GREEN SOFA What Manufacturing can Learn, and needs to do.

Tariff's have created global turbulence. The USA is hoping that the imposed Tariffs will reinvigorate Manufacturing in the USA. All agree that Tariffs will increase costs to the end consumer.

For most, Value Definition is determined by what the Customer is willing to pay for and by how much.

Because it is easier to shop in a "Low Cost Country" than figure out how to produce competitively locally the erosion of Manufacturing just naturally happened. Granted, other companies lave that Tariffs have been imposed on incoming goods to mask their lack of competitiveness and they can continue to be in business.

Let us park the discussion about Tariffs for a moment and talk about the Green Sofa.

Walking the halls at a furniture company i was employed at I got wind that our Merchandizing Team had purchased a container of Green Sofas from Asia. This was a direct assault on our core competency, we manufacture thousands of sofa on a weekly basis ... so obviously we had to question them as to why?

I was not prepared for the response I got. I expected to hear we got them significant cheaper, the quality is better Blah, Blah Blah. Instead, the response was "You are just to difficult to work with !"

OUCH !! That hurt, but to be honest when we worked with them we did ask for several inputs to scope the project to minimize waste and excessive time during the development time.:

• Forecast for the Style

• Forecast by cover type

• Cut notes

• Sewing Notes

• Mock-up drawing

And also "they can produce at a fraction of your cost"

Challenge Accepted !!

Merchandising provided us with their landed procurement price which now became our target manufacturing cost. But Bonus, they had a sample which we were going to be allowed to reverse engineer.

Of we went with our sample Green Sofa to our highly experienced Manufacturing Team to see what could we do. Upon initial observation we found the following:

• The Green Sofa actually looked pretty good from far.

• Sewing was pretty precise.

• Their frame was made from softwood. We use hardwood

• They had blown in the foam to fill the void of the sofa (think of blowing ups a balloon) Our typical Sofa used over 20 different densities of foam.

• They only used 50% of staples compared to our standard.

• Their cover was 50% thinner than what we would typically use.

Yes the Green Sofa looked pretty good from a casual glance but upon closer inspection it did not come close to our quality or meet the Brand Image we worked so hard to create.

The reaction from the team was unanimous .... The Green Sofa did not even come close to our Manufacturing Standard. Not one member of the team would be willing to have their name attached to that product in any way, shape or form. This was closely followed by we cannot make an equivalent product for the price Merchandizing purchased it for.

We told the Team if we walk away from this challenge we are starting to slide down a very slippery slope that would ultimately eliminate all of our manufacturing jobs across our 7 campuses in North America. We may not like it, but in order to preserve our jobs we had to figure out how to make a competitive product.

We had a Sample. We had a Target Price. What we needed was a Paradigm Shift!

We cast aside traditional Paradigms, tried and tested methodologies and practices. We over analized every micro element of the Green Sofa and came up with a cost effective alternative. Honestly, it was painful, it created many heated debates, frustrations and ultimately humble compromises leading to acceptance.

The final result ... WE DID IT !!! we had a competitively priced product and with slightly better quality. We proved that we could be competitive against a Low Cost Country and nobody had to sacrifice their pay rate.

We now had to pass 2 final tests:

• Acceptance by Merchandizing that we could provide a competitive product?

• Would it satisfy the Consumer's Value Proposition?

Merchandizing initial reaction was to withdraw from the meeting only to return to announce that the Asian Supplier was willing to reduce the price even further. Thankfully this counter measure was rejected.

Our competitive replica of the Green Sofa was positioned in our Retail Locations and then a very interesting thing happened. As an organization we thought we we were competing in the lower cost furniture category. What we found out is that consumers were purchasing our product as an investment to the point of it being a heirloom.

The Green Sofa did not sell. The price was not enough to satisfy our Consumer's Value Proposition.

We learned several things during this exercise:

• What may seem like an insurmountable challenge can be met with innovation

• We elected not to use automation as part of our solution.

• To become competitive you need to change Paradigms especially during design review.

• Never, ever accept Current State as being acceptable, constantly challenge your process.

• If you do not challenge your process someone will either Internally or External

• Lessons Learned will most likely apply to other processes.

• 50% improvement goals are achievable, in this case it was closer to 75%

If Tariffs are your instigator to seek a more competitive way, fine. But every organization needs to review their process and be prepared to embrace a significant Paradigm Shift.

Not related to the Green Sofa project our significant Paradigm Shift to implement single-piece-flow cells instead of having Technology Islands with huge batch and Que processing allowed us to produced a finished product within 2 hours instead of 14-16 weeks.