Orman Grubb Furniture

This article was originally published in the October 1998 issue of Midrange ERP magazine. It appears on the AGI Website with the permission of Midrange ERP.

TOC Case Study: Orman Grubb Furniture

The Theory of Constraints and Dr. Goldratt's thinking processes are not limited to the obvious constraints of the plant floor. The methods, in fact, can be applied in any situation where there is a conflict or a constraint that interferes with the accomplishment of a goal. Take the example of a company that wants to improve its financial performance and decides that the way to do that is to lower costs by reducing inventory. On the other hand, more inventory is needed to support higher sales and better customer service. This conflict can get in the way of any efforts to reach the goal.

This is exactly the situation faced by Pasadena, CA based Orman Grubb Company, a small manufacturer of wood furniture. Additional conflicts inhibiting efforts to improve financial performance included the desire to better match retailer inventory to consumer demand through smaller, more frequent shipments, balanced by the extra effort required to place those more frequent orders and the higher freight costs for small shipments.

Many manufacturers, large and small, face similar conflicts. While our traditional way of thinking may recognize the conflicts, it seldom offers a satisfactory resolution. Jeff Grubb, president of Orman Grubb, applied the Goldratt thinking processes to identify the problem and find a solution.

Grubb first read The Goal in 1990 and later attended several seminars at the Goldratt Institute to help him better understand the process and how to apply it to his own situation. As a result, he was able to develop the diagrams that helped identify just where conventional thinking was getting "stuck" on this conflict. He discovered that past experience and "normal" processes were standing in the way of creativity and reason.

In the furniture business, lead time and inventory levels (at the retailer) are critical to the sales process. When a customer picks out the furniture they want, they usually want it right then and there. If the items are not in stock, a ten week lead-time from the factory is the norm, and often will cause the customer to buy another manufacturer's product rather than to wait. Since the retailer has neither the money nor the space to stock an unlimited supply of every item, lost sales are a frequent occurrence.

The solution for Orman Grubb hinged on refuting the assumptions that small shipments have to be more expensive, lead times have to be 10 weeks, and more frequent orders have to take more time and effort for the retailers. Through an innovative solution, retailers were placed on a once-per-week or every-other-week reorder cycle. Instead of worrying through what to order and when, each was given a specified day to place the order and told to order just what had sold since the last order was placed. This program solved the frequency and ordering labor problems.

As to the cost of handling smaller shipments, Orman Grubb stopped using Less-Than-Load (LTL) and shipment consolidators in favor of their own transportation contractor, making up full loads from among their own customer shipments (multiple stops). Not only did this save money, but it made deliveries more reliable and reduced the damage that results from unloading and reloading at the consolidation points. The more regular (and predictable) shipments based on the weekly and bi-weekly cycles helped, as well.

All together, these changes resulted in a more steady flow of orders through the plant. Coupled with some other TOC-generated improvements, the company was able to guarantee "2+2" - shipment two weeks and two days after receipt of an order. Competitors said it couldn't be done, but Orman Grubb did it, and increased their sales considerably in the process. At existing retailers, sales increased by 20% to 100% almost immediately. They have found that some of the retailers have also eliminated some competing product lines since Orman Grubb offers greater availability at a lower inventory investment - an irresistible combination.

They have also signed 37 new dealers, on the strength of the 2+2 program. And price is no longer a prime criteria. The program is so strong that the retailers no longer press Orman Grubb for additional discounts, co-op advertising credits, and other revenue-lowering ploys. Their growing reputation has also allowed them to be more choosy with the dealers - they can afford to cut less reliable dealers in favor of those who can move more merchandise and ones who pay their bills on time.

Competitors, at first skeptical, have marveled over the transition. Are they likely to emulate Orman Grubb's methods and their success? Jeff Grubb isn't worried. If they do "catch on" and begin to compete effectively, he has at least two more programs, ready to go, to keep Orman Grubb a giant step ahead.

© 1998 Midrange ERP

A representative of Orman Grubb Furniture presented the company's story at the Jonah^SM Upgrade Workshop in March 1997. That presentation is available on video (JSA-4).