By Steven Feldman
CLARION, PA.—In an age where many manufacturers and larger retailers are choosing to source products from far-away lands, the re-structured Clarion Industries is providing a meaningful alternative: a domestic source of supply.
Clarion is not a brand you will ever see in a retailer’s showroom. Rather, it is what is referred to as an OEM—original equipment manufacturer— a company that makes a product for another company, which, in turn, re-sells it under its own brand. The laminate company seeks to have between eight and 12 customers that can include manufacturers, large retailers (big boxes, discount clubs, etc.) and even non-traditional avenues of distribution.
Helmed by former Pergo leader Tony Sturrus, Clarion seeks to provide solutions to U.S. manufacturers that find it is more cost effective to source certain products than make them themselves. To this point, most have been sourcing from companies in the Far East, primarily because of labor cost advantages.
But Clarion is a viable alternative for a series of reasons. It obviously begins with culture. “We have an understanding, not only as how a U.S. company works but how the consumer behaves,” Sturrus said. “This makes communication easier.”
1. State-of-the-art equipment with the technology to manufacturer products that others cannot. “We offer a flexible manufacturing platform,” Sturrus said, “that allows us to produce tiles as well as different lengths and widths of laminate flooring, from EIR to the high-volume, low-value products.”
2. Speed-to-market capability. “You put an order into Clarion and our lead times will vary from two to three weeks. Contrast that with supply chains from overseas, which can be from 45 to 60 days, depending upon from where you bring it in.”
3. Lower inventory commitments in terms of dollars. “There are minimums, but they are not measured in containers. That improves cash flow for our customers. They do not get caught with obsolescence or shortages.”
4. A “made in the U.S.A. story”—a growing interest for Clarion clients.
5. The company is debt free. “This allows us to be opportunistic in terms of product intros or support for marketing programs with our key clients. It allows us to take risks that others today are unwilling to do. I think it’s a key component to helping our clients develop their markets in the right way. It also allows us to attract good people. People know we are going to be here tomorrow.”
Clarion is also unique in its vertical integration—it is the only laminate operation in North America where the board manufacturing plant and flooring plant are housed on the same site, which creates significant competitive advantages.
For starters, there are savings in freight costs. In addition, owning a board facility controls one of the key cost components of laminate flooring. It also allows a manufacturer to maintain board quality to optimize finished product. “We have seen board coming in from China,” Sturrus said. “In contrast to what is made here, you can’t compare the two.” It also improves lead times.
But Clarion does more than manufacturer products. “By maintaining our financial strength, we have the ability to not only support our clients’ promotional opportunities or market development opportunities, but we are able to create a sense of continuity, so the supply chain becomes more secure,” Sturrus said.
It is this consumer centric philosophy that sets Clarion apart, Sturrus said. “We don’t wait for the client to call. We need to understand its business.” To that end, Clarion has set up customer relations personnel who become specific experts for the client. “I have one person truly focusing on Tarkett—what its needs are, what it orders, what it forgot to order, when it orders. It’s more of a partnership. We truly want to be arm-and-arm. Our goal is to ensure our customers can fulfill their customers’ expectations.”
In a relatively short period of time, Clarion has made huge strides. It has entered into vendor relationships with a larger account base than what it started with. “Some are rolling out now, some will roll out the early part of next year,” Sturrus said.
Current customers include Tarkett, Shaw, Mannington and Lowe’s, whose products are utilizing a third of Clarion’s 240-million-square-foot capacity. “Fundamentally, we have commitments [that will use two-thirds of our capacity] by next year,” Sturrus said.
Part of the reason Clarion is attracting these customers and more is product quality.
Not only has the workforce gone through substantial training, but there are all sorts of quality monitors in place that allows the company to measure whether there are any issues with product flowing through the plant so that it never ends up on someone’s dock. “Every single employee on the line is empowered to bring any issue to the attention of the supervisor,” Sturrus said.
Ground was broken on the Clarion facility in 2006 with the first products run in late summer 2007. A 50/50 joint venture between Aconcagua Timber (ATC) and Tarkett, the purpose was to support Tarkett’s vision to become a major laminate supplier in North America as it had become in Eastern Europe. However, the road to success was met with challenges, not the least of which was a blending of cultures. As well, neither company had the requisite experience in the manufacture of laminate flooring. “They bought the best equipment but had execution challenges,” Sturrus said.
The issue was magnified with the number of SKUs the plant was expected to produce. Not only did Tarkett have 45 SKUs, but it was also making product for another major customer. “Two major companies introducing major SKUs to be produced by a plant with no experience is a recipe for disaster,” Sturrus said. “Scrap rates were high. Delivery schedules were missed. Volume forecasts were dramatically missed. The partners couldn’t find anyone to blame, so they blamed each other. It all resulted in significant losses and the companies having to borrow on their lines of credit.”
Obviously, the partnership needed to be dissolved and new financing arranged. Tarkett decided it wanted to divest, leading ATS to seek out additional investors, which included Tarkett AG executives Marc Assa and Michel Cognet along with Sturrus, who was appointed Clarion CEO (FCNews, May 18/25). “We fundamentally deleveraged the company. We paid off the banks as well as fulfilled an obligation to Tarkett. Then we started doing things to make the business run. We began to pursue selected accounts.
“I came to this company with my idealism in tact. I did some due diligence on behalf of the investors. What I found was a wonderful workforce that wanted to succeed.”
The results are chronicled above. But after substantial losses in 2008, Clarion expects to break even this year in net income. And on the laminate side of the business, Clarion could see a doubling of sales, both in terms of units and dollars.