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Monday, 21 December 2015 15:04

Manufacturers rely on new products, talent development strategies to navigate industry challenges

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Joining MiBiz for a office furniture manufacturing roundtable were (top row from left) Bill Bundy of Trendway Corp, Ann Harten of Haworth Inc., Art Hasse of Kentwood Office Furniture. (Bottom row from left) Mark Lindquist of Rapid-Line Inc., Dave Rinard of Steelcase Inc. and Bill Stough of Sustainable Research Group LLC. Joining MiBiz for a office furniture manufacturing roundtable were (top row from left) Bill Bundy of Trendway Corp, Ann Harten of Haworth Inc., Art Hasse of Kentwood Office Furniture. (Bottom row from left) Mark Lindquist of Rapid-Line Inc., Dave Rinard of Steelcase Inc. and Bill Stough of Sustainable Research Group LLC. PHOTOS: Jeff Hage

The office furniture industry today faces a complex, challenging future.

Company executives must manage their operations amid increasing margin pressure and an influx of imported products and new regulations, all while running short on talent.

To navigate these challenges, industry leaders are turning to their strengths in new product development while implementing unique strategies to attract and retain talent.

MiBiz gathered a group of leaders in the furniture industry for a roundtable discussion to talk about how these challenges and solutions will impact their businesses in 2016. Participating in the conversation were:

- Bill Bundy, president of Trendway Corp.
- Ann Harten, vice president global human resources at Haworth Inc.
- Art Hasse, president and CEO of Kentwood Office Furniture Inc.
- Mark Lindquist, president of Rapid-Line Inc.
- Dave Rinard, director global environmental performance at Steelcase Inc.
- Bill Stough, president of Sustainable Research Group LLC

Here are some highlights of the discussion.


BUSINESS OPERATIONS

The Business Institutional Furniture Manufacturers Association (BIFMA) raised the issue of pressure from imports in its recent forecast. How will imports impact your business in 2016?

BUNDY: Imports have been a very interesting reality in our business. If you look at the BIFMA data, the U.S. produced value of office furniture in 1995 was about $9.5 billion. In 2014, and in 2014 dollars, the U.S. production value of office furniture was $9.5 billion. In 1995, imports from various parts of the world were $700 million. Today they’re topping $3 billion, up over 350 percent.

HASSE: We’re in the remanufacturing business, primarily of Herman Miller and Haworth systems, and 100 percent of those back in 1995 would have been locally produced. Today, there is a very significant portion of what we do that we import in containers in terms of parts, pieces and different items.

LINDQUIST: There was this massive wave of China, China, China until the longshoreman strike hit and all of a sudden the world changed. Finally, the element of risk came back into play. Everyone was enamored with the (imports), and now they’re not so enamored. It hasn’t slowed them down tremendously, but it has had them think twice about the risk involved of this process, certainly with regard to components.

HARTEN: Customers are starting to look for a collaborative space product that does not have to have the 20-year guarantee of staying power. … As you shift from the more private and assigned space to the more collaborative space, that collaborative space is viewed as something that should be updated on a regular basis. That opens up an opportunity for the lower-cost, potentially lower-quality product.


What does that do to durability standards?

RINARD: You talk about not just the quality standards, but let’s talk standards in general that we’re expected to meet domestically — whether it be quality, customer expectations around material chemistry and product off-gassing. The same customers that are demanding all of these high standards are the same customers who want the cheapest stuff they can get, and they don’t seem to be aware enough to realize the dichotomy that cheap gets you cheap.


With sustainability being championed by the office furniture industry, how do those products that don’t meet environmental standards impact the good actors?

STOUGH: I think the stakes are starting to rise on that very issue. There’s a brand new study from Harvard and their School of Public Health. They basically are saying that … your cognitive performance is 100 times different from a standard office space (compared to the) ultimate green (office space).

BUNDY: That’s a lot.

STOUGH: That’s a huge amount. If you think about a 2-percent performance increase company-wide, it’s millions of dollars. I understand what you’re saying about the margin squeeze, but more and more data is coming out saying that these cheap imports, maybe at some point, someone is going to realize that we can’t afford to have them in our facilities.

RINARD: I think we as major (manufacturers) in the industry will be impacted in many ways because face it, some of our supply chains go there. Nike is a good example where you, by default, become responsible for suppliers’ performance, and our brand reputations are incredibly important to us. We’re not going to let suppliers’ poor performance tarnish us. We’re going to have to build expectations into the supply chains we deal with.


How do you as manufacturers police and filter those regulations down to your supply chain partners?

HARTEN: Audit, audit and audit. (Suppliers) will sub-supply. So you have an agreement with one and the first runs are terrific and then six months later, all of a sudden you notice a quality issue. When you go back in to see what happened, there’s been a sub-supplier that’s been assigned your particular piece of business. … It’s about presence. Every visit, every handshake, every casual walk around the facility, you have to have savvy people who know what they are looking at.

RINARD: It’s a process that starts out with a qualification questionnaire that’s very broad — not just in terms of environmental performance but we’re also looking at it in terms of supply chain reliability and financial stability. There are a number of dimensions that have to be looked at to determine if someone is going to be an acceptable supplier. Particularly, as we’ve gotten more and more lean, you can’t afford disruptions. Then I think there becomes a relationship issue.


As a supplier, do you actively market the sustainability angle as part of your pitch to furniture makers?

LINDQUIST: You can’t. We’re kind of a mouse between two elephants. You’re not going to tell a steel mill that they’re going to do something. So you’re kind of out of luck on that.

RINARD: That is really true. There is not a special brand of Steelcase steel or Trendway steel. We all use the same stuff, and our whole industry is a rounding error to the steel industry. We have no leverage. If you look at all of our raw materials, our entire industry doesn’t have that leverage.


LEGISLATION

Do you expect any disruptions as a result of the upcoming presidential election?

HARTEN: Are we going to have a lift or a downturn next year as people are waiting? An election year always has one or the other. Are people going to be incredibly cautious because they’re concerned about who is going to be in office and hold their investments, or are they going to move forward?

LINDQUIST: Forty of the last 44 elections, the economy always goes up that year, typically in the last six months when the party in power stimulates the economy a little bit to try to get their candidates elected. So you can bank on the later half of the year being good for a short period of time. Now when you look at 2017, it could be very scary.

BUNDY: What is the disapproval of Congress — something like 80 percent? When it’s that high, something starts to set in, and it’s apathy. It doesn’t matter, they’re going to remain dysfunctional.


On the state level, is there anything in particular that you’d like to see Gov. Rick Snyder champion in 2016?

HARTEN: For those who are on an hourly wage, there is no place to live. … We’ve all just experienced it in the summer of discontent of 2015. It seems like the water raised for everyone, including the auto (suppliers), and we all started trading people. … We’re going to need people and we are going to need places for them to live. If I could ask Governor Snyder to work with businesses, (it would be) to figure out how to create places for people to live, close to where we are. There’s a proximity of life to work that is very important to them, and we need spaces for them in affordable housing for people to want to come.

BUNDY: I think we could do some things like bring the manufacturers of chair casters back to the U.S. It’s injection molding and assembly. … There are trades like woodworking that if we want to bring it back, we’re in trouble because the skilled trades have gone away.

RINARD: There was a study done that showed the single most-effective return on investment to grow prosperity and jobs was funding in the education sector. If you grow college degrees, then they said you create innovation economies, and it builds into skilled trades and trickles through the system.


TALENT

What are some ways the business community or state legislators can make up for the talent gap?

HARTEN: A light rail system between the major areas.

BUNDY: We’re hiring people through (Holland-based) 70x7 Life Recovery staffing. They’re working with felons who have served their time to bring them back (to the workforce). We have 10 to 12 of them and these people are some of the most grateful.

HASSE: We have several employees who have come from the prison system. Several have also come from Goodwill. The Goodwill people do much to help those people prepare to go to work. Once they’re there, we have greater success with them than we do with the temporary agency people.

RINARD: I’ve heard anecdotally that in the community, companies were having trouble hiring employees to work the 10-hour shift, and their constraint was that they had a second job they had to get to, because the first one wasn’t paying them enough to live on.

HARTEN: We’ve introduced new shifts into our programs. We have weekend shifts, part-time shifts and seasonal shifts. In Michigan, because agriculture is in our top three (industries), there are plenty of workers who can’t work from November to April so they’re willing to come in as seasonals. That’s a non-traditional approach for us.

LINDQUIST: The state has a fundamental problem. Something like 82 percent of the University of Michigan graduates leave the state. With that kind of vacuum being created, we can’t get there from here unless something changes.


What can manufacturers do to help keep those graduates in the state?

HARTEN: We take time to have our junior high and high school kids come through on tours and we show them this amazing thing called manufacturing. We take them into some of the areas where we have our highly technical products and we give them a peek at our design work.

LINDQUIST: You have to get the parents involved. The parents are so negative on manufacturing, so they steer the kids away from it. The school system pushes them to college, and the parents push them to some kind of clean industry or clean job.

RINARD: I went to, at the time, one of the wealthiest high schools in the state: little old Godwin High School. We were the school that GM and Lear paid the taxes on. We had the most amazing auto shop, wood shop, machine shop in this incredible facility. Most of that is all gone.


CONSUMER TASTES
Many experts have described sitting as the new smoking. How is the wellness movement impacting your business and how do you expect it to drive design in the future?

RINARD: The whole wellness movement is definitely a trend worth watching. I think it’s this whole idea of mind, body and soul — if you want to think about it in that holistic way — has been (on) a little bit of the pendulum moving. You’ve probably all experienced this where there was this time where no one had a space, everyone was mobile and nobody should have a space. I would describe that as pounding a square peg through the round hole, where (now) you’re seeing a shift backward where people do need private space. They need collaborative space. It’s what you’d call a variety of place.

HASSE: I think the key is balance. As you said, the pendulum has swung to the more open plan, lower-height workstations and that kind of thing. Then all of sudden the noise level and distraction level was driving people nuts, and there was nowhere to go for privacy. The whole worker thing has changed so dramatically and people are trying to optimize the real estate at the same time and have less real estate per person.


With more open spaces, obviously, the overall floor plan of workstations has shrunk. How has that impacted your business?

HARTEN: With collaborative spaces, we are outfitting the same number of offices for far less revenue because of the things you’ve outlined.

BUNDY: It wasn’t that many years ago where you could sell a workstation for $4,000. Today, a pretty rich workstation is $1,500. So you think about what we had to do, and that’s led to diversification to a lot of this lounge furniture and acquisitions for fabric companies. It’s pretty amazing.

HASSE: We had our two-day planning meeting yesterday, and I kicked it off by explaining that we’re manufacturing workstations for 80-percent off, where we used to sell for 65-percent off. We used to be 67-inch-high panels, now we’re 48 or 54 (inches). So the dollars per person of what customers are buying is down dramatically, which is why there is that margin challenge.


Are you adding value back in with technology and power integration?

HARTEN: Certainly. Getting power out to the middle of the floor is becoming one of the biggest challenges for our customers.

BUNDY: The integration of technology into the walls of furniture — I hear a lot of people saying be careful with that because the technology that you integrate today will be obsolete in three months.

HARTEN: We look at how you connect, then those connections are what we will update. Right now, you have USB and regular power and those things may morph and change, but you’re not building to a specific device. It’s the only way to succeed.


If there was one major disruptor for the office furniture industry in 2016, what would it be?

LINDQUIST: $40 a barrel of oil is a blessing and a problem at the same time. It’s a pretty major disruption right now.

RINARD: China’s economy softening has created some really interesting things in my little piece of the world. The value of steel to be recycled and the commodity market has tanked to a point where corrugated is very difficult to get recycled.

HARTEN: I wonder if corporate and office security is going to become an issue that somehow might impact what we do. It is on the minds of our members and customers. What is it that they are now going to want or is there anything that our industry will be able to provide? I don’t think we’re hearing it yet, but because we’ve had seven (terrorist attacks) this year and other (incidents), I’m wondering whether or not it’s going to start becoming a bigger thing.

Read 5820 times Last modified on Monday, 28 December 2015 10:26

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