Efficiencies help fend off rising raw materials costs
By Thomas Russell -- Furniture Today, December 4, 2006
High Point — Along with the challenge of securing retail floor space, North American metal bed producers face another big issue — rising raw materials costs.
Company officials say metal prices have more than doubled in the past three years. But while costs are rising, so is foreign-based competition, which limits the ability of domestic companies to raise prices, officials say.
"It has put a dent in our profit because we can only raise prices so much," said Wesley Allen President Victor Sawan. "Because we have competition from overseas, we have increased prices only 8% in the last three years. That doesn't begin to cover the cost of steel."
To survive, Wesley Allen has had to improve efficiency and productivity, he said.
Most companies surveyed have maintained employment levels at their factories over the past two years. But to do so, they have needed to reduce costs in other areas.
Wesley Allen is a prime example. It is in the midst of a five-year plan to cut expenses and improve operational efficiencies.
For instance, it installed a solar energy system more than three years ago at its main facility in Los Angeles, trimming energy costs by about 60%. It also refinanced two of the three buildings it owns and will have them paid off in 2007. And it has invested about $5 million in automated machinery and other modern equipment in the past four years, Sawan said.
A new online order system has allowed the company to shift several employees to other customer service jobs, where they can respond quickly to handle service issues. The new system also saves between $10 and $20 per order, which adds up over time, he said.
Charleston Forge has been investing $200,000 to $400,000 a year on such improvements as robotic welding machinery and computer-controlled equipment that cuts metal bed components.
The new gear has helped the company shorten its lead times by about two weeks. Lead times are now four to six weeks, and an express shipping program gets goods out the door in as little as seven days.
Charleston Forge also expanded its facilities in 2002 and 2003, adding 100,000 square feet of manufacturing, warehouse and office space. Officials said the move improved workflow and provided space needed to improve its on-site stocking program, another factor in shorter lead times.
Manufacturer Elliott's Designs became more efficient this year by reducing the number of beds it produces and focusing on its core business of Victorian reproduction beds. That required a smaller plant and a smaller work force.
At one time, Elliott's was producing as many as 80 models and employed as many as 100 workers in its 125,000-square-foot plant and warehouse. Today, it's in a 30,000-square-foot facility and employs fewer than 20 people.
"My goal is to run as economically as we can and as efficiently as we can," said President Elliott Jones. "That is the only way to survive."
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12/03/2006
