This classification covers establishments primarily engaged in manufacturing office furniture made chiefly of wood, including benches, bookcases, cabinets, chairs, desks, filing boxes and cabinets, panel furniture systems, stools, tables, partitions, and modular furniture systems.
337211 (Wood Office Furniture Manufacturing)
According to the Business and Institutional Furniture Manufacturers Association (BIFMA) International, a leading trade group, shipments for the office furniture industry as a whole totaled $8.89 billion in 2002. This was down 19 percent from shipments of $10.97 billion in 2001 and significantly lower than the industry high of $13.28 billion in 2000. The total value of 2002 shipments were the weakest in the industry since 1995. Wood products consistently made up about one-quarter of total office furniture sales.
The late 1970s and early 1980s were particularly profitable for the office furniture industry, with annual growth rates averaging 19 percent. The early 1990s saw an industry-wide recession. In 1990, for example, office furniture shipments increased by only 0.5 percent to $7.87 billion. The following year saw shipments drop by 8.1 percent to $7.2 billion. Growth then remained in the vicinity of 6.0 to 8.0 percent throughout the rest of the 1990s, with the exception of 1997 when the value of office furniture shipments posted a gain of 14.1 percent, and a 0.9 percent loss in 1999. With a strong economy boosting shipments to a record high in 2000, the shaky economic and political climate that ensued led to double digit declines in shipments in 2001 and 2002. Analysts predicted a nominal increase of 5.6 percent in shipments for 2003 followed by a 13 percent rise to $10.5 billion in 2004.
Western Michigan—most notably in and around the cities of Grand Rapids and Holland—was home to office furniture manufacturing giants Steelcase Inc. (whose product line focused on nonwood rather than wood furniture), Haworth Inc., and Herman Miller Inc., as well as a number of other firms. As a result, the area could boast that its facilities produced about 65 percent of all office furniture manufactured in North America. This dominance could be attributed to two factors: an abundant supply of good quality hardwood in Michigan forests during the industry's early years and the availability of highly skilled woodworkers.
When wood was still the material of choice for most manufacturers, stationery stores and office equipment dealers handled sales of office furniture. The concept of "office design" was unheard of; companies purchased desks and other pieces as needed, setting them up in rows in big, open spaces, creating an office environment that very much resembled a classroom.
Later, as the demand for office furniture increased and the market became more specialized and sophisticated, the major manufacturers developed their own sales staffs and dealer networks to handle large-scale orders. In addition, the introduction of new products such as computer desks and "systems furniture" (consisting of panels and other pieces that could be easily moved and reconfigured to accommodate changing needs) generated a need for office designers. As a result, the bigger firms began to offer design assistance to customers eager to get the most out of their furniture purchases. Smaller companies that were unable to support their own sales and design staffs turned instead to manufacturers' representatives to provide the same services to customers.
In the 1990s, although a few manufacturers still sold directly to customers, most relied on other means of distribution. Distribution channels shifted over the past decade. According to a joint survey conducted by BIFMA and the Business Products Industry Association, nearly one-third of sales went through such channels as office products megadealers, superstores/warehouse clubs/other mass merchandisers, wholesalers, mail order, and the government. Superstores, warehouse clubs, and other mass merchandisers showed the strongest growth. In 1993 they represented 2.8 percent of total distribution; by 1996 they accounted for 6.3 percent of the total.
Office furniture manufacturers of all kinds showcased their newest products and services at a number of trade shows around the country, most notably the NeoCon World's Trade Fair. Held annually at the Merchandise Mart in Chicago, it is billed as North America's largest commercial interiors exposition.
The wood office furniture industry first began to take shape in the late nineteenth century, a period of rapid industrial growth in the United States. This industrial growth—along with technical innovations such as the elevator, the typewriter, and the telephone—sparked a corresponding increase in the number of people working in offices. Manufacturers of residential furniture soon began to notice that more of their desks, tables, and bookcases were being put to use in a business setting. Some of them responded by designing and building pieces specifically suited to the needs of this new kind of employee, thus establishing office furniture as a separate segment of the overall furniture industry.
Wood dominated the market until the 1930s, when metal filing cabinets and desks became popular (and cheaper) substitutes for the old wooden models. The military's need for steel briefly interrupted this trend during World War II, but in the postwar years, metal office furniture once again reasserted itself as a serious threat to wood. Both sides responded by launching aggressive marketing campaigns emphasizing the advantages of their respective products.
The rivalry between the two camps gradually eased, however, as wood office furniture manufacturers began to incorporate steel parts in their designs, and metal office furniture manufacturers began to feature wooden tops. By the early 1960s the distinctions between the two industries had blurred to the point where the wood furniture manufacturers dissolved the trade association they had originally established to distinguish themselves from metal office furniture manufacturers. In 1973 office furniture manufacturers of all types officially recognized their common interests and concerns by joining forces in a single trade organization, BIFMA International. By 1997 BIFMA represented over 140 North American office furniture manufacturing companies located throughout the United States, Canada, and Mexico.
Growth was especially strong in the office furniture industry in the late 1970s and early 1980s, with average annual sales gains of 19 percent. Beginning in the late 1980s, however, significant white-collar downsizing in a number of Fortune 500 companies had a marked impact on office furniture manufacturers—fewer employees translated into less need for new desks, chairs, and other equipment. A recession in 1991 and 1992 added to the industry's troubles, resulting in a drop of 8.5 percent in the value of shipments in 1991 over 1990 figures. The picture began to improve a bit in 1993, with shipments of wood office furniture showing a slight increase. Virtually no one, however, was forecasting a return any time soon to the strong growth of the early 1980s.
By 1997, there were approximately 676 wood office furniture manufacturers, according to the U.S. Census Bureau. That year the industry employed nearly 31,000 people. Industry analysts continued to be cautiously optimistic in their predictions for the office furniture manufacturing industry as the 1990s drew to a close. Steady interest rates, a moderately growing economy, and low inflation all seemed conducive to a sustained period of modest sales gains in the range of 4 to 5 percent. Nevertheless, many wood office furniture manufacturers reassessed their markets in the middle of the decade, noting that the strongest demand for office furniture was coming from small companies with limited budgets and a desire to stretch their dollars as far as possible. The high-end products that large corporations typically purchased were simply out of reach for businesses with only a few dozen employees. A number of the major manufacturers responded to the situation by creating new lines of mid- and low-priced furniture.
Wood office furniture manufacturers also began exploring new niche markets for their products during the 1990s. With an estimated 43 million people doing at least some work out of their homes as of 1996, companies looking for ways to expand their traditional customer base offered more and more pieces intended for home offices. Another growth market was ergonomically designed furniture, which client companies hoped would increase productivity, cut down on the number of repetitive strain injuries and backache (thus curbing health care costs), and reduce the threat of lawsuits from employees with work-related disabilities.
Industry observers also continued to express concern about the common practice of price discounting as much as 50 percent or more in a fiercely competitive market. Because it drained financial resources, discounting was blamed for the rise in the number of buyouts and mergers that occurred in the office furniture industry during the 1990s. The small company with a foothold in a niche market that a larger competitor wished to enter proved to be especially vulnerable to this kind of takeover. Major acquisitions were made by HON Industries Inc., Kimball International, and Haworth throughout the 1990s. Some companies did consolidate, though, such as Herman Miller in the late 1990s. Many companies called for an end to discounting and price wars, listing them among the greatest challenges the industry faced in the 1990s.
In a related action, office furniture manufacturers also joined together to fight for legislation to eliminate the competitive advantage enjoyed by the Federal Prison Industries (FPI) over private companies. By law, whenever the federal government was in the market for office furniture, it had to give preference to FPI and its prison-made products, regardless of cost. As a result, U.S. manufacturers lost tens of millions of dollars in sales every year.
In addition, wood office furniture manufacturers expressed apprehension about the effect of ongoing environmental legislation on their bottom lines. In their factories, they already incurred increased costs for disposing of hazardous wastes generated by the furniture-finishing process. They also had to abide by strict rules governing wood dust levels. In the marketplace, they faced mounting concerns about the effect of various pollutants on indoor air quality. Under the terms of the Clean Air Act Amendment of 1990, for example, various substances involved in the production of wood furniture were subject to regulation. Most commonly cited were the volatile organic compounds used in finishes and two types of adhesives, urea-formaldehyde resins and contact adhesives. To address these problems, some U.S. wood office furniture companies switched to water-based finishes and alternative glues, although some of these substitutes performed poorly.
Office furniture manufacturers faced continuing challenges as they headed into a new century, including dealing with continued corporate downsizing; adjusting to the increasingly limited supply of wood and the subsequent rising price of wood and wood-based panels; and developing more products for home use in a market that was increasingly dominated by ready-to-assemble (RTA) furniture companies such as Sauder Woodworking Co., Bush Industries Inc., and O'Sullivan Industries Holdings Inc. On the labor front, they were also concerned about the shortage of skilled workers (especially wood experts) and the need to work more efficiently to cut manufacturing costs.
With a record decline in shipments of 19 percent to $8.9 billion in 2002, office furniture makers suffered from a weak economic climate that began shortly after the new millennium dawned. The terrorist attacks of September 11, 2001 led to further economic softening and widespread corporate layoffs, negatively impacting new office furniture construction. Analysts saw signs of corporate stabilization, however, in early 2002 and predicted a modest recovery for the office furniture market. A 5.6 percent increase in shipments was predicted for 2003, with a value of $9.4 billion. Expectations were better for 2004, with a forecasted 13 percent rise to $10.6 billion in shipments.
With the market size shrinking, competition in the industry rose sharply during the early 2000s. Reducing costs and increasing operating efficiency became of primary importance for manufacturers, whose customers became increasingly price and service conscious. Accordingly, low cost ready-to-assemble manufacturers fared better than traditional furniture manufacturers in that climate. A growing office furniture recycling and refurbishing industry, with more than $1.2 billion in sales, may also prove significant competition for manufacturers of new office furniture.
A trend that may translate to some good news for wood office furniture manufacturers was the desire to warm up office decor that began in late 2002. With fewer workers and heightened security in a post-September 11, 2001 climate, corporations sought a more homey atmosphere at work to instill a sense of safety and comfort for remaining employees. As a result, cubicles were increasingly pushed out by comfortable chairs, lounge areas, and coffee tables. With the economy showing signs of recovery, more deluxe surroundings may spell better future sales for manufacturers.
Publicly traded Herman Miller held the number-one spot among wood office furniture manufacturers. It ranked as the second-largest general office furniture manufacturer behind Steelcase (which specialized in nonwood products). For 2002 Herman Miller posted sales of $1.47 billion, down more than 34 percent from the previous year. Herman Miller began as a residential furniture manufacturer founded in 1923 by D. J. De Pree. He used money borrowed from his father-in-law, Herman Miller, to buy the Star Furniture Co., which had been in existence since 1905. De Pree then renamed the firm in honor of its major shareholder.
Herman Miller struggled to compete with larger local manufacturers during the Great Depression, most of whom were turning out reproduction pieces. To make his company's offerings stand apart from everyone else's, De Pree introduced a collection of furniture with a distinctively modern flair. Innovative design soon became a hallmark of the Herman Miller line of office furniture, some pieces of which were created by notables such as Charles and Ray Eames and Isamu Noguchi.
In the mid-1960s Herman Miller once again revolutionized the industry by introducing systems furniture. Its panels, storage units, and work surfaces made it simple to rearrange and customize open-plan office spaces. Since then, the company also devoted considerable research and design efforts toward developing ergonomic seating and other components that fulfilled the need for comfortable and multifunctional office furniture. Herman Miller also branched out into manufacturing furniture for hospitals and other health care facilities and entered the residential office furniture market as well with a line called Herman Miller for the Home.
For almost its entire history, Herman Miller was known as an unusually progressive firm in terms of its treatment of employees. In 1950, for example, it became one of the first companies in western Michigan to institute a participative management program that made it possible for all workers to be involved in setting goals for the firm, making suggestions for cost cutting and other improvements, and sharing in the profits. As a result, Herman Miller consistently ranked among the most admired companies in the United States.
The boom in office furniture sales in the 1980s led to record sales at Herman Miller in 1990. But a recession hit the following year, and by 1992, the company had posted the first loss in its history. It then began restructuring in an effort to combat the negative impact of the recession and decreased demands for its high-end products. With seven subsidiaries and operations in some 45 foreign countries that employed 7,291 people, Herman Miller continued efforts to compete more effectively in the marketplace by cutting jobs (including many in the executive ranks) and shutting down plants that failed to meet performance expectations.
The nation's second-largest wood office furniture manufacturer was Haworth Inc., a private company with estimated 2001 sales of $1.71 billion, down more than 17 percent from 2000. Teacher Gerrard Haworth started the firm in 1948 in his garage, enjoying modest success with his wood and glass office partitions. But it wasn't until his son Richard patented a prewired, movable office panel in 1975 that sales really began to make it possible for customers to assemble and disassemble workstations to suit new office arrangements without having to call in an electrician. Before long, Haworth had vaulted into the top ranks of office furniture manufacturers. It aggressively defended itself against patent infringements by competitors, winning millions of dollars in damages from both Herman Miller and Steelcase over its prewired office panel.
Since 1988 Haworth pursued an ambitious policy of acquisition, buying up a number of smaller companies at home and overseas to broaden its product base and distribution channels. One of Haworth's acquisitions was the German company dyes, which specialized in desks and work tables. While making these acquisitions, Haworth paid very close attention to the bottom line. As a result, the company enjoyed a reputation for being one of the leanest and most profitable businesses in its category, with a solid manufacturing, marketing, and distribution presence throughout the world and a reputation for undercutting its rivals on price. The products manufactured and sold by its 10,000 employees included a full line of systems furniture, desk and guest seating, steel and wood casegoods (bookcases, cabinets, and other pieces that provide interior storage), files, tables, and desks. Haworth made these items available in nearly all price ranges but was increasingly emphasizing its less expensive lines.
Another notable wood office furniture manufacturer was HON Industries, with 2002 sales of nearly $1.7 billion. The company's sales fell 5.6 percent from 2001. HON, considered the leading manufacturer of value-priced office furniture, was a highly diversified company that designed and built mid-priced products for both office and home, including desks, chairs, file cabinets, credenzas, storage units, tables, bookcases, partitions, and panel systems. HON marketed its wood office furniture lines under the Gunlocke, Holga, and BPI brand names. It also manufactured metal office furniture. Some 8,800 people work for HON.
A trend that had traditional office furniture manufacturers looking over their shoulders was the boom in ready-to-assemble (RTA) furniture. This inexpensive but serviceable alternative to traditional office furniture was fueled in part by the rise in home-based businesses. Some estimates put the number of Americans who worked at home at least part time at over 40 million. The number of strong players in this market was growing. Sauder Woodworking, with estimated 2002 sales of $700 million, was the largest RTA manufacturer, employing some 3,050 people. Second was Bush Industries, with 2002 sales at more than $340.2 million and 4,100 employees. O'Sullivan Industries, the number-three RTA manufacturer, employed some 2,225 people and posted 2002 sales of $349.1 million. Most RTA furniture (desks and tables, computer stands, credenzas, and cabinets) was sold through office superstores, mass merchants, catalogs, and furniture specialty stores.
Since 1988 employment steadily declined in all sectors of the office furniture manufacturing industry. The wood segment experienced the most significant losses but appeared to be making a comeback. After climbing steadily through the early and mid-1980s, the workforce fell from 31,000 people in 1987 to 30,800 in 1988. It rose slightly in 1989 to 31,000 before falling to 28,200 in 1990. In 1991 it plunged to 22,500 as a result of the recession that began that year. Among production workers in particular, jobs fell from 24,600 in 1988 to 24,300 in 1989, 22,100 in 1990, and 17,000 in 1991. By the middle of the decade, total employment in the wood office furniture industry appeared to be stabilized at nearly 28,000. By 1997, however, the employment figure was around 30,600, with 24,600 production workers. Average hourly wages for production workers in the later 1990s hovered around the $11 mark.
With no rise in demand expected in the U.S. market any time soon, wood office furniture manufacturers looked overseas to increase their sales. Results were lackluster at best; as of the late 1990s, the major firms had yet to see much in the way of profits from their foreign divisions, often because of economic and political instability in certain markets.
The passage of the North American Free Trade Agreement in 1993 opened the doors to anticipated heavier volume of office furniture imports and exports. Overall, however, imports and exports of wood and nonwood office furniture continued to make up a fairly small percentage of total industry shipments. According to BIFMA, U.S. office furniture imports in 2002 totaled $1.77 billion, and exports totaled $338 million. Canada ranked as the country's main trading partner. In 2002 it received about 36 percent of all U.S. office furniture exports and provided more than 64 percent of all office furniture brought into the United States.
The growing popularity of Swedish furniture maker IKEA International, both in the United States and abroad, was still another factor in wood office furniture sales. IKEA, with 2002 sales up more than 13 percent to $11.78 billion, had about 175 stores in nearly 30 countries. It offered stylish, affordable, (usually) RTA furniture, for both the home and the office.
In response to management trends stressing teamwork, ongoing corporate downsizing, concerns about occupational-related injuries, and the increasing number of people working out of their homes, office furniture manufacturers were devoting many of their research dollars to the development of multifunctional, ergonomically designed products. In larger offices, for example, cubicle clusters and movable panels were being replaced by a more open, less isolated environment that encouraged people to work together and made it physically easier for them to do so. Also growing in popularity were adjustable work surfaces and components that could serve more than one use, so as to accommodate workers whose jobs were no longer quite so narrowly defined. Designing all of these products to work better with rapidly changing computer technology was also a top priority.
Ergonomics was in the forefront, too, as employers and manufacturers both sought ways to comply with federal mandates (some resulting from the 1990 Americans with Disabilities Act) and ward off lawsuits filed by workers suffering from job-related aches and pains. The emphasis was on adjustability, such as motorized tables with multiple height settings to accommodate a person who was standing or sitting, and chairs that came in several sizes to fit a wide range of body types.
The need many people had for a comfortable and functional home office also led to creative new products from the design centers of U.S. manufacturers. Flexibility and good looks were especially important to this market, given that home office space might be very limited and any pieces had to blend well with home furnishings. So manufacturers were putting work centers and other components on wheels for portability, inventing desks that folded out or swung open for working and then closed up to hide office equipment, and creating adjustable tables that could do double-duty as coffee tables or typing tables.
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