Case Study: Herman Miller
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Case Overview
Herman Miller SQA has managed to improve their supply chain strategy by implementing innovations targeted towards supply chain strategic fit. Herman Miller SQA has accomplished this by adopting and implementing innovative technologies modeled after other industries. New software programs and communications systems such as the Z-Axis program, 1:1, EnSync and the Product Metering Center have all positively contributed to Miller SQAs goal of increased responsiveness to customer orders and improved efficiencies in operating procedures. Prior to their investments in software technologies, Herman Miller SQA was generating marginal revenues from collecting, refurbishing and reselling office furniture. High transportation costs combined with strong competition from office furniture brokers eventually drove profit margins and forced Herman Miller SQA to rethink its business strategy. Rather than focus on new product development to simulate demand, Miller SQA realized the bigger concern was within its own operations.
A lack of information sharing, ineffective use of production space and a significantly time consuming process to fulfill customer quotes and orders all drove Herman Miller SQA to improve its business model. Miller SQA shortened the average time from order to shipping to six days (compared to the industry average of four to eight weeks). In addition, reliability jumped to an average of 99.7% on-time shipments, achieving 100% reliability every 6 out of 10 days. These results, while impressive, show the positive impact Herman Miller SQA has been able to achieve. Miller SQA recognizes additional improvements are needed to achieve supply chain strategic fit. The following report outlines in detail the innovative technologies and strategies Herman Miller SQA is utilizing.
Case Questions
What has Miller SQA done in its choice of facility location, inventory management, transportation, and information infrastructure to develop capabilities that support its supply chain strategy?
Answer: Miller SQA implemented several new innovations to better support its supply chain strategy. First, Miller SQA contracted with a software development company (after researching and finding inspiration at a lumber yard) to build a new sales technology program called “Z-Axis.” This program allowed customers to see their new offices in 3-D color and customers could see immediately how changes in fabrics and finishes would affect the price of their order. The program also created installation plans with elevations and 3-D views that help ensure accurate installation. Most importantly, the program assured 100% accuracy in parts lists which in turn increased both order and installation accuracy. To enable quicker production and better responsiveness, Miller SQA pared down its product offering. The Z-Axis program was able to make the parts list based on customer inputs which helped Miller SQA better manage its raw materials orders. Z-Axis allowed sales representatives and dealers to quickly respond to customer inquiries. A price and material quote previously took sales representatives and dealers weeks to prepare could now be completed within an hour using Z-Axis. Miller SQA also developed a highly integrated system of electronic data communication. The SCR order-to-fulfillment system was developed from three core customer priorities: speed, convenience, and reliability. The SCR system combined with proprietary tools such as 1:1 resulted in the customer receiving an order confirmation with shipping and installation dates two hours after the sales representatives entered the information in the SCR system. An enterprise resource planning (ERP) system communicated with 1:1 the detailed product specifications and resulted in a bill of materials that was processed immediately through Miller SQAs Expert Scheduling module. The Expert Scheduling module identified critical component materials and availability as well as the product assembly capacity required to meet the delivery date requested by the customer. Using a real-time check of materials and capacity, Miller SQA was able to better schedule the timing of jobs for the production line. Another program Miller SQA implemented was a manufacturing execution system called EnSync. The goal of this system as to build one order at a time versus building single product types that were parts of different orders, warehouse them, then bring them together to form a complete order. This significantly reduced set-up times and improved customer responsiveness. Furthermore, Miller SQA created another subsidiary to better manage their raw materials inventory. The Product Metering Center (PMC) was a third-party warehouse that stored supplier-owned components. Before PMC, Miller SQAs production space was used to store raw materials (40% of production space). The PMC has electronic access to the real-time demand at the factory for component parts. Shipments were made to the production facility site every two hours based on demand. This resulted in Miller SQA having less than two days of on-hand inventory and allowed them to almost triple assembly capacity.
Effect: All of the implemented strategies described above allowed Miller SQA to accomplish its primary goal of high customer service through strong response time. Miller SQA recognized other industry competitors niche advantages and decided not to fight them head on but to create sustainable competitive advantages in their own supply chain strategy to improve customer responsiveness while at the same time lowering operating costs. Miller SQA ultimately achieved 100% on-time delivery for 74 consecutive days in Mach 2000 and the average time from order entry to shipping was six days (compared to an industry average of four to eight weeks).
What are the main elements of Herman Millers history, design philosophy, and corporate values? How have they influenced the companys success?
History
Founded in 1905 as the Star Furniture company in Zeeland, MI
Initially produced high quality furniture in historic revival styles
Dirk Jan De Pree and his father-in-law purchased 51% of company stock in 1923 and renamed it Herman Miller Furniture Company
Reformed line of traditional wood furniture to modernist designs over next several decades and introduced office furniture market in the 1940s
Influential staff included renowned architects and award-winning designers
Remained family run until 1990