ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Wednesday, April 2, 1997 TAG: 9704020030
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
SOURCE: MEGAN SCHNABEL THE ROANOKE TIMES
The company's chairman credits the workers, who have cross-trained in all aspects of production and now make production decisions.
Rowe Furniture Corp. is discovering how changing key processes in the factory can lead to results in the showroom - and on the balance sheet.
The Salem-based manufacturer of upholstered furniture just ended an "exciting" year, Gerald Birnbach, president and chairman of the board, told shareholders Tuesday. Sales in 1996 rose 14 percent from 1995. Excluding the impact of a one-time property sale that added about $3 million to the company's earnings in 1995, Rowe's 1996 net earnings were up 58 percent from 1995 figures.
The company also is off to a strong start in 1997. Rowe recently reported first-quarter earnings of $2.1 million on sales of $35.4 million, compared with year-earlier earnings of $830,000 on sales of $34.8 million.
Birnbach credited the employees, who have had to learn a new production style while continuing to turn out orders.
Rowe over the last two years has changed its style of manufacturing from traditional assembly line to a cellular system. Under the new process, workers are no longer paid by the piece, which emphasized quantity over quality. Instead, they are cross-trained in all aspects of production and are given authority to make production decisions. Workers are paid by the hour, and they're rewarded for saving the company money and increasing productivity.
The transition hasn't been painless, Birnbach said. Whenever a new way of doing business is introduced, he said, people are reluctant to embrace it immediately. And the furniture industry is especially slow to change, he said.
But Rowe's gamble has paid off, said Jerry Epperson, who follows the furniture industry for Mann, Armistead & Epperson in Richmond. Rowe has not only made the company more efficient but has managed to improve the quality of the product as well, he said, without raising furniture prices. Retailers have noticed, he said.
"Rowe has gone from being just another company to being a real value in the marketplace," he said.
Rowe's success also comes from its willingness to try something new in response to changing customer demands, Birnbach said. Furniture shoppers - especially baby boomers - are looking for casual, comfortable furniture, he said, so Rowe has debuted a line of slipcover sofas and softer cushions.
The slipcover collection, which has just begun hitting stores, has received a favorable response so far, he said.
Epperson agreed that the Comfortable Stuff collection has helped Rowe's position in the often sluggish retail market. "Not that slipcovers are brain science," he said. "But it gives them a little extra niche."
He said Rowe is ready to begin thinking about diversifying by purchasing existing companies or expanding its operations. The company could branch further into leather furniture, he said, or give recliners and other motion pieces another try.
Birnbach said fine-tuning the new manufacturing system is a company priority. The goal, he said, is to make the new way of working second nature.
"We learned a great deal" in 1996, he said. "But as you know, the race never stops. ... It's something you never stop working on."
LENGTH: Medium: 63 linesby CNB