Herman Miller Memo

Herman Miller Memo

Mr. Schramm,

I understand you and the team at Herman Miller are facing two critical decisions prior to the launch of the Mirra chair in June 2013, only 10 short months away. As such, please find my analysis on the two issues for consideration in your decision.  In contemplating whether to use PVC, TPU or another material, Herman Miller has many factors to wrestle and contend with including, but not limited to, the company mission and values, profitability, procurement time, product quality, supplier relations and consumer/market preferences.

Since purchasing the company in 1923, D.J. De Pree and his sons believed on creating a furniture and workplace design company that valued innovation and good design as well as “served a moral purpose” (p.2).  This belief was exemplified through Herman Miller’s adoption of the triple-bottom-line philosophy and more particularly through the creation of the Environmental Quality Action Team (EQAT) which provided a holistic approach for the company to achieve its “Perfect Vision” by 2020.  By 2002, these principles had guided Herman Miller to become the third largest US office furniture supplier.

One component of the EQAT is the “Design for Environment” (DfE) team which focuses on creating environmentally responsible design standards.  Most recently, they worked on bringing the Craddle-to-Craddle (C2C) standard to life with the Mirra chair intended to be the showcase product.  Unfortunately, if Herman Miller proceeds with PVC arm pads the product will be in violation of the CSC standard due to the high toxicity levels (“Red” classification) produced during manufacturing of PVC and expelled if subsequently burnt.

It is clear Herman Miller’s values, culture and decision making process have always been focused on environmental stewardship, pushing the boundaries of materials and designs and providing quality products.  When examining the PVC, TPU, or other material decision from this lens there is no doubt Herman Miller should forgo PVC and transition to TPU or another material.  Failing to do so would simply delay the inevitable as environmental regulations continually tighten throughout the world while sending a signal to employees, customers and suppliers that Herman Miller’s words hold more weight than their actions.  These decisions could have cascading effects for employee morale, customer purchasing decisions and supplier expectations.

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A second factor to consider is the financial implication associated with switching to TPU based arm pads.  While modification to the original tool seems to pose product quality risk given the short time frame until launch (10 months) the option to retool with our supplier would cost Herman $100,000.  TPU will also increase the arm pad cost by 30% which previously made up 10% of overall chair cost.  Therefore, there would be a net 3% increase in manufacturing cost which is illustrated in the table above.  Certainly not an insignificant increase in cost but also not one that makes the chair unprofitable.  Harmen prides itself on being forward looking with materials and the environment, therefore a short term hit to margin until efficiencies of scale can be obtained and supplier integration is achieved is manageable.  Further, when taken in the larger context of overall sales of $1.5 billion in 2002 and almost $500 million in Net Earnings over the past 5 years, it appears to be a low risk financial decision that could have implications for innovation, design and sustainability in other products.  

Herman Miller has a significant presence in healthcare, education and residential – markets that are highly conscious of the materials used in products that their patients and children will interact with.  By using TPU arm pads the Mirra chair can conform to C2C standards without any “Red” components which may bolster sales in these categories.

It would be irresponsible to believe there will not be some obstacles to implementing TPU in the Mirra.  Herman prides itself on sleek, innovative, quality products.  Therefore, if quality standards cannot be assured before production must commence, Herman should consider designing the arm pads such that they can be removed, returned and replaced at a later date when a C2C conforming material is tested and accepted.  Further, Herman is likely to experience friction with supplier sourcing and integration.  However, due to the small volumes for the first 12 months, I believe they will be able to secure enough supply from a partner wishing to obtain positive publicity from the current wave of C2C coverage.