Office furniture manufacturers have been late adopters of automation, particularly inside their West Michigan-based factories.
But lately, they’ve switched gears and are investing in more technology, according to industry experts, who point to a statewide labor shortage, problems with outsourcing materials, and companies adjusting to repeatable processes as factors leading to more automation.
The industry has “lagged” in automation in the past, but business decisions have forced companies to act with more technology, said Tom Haverdink, production work team leader at Zeeland-based Herman Miller Inc.
“From where I sit, I believe there has been an increase in automation,” Haverdink told MiBiz. “I do not see them ever being what I would call ‘a very automated industry,’ but I would say it is on the increase. … As we move more from craftsmanship to high volume items, it lends itself to automated processes.”
The company is investing in its manufacturing operations to help drive operational efficiency. In the first quarter of Herman Miller’s 2018 fiscal year, the company experienced capacity constraints in several product categories, including height-adjustable tables and laminate storage solutions.
As a result, Herman Miller’s first quarter gross margins came on the lower end of expectations as the company incurred higher costs related to overtime and outsourcing, President and CEO Brian Walker said at the time. The gross margin pressure also carried over into the second quarter.
Walker told brokerage analysts that the company plans to invest in manufacturing equipment over the next three years as a means to reduce labor costs in the long term and “drive greater efficiency so that we can … be able to run with fewer people.”
“That will largely be how do we not replace folks that are retiring and at the same time be able to grow volume,” he said in a conference call to discuss quarterly results.
To drive supply chain optimization in the future, the company will invest in automation in its wood construction, steel, steel finishing, high-speed assembly and upholstery lines, said Greg Bylsma, president of North American operations at Herman Miller.
“Our investments in automation are building,” Bylsma said in an email to MiBiz, noting the company bases its insourcing decisions on its capabilities. “Our capacity constraints are both internal and supply based. That said, these (issues) are driven by strong growth in new product categories.”
Looking ahead, Bylsma said Herman Miller’s approach to driving capacity improvements will be focused on “lean manufacturing and automation both internally and in our supply base.”
The company expects capital expenditures for the 2018 fiscal year to range from $85 million to $95 million primarily for investments in facilities and equipment, according to a second-quarter filing with federal securities regulators. The company’s capital expenditures totaled $87.3 million in the previous fiscal year.
ADJUSTING TO A TALENT SHORTAGE
While the Grand Rapids-based Business and Institutional Furniture Manufacturers Association (BIFMA) does not track industry investments in automation, Executive Director Tom Reardon said anecdotal evidence suggests that companies are investing more in the technology as a result of the current labor shortage.
“There’s has been a trend toward increasing automation (and) robotics for decades,” Reardon said, noting the trend has occurred broadly in the manufacturing sector for years. “The pace of implementation of automation and robotics is increasing.”
Already the market for robots is growing at a breakneck pace across a broad swath of the manufacturing industry. According to a forecast from the Boston Consulting Group, spending on robots will reach $87 billion by 2025, a 30-percent increase the firm’s estimate nearly four years ago.
Kevin Kuske, the president of Genesis Seating, Davidson Plyforms Inc. and Grand River Polishing — which are part of Carthage, Mo.-based Leggett & Platt Inc. — recognizes office furniture manufacturers in West Michigan are embracing automation, especially because of their struggle to find talent.
“It is early for the furniture industry, but there definitely is an interest in both automation and the ‘digitization’ of manufacturing,” he told MiBiz in an email.
As a supplier of automation equipment to manufacturers, including office furniture OEMs, Industrial Control Service Inc.’s Mark Ermatinger hears repeatedly that the labor shortage is fueling customers’ investments in robotics.
“Traditionally, the furniture people haven’t done much (with automation),” said Ermatinger, the vice president of sales at Industrial Control. “Before they weren’t doing any automation, (but) the people issue has really hurt them. … They have exhausted all other options physically possible.”
At Herman Miller, the investment in automation is contingent on “reducing human struggle,” Bylsma said.
“We believe that we need to continue to be an employer of choice through wages, benefits, and growth opportunities for our employees,” he said. “Part of this is demonstrating that we are committed to reducing human struggle in our work through investing in technology and automation.”
WHERE ROBOTS ‘MAKE SENSE’
Despite supply chain optimization initiatives, some supplier executives see a bifurcated approach among office furniture OEMs in West Michigan when it comes to their manufacturing strategies.
Some vertically integrated companies “manufacture like crazy and they think it’s their competitive advantage,” said Rick Van Dis, president of Rapid-Line Inc., a Wyoming-based a full-service metal fabrication shop and contract manufacturer. “There are other folks that only manufacture stuff that falls in their core competency and they outsource everything else.”
Throughout the supply chain, companies have invested in automation in recent years, but it’s important for executives to invest wisely, Van Dis said.
According to a Furniture Today report, 47 percent of upholstered furniture manufacturers say they want to use more technology, while another 47 percent say they are already using CNC or virtual prototyping technology for some manufacturing processes.
“It’s high-volume stuff and repeatability where robotics makes sense,” Van Dis said. “It depends on the company. There is a pressure, I think, to automate more, but it doesn’t make sense everywhere. I’ve seen plenty of examples where folks invest in automation or robotics, (but) robots aren’t always as flexible as the human being. The next-level problem is you have to have somebody who can program (the robot).”
Grand Rapids-based Steelcase Inc. (NYSE: SCS) has been a long-term adopter of automation technology.
Instead of manually sorting the raw materials, the company has invested in an artificial intelligence-based technology “to scan, categorize and sort different natural woods based on color characteristics that can then be matched with similar finishes during production,” said Katie Woodruff, a company spokesperson.
“At Steelcase, we are investing in automation and strategic use of technology throughout our global operations footprint and supply chain,” Woodruff said in an email to MiBiz. “Our objective is to improve our agility, enabling us to react quickly to today’s rapidly changing regional market business conditions, all in service of meeting ever-evolving customer demands.”
As Steelcase integrates new technologies, the company is looking for ways “to streamline production; ease the challenging, physical or repetitive nature of tasks; and improve the safety of our employees,” according to Woodruff.
“It’s not about replacing people with machines, but using machines to enhance and allow for more meaningful, safer employee work, ensuring we deliver on our quality promise to each customer,” Woodruff said.