(As published in the MMQB, 2/7/2011. Click here to see the article and video.)
Affordable Interior Systems (AIS), is, in many ways, an unfinished painting or sculpture. There are so many things the company does well -- its manufacturing and customer service -- yet there are a few key pieces that are still on the palette waiting to reach the canvas.
And no wonder. The company is only 21 years old, a blink of an eye in an industry where companies like Steelcase are preparing to celebrate its 100th anniversary. That doesn’t mean the company or its experience should be taken lightly. It is a company with a chip on its shoulder, ready to go toe-to-toe with any rival on any project.
The company is not a design leader. It has just a few of its own systems furniture products and made its name mostly as a clone panel maker and before that, a refurbisher. Still, the company has lofty goals and a tenacious leadership that will settle for nothing less than a place at the table with the industry’s top firms.
“AIS has a corporate culture that wants to win, needs to win,” said Bruce Platzman, as he explained the company’s culture in his Boston accent while sitting in the company’s Hudson, Mass. headquarters, his office filled with Boston sports memorabilia. “We do have a chip on our shoulder.”
Larry Bird and Danny Ainge would be proud.
While the company admittedly doesn’t lead in design, it believes it does lead when it comes to delivering value and profits to its dealers. “Our customer is really our dealers,” he said. “Dealers that want to sell our products find that they receive value that exceeds the competition. A dealer today can make a lot more GP (gross profit) selling AIS than others in the industry. And they can go to sleep at night knowing they are going to get an on-time and high quality product that helps them grow their bottom line.”
It’s no surprise Platzman and his executive vice president of sales Rob Lazarus both come with a dealer background. Platzman’s career started at a Boston Steelcase dealer and later a Knoll dealership and Lazarus’ father owned a Southern California dealership. The dealer community comes first at AIS, executives said.
About 90 percent of AIS’ business is in systems furniture, yet only 20 percent comes from the clone systems that helped build the company. And therein lies a conundrum. To keep moving forward the company needs to expand its product offering. Its new Calibrate benching system is expected to fill a major hole. AIS also plans to acquire a seating maker when it finds the right fit, Platzman said.
“We need to diversify our product line,” he said. “Our seating business could be much broader than it is today. We want to make an acquisition. I think there will be further consolidation in the industry. I think all of us feel we can get heavily involved in task seating, which will open up some pull through business for us. It will be the same go to market with our panel systems.”
AIS has a unique mix of employees -- industry veterans combined with young up-and-coming home grown talent that fill the headquarters. The passion is palpable. “I always say to our sales people that it would be really easy if we were going up against a bunch of losers, but we’re not,” Platzman said. “You are not going to love coming to work today if you are not winning.”
The company has done a lot of winning since the doors Calibrate Freestanding opened in 1990. AIS has never had a year when it did not outperform the industry. Based on EBITDA, Platzman said the company is the most profitable in the industry. AIS gets calls from its competitors every few years who want to tour the company’s factories and find out just what’s going on there.
Using 2000 as a benchmark, the company has grown 225 percent. Sales have dipped along with the rest of the industry, but AIS has never had a quarter where it lost money. To be sure, the company’s pricing has helped it grow. But its consistent quality, aesthetics and function mean a lot too. “We have a great price, great service and quality products,” said executive vice president of sales Rob Lazarus.
Platzman started the company in 1990 with Arthur Maxwell after the office furniture industry in New England bottomed out. The duo decided to go into refurbishing and found a lot of used products in Colorado and flipped it, making a nice profit. Then opened a remanufacturing firm in downtown Boston dealing mainly in old Westinghouse panel products. The company got its big break in 1990 when Digital Equipment Corp.
called and asked if the partners had any use for 10,000 Westinghouse workstations. There was no catch. Clear out the furniture and it was theirs for free. “That really helped get us off and running and gave us a tremendous inventory that would last us a few years,” Platzman said.
Early on, the company opened a facility in Boston in an old nine-story Army building that could literally withstand an atomic attack. They found the nine story building was a logistic nightmare as they tried to move product from floor to floor. They decided it was time to move. The company found a building in Hudson, Mass., about 45 minutes outside of Boston, in the early 1990s. The building had been built by a company
that went out of business and never moved in. A New England business publication called the purchase the “Steal of the Year” because of the low price the company paid for it.
As the company grew, it quickly realized it couldn’t control its own destiny as a remanufacturer. They would always be subject to the ups and downs of the economy. If they happened to catch the right bid, the business thrived. But if the used market dried up, business was lean. Still, AIS grew into the largest remanufactuer in the industry.
And the industry took notice. The company was acquired by US Office Products in 1996 with the hope that AIS would gain access the the vast empire US Office Products had built and with the promise that AIS could create new products of its own. The company decided it would clone Herman Miller’s Action Office II and Steelcase’s Avenir because of the brand recognition of the two lines and the massive installed base. In 1995, the two systems products probably controlled 80 percent of the systems market share and the patents had run out.
As the US Office Products empire began to crumble, AIS management bought the company back for the same price they had sold it (and that’s after US Office Products had invested $5 million into the operation). Mike DuGalley was hired to take AIS’ platform national and he did.
By 2001, the company was expanding beyond New England and growing 30 percent to 40 percent a year. That’s when the company came up with its own systems product, Matrix. “AIS needed to get beyond the clone environment and take a leap of faith,” Platzman said. “This company is not afraid to take some risks, but we are risk averse. If it’s calculated risk, we’ll take it.”
2001 was a big year because J.D. Power selected AIS to supply its headquarters. J.D. Power looked at nine different workstations at the time. The company made the final two along with Herman Miller. Both companies were asked to do mock ups. AIS said it won the project because it was 20 percent less expensive with a shorter lead time, even though Herman Miller had a 20-year relationship with J.D. Power. “J.D. Power is associated with quality and customer satisfaction,” Lazarus said. “That was an important project for us.”
AIS completed a more somber job in 2001 as well. The company was instrumental in helping the federal government rebuild after the terrorist attacks. AIS received a call to help create a temporary workspace for the Department of Navy to relocate 2,300 work stations shortly after the attack. The 6-foot by 6-foot gray station needed to start shipping immediately. AIS started shipping them in 72 hours and finished the
entire project in 30 days.
“Most of the people who work in our factory come from different countries,” Platzman said. “These guys were working seven days a week and they would bring in American flags to put on their lines. These are guys from Mexico and Puerto Rico and they were pulling together to help their adopted country. It gave me goose bumps.”
The company also experienced a major milestone in 2003 when it won the Shingo Prize for lean manufacturing excellence. Though almost every office furniture maker pushes for lean manufacturing, AIS has pushed it to the extreme, not only because it saves time and money, but because they must. Massachusetts is not known as a friendly place for factories. And many ask why AIS hasn’t moved to Mexico, or at least farther south. “I love it that we are not only competitive in a tough industry, we are successful in a state not known for manufacturing.
But we are going to stay here,” Platzman said.
The company also has pushed forward with its environmental initiatives, becoming the first carbon neutral systems furniture maker in the industry in 2010.
AIS has grown by continue to move forward. It could have stayed a rock-solid remanufacturer or clone maker. Instead, it has pushed ahead and created a place in the market for itself, despite formidable competition. Don’t think for a minute the growth has stopped. AIS is going ahead full steam. Be careful if you get in its way.