Knape & Vogt Manufacturing Company

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Knape & Vogt Manufacturing Company

2700 Oak Industrial Dr. N.E.
Grand Rapids, Michigan 49505
U.S.A.
(616) 459-3311
Fax: (616) 459-3290

Public Company
Incorporated: 1898
Employees: 1,400
Sales: $183 million (1995)
Stock Exchanges: NASDAQ

SICs: 2541 Wood Partitions& Fixtures; 2542 Partitions and Fixtures, Except Wood; 3429 Hardware, Not Elsewhere Classified; 3496 Miscellaneous Fabricated Wire Products

Knape& Vogt Manufacturing Company is one of the United States’ leading suppliers of large adjustable steel shelving units, such as those used for the display of merchandise in stores, and has also long been a leading producer of drawer slides used by makers of cabinetry and office furniture. It is a producer of many storage and hardware products, which it distributes to other manufacturers for use in their own products, or to retail outlets for sale to the general consumer. Numerous acquisitions and mergers throughout the years have helped Knape& Vogt improve its own product offerings, while also adding retail items such as storage and organizational systems, home workshop components, and ready-to-assemble furniture to its product lists.

The Early Years

The company’s beginnings can be traced to the late 1800s, when German brothers-in-law John Knape and Englebert Vogt arrived in Grand Rapids, Michigan, and began working on Knape’s idea for a chainless bicycle. Knape saw great potential in his design, but another inventor’s creation of the chain-drive coaster brake rendered Knape’s idea unnecessary. Therefore, he and Vogt founded the Knape& Vogt Manufacturing Company in 1898, and began producing specialty machinery and tool and die products in order to make a living.

John Knape passed away in 1914, and the business was continued by his three sons and Vogt. The company soon expanded its scope and began producing specialty hardware for local furniture manufacturers in addition to its machinery products. It was at this time that Knape& Vogt entered into the business of producing drawer slides, which became one of its most important products throughout the rest of the century. By the 1920s, the company was also supplying hardware to makers of store display fixtures and showcases around the United States. This broadening of production focus led to the creation of Knape& Vogt’s own adjustable shelving hardware, and Joseph J. Knape’s 1934 invention of the company’s patented adjustable standards and brackets.

By the time the United States entered into World War II, Knape& Vogt was supplying its products to other manufacturers around the country and was also continuing to develop new products. The war effort, however, caused the company to temporarily abandon the production of its regular product lines and instead begin completing contract work for the military. Knape& Vogt’s plant in Grand Rapids contributed to the production of glider wings, shell casings, and bandolier clips throughout the war. As was also the case with many other manufacturing companies, the increased production demands of the war left Knape & Vogt in good financial condition at the conclusion of the war in 1945.

Post-World War II Diversification

Interestingly, as wartime led to an increase in Knape& Vogt’s production, so did peacetime. The late 1940s saw the beginning of the “baby boom,” as thousands of soldiers returned home to start families. As these families started seeking ways to expand and improve the their homes without spending large amounts of money, the “do-it-yourself” concept began to gain popularity. Knape & Vogt decided to take advantage of this shift by expanding its product line to target the retail market as well as the other manufacturers to which it already supplied hardware. Therefore, in the 1950s the company developed different shelving and storage systems to sell to consumers for their homes.

The success of its entrance into the retail market led Knape & Vogt to go public in 1961; at the same time, the remaining members of the Vogt family divested their shares of the company. Two years later, John Knape’s grandson, Raymond Knape, left a promising law career to join Knape& Vogt under his cousin, Donald, who was at that time president of the company. Raymond Knape believed that the company’s future growth potential was dependent upon its acquisitions of other companies with complementary product lines. He helped engineer the company’s first major acquisition in 1967, when Knape& Vogt purchased Modar, a furniture components manufacturer. The purchase strengthened Knape& Vogt’s standing in the retail arena, as Modar began supplying laminated wood-fiber shelving and ready-to-assemble furniture to Knape& Vogt’s retail offerings.

Under Donald and Raymond Knape, the company proceeded to manufacture and distribute its products throughout the 1970s, while also beginning to emphasize new product development. It began redesigning and improving its hardware items, such as drawer slides and shelving brackets, and also continued the development of new retail items such as Modar’s ready-to-assemble furniture and storage items. Whereas much of Knape& Vogt’s hardware items had previously been used in raw store shelving displays and fixtures, the improvements and new developments led to its use in high-quality kitchen cabinetry and wood office furniture. By the mid-1980s, the company had created and begun to market its 8000 line of precision ball-bearing drawer slides, a product line which was soon in high demand among Knape& Vogt’s customers.

Acquisitions and Expansion in the 1980s

In 1985 Donald Knape died, leaving Raymond Knape to take over as president and assume control of the company. Raymond Knape immediately began evaluating the company and its future potential, and came to a number of conclusions. He realized that the company was relying on mature product lines with little or no opportunity for future growth. Revenue gains were coming mainly from yearly price increases, and unit sales for many products were actually decreasing. Knape also recognized that since the company’s 1967 purchase of Modar, the only other additions to Knape& Vogt’s product offerings had been small improvements or changes to certain hardware items. Therefore, Knape decided that the next few years would have to be devoted to increased research and development efforts, and a search on his part for new acquisitions that could offer Knape& Vogt the opportunity to grow.

Knape& Vogt began investing heavily in product development in the late 1980s, spending approximately $8 million per year on the creation of new items. The company’s research and development philosophy, which had previously been to find out what could be created using existing equipment, soon became market-driven as the development teams instead asked themselves what items needed to be created in order for Knape& Vogt to expand and succeed. Meanwhile, Raymond Knape had been negotiating with potential acquisition candidates, which resulted in the 1987 purchase of Roll-It of Canada, Knape& Vogt’s largest competitor in the market of store shelving and display fixtures. Another acquisition took place in early 1988, as Knape purchased Feeny Manufacturing of Indiana, a leading supplier of wire storage parts to cabinet manufacturers.

1988 also saw major changes take place in Knape& Vogt’s manufacturing plant in Grand Rapids. First came the purchase and implementation of a $2 million computerized manufacturing resource planning system, which was used to help run production as the plant continued to handle more material each year. Also new was the introduction of an employee suggestion system, which Raymond Knape instituted under the belief that the workers on the production floor knew more about the actual job than did those in management. Within a year, changes generated by the suggestion program helped Knape& Vogt realize over $360,000 in yearly cost savings, five percent of which went to the employees themselves. Finally, a profit-sharing program was implemented, which also helped boost the employees’ interest and involvement in their company.

By 1989, Knape& Vogt’s sales had reached $114 million, with the company’s line of adjustable shelving for store displays making up almost 45 percent of that figure. Another third of the income was derived from sales of Knape& Vogt’s drawer slides, a segment of the business that had grown considerably in 1989 due to the addition of heavy-duty and epoxy-coated European drawer slides to its product line. Most important, however, was the fact that the company’s recent emphasis on product development was beginning to pay off, with sales of new items bringing in three times as much money as five years earlier.

Company Perspectives:

The corporate philosophy emphasizes providing a stable investment return for shareholders, a secure work environment and quality of life for employees and being a conscientious corporate citizen. We are a leader in the hardware and home center market with storage, workshop and specialty hardware products and a major source for metal drawer slides and related hardware for original equipment manufacturers. We pride ourselves on being a builder of quality products sold at competitive prices.

The 1990s and Beyond

Introduced in early 1990, a newly-developed shelving system called Variations was backed by high expectations on the part of the company’s management. Considered at the time to be revolutionary, Variations was a ready-to-assemble wood and glass storage unit that was attractive enough to be found in the living room of consumers’ homes. Variations won awards as one of the outstanding new products of the year but failed to capture consumer interest and did not perform as well as had been predicted. Another decorative shelving unit, Shelf Anchor, had received considerably less attention when also introduced in 1990, and soon greatly exceeded Knape& Vogt’s expectations and generated an abundance of sales. Shelf Anchor, which used a patented bracketless-mount design, quickly became a bestseller in the retail arena.

Unfortunately, the failure of Variations was one of the factors leading to a 40 percent decrease in earnings during the following year. Retail outlets began submitting smaller orders for Knape& Vogt merchandise, as a slump in the do-it-yourself market affected the entire industry. Luckily, the 1993 acquisition of the Hirsh Company of Illinois for almost $30 million gave Knape& Vogt the boost it needed. Hirsh, also a producer of freestanding steel shelving, as well as home workshop items and closet storage systems, helped Knape& Vogt double its shelving offerings. Through the purchase, the company also gained Hirsh’s top three customers: Kmart’s Builder’s Square, Dayton Hudson’s Target, and Wal-Mart.

The sudden expansion in product offerings that came with the acquisition of Hirsh prompted Knape& Vogt to restructure its organization of items into four separate product lines under the Knape& Vogt brand name. Shelf Help Shelving Systems came to include the company’s steel shelving and store display items; Space Solutions Storage Systems encompassed all of the company’s different home storage and ready-to-assemble offerings; Iron Horse Work Systems was made up of home workshop items; and finally, Knape& Vogt Drawer Slides rounded out the company’s offerings. Leading this reorganization effort was Allan E. Perry, who in 1994 became the first non-family member in company history to be named president and chief operating officer.

In 1995 the Space Solutions line was bolstered by the addition of a ready-to-assemble wood closet storage system, with marketing of the item being based on its attractive appearance and ease of assembly by consumers. Modar’s manufacturing facility in Michigan immediately began playing a large role in the production of the new Space Solutions items, which helped both Modar and its parent company generate profits. Although raw material costs were steadily on the rise and negatively affected the company’s earning potential, Knape& Vogt managed to add some retail customers to its distribution list, enabling the company to increase its 1995 sales to $183 million.

In 1996, Raymond Knape continued to pass on more of his responsibilities on to Allan Perry, in an attempt to prepare him to take over as chief executive officer when Knape retired on his 65th birthday in December of that year. After almost 34 years with the company, Raymond Knape had helped Knape& Vogt expand and diversify through his emphasis on product development and his negotiation and acquisition skills. In 1996, the ready-to-assemble market was thriving due to the popularity of both home-based business operations and personal computer use. With operation and manufacturing sites spread across the United States and Canada to handle heightened demand for its products, Knape& Vogt entered the end of the century poised to strengthen its presence in the hardware, home center and drawer slide markets.