Herman Miller Furnishes Diversified Strategy

Herman Miller Furnishes Diversified Strategy

Office furniture leader expands health care and educational institution offerings to lessen dependency on slowing office products market.

From the headquarters of Herman Miller Inc., Curt Pullen talks amid the unmistakable pounding sounds and commotion associated with a construction work site about his company's plan to rebound from the recession. Pullen, the firm's executive vice president and president of North America, says the workers are installing new lower-height Herman Miller workstations designed to accommodate a growing trend in offices toward more open, collaborative environments.

The new product, called Canvas, is part of the company's market-shift strategy after the demand for office furniture fell hard during the economic downturn. The plan also involves diversifying into the health care and academic furniture markets and more emphasis on emerging economies.

The plan appears to be paying off. For the first time in nearly four years the company reported two consecutive quarters of double-digit percentage sales growth after releasing its second-quarter earnings statement on Dec. 15. Orders in the second quarter rose 34% to $462 million.

CEO Brian Walker noted the company's expanded market reach as a contributing factor to growth. Significant increases occurred in international markets where sales rose 33%. In 2010 the company acquired UK-based ergonomic workstation manufacturer Colebrook Bosson Saunders and purchased assets from Australian furniture maker Living Edge Group. In 2008, the company announced a partnership with China's Posh Office Systems Ltd. to expand in the Asia-Pacific region.

The company attributed a year-end surge to gains in its international, health care, learning and retail vertical markets. The expanding health care industry has become one of the company's key growth targets. One of the more recent expansions into the health care field came on Jan. 31 when Herman Miller completed its acquisition of health care furniture manufacturer Nemschoff Chairs LLC based in Sheboygan, Wis.

Herman Miller designed the Canvas workstation, pictured above, at a lower height than traditional workstations to facilitate a workplace trend toward more collaborative environments. The design also allows more light into work areas and saves space, the company says. Photo: Herman Miller Inc.
The company expects its Compass configurable patient-room system to reinvent hospital care settings, says Pullen. Herman Miller introduced Compass in June during the NeoCon interior design conference. Compass is a system of rails that allows wall components, including sinks and headwalls, to be reconfigured to meet patient needs.

Educational Experience

Higher education is another area where the company continues to make investments. The college environment presents an estimated $1 billion in potential annual consumption, Pullen says. The company's higher-education market share is similar to its overall sales. In an effort to gain insight into the college market, on Jan. 25 the company launched its second-annual Where's Your Hub? student video contest. Herman Miller is asking U.S. and Canadian college students to highlight how they use their hub spaces and how higher-education facilities can better respond to their needs.

Colleges are re-examining how they present themselves during student visits to attract new applicants amid rising tuition costs, Pullen says. "Just like there's a war for workplace talent, higher-ed places are also going through similar feelings of how do they attract the student body they're looking for," he says.

Revamping the Office Layout

The company is leveraging its expertise in offerings that facilitate human interaction in the office environment to expand its higher-education solutions. But that doesn't mean Herman Miller has abandoned its roots in the office furniture arena. The Canvas workstation the company was installing at its headquarters features a design that provides a more open, collaborative environment, Pullen says.

Curt Pullen: "Just like there's a war for workplace talent, higher-ed places are also going through similar feelings of how do they attract the student body theyre looking for."
Office spaces have shrunk by half over the past 10 years to about 200 square feet per person as increased mobility has reduced the need for larger areas, Pullen says. In addition, the need for information sharing has grown. "Work is getting done in small teams of two, three, four or five people who come together to share their knowledge information, so you see a much larger shift in the footprint toward zones that can support that collaborative community," Pullen says.

Herman Miller has adopted the concept of "compression and enrichment," which offers customers the ability to reduce their real estate investment and costs by placing more employees per square foot in smaller individual offices that provide spaces conducive toward collaboration. The Canvas workstation was designed at a lower height than traditional workstations to allow more light into the work area and provide a more "residential feel," Pullen says.

Lean Dealers

The company's ability to bring these new products to market quickly and effectively depends heavily on its manufacturing process. Over the years Herman Miller has implemented a lean manufacturing system that extends throughout its supply chain network, including its distribution channels, Pullen says.

The company has introduced lean concepts to its dealership network to streamline the installation process at customer locations. This includes taking the same type of one-piece flow on the plant floor and using it for its delivery and installation system. In the past a workstation installation might begin with a batch shipment of frames and then subsequent shipments of the remaining individual components needed to complete the job.

Around the 2005-2006 time frame the company began sequencing its manufacturing, installation crews and delivery process into a building so workstations are completed in a more orderly fashion. The result is a less cluttered and confusing work site, leading to faster installation times. That ultimately takes cost out of the process for customers, which benefits Herman Miller in an increasingly competitive environment, Pullen says. "The customer is paying for the inefficiencies, if we don't do that, through higher prices, higher installation costs, reduced satisfaction because it takes longer to get done," Pullen explains.

All of the company's major dealers are involved in the process with the company, Pullen says. The dealers are an integral part of the company's overall success because of their direct interaction with customers, says company spokesman Mark Schurman. "These dealers are independent businesses, but they're the people who are ultimately dealing with the customer on a day-to-day basis. To the extent that we can help them be more profitable through the elimination of waste -- although that's not our business per se -- it's a vital part of our business. Their economic strength becomes an enormous competitive advantage to us as far as their ability to weather downturns in the market and service the customer," Schurman says.

The system has been such a success that lean pioneer Toyota has sought information from Herman Miller on what the company has learned from its dealers so Toyota can apply those same principles to its distribution network, Pullen says. "They have been working with us very steadily through this process to learn what we're finding," Pullen says.

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