Office furniture companies are dealing with a difficult economy by increasing efficiencies, focusing on new market segments and continuing to promote sustainability.
|According to BIFMA, office furniture demand is expected to begin to climb again in the second half of 2010. Photo courtesy of KI|
The state of most industries right now have been affected by the economic downturn, and the the office furniture industry is no exception. According to the Business and Institutional Furniture Manufacturers Assn.âs (BIFMA) quarterly report published by economic consulting firm Global Insight and released in March, office furniture shipments were predicted to contract 19 percent in 2009, as compared to 2008, and orders were expected to decline 25 percent. The report also states that commercial and office sectors will be stalled by restricted credit and waning demand through 2009, with hopes of demand beginning to climb again during the second half of 2010.
âThe current economic climate continues to provide numerous challenges, with industry shipment volumes down about 30 percent from last year,â says Tom Reardon, executive director of BIFMA.
Dealing with the impacts of the recession can be tricky. Containing and cutting costs, continuing capital investment and focusing on new market segments are just some of the strategies being implemented by office furniture companies.
âThe recession has impacted our business, just like it has the rest of the industry,â says Jeff Fenwick, vice president and general manager of Kimball Office. âWeâre also facing ongoing challenges from increased competitive price discounting, higher commodity and raw material costs, and rising fuel-related freight costs. Our strategy, however, is to remain focused on meeting the needs of our customers and dealers. In addition, the cost structure changes weâve implemented are not only allowing us to effectively manage through the current business environment, they are also giving us the ability to pursue new business opportunities, such as our marketing partnership with Interstuhl, one of Germanyâs dominant seating companies.â
âWe have felt the hesitancy of certain market segments, such as the banking, legal and service industries to purchase new product,â says Tom Willman, national sales manager, contract and hospitality, at Harden Contract. âOur response to the overall economic slowdown has included focusing on growth market segments, such as government and education. Internally, we have taken proactive steps to update our strategic plans to insure they are in line with our market expectations, implementing cost-containment measures and flexing manpower requirements based on order intake.â
âWhat weâve done is continue to invest capital into products,â says Brian Krenke, executive vice president of KI. âWe have not reduced our capital investment in new product development at all in 2009. At the end of the day it is about what type of innovative products you bring to the marketplace and how your customer base responds to those products.â
Some companies, such as OFS Brands, saw the downturn coming and took action early. âFortunately, we anticipated the slowdown, and since June of 2008, we have been preparing our business for a decline in revenue,â says Mike Wagner, senior vice president, sales and marketing. âWe reacted quickly by cutting structural costs and increased efficiencies by consolidating production. Our entry into the healthcare market in 2007 with the acquisition of Carolina has also helped offset the reduction in office furniture sales.â
The Benefits of Being Green
Office furniture companies as a whole have been ahead of the curve in regards to environmental responsibility. BIFMA plans to launch its own sustainability standard called âlevelâ soon, and this trend should continue to in 2009.
âWhen it comes to product innovations, durability and overall quality, weâve been designing with the environment in mind for decades,â says Susan Koole, corporate communications at Herman Miller Inc. âBy abiding by these goals and practices, weâre also educating our employees, customers, suppliers, and our community about how to take care of our environment and preserve it for future generations.â
â[Green] has been a cornerstone of our companyâs culture since our inception in 1995,â says Brad Davis, president/CEO of Industrial Woodworking Corp. âCompanies that adopt an environmentally responsive culture will also realize the hidden cost benefits, and therefore, the competitive advantage this provides. If you think that going green costs you money, in the long term, you are dead wrong. We save literally tens of thousands of dollars by simply doing what is right.â
âAny major manufacturer or supplier that is not fully embracing this fundamental value shift has already experienced a shrinking market presence and will, no doubt, continue to lose market share,â Wagner adds.
|Cutting costs, continuing capital investment and focusing on new market segments are just some of the strategies being implemented by office furniture companies to survive the recession. Photo courtesy of Kimball Office|
The 41st annual NeoCon Worldâs Trade Fair, a contract furniture tradeshow, was held in June in Chicago. Though expectations were lower this year, many companies reported positive experiences at the show.
âAttendance at NeoCon 2009 was reportedly 36,853, down from the 50,000 attendees in 2008,â says Koole. âAlthough attendance at the event was down, our showroom received a steady flow of visitors.â
âWe were very pleasantly surprised by the attendance at NeoCon this year,â says Wagner. âOur fear was that the market attendance could have been down as much as 70 percent, but within the first 30 minutes of the showâs start time, it was obvious that the show would be much better than anticipated.â
âWhat really stood out this year over previous years is that most of our visitors had active projects in mind as they explored our new and current furniture solutions,â says Fenwick. âIn fact, weâve already had several significant business opportunities.â
âWe are working on a number of projects at this time born from the NeoCon experience,â adds Davis. âFurthermore, we added quite a few new dealers within days of the show.â
Trends seen at the show by those interviewed included lighter scale furniture with lighter color finishes being utilized; multi-purpose products that adapt easily to changing footprints and flex with the flow of people and projects; and further expansion of mobility, height adjustability and general flexibility for a quickly changing office environment.
âI can say a couple things surprised me,â adds Krenke. âOne was the large investment I saw by a lot of the other manufacturers in the industry in task seating. I also found it interesting that a lot of the manufacturers continue to promote âopen planâ systems versus the traditional panel systems you see in the market, opening up space rather than very defined space like you used to see traditionally in the workplace.â
Living to Play Another Day
Though the immediate future looks challenging, many companies are trying to ride out the downturn, and in the process, turn âlemons into lemonade.â
âWith companies fighting to survive in a down economy, there exists an opportunity for companies with a strong balance sheet to gain market share in several market segments,â says Willman. âWith the expected upturn in the economic state of the country, Harden is positioned to take advantage of the inherent pent up demand with a diverse product offering, competitive lead times and a team of dedicated individuals focused on providing our customers with the highest quality solid wood furniture in the industry.â
âOur biggest challenge this year will be preparing our business to quickly flex with the ebb and flow of the sporadic demand created by the current economic climate,â adds Wagner. âAnd, as you might imagine, the competition for market-share is fierce.â
BIFMAâs new Sustainability Standard âlevelâ
Modeled after the U.S. Green Building Councilâs LEED (Leadership in Energy and Environmental Design) rating system, the Business and Institutional Furniture Manufacturers Assn.âs (BIFMA) new multi-attribute, sustainability standard and third-party certification program for the furniture industry, âlevel,â provides measurable market-based definitions of progressively more sustainable furniture by establishing sustainability performance criteria in four areas: materials, energy and atmosphere, human and ecosystem health, and social responsibility, according to BIFMAâs Executive Director Tom Reardon.
âIn 2006 the BIFMA and NSF Intl began drafting [BIFMA e3] with a broad and diverse group of stakeholders following the American National Standards Institute consensus process,â Reardon says. âIt has been created to deliver the most open and transparent means of evaluating and communicating the environmental and social impacts of furniture products in the built environment. Once approved as an ANSI standard, the BIFMA e3 document will be in the public domain for use by anyone. A manufacturer choosing to make a self-declaration regarding their products conformance to the standard would state that the product conforms to e3. Use of the level conformance mark is restricted to those that have gone through the additional rigor of using an approved third-party certification body to verify the conformance claim.â
âlevelâ has three conformance thresholds within the standard; level 1, level 2 or level 3, based on the combined score achieved in a companyâs sustainability evaluation, with level 3 being the highest award a product can achieve. The thresholds are analogous to the silver, gold and platinum rankings within the LEED rating system, but they provide flexibility to add new thresholds to the program as the industry evolves, according to BIFMA.
Reardon sees âlevelâ as having a positive effect on the industry. âOur objective is that âlevelâ will provide the industry and our customers with a common set of metrics to evaluate the sustainable attributes of furniture,â Reardon says. âAnd that it will simplify the review and specification process for our customers.
ââlevelâ is a product standard, but it also includes a review of manufacturing impacts and corporate policies and practices,â Reardon adds. ââlevelâ is innovative because it looks at sustainability in its entirety and with multiple lenses. It helps ensure that green products are being produced in green factories by green companies.âFor more information on BIFMA and the âlevelâ program, visit levelcertified.org.
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