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Se7en thrives with U.S. plant

Gary Evans -- Furniture Today, January 9, 2012

BURLINGTON, N.C. - As U.S. upholstery companies shifted fabric buying to China and domestic mills were dropping out like flies, a group of former Burlington Inds. executives spent some sleepless nights wondering if they were out of their minds.
     Against the odds, the group was investing its financial future on a bet that the appeal of cheap prices and limited options from China would eventually give way to the desire for shorter delivery times, better quality, reduced transportation costs and the can-do relationship that previously existed between domestic upholstery makers and homegrown U.S. mills.
     Now it's beginning to look like the management team of Burlington Technologies, whose core business is Burlington Mfg. Services (yarn packages and dye services), and Se7en (interior fabrics), has guessed right.
     The company, with two sprawling plants (Pioneer and Williamsburg) is growing in the worst of economic times and seems to be following its own mantra: "Survive and thrive."

Textile industry veteran Michael Durham and several
partners purchased fabric producer Tietex Interiors in
2009 and renamed the business Se7en. Durham is the
company's president and CEO.

     The owners - Robert Sills, co-chairman; Michael Durham, Burlington Technologies president, CEO and co-chair; Al Blalock, BMS president; and Marvin Gaines, executive vice president, manufacturing, BT - founded the business in April 2007, bought fabric maker Tietex Interiors in 2009 and re-formed it to become Se7en.
     It also has diversified with the startup of protective clothing business VitaFlex and investment in hand-held diagnostic medical technology through Diagnostic Chips. And most recently it acquired Verelli, which makes custom wall coverings and fabrics for the hospitality industry, with customers that include Ritz-Carlton and Four Seasons. Other acquisitions may be announced in the near future, the owners say.
     Despite the rocky economy, "We chose that time to start the business," said Durham, an engineering grad and Harvard MBA whose career path took him from Procter & Gamble to the textile industry.
     "There was a need for us to create a foundation that would mimic the needs of customers who wanted to be here and had no intention of going to China," he said. "We wanted fabric to be close to that. But the question was: Would there be enough customers of thA worker adjusts a loom at Se7en’s fabric plant near Williamsburg, N.C.at level left to justify putting the business together?"
     The team determined the business was there - particularly in the middle to upper price points.
     Durham said that several financial institutions also believed in the company's business model, believed that business would come back, predicted an eventual China backlash, and were ready to provide operational money to help the company grow.
     It wasn't that hard to find a manufacturing platform. There is over a million square feet of space here that was once part of Burlington and its Burlington House division.
     As executive vice president of Burlington House, Durham was in on the planning of the 294,000-square-foot Williamsburg facility built in 1963-64, and knew exactly what it cost to build, how it was built, and what equipment was in it. And despite its big-time capacity, Durham and his group have instilled a small business mentality and culture to keep the company flexible and ready to serve.
     Besides Valdese Weavers, Se7en is the only other vertical North American operation that can prepare thread, run it through its own dye house and send it to looms that weave it into fabric for upholstery and other uses. Se7en makes all of its mid-priced ($5 to $15 a yard) decorative fabrics in North Carolina but the company partners with a Chinese factory for base cloths at $5 and under - a price range where China is hard to beat.
     "What we try to do is design beautiful products for customers that want and need to buy locally in small or large ‘made-to-order' quantities, deliver first quality on time, as well as help customers in oversold situations with expedited delivery," Durham said.
     He said Se7en can deliver in two weeks if necessary but the standard is six weeks. It's hard to know if Durham is serious when he says he'd like to get delivery down to seven days ("We like the number seven"), but he assures that the company has the ability for quick response: "We do patterns on the fly.... We can even do market samples for five, 10, 15, 25 yards - no minimums."
     Being the new boy on the block has its drawbacks, one of them uncertainty from customers.
     "So many customers are still wary of a new source, a new name and almost anyone other than Valdese," Durham said. "I think that this outlook really, really hurts the rest of the industry - fabric and furniture companies.... What our industry and customers need to see, hear and feel is that there are alternatives waiting for them when business comes back. I think that many are very fearful that when business and the economy doeThe North Carolina plant’s looms produce upholstery fabric targeting price points of $5 to $15 per yard.s rebound, the problems will be exacerbated."
     Durham said Se7en is positioned for growth with a million square feet of manufacturing space that can be ramped up with little or no capital investment, except for labor. The company now employs 125 workers, many of them longtime textile pros. The team says it knows that China is not going to fade away as a source in the foreseeable future.
     "We're hoping that with volume customers saying things aren't getting any better in China and high-end customers really not wanting to go there because it doesn't fit, we think we have a very valid business model for a long, long time," Durham said. From a capacity and space standpoint, Se7en has lots of wiggle room.
     "We've right-sized our company, both in floor space and people, and have plenty of assets so we don't have to go to the banks (for capital improvements)," Durham said. "We would just need labor. It's a matter of running more people and more shifts. That's a pretty neat position to be in."
     Burlington budgeted $5 million to build the Williamsburg plant in the '60s and went over budget by a half-million, spending the equivalent of $25 million in today's dollars.
     "If business came back, who's going to build? The margins are pretty low so who's going to spend $25 million to build a new facility? That doesn't include the equipment (over a quarter-million dollars per loom)."
     Dealing with a domestic mill provides the flexibility to customize and tailor product to meet a merchandiser's needs quickly by doing special patterns, colors, and exclusives, the executives say.
     As a bonus, Se7en owns archives formerly owned by Burlington that contain 7,000 pieces of artwork, fabric documents and other materials dating to the 1890s that customers can use for inspiration.
     "People think that since everything has to come from China and that lead times are so long, they can't change, edit or customize something anymore that they would like to do," said Durham. "But they still can with U.S. mills."

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