Herman Miller Inc.

Iman Toto P. - Listya Diani P. - Milky Umar - Miranda Margareth C.- M.

Priyodhya
CASE OVERVIEW
Background

First Decade of 21st Century
Record profit on 2000 & 2001
Post 9/11 :
Sales drop by 34% from $2.2 billion to $1.5 billion
Declining profits from $144 million to ($56 million)
Volkema makes changes :
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

Transparency Performance
Organizational
Values
A Better World Inclusiveness

Foundations Design
Management
- Herman Miller Living Office - living room design office space

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

- 14 members of the boards should be independent

- equity interest after one year on the Board

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

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

Honor organizations where our employees are involved

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 :
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 Support Center.
Environmental friendly
Marketing
- Green Marketing (environmentally friendly) :
- 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.

- 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."

Retirement
Compesation
Income Plan
Standard Benefits Extensive Benefits
- Eligible for all employee Health insurance Gym memberships
- 4% from compesation Dental insurance Health services
Base pay Profit Sharing
- Interest paid quaterly Vision care plans Employee assistance programs
- Can be vested after 5 yr Prescription plans Health risk assessments
Flexible spending accounts
etc

- Length-of-service
- Annual
Finance
Ratios Performance Trends

2006:

- Companys 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.
- 2006, Hofmeyer established the Accessories Team by recruiting Larry Kallio
to be the head engineer and Wayne Baxter to lead sales and marketing.
- Launching target in 16 months
- Recruited people with different disciplines
- 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.
- We rely more on guts and experienced. At the end of the day, its just fine because we have
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
- Computer for working
- Raw Material Cost -> Overseas competitor
The Future
Transformational Product and Process

Best of NeoCon recognition for their 5 new Design

Double digit sales growth

Questions
1. 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?
2. Will disruptive global, economic, and competitive forces compel it to change it
business model?
ANALYSIS
 Strength Weakness
- Well-known as green/innovative - Vulnerable to heavy losses
company in bad economy
- Voted Fortunes 100 best
companies to work for
- High price
- 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
 Opportunities Threats
- Increase in demand for - The price of raw materials
ergonomic furniture - Many cheaper alternatives
- Take advantage of the product
growing desire for green - People now able to work
products from home or mobile
- Continue to expand the
business
- Continuous improvement
by the system
Five Forces Model of Competition
Buyer Bargaining Power:

- Consumers are willing to pay a premium 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, its 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 terms of

technology and customer needs.
What should
Herman Miller do?
Herman Miller should update the current
business model

- 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?