Take 5: Jim Collins

October 23, 2018  by HFBusiness Staff in Business Strategy, Industry   

Home Furnishings Business: How would you describe current business conditions in furniture for Lectra and what are the biggest challenges?

We see a robust market for technology in the furniture sector. It’s one of our key markets for Lectra North America. Companies with old technology are looking to upgrade to the latest and greatest, and to do more with technology. That’s where we have been hitting the market the last few months. We have a very high-tech piece of equipment and getting people to adopt that technology is our biggest challenge. The products that we are supplying can increase throughput, save material and labor. There is a long sales cycle on it because it’s new and almost futuristic, and it’s difficult for some to get their arms around it right now. Cutting machines used to be seen as doing just one thing, but now they are a real driver of profitability. If run correctly, they can improve the profitability of the entire company. North Carolina is the largest market, but there are clusters of manufacturing around the U.S. and Canada. A couple of areas of Indiana have quite a few manufacturers that supply local markets and there are other areas in the Midwest. Los Angeles has a robust local market.

HFB: A major driving force for Lectra’s product is the perceived need for customization to satisfy the needs and wants of millennials? How does this tie with their tendency for lack of commitment? 

Our Made To Order solution is geared toward millennials. They might want a fabric, but six inches longer and two inches deeper. We have the system that can do that on the fly. We have geared our Made To Order to specially handle that kind of business.  Millennials want a piece of furniture in their own style and they don’t want to wait eight weeks for it. So the manufacturing has to be done in the U.S. to maintain that kind of delivery schedule.

HFB: Will the potential tariffs on “cut and sew” from offshore drive the production back to the U.S.? Will this impact your adoption rate and what effect will the labor shortage in manufacturing have?

We have heard that a couple of large manufacturers are considering bringing production back. Things are on the path for speedier delivery. Tariffs have accelerated their plans. Back in the day, if you picked something from the La-Z-Boy gallery you could wait 12 weeks. No one is accepting that now. That is supporting our business. Obviously, there is a scarcity of labor in the U.S. Our solutions help speed up the process and reduction of labor allows them to move production to the U.S. Labor costs in China are increasing as well. Also, China is looking for American goods. Labor is a big problem across all manufacturing. The furniture industry needs degreed engineering people now with the complexity of pieces and the complexity of manufacturing, they really need top-notch people and companies are starting to recruit a higher level of engineers. A lot of that is coming over from the automotive seating business, which has had lean manufacturing in place for a long time. They are big in to Six Sigma and that has moved into furniture over the past five years.

HFB: A major tangible justification for capital investment is material savings. Ekornes stated that five to six percent is typical? What is the starting investment for cutting?

Material savings is one of the key drivers for ROI for any technology. Our customers have been using CAD and cutting for 30 to 35 years. They have experienced the major savings from moving to automation years ago. For the last couple of years, we have been driving new ways of accomplishing fabric savings. We’ve tested algorithms, developed better matching and our machines cut tighter. Twenty years ago we would have talked about fabric savings in the 20 percent range. Now, it’s in the three to five percent range and that is considered huge. Manufacturers have moved to way more expensive materials. We have seen our latest machine, Virga, in its first couple of tests in North Carolina, achieve three to nine percent in material savings. The way the machine looks at fabric, we are able to capture some of those savings. It’s the same for leather, too. We talk about major savings going from one cutting technology to another as being in the one to two percent range. That could be $1 million. In the past, the cutting area of manufacturing has been a big black box with companies doing whatever they can do to get parts cut. In the 1990s, when the market was rolling, they were like, ‘give me another machine, give me another one.’ When the Great Recession hit, they may have had 15 machines when they really only needed three. That brought the whole concept of lean manufacturing into these companies that didn’t have it before. The thinking was, ‘I’ve got 10 machines, but they are only running at 35 percent. If I had four running at 80 percent, I can save five percent on material. It has been driving a transformation. Cutting has always been like a panic mode business. Our system is one of the only ones out there that gives the cutting room more visibility. The same transformation is going on on the wood side as well.

HFB: What’s next in Lectra’s R&D pipeline?

“We just launched our Made To Order platform and we plan to expand it throughout our product line. The Virga [Lectra’s new single-ply cutting system] is one of our new machines and we plan to make this platform the normal way people do business. We are going to offer it on some of our older machines, going back to 2007. The cutting business isn’t really about cutting. It’s about the management of the entire process and it’s about driving savings. We do demos and events for people and very little of it is about cutting. It’s all about management and data flow. It’s become more important than just cutting. R&D is a long process. We have more than 250 employees in France working on R&D. We will pick specific customers, interview them, find out their needs and find out where they are growing and build with them. We will roll out new machinery even to a pilot situation on the factory floor. When we are convinced it is ready to go, we will then kick it out.