KraftMaid Cabinetry, Inc.

views updated

KraftMaid Cabinetry, Inc.

15535 South State Avenue
P.O. Box 1055
Middlefield, Ohio 44062
U.S.A.
Telephone: (440) 632-5333
Fax: (440) 632-5648
Web site: http://www.kraftmaid.com

Wholly Owned Subsidiary of Masco Corporation
Incorporated: 1969
Employees: 4,000
Sales: $511.1 million (2003 est.)
NAIC: 33711 Wood Kitchen Cabinet and Countertop Manufacturing

KraftMaid Cabinetry, Inc., is the leading manufacturer of "semi-custom" cabinets in the United States, which are built to order for each customer. The firm offers close to 100 different styles and finishes of cabinets, primarily for kitchens and bathrooms, and sells them through do-it-yourself chains like Lowe's and Home Depot, as well as via other home design retailers. The company is a subsidiary of Masco Corp., whose combined cabinet-making operations make it the number one cabinet-maker in the world.

Beginnings

The origins of KraftMaid Cabinetry date to 1969, when a one-man cabinetmaking shop was opened in Independence, Ohio. The company's products sold well, and over the next decade KraftMaid grew to serve a five-state area, with revenues hitting an estimated $10 million by 1981. That year, the firm moved its operations to a new, larger plant in the small town of Middlefield Ohio, east of Cleveland in the heart of the state's so-called "Amish Country." KraftMaid also formed an in-house advertising agency whose work helped spur even faster growth. Over the next decade, revenues grew tenfold.

In 1990, the company was acquired by Masco Corporation of Taylor, Michigan. Masco had focused exclusively on manufacturing plumbing products until the mid-1980s, when it started buying cabinet makers. Prior to acquiring Kraftmaid, Masco had purchased Merillat, the second-largest cabinetmaker in the United States, as well as Fieldstone and StarMark. After the Masco purchase, KraftMaid continued its growth, with revenues hitting $130 million in 1992.

The company's specialty was "semi-custom" cabinetry, produced on a mass scale yet built to order for each customer. Its products were typically used in kitchens that were being upgraded, and, given that the dimensions of each were different, every cabinet order was a custom job. The company offered a wide variety of materials, styles, and finishes to customers.

At the firm's plant, parts were cut and finished by its workers for each order. The production process saw each item slowly evolve as different pieces were added to it. The factory was filled with partially completed cabinets and raw materials awaiting batches of different parts for final assembly. Turnaround time was typically three weeks, which was typical for the custom cabinet industry.

"Kaizen" Introduced in 1995

In 1995, the company began working with TBM Consulting Group of North Carolina to help it streamline the manufacturing process. TBM advised the company to implement the Japanese principle of "kaizen," or continuous improvement, which allowed production activities to easily be rearranged to improve workflow and productivity. Kaizen "events" were soon being held regularly in the factory, during which employees helped guide the changes in production based on their own experience. A key element of the philosophy was that no employee would lose his or her job, and when positions were eliminated by workflow improvements, the affected employees were assigned to different departments or the company's new kaizen promotion office.

In 1996, KraftMaid appointed a new senior vice-president of manufacturing, Tom Chieffe, who had previously worked for Masco managing mergers, acquisitions, and divestitures and who also had a background in the auto industry. Under Chieffe the firm added to the kaizen philosophy such manufacturing concepts as the Toyota Production System, just-in-time manufacturing, and total prevention maintenance, which helped further refine the firm's assembly process. New, high-tech equipment was also purchased that allowed greater flexibility and which was positioned to ensure proper workflow and maximum efficiency. A new manufacturing strategy, called "Kitchen at a Time," was developed in which KraftMaid workers would build all the cabinets for a particular order together and then load them onto a truck at the end of the assembly line. Quality was important to the firm, and parts were inspected at numerous points in the process so that effort was not wasted on finishing items with defects.

KraftMaid's suppliers were also given new requirements for deliveries so that materials were on hand just before they were needed, rather than being stockpiled far in advance. This just-in-time strategy significantly cut inventory costs.

The firm invested $10 million in new equipment to make these manufacturing changes, but it proved well spent as production was increased by 250 percent, from 4,000 cabinets per day to 10,000. At the same time, turnaround was reduced from three weeks to five days. Factory floor space also decreased by 36 percent, inventory by 47 percent, and distance traveled by products 69 percent. In addition, the number of operators needed to run equipment fell by 27 percent.

KraftMaid had opened a second finishing plant in Orwell, Ohio, in 1996, and the firm continued to grow rapidly during the decade, with employment increasing from 1,568 in 1995, to 2,078 in 1997, and to 3,062 in 1999. In December 1998, the company appointed Tom Chieffe president of the company.

New Products and Finishes in the Late 1990s

At the same time that it was implementing new manufacturing techniques, KraftMaid was also introducing the largest number of new products and product options in its history. The firm was now seeking to move beyond outfitting kitchens and bathrooms to becoming a supplier of cabinets for family room, bedroom, home office, and home theater applications. New options that were introduced for such uses included a white porcelain glaze and a chocolate glaze that was intentionally "distressed" to mimic antique furniture.

A major innovation from the firm was a line of cabinets called Passport. Designed for older customers as well as those who were handicapped, it featured higher floor heights and other features that made the cabinets easier for people with mobility problems to use. Passport, which was the first cabinet line certified by an independent testing facility to meet Universal Design standards, was named the year's best product by Today's Homeowner magazine in 1998, while the American Society on Aging gave it an award for Outstanding Design for Mature Consumers. All of the company's products were given "Best Buy" status by Consumers Digest during the year as well.

During the 1990s, KraftMaid parent Masco had continued to buy cabinet makers, adding Texwood Industries in the United States as well as firms in the United Kingdom, Germany, and Spain. By 1999, Masco's North American cabinet companies had annual revenues of more than $1 billion, making it the largest cabinetmaker on the continent. Sales of cabinets, along with faucets and plumbing supplies, also made Masco the largest supplier of manufactured goods to Home Depot, the leading retail chain catering to the do-it-yourself home improvement market.

In 1999, KraftMaid began an $11.4 million expansion of its Orwell plant, which would triple in size to 262,000 square feet. That year also saw the firm extend its product warranty from moving parts alone to covering the entire cabinet for as long as it was owned by the original purchaser.

Over the next several years, the company continued to expand its cabinet options, and by 2001 it offered more than 100 cabinet door styles in seven woods and a number of different laminates. There were more than 150 different storage options to choose from along with many molding styles and other decorative enhancements, as well as 21 finishes. Sixty percent of sales were made through home centers such as Home Depot and Lowe's, while 35 percent came from dealers or designers, with the rest of sales made via independent distributors or directly to consumers.

Expansion Continues in the 2000s

While many businesses saw earnings drop as the U.S. economy slumped in 2001 and 2002, KraftMaid's sales surged upward as people began investing in their homes, spurred on by record-low mortgage interest rates. In the fall of 2001, the company hired 100 new workers, then added 300 more early the following year. A new cabinetmaking line, the firm's 15th, was also added. The company's sales had reportedly doubled in the previous five years. Its just-in-time manufacturing was so finely tuned that KraftMaid closed the last of eight warehouses it had been using to store raw materials in December 2001.

The firm had launched its official Web site in the mid-1990s, and it now created a second one called Superkitchens.com to help steer more business its way. The new site offered a wide range of remodeling ideas for kitchens and covered all product categories, not just cabinetry. It was developed in partnership with several other corporations, including General Electric, Armstrong, Andersen Windows, and DuPont Corian. While KraftMaid built and paid for the site, its partners provided links and content. Corporate affiliations were downplayed, and only products made by KraftMaid and its partners were featured.

Company Perspectives:

We offer the custom look and customized cabinetry, without the custom price or custom lead times. Our product is 100% built-to-order. This means that each and every cabinet is built specifically for the individual consumer and built to their specifications. With KraftMaid, you choose your door style, wood species, cabinet size and cabinet construction as well as all of the storage solutions and decorative enhancements that make your kitchen, bath, home office, etc. function for the way your family lives today.

In early 2003, KraftMaid assigned its advertising account to a new agency, W.B. Doner of Detroit. The company was now spending an estimated $1 million to $2 million on advertising annually. A new campaign launched in the spring included advertising in both the print media and on television. The company continued to expand its offerings during the year, adding more than 100 new products including 5 glaze finishes, 9 door designs, and 20 new storage concepts.

The year 2004 saw KraftMaid spend $25 million to add another 150,000 square feet of manufacturing space to its three plants. The firm subsequently hired 500 new workers and announced plans to add as many as 500 more over the next five years. The company's two Middlefield plants employed 2,700, more people than lived in the town itself. Also in 2004, KraftMaid took over some administrative, sales, and marketing tasks from Masco subsidiary Mill's Pride as part of a restructuring of Masco's cabinet business group.

In February 2005, the company announced plans to build its first plant outside of Ohio. After considering locations in five states, KraftMaid officials decided on an 80-acre location in West Jordan, Utah, about 15 miles south of Salt Lake City. Like the firm's Ohio facilities, it would use computerized equipment and laser cutters to perform assembly, milling, and finishing operations under a single roof, with output expected to reach 6,000 cabinets a day. A primary goal of the Utah plant was to decrease turnaround time for orders shipped to the western region of the United States.

To entice KraftMaid to locate there, the state of Utah had pledged a $2.25 million training and recruitment grant to the firm, while the city of West Jordan issued an $11 million bond to buy the land and build needed infrastructure. The bond would be repaid by KraftMaid's property taxes. The 700,000-square-foot plant was expected to cost $106 million and would employ 1,300 after it opened in mid-2006.

More than 35 years after its founding, KraftMaid Cabinetry, Inc. had become the largest maker of semi-custom cabinets in the United States. Innovative products like the Passport line, as well as the added capacity of its new Utah manufacturing plant, were likely to bring it an even larger share of the U.S. market in the years to come.

Principal Subsidiaries

KraftMaid Trucking, Inc.

Principal Competitors

Masterbrand Cabinets, Inc.; Armstrong Cabinet Products; Elkay Cabinet Group; American Woodmark Corp.; RSI Holding Corp.

Key Dates:

1969:: A custom cabinet-making shop is founded in Independence, Ohio.
1981:: KraftMaid moves to Middlefield, Ohio; the company expands rapidly, and sales reach $100 million by end of the decade.
1990:: KraftMaid is acquired by Masco Corporation of Taylor, Michigan; Passport cabinet line for elderly and disabled customers is introduced later in the decade.
1995:: The company begins to implement "kaizen" and lean manufacturing techniques.
1996:: A new plant opens in Orwell, Ohio.
2004:: A $25 million expansion program adds 150,000 square feet to the firm's three plants.
2005:: Construction of new plant in Utah begins.