacts of Volatile Tariff Policy

Both Le Puzz and Oakland Puzzle Company shared with me a sobering problem. The lead time required with their manufacturers is several months. This is completely normal in the manufacturing world. Let’s say 4-5 months as a baseline to work with your manufacturer and get the product made and have it shipped here.

As a business, let’s say you placed your order in the middle of January 2025. Consider where the tariff levels were with China at that time- 0%. Now four months later when your product is manufactured and goes on the boat to come here, there is now a 145% tariff. How well do you think they as manufacturers can absorb a 145% tariff? The Chinese are not paying these tariffs- the small companies are. Even if they plan to raise prices, they still have to be able to pay a bill that has a large tariff added on to it.

Let’s pause for a moment to let that sink in. Could you just “absorb” that cost increase? Would you have the cash on hand to even pay the new bill with the tariff?

Here’s what’s even worse. The tariff bill isn’t always included right away as shipping companies struggle to keep up. You can be retroactively billed for the difference. There is much tariff confusion. Small companies can find themselves being retroactively billed for a large tariff. This is a huge and scary burden for small companies and it is not being talked about enough.

Who wins in all this? Let’s put on our finance hats here. He or she with the strongest balance sheet and access to capital wins. None of the small companies can pay these bills for long. They can’t draw on large lines of credit like bigger companies. In this case, it means Big puzzle wins by default. They are likely the only ones with the capacity to pay those types of bills. Or they utilize enough manufacturing here due to their scale.

According to a recent survey conducted by CNBC: “Most companies say high costs will keep them from moving manufacturing back to the U.S., according to a new CNBC Supply Chain survey, and if they do, 81% expect automation to be favored over workers.” Source: CNBC State of Freight

“Taken together, the majority of respondents estimated that the price tag of building a new domestic supply chain would at least be double current costs (18%), or would likely be more than double costs (47%). Instead of moving supply chains back to the United States, 61% said it would be more cost-effective to relocate supply chains to lower-tariffed countries.” Source: CNBC State of Freight

In order words, companies are saying the will go low tariff hunting and hop from country to country to outrun tariffs. The only companies that can afford to build and rebuild their supply chains are large companies. Is this what we want? To damage or destroy creative and entrepreneurial small companies that had to bridge gaps due to what’s missing in our ecosystem?

These stories are representative of what is happening to many small businesses. I’ve talked with dozens of small businesses over the last few months that are impacted in similar ways. There is a grand irony in all of this. Most artisan businesses I talk to wish they could utilize more local suppliers and manufacturing. Most small businesses everywhere try to do this. Whether you are in Canada, the UK, Australia, the US- we want to support local where we can.

We look elsewhere after exhausting local options or having outgrown local capacity. In my interviews, most people understand the need for tariffs in certain situations. But to put the money from the tariffs into a general fund is a problem. Where does that money go?

There is no dialog about how exactly the tariffs will help close the gap. There is no connection back to building anything. No connection to it helping foster collaboration or ingenuity or new manufacturing capacity. How will we close the manufacturing gap if those very tariffs have no programs, plans, or means for which they will be used to rebuild industry? How much damage will we do to these small companies in the mean time? And why is this our only choice?

If you found this series interesting, you might also like our article on this topic for the wool industry here: We're gonna need more sheep 

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