Industry: Built Environment
Products: Custom cabinetry
When Rummery purchased Tharp Cabinet Company, the transaction was the culmination of a careful search for a product-focused manufacturer with a strong brand and differentiated product.
"Tharp had great product along with great sales and marketing," he recalls. "Though the company didn't have the strongest processes in place at the time, I saw that as an opportunity to use lean and advanced manufacturing methods to really improve and grow it."
Since he acquired the 100,000-square-foot custom cabinet shop in 2014, that's exactly what Rummery has done: Revenues have eclipsed $15 million while management has instituted myriad changes focused on creating value while reducing waste in all its forms. "On our manufacturing floor, everything is clean and tidy, making it easy to identify issues," he explains. "We've also rolled out metrics for safety, quality, delivery, and cost, which we track daily."
From there, Rummery moved on to ingraining the lean principle of kaizen -- or continuous improvement -- into the company's culture in every way possible. "We'll pick one problem to solve every day, knock that solution out, and then, when we have bigger opportunities, we hold a kaizen event," he continues. "That's where we put a bunch of smart people in a room to deal with the issue. We then take their solution and implement necessary changes very rapidly."
Other improvements have included a move from push to pull scheduling; new systems for CRM, MRP, materials flow, and ordering; documented instructions for every process; and employee cross-training.
"Instead of hiring someone and making them a sanding operator for the next 40 years, we allow them to cross-train and become cabinet makers, for example," Rummery explains of the last improvement. "That gives them opportunities for advancement and avoids boredom. It also benefits the company because if a saw operator is out one day, we have multiple other people trained to run that saw. Or, if one department is busier than another is, we can move folks around."
In addition to cross-training employees, Rummery has restructured the concept of teams within Tharp Cabinet Company, eliminating the traditional organizational structure of departments. "Instead of organizing by departments or functions, we organize by teams," he says. "Each individual team is vertically integrated from the beginning of the process until the end. They work together to put out a high-quality product and take ownership of it."
"We rolled out teaming to the front and back end of the business," he continues. "Instead of having front desk and sales, design and engineering, production, delivery, and customer service all sitting in different areas with little communication, we blew those silos apart. Now, we have three teams, each with three to four sales people, a designer, one or two engineers, production and customer service people. And they are all co-located so that they can have clear communication."
Rummery says these changes have led to a better customer service experience, and -- just as important -- most of Tharp's employees embraced them. "We changed the culture to be change-focused," he says. "In my first talk with the employees, I told them the one thing that I would guarantee would be constant was change. It scared a lot of people. But while we lost some good people, we've had a lot more who got on board."
Challenges: Rummery says Tharp's current challenges range from the quirks inherent in working with wood to hiring to dealing with cost pressures and government regulation of employer health insurance and retirement benefits packages. "The cost of materials, labor, and insurance is all increasing," he says. "The market has slowed up a bit, with some of our previous semi-custom and custom high-end accounts moving towards less expensive imported products in order to hit lower price points, but we don't want to just pass those increases along to our customers."
Rummery continues, "It's hard to be a company our size, in that 50 to 250 employee range. Under the ACA, if you have 50 or more employees, you have to offer health insurance. But if you have more than 100 employees, the carriers don't have to quote you. That can put you in a hard spot. And if you have more than 100 eligible people, you have to pay $10,000 for a 401 (k) audit each year. Also, the Colorado property tax system and sales tax here in the state add a lot of friction that makes it harder to do the things we want to do to grow. It certainly doesn't feel like we're being helped by the laws that are in place."
Opportunities: After growing 10 percent in 2017, Tharp Cabinet Company is poised to expand its custom cabinet residential and commercial market share in Colorado and Wyoming, says Rummery. "Now that we've fixed the core of the business, are finishing jobs quickly, and have amazing quality coming out, we've really got something we're proud of," he explains. "Our reputation and reviews have improved immensely, so it's time to look more externally at continuing to grow."
Additionally, Rummery says Tharp will be introducing a lot of new products in 2018. "We had been holding off on new product development while we were fixing our issues," he says. "Now, we're at a place where we can we can pick the best ideas from our customers and employees and roll out new products to drive business growth."
Needs: Rummery would love to be able to invest in more automation, but feels that the technology isn't quite where it needs to be yet for him to do so. "We've already made several small movements towards automation, but there are bigger opportunities that for our size don't yet justify the capital expenditure," he says. "Due to the custom nature of our products, we rarely have multiple identical cabinets come through here. Fast changeovers in automation and the ability to use computers instead of people to make those changes hasn't really come down to our scale yet in an implementable way. But I think in the next year or two we'll be in a place where development in automation will be far enough along that we can really jump in."