In an Embattled Industry, Valdese Weavers Thrives
In an Embattled Industry, Valdese Weavers Thrives
By Lydia Dishman, October 25, 2011
Anita Huffman, controller of Valdese Weavers, signs off email messages with a quote from Jack Kerouac: "Great things are not accomplished by those who yield to trends and fads and popular opinion."
It’s a poignant statement on the importance of staying true to one’s self. It’s also an appropriate reflection on her employer’s dedication to making upholstery fabrics in the United States despite how much that industry has dwindled here in recent years.
Since opening in 1915, the privately-held maker of jacquard fabrics for commercial and residential markets has been based in the heart of the Burke County, North Carolina, “furniture belt.” The business has only changed hands once, in 1935, when the Shuford family bought it out of receivership and then guided it through the Great Depression and into profitability.
Over the years, Valdese Weavers has had its share of challenges. While the company adapted to industry changes and fought to succeed during tough times, it’s never lost sight of its core business. That business includes supplying fabric for pillows and bedding to consumer products companies such as Dan River and Fieldcrest and to institutional furnishing manufacturers such as Steelcase and Herman Miller.
Upholstery fabric may be a small niche in the textile industry. But in 2008 when the industry publication Fabrics & Furnishings International listed the world’s top 50 mills, Valdese Weavers’ annual sales of $100 million put it in the top five.
The recession and continued offshore competition changed that. Just three short years later, Valdese Weavers is the only mill from the list still in business. Except for a down year at the depth of the recent recession, the company continues to grow.
In such a challenged industry, there are the two keys to success: excellent financial management and making smart business decisions to increase market share, according to Brad Burnett, president of the Southern Textile Association, a regional trade group. “Century-old companies that couldn’t do that closed their doors,” he says.
In such a challenged industry, there are the two keys to success: excellent financial management and making smart business decisions to increase market share.
Valdese Weavers’ management, led by Chief Executive Officer Mike Shelton, employed a variety of strategies over the past 15 years to keep the privately-held company on a winning trajectory. Those tactics included overhauling the company’s enterprise resource planning (ERP) system, expanding product lines and keeping close tabs on spending – all best practices for any mid-sized business looking to stay competitive in any economic climate.
The Home Field Advantage
In the past two decades, overseas manufacturers in developing countries using cheap labor to produce fabric for less money have taken their toll on the American textile industry.
U.S. fabric and yarn manufacturing peaked in the 1990s. “Back in the old days, a company was happy to get a great big order and crank out the same thing all day long,” says Mike Hubbard, vice president of the National Council of Textile Organizations. Today, companies that are thriving use technology to quickly turnaround small, top-quality production runs, he says.
Valdese Weavers is one that tapped into that formula for success. The company grew dramatically throughout the 1990s by diversifying into decorative products such as intricately woven paisley fabrics that required more customization, says Shelton, the CEO.
At the same time, the company shied away from becoming a low-end commodity manufacturer, “because there have never been great margins, it is all just based on volume,” he says.
Valdese Weavers didn’t stop investing in its in-house design team or manufacturing infrastructure, says Huffman, the company’s controller. “We can turn orders around in 72 hours while [a manufacturer in Asia] has to build in shipping time.
When overseas labor was cheap, wholesalers called “converters” gave U.S. upholstery makers a run for their money by buying up limited runs of cheap foreign-made fabric and selling them here. Now that labor costs in countries like China are rising, prices for U.S.-made upholstery are more competitive. Add to that its more intricate fabric designs and better customer service and Valdese now has the upper hand, Huffman says. “Their product is more expensive and they can’t compete with our service model or our design effort,” she says.
Part of the company’s growth has come from retooling its financial infrastructure. In 1999, Valdese Weavers scraped some time-worn processes for financial reporting and other processes and invested in an enterprise resource planning (ERP) system. When the implementation was complete, the company became the first American textile manufacturer to have every aspect of its business integrated through ERP software.
The company spent $12.2 million on the program, nearly 15 percent of its annual sales at the time. But the investment enabled it to work more easily with large original equipment manufacturers (OEMs) and helped control costs by analyzing individual divisions’ profit margins. That proved useful in 2007 when Valdese Weavers acquired a competitor and its sales grew to $121 million, and again during the recession when the company was forced to cut spending.
In 2007, when Valdese Weavers switched from handling predictable larger orders to making more frequent smaller custom runs, the finance department switched away from relying on annual budget forecasts. “We have a blended philosophy now,” Huffman says. “One budget is created at the beginning of the year that sets our costing, but projections are updated quarterly so we can map where we are going based on sales.”
That nimble approach came in handy when the recession saw the company’s annual sales drop close to 30 percent from a record $128 million in 2008 to $90 million in 2009. To compensate, Valdese Weavers held off capital expenditures and cut 20 percent of its workforce to ensure it would be positioned with room for growth when the economy rebounded. “We cut the travel budget when most customers were not adding new product,” Huffman says. “We historically spent 1 percent of sales on travel and we cut back to .5 percent through the worst of the storm.” The company’s business travel budget rebounded to over 1 percent in the last year.
With physical and computer systems in place and a keen eye on the budget, Valdese Weavers came out of the recession quickly, posting sales of $111 million in 2010. “The rebound that we have experienced after the bottom of the recession has been significantly better than our competitors and the industry at large,” Shelton says.
So far in 2011, the company’s achieved a 17 percent sales increase and is approaching pre-recession levels despite continued weakness in both the residential and contract markets, Shelton says. “We have never been so prepared for an upturn in our business as we are today.”
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