Vermont furniture factory comes back after nearly closing
Burlington Press
By Leslie Wright
Free Press Staff Writer
BRANDON -- Imagine buying a company that hasn't turned a profit in years, with no knowledge of the business, in an industry that's fleeing the country for cheap labor overseas.
A reasonable person might guess the odds were long for such a venture.
Jon McNeill and Fred Musone didn't see it that way. Two years ago, they bet that Vermont Tubbs, a furniture manufacturer with deep Vermont roots, had a chance. To make it work they had to retool manufacturing and retrain workers, flying in the face of long held industry standards.
"Everybody in the furniture business said that really didn't work," Musone said. "We were too inexperienced to come to that conclusion."
Defying their detractors, Mc- Neill, 39, and Musone, 61, have engineered a turn around at Tubbs that has others in the industry asking them how they did it.
Starting over
McNeill found out about Vermont Tubbs on Labor Day weekend 2003. McNeill, an entrepreneur from the Boston area, had just left Sterling Collision Centers, a chain of auto body shops he started.
While he was looking for new opportunities, the Tubbs call came when he was on vacation and had promised his wife and children he wouldn't mix business and pleasure.
The voice on the other end of the line pleaded. Brandon wasn't that far from Waitsfield, where he was staying. Couldn't he just take a ride over the Green Mountains? There were jobs at stake and people who needed those jobs to put groceries on the table.
McNeill knew the Tubbs brand of solid ash furniture. His kids had Tubbs beds and he liked them. He acquiesced.
After he toured the factory, he rang Musone, who was on his boat and also not taking business calls. Musone had been on the board of Sterling Collision Centers. He, too, agreed to take a look.
When they visited the plant, production was winding down in advance of a liquidation that was just weeks away.
New orders were no longer being taken. After several rounds of layoffs the plant was down to 58 workers working three-day weeks. Unsold inventory was stacked up.
"We saw a business that was definitely broken from a manufacturing standpoint, but the question was how healthy was the brand?" McNeill said. "It's one thing to fix an operation. It's another thing to fix a brand."
McNeill checked in with retailers, like Crate & Barrel, which constituted more than half of the company's business. He was surprised that despite delivery lag times as long as four months, retailers were fans of the furniture and wanted more of it.
They urged him to keep the company alive. That was a good sign. The product had customers -- enthusiastic customers.
Musone saw the problems with the manufacturing operation as another a good sign. If the company was in trouble with good customers and efficient manufacturing, there would have been no saving it because there would have been no room for improvement, Musone said.
McNeill, Musone and a silent partner decided to buy the company. The deal was risky enough that federal and state government guarantees were vital to landing a $2.3 million loan with KeyBank. McNeill declined to reveal the purchase price.
New school
Given the situation at Tubbs when they bought it, McNeill and Musone knew they had to make some radical changes. The old way of doing things clearly wasn't working.
Under the old system, furniture was built in anticipation of orders, a practice called cutting. This was, and still is, the standard manufacturing method in the furniture business, McNeill said.
At Tubbs, projections were often wrong. The company sat on unsold inventory, tying up cash. Plus, lead times for delivery were running as long as five months.
Like many U.S. manufacturing businesses, Tubbs was competing with cheap labor from overseas. Sales of imported furniture have jumped dramatically in the past decade. In 1994 imported furniture accounted for 22 percent of sales. Last year imports were 43 percent of furniture sales, according to the American Home Furnishings Alliance.
To compete with overseas manufacturers, Tubbs had to get delivery down to four to six weeks. Another way to compete with overseas manufacturers was to deliver quality. Furniture from places like China comes in containers shipped over the ocean. Delivery takes about five months and typically, 25 percent of a shipment is damaged in transit or has quality problems, McNeill said.
The answer was lean manufacturing. McNeill and Musone had been down this road before in another industry -- auto body repair.
McNeill started Sterling Collision Centers in 1997. When Sterling was sold in 2001 to Allstate Corp., the insurance giant, there were 60 centers with $170 million in sales. McNeill continued to work for the company into 2003.
At Sterling, McNeill applied lean manufacturing principles to auto body work. Lean manufacturing uses minimum inventory levels, streamlines manufacturing and eliminates the need for middle management.
Musone was an expert in the method, having been president of a U.S.-based company that sold airbags to Toyota, a pioneer in lean manufacturing.
"Furniture in and of itself doesn't generate cash," Musone explained. "Only the order generated cash. So we had to shift from thinking about building pieces of furniture to building orders because that's the only thing that rang the cash register."
Tubbs isn't the only manufacturer in the state to adopt lean manufacturing. Vermont Teddy Bear Co. in Shelburne recently shifted to a similar system called modular manufacturing in which workers are cross trained on a variety of tasks and work in teams, doing away with assembly line-style production.
Other companies have taken a hard look at how to manufacture more efficiently and capitalize on their strengths, said Bob Zider, director and chief executive officer of the Vermont Manufacturing Extension Center in Randolph.
In general to survive in the world of low-cost manufacturing, companies have to figure out how to offer things that their cheaper competition can't, like customer service and custom orders, Zider said. "If you are a company that is nimble, agile, with quick turn-arounds, that adds real value, especially in today's world," he said.
Turning heads
Tubbs has made money in two of the last three quarters and is heading into what looks like a profitable fourth quarter, McNeill said. Furniture is being built by 110 workers in three shifts.
The product line has increased by 50 percent and 24 paint colors have been introduced in addition to the traditional stains. Painted furniture is now 60 percent of sales. Returns are running at less than one-half percent, down from 10 percent. Deliveries are on time 99.5 percent of the time, up from being on time less than 60 percent of the time.
"We give it to you fast so you don't have to carry inventory. We give it to you in the way your customer wants it in the color they want, the style they want, and you get 99.8 percent quality, not 75 percent quality," McNeill said.
A line of home entertainment centers and office furniture is about to be launched to round out Tubbs' bedroom furniture offerings.
One hundred and twenty new accounts have been lined up, for a total of 440. McNeill and Musone won't reveal sales figures, but said annual sales have surpassed the $6 million mark, up from between $1 million and $2 million in sales when they took over.
The furniture industry has noticed. Both McNeill and Musone have done consulting work for other furniture companies, bartering their time for machinery and a trade show booth, to show others how lean manufacturing works.
Competitors have tried to hire workers away from Tubbs, Musone said. Not only is he optimistic about Tubbs future, he's convinced the U.S. furniture industry can survive. Tubbs proves that U.S. manufacturers can compete, he said.
"We are three guys that never saw a furniture factory before, competing against 25 cents-an-hour labor in China, and we are celebrating our third Christmas," Musone said. Contact Leslie Wright at 660-1841 or lwright@bfp.burlingtonfreepress. com
