Herman Miller Business Case Essay
1. Executive summary
Herman Miller, an environmental leader in the office furniture industry that offers a wide variety of products including seating, systems furniture, filing storage, desks, tables and health care. In 1989, the company decided to adopt a triple-bottom-line philosophy, so it established and changed company’s environmental direction by adopting “Perfect Vision” initiative that targeted zero landfill, zero hazardous, waste generation, zero air and water emissions.
In 1997, the company decided to implement a cradle-to-cradle (C2C) protocol based on eco-effectiveness vs. eco-efficiency and Waste equals food; which consisted of four key elements: biological and technical nutrients; green-yellow-orange list disassembly, recyclability and recycled content. The C2C approach focused on minimizing toxic pollution and reducing natural resources waste.
After years of extensive work, in 2001, the company decided that it was time to implement a C2C design protocol on a product that would contain recyclable materials from beginning to end; Mirra chair project was launched. Herman Miller worked toward the design process, manufacturing, engineers, supply chain managers, manufacturing associates, design consultants, trained over 300 employees, worked with suppliers to find substitutes eco-friendly materials, performed raw material assessment, met with people from sales and marketing and discussed several options for closing the loop by recycling the material from Mirra chair.
The major issue the company faced was determining the material that was going to be used for the arm-pad skin: polyvinyl chloride (PVC) versus thermoplastic urethane (TPU). PVC was known to be inexpensive and provided to be durable, scratch resistant and soft; but violated the standards of the C2C protocol. PVC had bad press due to its toxicity during manufacturing process and when it was burned or incinerated. In contrary, TPU showed that had acceptable quality characteristics; prove to be even more scratch resistant than PVC, but raw material cost was twice of PCV. Development and supply chain management teams preferred to proceed with PVC while the design for environment (DfE) team wanted to press forward with TPU. 2. Introduction
2.1 Company background
Herman Milller was founded as a Michigan Start Furniture Company in 1905. In 1923 D.J. De Pree purchased it, renamed it after his father-in-law and grew the company into an internationally acclaimed furniture design house. Herman Miller is considered as one of the top four suppliers in the US office industry that offers suite office furniture including seating, systems furniture, filing, storage, desks, tables and healthcare furniture. In 2001 annuals sales were about $1.5 billion dollars.
In 1989, the company decided to move toward environmental sustainability by changing company’s environmental policy and direction by adopting a cradle-to-cradle (C2C) design protocol for environmental sustainability. The cradle-to-cradle approach will emulate nature regenerative cycle at the end of the life cycle. C2C redesigned industrial processes by minimizing toxic pollution and reducing waste. In 2001, a Design for Environmental (DfE) team was formed to design and develop a new product. Mirra chair would be the most advanced and complete application of the C2C design protocol among any product manufacturer to date.
3.2 Identification of key issues facing the company
* In 2002, the company suffered a decline in sales due to economic crisis and pre-internet-bubble where many of its customers cutback or dissolved. * The company realized that the ways its products were designed generated waste in the production process. * Cradle-to-grave process used by the company at the time, released toxic material into the environment. * Products were useless waste at the end of the useful lives. * The major key issue that the company faced when launching the design protocol of Mirra chair was to decide the type of material that was going to be used for the arm-pad skin: polyvinyl chloride (PVC) versus thermoplastic urethane (TPU) * Another relevant issue was the collection of Mirra chair after the end of its life cycle. DfE team were evaluating three alternatives: Herman Miller to collect chairs; retailers to collect the chairs; third party company would collect them or customer could return them directly.
3.3 Issues facing the company and/or industry
* Herman Miller international market was significant. Most of Herman Miller’s customers were multi-national; therefore, tighter environmental regulations contributed to realize that the company needed to change its sustainability approach in order to stay ahead of the industry standard. * Moving toward environmental sustainability implied to review and redesign industrial processes that would generate less toxic pollution and deplete natural resources.
3.4 Opportunities for the company
* Leader of residential, office furniture and workspace design. * One of top four suppliers in the U.S. office furniture industry. * Company offered innovative good designed and high quality products. * Sustainability strategy was one of their competitive advantages. * Company stay ahead of the game by setting new industry environmental standards.
3. Problem identification and analysis
The company analyzed that the way their products were designed using the cradle-to-grave process released toxic material into the environment and generated waste that could be minimized or avoided. Tighter environmental regulations help to realized that in order to stay ahead of the game, they needed to change cradle-to-grave for a cradle-to-cradle process.
In 2001, Herman Miller decided to implement a design protocol on a product from beginning to end, so Mirra chair project was chosen. In order to implement C2C protocol a DfE team was formed to develop environmental evaluation measures of the new product, redesign and change processes, create a database for suppliers’ materials using the Green-Yellow-Orange-Red list criteria and establish disassembly guidelines for the new product. Engineers, supply chain managers, manufacturing associates and design consultants worked together to change their processes. Over 300 employees were trained on the new design protocol.
The design process was the first one to be reviewed. During the exploration phase, designers brainstormed on the basic concept of the product and outlined high-level specifications. Once the basic design was established during the development process, the product was divided into modules and different teams were assigned to each module. Each team developed a prototype of their modules, DfE team assessed the design, following the C2C protocol for material chemistry, disassembly, recyclability and recycled content.
Scorecards (See annex 1) were created and feedbacks were communicated to the development team. The final DfE assessment (Annex 2) aggregated the material chemistry, disassembly, recyclability and recycled content scores for all modules and a scorecard for the final product was entered into Herman Miller’s material database for future reference. Each case was analyzed on a case-to-case basis; a final DfE score of at least 50% was typically required for product acceptance. Calculation of weight and scores were calculated using Exhibit 5 formulas and criteria (See annex 3a and 3b). The importance of these calculations was used to perform a material evaluation assessment. If final score were below 50%, the company would find alternate components that meet C2C protocol requirements or work with suppliers to find substitute inputs or completely new material.
One of the major issues was the PVC material used for the arm-pad of the chair, it was classified as “red” material, and its final DfE score was 0% because of the toxins released during its manufacturing and disposal process. PVC is known to be extremely durable, scratch resistant, formable and cheap; but it doesn’t comply with the C2C protocol. Development engineers and supply chain group preferred PVC material because it was an inexpensive material and the tooling for the PVC arm pads had already been fabricated.
Thermoplastic Urethane (TPU) was identified as an alternate and suitable material that meet the same product performance as PVC. Tests showed that TPU had acceptable quality characteristics and might be even more scratch resistance than PVC; however, raw material cost of TPU was twice of PCV and increased the cost of the arm pad assembly by approximately by 30%. To switch to TPU would cost over $100K in retooling or would try to modify the PVC tool to work with TPU. Modifications of the original tool were feasible, but it was unclear whether the part quality of the TPU arm pad skins would be consistent as the PVC skins. DfE team wanted to purse the use of TPU since it complies with C2C protocol.
The closing loop of the Mirra chair was another relevant issue that concerned the company. Mirra team discussed several options of how to collect the recycling the material of the chair. Three basic options for collecting the chairs were identified: 1) Herman Miller could collect the chairs itself; 2) Retailers could collect them, 3) A third party company would collect them or 4) Customers could return the chairs to Herman Miller once they finished with their useful life or wanted to upgrade to newer chair models. If Herman Miller took the responsibility of collecting the used chairs, it would have to develop logistical support for handling the products coming back to the company.
Based on environmental sustainability culture and the triple-bottom-line philosophy adopted by Herman Miller, I would recommend pressing forward with TPU material, which complies with C2C design protocol and continuous improvement policy of no inventory, no waste products and no waste parts and time. The company should promote a strong “PVC-free” marketing strategy to attract a bigger market share, taking into consideration that Mirra chair would be the most advanced and complete application of C2C protocol among competitors; and the first manufacturer to offer a product of its kind.
Mirra chair project should be used as a base-line to determine the future of other Herman Miller’s products. If Mirra chair demonstrates to have a higher acceptance rate among customers, increased sales and elevated overall performance; the company should consider expanding its line of “green” products; or even switching from PVC products to PVC-free products over the course of the years. It is important to make a cost-benefit analysis comparing the two materials in order to have a better picture of the pros/cons and implications of any final determination.
In addition, the company should hire a third party collector in order to avoid developing further logistical support and increase the cost for handling products coming back to the company at the end of its life cycle.
Herman Miller’s corporate environmental goal was stated as to “become a sustainable business – manufacturing products without reducing the capacity of the environment to provide for future generations”. Therefore, final decision of pursuing PVC or TPU should be based corporate values and policies. The company needs to evaluate the possibility of the negative impact and consequences if it decides to launch a “green” product strategy but continues to include non-environmental friendly material on its products.