Reinvesting during boom now paying off for Harden
By Powell Slaughter -- Furniture Today, June 29, 2003
McConnellsville, N.Y. — In the furniture industry's salad days a few years ago, a lot of U.S. manufacturers were happy to crank out product and pull in the cash. China was building market share but, hey, there was plenty to go around.
In retrospect, Harden Furniture, a domestic producer of high-end case goods and upholstery employing 500 people at two plants in upstate New York, looks pretty smart. The family-owned company embarked on a capital improvement campaign that pumped $9 million back into the business within a couple of years — quite a chunk for a then-$60 million-a-year operation.
Harden built a new sawmill in late 1999, bought a fourth CNC router and added 50,000 square feet to its finishing operation. Other improvements included upgraded electrical systems and redesigned footprints in the factory for better product flow.
The result has been savings that have helped the company weather industrywide lackluster case goods sales that have dragged revenue down into the $50 million range. Harden has kept the great majority of its production at home, importing only about 15% of its goods, a ratio it wants to maintain.
Investing in itself
Greg Harden, president and chief executive officer, said that several years of good business in the mid- to late '90s put the manufacturer in a position to spend some money. Rather than grow by acquisition, the company invested in itself.
"We didn't know just how good 1999 through 2001 would be, or how bad 2002 would be," he said.
For all of its 160-year history, Harden has owned timber resources. The company produced trestles and other components for bridges and canals in the mid-1800s before venturing into furniture. By the late 1990s, business had outgrown Harden's 40-year-old sawmill.
"The new sawmill led to a dramatic increase in our efficiency," said Harden. "We started from scratch and built from the ground up. All the waste material drops to a lower level where it's not in the way, and we use it to heat our factories in winter."
By doing its own sawing, he estimated Harden saves 20% on lumber costs. "There are savings that end up in the product delivered to our dealers," he said.
Harden's control over its raw materials also gives it an advantage. The company owns 10,000 acres of forestlands and manages another 20,000. Together, that accounts for about 15% of the lumber it uses. The company is an investment partner in a consortium of landowners, which provides another source of logs. Harden also provides forestry consulting to other landowners, and buys some timber from them.
The sawmill can cut 400 logs a day.
"We have 100% control over all the processes," said Barc Mutch, vice president of manufacturing. "It gives us an opportunity to utilize lumber better than most of our competitors. In the open market, a lot of wood gets lopped off. We saw to our needs, not the general marketplace's."
Some of the waste material goes into pallet manufacturing.
"Anything we can't sell, we chip for heating the plant in winter," Mutch said. "We try to maintain a million-dollar inventory of logs in the yard, and $1 million in the lumber yard. We maintain those levels since the wood is drying for free, and you need less time in the kiln."
Vertical integration also helps Harden in its campaign for certification of its timber harvesting activities through the Sustainable Forest Initiative. SFI is a system of principles, objectives, performance measures and indicators designed to support the sustainable harvesting of forest products to ensure long-term forest productivity. Harden aims to complete certification this summer, and would be the first U.S. furniture manufacturer to achieve 100% SFI certification.
"We'll be able to say, when you buy Harden case goods, they come from forest properties that are managed in a sustainable manner," Harden said.
Borrowing, at last
The fifth generation of his family to run the business, Greg Harden said it wasn't easy to convince the fourth generation, led by his father, Dave, to borrow funds needed for the capital program.
"With them, you didn't borrow money for anything," he said. "But we funded the expansion with cash flow and a $3 million industrial development loan. Our investment banker told us that, after the loan, 'You went from the best balance sheet of any company we do business with to the best balance sheet of any company we do business with.'"
Being a closely held company with a careful approach to costs is a bit of a mixed blessing, Harden admitted, but that control over how much gets spent on what is worth it.
"It limits your growth ability when business is good, but when it turns down we don't make headlines with financial problems," he said.
This year, the company will invest in itself again, not with capital improvements but in telling its own story to consumers, increasing its national advertising budget in shelter publications to $1 million.
-
Asian sources coping with tough issues
May 6, 2007 -
Mexico slips to No. 4 but still a key source
Mar 9, 2008 -
Mexico slips to No. 4 but still a key source
Mar 9, 2008 -
Some U.S. importers own, run offshore plants
Apr 2, 2006 -
Protecting the woods
Nov 6, 2005
Featured Company
-
Brandwise Inc.
Brandwise serves a model - not just an industry - by integrating, automating, and optimizing the entire sales channel, from wholesale Suppliers to their Reps and the Retailers they service. In short, our software helps Reps and Suppliers sell more and create... more
VIEW ALL GALLERIES
