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Business

American Leather’s Lean, Mean Furniture Machine

The company takes modern Japanese manufacturing strategies and applies them to an old-line industry.
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EARLY ENTREPRENEUR: The son of a South Texas cotton ginner, Bob Duncan always knew he wanted to own his own business. Photography by Scott Womack

Bob Duncan was just 26 when he bootstrapped American Leather in 1990 with co-founder Sanjay Chandra, a college friend who still serves on the company’s board. Last year, the Dallas-based manufacturer of high-end furniture hit a milestone: $100 million in sales. 

The company’s modern, private-label goods are sold at Cantoni, Design Within Reach, Room & Board, Crate and Barrel, Pottery Barn, Macy’s, and other stores. Furniture retailers carry its American Leather-branded products, and high-end hotels buy its sofa beds.

Duncan credits lean manufacturing strategies for much of the company’s success.

“Everything about our process—then as well as today—was designed to be as efficient as possible, making only one of something at a time,” he says. The company now produces about 350 pieces of furniture a day at its 250,000-square-foot plant in South Dallas.

It wasn’t until the company opted to hire its own designers, including well-known names in the industry, that it really found its niche, Duncan says.

The son of a South Texas cotton ginner, Duncan always knew he wanted his own business. After graduating from the University of Texas in the mid-1980s with a degree in industrial engineering, he joined Anderson Consulting (now Accenture), where he helped companies operate more efficiently using Japanese lean manufacturing concepts. When he learned about the archaic processes used by furniture manufacturers, Duncan thought he could do it better. 

Under a model still used today, most manufacturers require long lead times of 10 to 16 weeks, if a customer wants a piece of furniture not available in the store’s warehouse. 

“I felt like this was a nice opportunity to take these proven Japanese methods and apply them to this old-line industryfurniture,” Duncan says. “The advantage would be that we could offer custom-order leather furniture and we would ship it in three weeks or less, which was three to five times faster than the industry average.”

The shorter lead times also meant that retailers could buy their floor samples and not have to stock a warehouse. It was a big change from buying furniture manufactured offshore, where retailers often are required to buy a full container and pay for it upfront.

Duncan says he picked leather furniture because it was growing in popularity at the time. (American Leather purchased a fabric-upholstered furniture company in 2008 to expand its offerings.) He spent his first year making prototypes, mainly copycats of popular styles. A mentor in the upholstery business—and an early investor in the company—provided free rent. American Leather began making sales in 1992 and ended that first year with $1.1 million in revenue.

But it wasn’t until the company opted to hire its own designers, including well-known names in the industry, that it really found its niche.

“Once we had original fashion, and things you couldn’t find anywhere else, then no one bothered us on price,” Duncan says.

[inline_image id=”1″ align=”” crop=”wide”]Although the concept of lean manufacturing hasn’t changed, American Leather has continued to innovate. Today it offers 195 collections in its American Leather brand, and customers can customize their furniture in countless ways.

On the factory floor, advanced computer systems track specifications, and lasers “nest” the patterns to be cut into the leather to use raw material as efficiently as possible, says Veronica Londoño, chief operating officer. Workers get paid by the hour and earn an incentive for getting a “higher yield” from the leather, which accounts for about 25 percent of the cost.

Every day a new production schedule is released, going to the cutting department and to the company’s foam manufacturers—and culminating in an area where the furniture is packaged for shipment.  

Many of American Leather’s factory workers—about 375 of its 430 employees work on the plant floor—are first-generation immigrants who hail from 22 different countries. The company honors their diversity by hanging flags from each country represented in the break room. 

Bruce Birnbach, president, says Duncan’s integrity is another key to American Leather’s success. The company has a college scholarship fund that gives away about $50,000 annually to employees’ children and grandchildren. A wellness center is scheduled to open this fall.  

With many of its original strategies still intact, American Leather has been built to last.

“Our pitch [to retailers] was, ‘All you invest in is your floor samples,’ ” Duncan says. “That is still our pitch today.”