Dynamist Blog

Reinventing an Old Industry

My latest article (for a special NYT section on small business) is a profile of American Leather, a flourishing Dallas-based company in an industry struggling with Chinese competition. The company embodies many of the themes I find particularly interesting: the application of modern manufacturing techniques, the use of information technology to manage complexity, the value added by variety and aesthetics, and, of course, the innovation and improvement spurred by competition.

DALLAS--WHEN Bob Duncan was studying engineering management at the University of Texas in the mid-1980's, Japanese competition had American businesses terrified. "There was great concern that Japan would eliminate the U.S. manufacturing base just totally," he recalled.

To the confident young Mr. Duncan, however, Japanese manufacturing was not a threat but an inspiration. After graduation, Mr. Duncan worked for Andersen Consulting (now Accenture), teaching clients lean manufacturing techniques originally developed in Japan.

Within a couple of years, he had an idea for his own company. He decided to do for leather furniture what Japanese companies had done for cars, steel and shipbuilding: shake up a staid, complacent industry by rethinking the manufacturing process. In 1990, with another Andersen consultant, Sanjay Chandra, as his partner, Mr. Duncan set out to turn this concept into a business, the Dallas-based American Leather.

Instead of making sofas in big batches, with each step handling a week's worth of material at a time, they would treat each order as a single batch and make it in a few days. Rather than segregating cutting, sewing and upholstering, they would organize the plant in smaller teams, called "cells" or "minifactories," making it easier to spot quality problems and track a single sofa from start to finish. They would apply just-in-time techniques and keep the backlog to a week and a half, compared with the industry's six to eight weeks.

With this process, Mr. Duncan figured, their company could give customers quicker turnaround and more choice. If they wanted a sofa in a color other than black, brown or burgundy, they would no longer have to wait months for container ships from Italy. They could pick from dozens of colors and count on delivery in 30 days.

But raising money and selling furniture proved much harder than Mr. Duncan, now 41, expected. "At 26, you just don't know," he said. "You assume, Why couldn't you? It just seemed so obvious."

American Leather took more than a decade to hit $30 million in sales, not the projected three to five years. But the business was profitable by its second year, and today it is flourishing. "American Leather has literally come from nowhere to be one of the most popular leather companies in the United States," says Jerry Epperson, a furniture analyst with Mann, Armistead & Epperson in Richmond, Va.

Read the rest here. The Times website also has a slide show of photos from the plant, with audio commentary from American Leather CEO Bob Duncan.

After nudging from Reason editor-in-chief Nick Gillespie, I've established an email list to send out my articles. If you'd like to receive them by email, send an email to [email protected] with the subject line and message "subscribe."

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