Herman Miller Case Study 6x475a

Herman Miller Inc. Iman Toto P. - Listya Diani P. - Milky Umar - Miranda Margareth C.- M. Priyodhya

CASE OVERVIEW

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Background

First Decade of 21st Century ● ●

Record profit on 2000 & 2001 Post 9/11 : ○ ○

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Volkema makes changes : ○ ○ ○

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Sales drop by 34% from $2.2 billion to $1.5 billion Declining profits from $144 million to ($56 million) 38% employee has been cuts on 2003 “Lifelong Employment” to “Social Contract” Redesigne benefit plans

2003 - 2008 sales are stable - Profit 2009 Sales dropped by 19% after recession 2010 introduced new product SAYL line of Chairs.

Herman Miller in 2013 Curiosity & Exploration

Engagement

Performance

Transparency Organizational Values A Better World

Inclusiveness

Foundations

Design

Management -

Herman Miller Living Office - living room design office space

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10% pay cut on Jan 2009 for BOD, and on March 2009 for the other employee

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14 of the boards should be independent

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equity interest after one year on the Board

Management ●

Teams were often Cross-Functional -> employee ability to contribute

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Teams were often based on product development “Workers at all levels were encouraged to put forth new ideas”

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Honor organizations where our employees are involved

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Employees could work 16 paid hours a year with a charitable organization of their choice

Production/Operations ● ● ●

Manufacturing operations located in Michigan, Georgia, and Wisconsin. Europe in United Kingdom. Asia in China. HM owned their system - called HMPS (Herman Miller Production System) HMPS competitive advantage : ○ ○ ○ ○

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Lean system - Just in Time Order Driven Limitation of fixed production cost Continuous Improvement (kaizen)

Benchmarking has been done by subsidiary Integrated Metals Technology (IMT) with consulting their system to Toyota Supplier Center. Environmental friendly

Marketing -

Green Marketing (environmentally friendly) : -

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Assembly of the chairs used 100 percent renewable energy.

Builders who used Herman Miller products in their buildings could earn points toward Leadership in Energy and Environmental Design (LEED) certification. Cooperative advertising - i.e. : Hilton Garden Inns, some rooms were equipped with Herman Miller's Mirra chairs. On the desk in the room was a card that explained how to adjust the chair for comfort and listed a Hilton Garden Inn website where the chair could be purchased.

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Market Segment : Work, Home, Health care, Education, and Government.

Human Resources During 2010 business down turn, Herman Miller sucessfuly :

"handling the downturn with class and doing what is best for the collective whole."

Compesation Base pay

Profit Sharing

- Length-of-service - Annual

Retirement Income Plan - Eligible for all employee - 4% from compesation - Interest paid quaterly - Can be vested after 5 yr

Standard Benefits Health insurance Dental insurance Vision care plans Prescription plans Flexible spending s etc

Extensive Benefits Gym hips Health services Employee assistance programs Health risk assessments

Finance Ratios

Performance

Trends

2006: -

Company’s leverage ratio was below the industry average and its times interest earned ratio was over twice the industry average Debt to equity ratio rose precipitously, from 1.18 in 20016 to 47.66 in 2008

2007: -

Invest around US$ 10 million in a R&D project called “Purple”. (Programmable Environtment)

Financial Performance 2007 - 2012 in million US$

The Accessories Team -

Office accessories was one area in which Herman Miller had not been historically involved.

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2006, Hofmeyer established the Accessories Team by recruiting Larry Kallio to be the head engineer and Wayne Baxter to lead sales and marketing.

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Launching target in 16 months

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Recruited people with different disciplines

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Conduct intensive meetings (1-2x per week)

The Accessories Team -

What happened to the team? -

We all seem to have a very strong voice regarding almost any topic, it's actually quite fun and dynamic. We all have kind of our roles on the team, but I think other than maybe true engineering, we've all kind of tapped into other roles and still filled in to help each other as much as we could.

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We rely more on guts and experienced. At the end of the day, it’s just fine because we have

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enough experience. We're not experts, but we're also willing to take risks and we're also willing to evolve. Ideas and other contributions to the success of the team were accepted from all sources.

Named : Herman Miller's Thrive Collection To indicate the focus on the individual and the idea of personal comfort, control, and ergonomic health. Won Gold and Silver honors from the International Design Excellence Awards (IDEA) in June 2010.

The Industry Industry sales decreased by approximately 26.5 percent from 2008 to 2009 impacted by couple of trends : -

Telecommuting

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Computer for working

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Raw Material Cost -> Overseas competitor

The Future ●

Transformational Product and Process

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Best of NeoCon recognition for their 5 new Design

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Double digit sales growth

Questions 1.

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Will the strategies that have made Herman Miller an outstanding and award-winning company continue to provide it with the ability to reinvent and renew itself? Will disruptive global, economic, and competitive forces compel it to change it business model?

ANALYSIS

Strength -

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Well-known as green/innovative company Voted Fortune’s 100 best companies to work for Won Gold and Silver honors from the International Design Excellence Awards (IDEA). Strive to create a better world Promising new R&D project Having a solid and helpful teamwork, esp. Accessories division Having HM Production System

Weakness -

Vulnerable to heavy losses in bad economy High price

Opportunities -

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Increase in demand for ergonomic furniture Take advantage of the growing desire for green products Continue to expand the business Continuous improvement by the system

Threats -

The price of raw materials Many cheaper alternatives product People now able to work from home or mobile

Five Forces Model of Competition Buyer Bargaining Power: -

Consumers are willing to pay a for quality

Substitute Products: -

High threat of consumers to choose alternative products (ergonomic vs ordinary)

Supplier Bargaining Power: -

Maintain relationship to suppliers for spesific/unique raw materials to optimize the Just In Time inventory

Five Forces Model of Competition Potential New Entrants: -

Small profit margin industry Existing competitors are struggling to earn good profits. So, it’s a bit difficult for new entrants Have utilized Just In Time inventory

Rivalry among Competing Sellers: -

Compete with existing competitors like Haworth, Steelcase, etc in of technology and customer needs.

What should Herman Miller do? Herman Miller should update the current business model -

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Improve their current strategy and create new innovation Maintain financial stability, including improve inventory turnover Continue their Purple Project. Optimize their HM Production System Enhance the Public Relations activity as an addition to their marketing activation Doing CSR to increase the brand value

Thank you :) Any questions?