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The Quiet Innovator

Solid financial resources, strong brands and innovative marketing and manufacturing make Springs a winner.

2003 Innovation AwardBy Alfred DockeryThe Quiet Innovator Solid financial resources, strong brands and innovative marketing and manufacturing make Springs a winner.Today, Springs Industries Inc., Fort Mill, S.C., stands as a home furnishings textile company on solid financial ground and poised for growth in the decade ahead. Springs has developed its own distinct innovative business style, and carried it across a number of disciplines including finance, customer focus, domestic manufacturing, international sourcing and product development.Several years ago, the company changed its focus to center its business around major customers. This strategy has been highly successful. The companys approach to balancing domestic manufacturing and international sourcing is another of its strategic initiatives. Finally, there is Springs long history of product innovation most recently, its introduction in 2002 of temperature-regulating bedding products.

Springs' Close Plant houses various automated systems for comforter production.Transitioning From Public To Private OwnershipTwo years ago, looking to better implement major investments for the long-term benefit of the company, Springs announced its intent to become a privately held company. The transition was completed in September 2001, just days before the 9/11 terrorist attacks and months before the Enron scandal events that later would likely have made financing the deal impossible.It has been good not to have to deal with the constant short-term scrutiny of being a public company, particularly in the current atmosphere, said Crandall Close Bowles, chairman and CEO. Weve achieved a lot of our objectives and have been better off being private rather than public in the last couple of years.Heartland Industrial Partners LP, a private equity firm based in Bloomfield Hills, Mich., put up $225 million in the fall of 2001 to buy 45 percent of Springs Industries. The founding Close family holds the remaining 55 percent of the company.Heartlands stated strategy is to acquire and expand industrial companies in sectors ripe for consolidation and growth. The company builds value by investing in well-positioned industrial companies, like Springs, whose talent, technology, assets and market position afford them the opportunity to be a platform for industry consolidation and value creation.Ultimately you have to grow, which means taking market share and bringing better products to the market, Bowles said. We want to be a viable, profitable and successful supplier of home furnishings products in the market years from now.Springs insiders say the partnership with Heartland has been beneficial. The company has gained much from Heartlands financial acumen and from additional infusions of capital for acquisitions. Heartland has lent both discipline and expertise and challenged some of Springs cherished corporate beliefs, some of which withstood objective examination from outsiders and some of which didnt.In Acquisition ModeThe company is steadily filling in gaps in brands, products and manufacturing capabilities. Springs recent acquisitions include:Charles D. Owen Manufacturing Co. Inc., Swannanoa, N.C., the worlds largest unit producer of consumer blankets;Burlington Industries window treatments and bedding consumer products businesses, including a manufacturing facility in Mexico and a license to use the Burlington House® and American Lifestyle® brand-names;Beaulieus rug divisions in the United States and Canada, including manufacturing facilities that employ approximately 650 people in Dalton, Ga., and Canada, and a license to use the Beaulieu and Peerless brand-names on home furnishing products other than carpet;Ultima Enterprises, a Shanghai-based sourcing business with a staff of 65; andMaybank Textiles, a yarn mill in Cartersville, Ga., with 130 employees.The first thing we look for is to add strength in our current areas, said Bowles. We look for brands. We look for product line extensions and capabilities. If you look at the acquisitions that we made last year, we got into the area-rug business. If you look at the pieces of Burlington we purchased, it was more strength in top-of-bed, textured top-of-bed and soft windows. We had a small soft windows business, and this was a significant addition to it. We got the Burlington House brand. We acquired a small import company in the quilt product area based in Shanghai. We always look at whats a match for our key customers.Balancing Sourcing And ManufacturingStriking the right balance between domestic and offshore production is one of the companys key challenges, given that almost all of its customers are actively sourcing overseas themselves. Springs must find a way to add value doing fundamentally the same thing. Increasingly, the company brings in commodity products from offshore in order to be competitive. At the same time, Springs leverages its US manufacturing base to supply complex or time-critical styles and products that dont lend themselves to sourcing because of transportation costs or other issues.Our domestic facilities give us a big advantage in some areas, Bowles said. I dont see us ever not having significant production here. How to best combine those is one of our strategic challenges.As part of its sourcing strategy, Springs announced a long-term alliance with Coteminas, a Brazilian manufacturer of bed and bath products, in 2001. Coteminas supplements Springs manufacturing capabilities with world-class textile facilities and allows Springs to offer a broader array of products on a competitive basis.The first thing that we consider is how to create value for the retailer, said Tom OConnor, executive vice president and president, marketing group. We are convinced that if we create value for the retailer, it will trickle down and create value for our shareholders. When we look at offshore opportunities, we think about cost, supply chain and product development. Making product in the United States is not an objective. Sourcing product offshore is not an objective. The objective is to create value through supply chain, product development and branding.
Dean Riggs, executive vice president, home furnishings operations
Crandall Close Bowles, chairman and CEO
Tom O'Connor, executive vice president, and president, marketing groupRetail Issues: Customer FocusSeveral issues dominate Springs approach to retail strategy, including retailer consolidation, SKU proliferation and ever-shorter product life cycles. The company has augmented its design and distribution capabilities to stay ahead.Retailers have really lost the power of pricing in the marketplace, said OConnor. They have to look to differentiation as a very important element of their proposition. Everybody has to have his/her own thing. Then you take that one step further. The consumer is far less patient, so product life cycles are much shorter.While no one is surprised to learn that the companys largest customer is Wal-Mart which accounts for a huge chunk of Springs sales and also constitutes much of the companys international business some are taken aback to discover that Springs second-largest customer is Home Depot. This is, to a large part, due to Springs hard windows (hardware, blinds and shades) business, and the addition of Beaulieus area rug business last year.Springs key retail customers also include other large mass merchants and departmental specialty stores such as Kmart, Target, Linens n Things, Federated, JCPenney, Kohls, Sears, Lowes and Bed BathandBeyond. First and foremost, we focus on our key customers, said OConnor. Our key customers strategy is about where consumers are shopping. To the extent that consumers are shopping in those venues, we will be there. Brands are important resources. We want our brands available where consumers shop. The greatest value to a brand is getting a positive customer experience.We havent figured out how to be a scale player and a niche player simultaneously, he continued. We just arent going to make a Mercedes in a Chevy plant. At the same time, we will not stay away from upper-end products where they are sold in scale.Innovative Manufacturing Textile World editors toured several Springs plants south of Fort Mill in Lancaster, S.C. The tour included a weaving plant where state-of-the-art, air-jet weaving machines were making sheeting at a blistering 650 picks per minute. The plant manager has seen an increase in style changes and expects the pace to pick up further to meet retailer demand.Also on the tour was an automated cut, sew and assembly plant for bed-in-a-bag products. Of course, no tour of the plants would be complete without visiting Grace Complex, which Springs executives refer to as the heart of our bedding business (See Amazing Grace, TW, this issue).Everywhere TW went, plant personnel spoke about how they had shortened their production cycle time more than they would have believed possible just a few years ago. All were actively working on projects to narrow production times further.Springs has spent quite a bit of money over the past five years in the bed-in-a-bag area automating production, said Dean Riggs, executive vice president, home furnishings operations. No one else is even close to being at that level of technology.This high level of automation cuts out labor costs in a product that would be inherently difficult to source offshore due to its bulk and size.The company constantly looks for new technologies to leverage, whether they are off-the-shelf solutions or emerging technologies that it can develop working with its supplier partners.For years weve been very innovative in air-jet spinning, said Bowles. Weve led the way with Murata to develop Murata Jet Spinning and now Murata Vortex Spinning. Weve been partners with Murata for a long time.Riggs pointed out that Springs leadership in vortex spinning is paying off by improving the companys ability to respond to customer requests. He also mentioned the companys transfer of jet-sew technology, developed for sewing washcloths, to improve bath rug production.Decision-making [for capital spending] has become significantly more complex in the last few years, said Riggs. There are so many other alternatives that have to be weighed out as part of the justification process. The opportunities for new technologies or improved technologies which in the past would have been justified only against a return in a particular plant or location now have to be looked at against whether there is an opportunity to buy that product at a lower cost.In the past few years, more and more of Springs capital spending has gone into areas such as distribution, information technology (IT) and design. A good example can be found just across the street from the companys headquarters the building that used to house a pilot plant for research and development was remodeled in 1999 to accommodate IT, design and merchandising teams.One Springs: An ERP InitiativeDuring a tour of this building, TW saw scores of IT associates in conference room after conference room working feverishly to get Springs enterprise resource planning (ERP) initiative, One Springs, up and running.The company launched this initiative less than two years ago, and it has achieved several milestones to date, such as redesigning internal systems and processes to operate under new environments; and going live with a new system in several areas of the business, including the first manufacturing site earlier this year. It is scheduled to go live at two more sites in June and will continue to roll out at other sites during the year.One Springs is broader than just IT. It is all-encompassing, involving new software systems and a reengineering of the companys internal work processes. The ultimate objective is to make Springs operate more efficiently with fewer resources, deliver higher service levels to customers, run with less inventory, and thus improve the companys competitive position. Editor's Note: Alfred Dockery is editor of The HunTex Report, a newsletter for industrial textiles. A graduate of North Carolina State University's College of Textiles, he has been writing about the textile industry for 15 years. Dockery is based in Clemmons, N.C.

June 2003