The manufacture of furniture and fitted kitchens is hardly what springs to mind when hi-tech industry is mentioned. But Daval, a 30-year-old Huddersfield manufacturer of custom-built furniture has recently made some changes that defy preconceptions about its trade. Jane Gray talks to marketing and business development manager Simon Bodsworth to learn more.
To say the recession has made times tough for manufacturers is a pointless cliché. Of course it has. But there some that have undoubtedly been pinched harder than others. Manufacturers in luxury markets are certainly among those most squeezed, most under pressure to gain new understanding of customer spending habits and most in need of clever innovation strategies.
Three years ago Daval’s major offering was in luxury bedroom furniture, a market which had brought it considerable success prior to 2008. But things have changed.
“Fitted bedrooms, kitchens and bathrooms are a high value spend and the market has been hard hit,” says Simon Bodsworth, marketing and product development manager at Daval. “Before we entered recession the vast majority of our business was in fitted bedroom furniture but when a customer’s cash is limited revamping the bedroom is simply less essential than other home improvements or changes.”
Give me a reason Looking into customer spending habits right across relevant markets Daval identified growing concern over value for money, whichever end of the quality spectrum was under the microscope.
Mr Bodsworth also asserts that “People are looking for a greater reason to buy.” In part this meant more essential rooms were being prioritised by customers and in response Daval saw demand for its range of fitted kitchens, previously accounting for just 12% of turnover, more than double throughout 2008-2009. “Kitchens now contribute 25 to 30 per cent to our total turnover and the share is still growing,” comments Mr Bodsworth.
against volume competitors who are unable to adapt quickly to accommodate customer trends but even more importantly Bodsworth says, “we are allowing our retailers to stand out against their competitors. We’ve been able to give them more up to date product. It’s not necessarily that the market has been growing. It’s simply that our product development and delivery is allowing them to win more business on the high street.”
Implementing and optimising
Implementing the new software system has taken two years and represents a £2 million investment for Daval. This cost has included training and integration costs, perhaps the areas of investment, which will deliver most value in the long term.
Training staff to use maximise the potential of the Option-I technology has meant some radical changes. Bodsworth enthuses: “The changes we have had to make to maximise the potential of the technology investment have closed the doors on the our old business and opened up an entirely fresh enterprise.” He continues: “We have gone back to scratch and have new ways of taking orders and processing them. We have new quality procedure and checks throughout manufacture and assembly and delivery practices have also been overhauled.”
Bodsworth says that the re-education process for Daval’s 70-strong workforce amid all this change has been “fantastic.” Shop floor staff now have a far greater sense of job satisfaction, according to Bodsworth, since they have control over and ownership for the progress of personalised orders, each marked with the characteristics and preferences of a customer they can identify. “In batch production situations,” says Bodsworth, “all a shop floor employee is doing is moving components. Now our shop floor workers are making a product for an individual person, they know about the whole process – not just one part – and are multi-skilled.” The increasing level of skills on the shop floor have been match by increasing level of comradely and friendly competition as the new cell-based production team fight for top performance stats. Figures they are now responsible for capturing and monitoring themselves (see box).
For Bodsworth and other long serving members of staff at Daval these recent improvement have been a long time coming. For although the implementation of Option-I has taken two years it was in the pipeline years before. “We’ve known what we wanted to do for perhaps six or seven years,” say Bodsworth. “But before, when we approached partners that capability, the technology, simply wasn’t out there.”
Feeding the flame
Of course now that the system, along with all its added capability is in place there is a duty to push forward with innovations and feed the growth trend experienced over the last couple of years in the kitchen business.
For this Daval quickly recognised that technology alone is not the answer.
Considering Daval’s environment and background in a market which has been traditionally fairly slow moving in terms of product development, the changes actioned with regard to roles and responsibilities as well as the product development process are impressive.
There is now a dedicated product development team, managed by Bodsworth and including the company head of IT, head of technical processes and head of design. This team meets once a week to review Daval’s offering and analyse developing customer trends. Such conversations used to happen perhaps once a year and proposed changes were time consuming to implement. Now they are immediately effective.
Suppliers too are involved in Daval’s dynamic new culture of innovation at regular meetings with trend presentations.
Dividends
For a company with an SME manufacturer rather nearer to the small end of the spectrum than the medium, the investment of £2m in a software system was not taken lightly. The company funded the spend from its own revenues at a time when other companies would have been reluctant to let any cash go.
Happily the risk paid off. The system is already paying dividends. Indeed it has funded the establishment of a new 426m2 showroom at Daval in which the company’s diversified portfolio can be shown off to advantage.
Impressively, Daval has side stepped the planning permission nightmares so often faced by expanding manufacturing firms, by converting space within its own factory walls for this new company asset. The space has been made available thanks to the move away from batch production and towards leaner operations. The reduction in inventory and re-structuring around more space efficient manufacturing cells paved the way for a £60,000 spend on converting the factory space.
Rough with the smooth
With so much talk of improvements and achievement it would be easy to assume that business is now plain sailing for Daval. Sadly this is not the whole truth.
Like any other manufacturer operating in the UK today Daval is hampered by rising input costs and insensitive environmental policy from government. Bodsworth explains how the subsidies government has been given businesses to encourage the burning of biomass as a renewable energy source has caused the price of their raw materials to rocket. The effect is similar to that seen during the sudden popularity of rapeseed oil as a form of bio-fuel. Its application as an energy source priced it out of its traditional markets.
There is little Bodsworth can suggest as a means of combating this trend except working closely with suppliers to arrange fair prices and ensuring that the company seeking cost cutting efficiencies everywhere it can. For instance the company now collects all of its chippings, offcuts and scrap to use in its own biomass generator.
On the supplier side Daval is proud to say that it is the oldest UK customer of Egger, the Austrian timber supplier founded in 1961. Daval supports Egger’s sustainable timber sourcing practices and has a close working relationship with the company.
Despite difficulties
In spite of the above challenges however Daval has ambitions for further growth and development.
The process of exploiting the complete potential of the Option-I system is not yet over. Bodsworth says there is a new phase of development planned whereby the customer will be given ownership and direct control over the entry of their order.
Furthermore, although company currently only sell to UK customers, long-term strategy does include the possibility of expanding into export markets.
There is often scepticism among business people about the transformative power that IT systems can have on an organisation. It is very much a la mode to say that people power is the crucial element. This may be true but Daval has shown that in the right hands and with the right strategy behind it, technology really can change a company’s fortunes.
Measure it, manage it It is well-established wisdom within business that measurement facilitates management. But can you be sure that you are measuring the right things? Wasting resources on managing inappropriate performance indicators can be misleading and, frequently, damaging. Before implementing its Option-I system and gaining the assistance of lean consultant John Pegg, Daval had been working on traditional batch production schedules. The company had held a lot of stock to cope with fluctuations in demand and KPIs were focused on financial interests such as turnover. Thanks to a thorough education process in lean principles, spurred on by the desire to get the most out of the company’s £2m investment in its new IT system, this has now changed. KPIs are now customer focused and are measured daily on the shop floor by shop floor operators. The key metrics used to measure business performance are now: “The business has always tried to keep simple,” says Bodsworth, but now that simplicity is better focused thanks to the enhanced transparency and information gathering capabilities of the new Option-I system.
