January 20/27, 2014; Volume 27/Number 19
By Ken Ryan
The decision to start Engineered Floors came in 2007, a time when both the flooring industry and Dalton were mired in a deep recession. The residential carpet business was in what industry pioneer and Engineered Floors chairman Bob Shaw called a “depression,” having dropped nearly 50% from its peak in 2005. The manufacturing icon said the decline ended just over two years ago in 2011 and has bumped along ever since.
Starting a business in this economy? “That’s stupid, isn’t it?” quipped Bob Shaw.
Apparently, Engineered Floors never got the memo that launching a new business in Dalton in 2009 made no sense. Since its founding, Engineered Floors has executed a rate of growth and expansion that is remarkable, if not unparalleled. Years from now, it could be a Harvard Business School case study.
The company finished its second completely new plant in 2013—a 215,000-square-foot building the company could expand up to 1 million square feet. Engineered Floors also announced in 2013 a $450 million expansion that will more than double its workforce in northwest Georgia.
Shaw told FCNews that one of the most difficult things in starting a business is “to obsolete yourself.” He is not the first great executive to believe in that philosophy; former Intel chairman Andrew Grove, in his book Only The Paranoid Survive, wrote that companies succeed only by first being able to obsolete their own products.
According to Shaw, a company always has to be ready to obsolete itself. In Engineered Floors’ case, it continues to seek ways to upgrade its process and embrace new technology as opposed to clinging to the old ways.
“Mr. Shaw started his career in this industry working for his father at Star Dyeing and Finishing,” said James Lesslie, assistant to the chairman at Engineered Floors. “He now realizes that aqueous dyeing carpet is ‘old technology’ and we have moved to a new model.”
In other words, “We may not always use solution-dye technology if another technology comes along,” Lesslie added. “With that said, it is a company value more than a signal that we are moving to something in the near future.”
Today Engineered Floors makes one type of carpet—solution-dyed polyester, and at less cost than its competitors, company executives said.
“We believe we can sell our production,” Shaw noted.
On solution dye, “It doesn’t take a genius to see where the industry is expanding; it is the only area that is expanding,” he said. “We’ve had some obsolescence, some of the polyester and polypropylene. If you buy a plastic chip and add value, you have a better chance to control your destiny than if we bought yarn from various suppliers.”
With Engineered Floors’ PureColor carpet fiber, the color is actually part of the material and goes all the way through it—like a carrot. With many other carpet fibers, the color is on the surface only—like a radish—and can be worn off or fade easily. “We have sold a lot of it, so I guess the dogs are eating the dog food,” Shaw said.
Because of efficiencies and the way PureColor solution-dyed polyester fiber is made, Engineered Floors is able to use considerably less energy and 50% less oil than piece-dyed nylon. The company also saves millions of gallons of water each year because PureColor Fiber doesn’t require it.
Engineered Floors will continue to expand, Shaw said. Plans for 2014 and 2015 are already in place and ready to be executed. The company is also gathering ideas and gearing up for 2016 and 2017.
“Truth of the matter is if we can ever get out of this recession on the residential side of business, we’ll be all right,” Shaw said.
A positive sign, he noted, is that for the first time in six years housing starts have gone above 1 million. “Hopefully the residential side of the business will start growing and we will get a good run. Unfortunately we’re not in the commercial side. Normally residential would recover 18 months after the commercial end of the business starts its recovery.”
In terms of consumer confidence, which many flooring executives feel is on the upswing, Shaw believes it is on its way, as long as some of the “higher powers” allow progress to occur. “If the government would get out of our business just a little bit, consumer confidence will come back,” he explained. “We will have people spending money again, decorating a room at a time. We expect to have pent-up demand, and eventually someone will say, ‘Hey, that carpet is dirty and we need to put a new carpet down.’”
Flooring dealers have raved about the profit margins realized by carrying Engineered Floors’ solution-dyed products. For Richard Longwill, president of Airbase Carpet Mart, New Castle, Del., Engineered Floors came in and filled a need for his retail operation.
“If you want to do business with them, you have to have the ability to take in truckloads in 300-foot rolls,” he said. “We have a machine in Georgia where we can make three rolls out of that and put them in three of our stores in close proximity to each other. And they were very reasonably priced. Mills did not want to chase them at the low end. [Bob Shaw] wanted to capture the people who do apartments, renovations, etc.”
When Engineered Floors first approached Redi Carpet of Houston about taking on the line, executives spoke about how the construction of the product and its anti-bleach characteristics would hold up in apartment dwellings. “The things they talked about, such as the performance of the product (they made sure they had plenty of twist in the yarn bundles)—have held true,” said Redi Carpet president and COO Jerry Hosko, whose company sells exclusively to apartments. “Most apartment residents don’t take good care of their carpet because they don’t own it. But because this product is solution-dyed, there is no need to replace it. It doesn’t discolor if someone spills something on it.”
Redi Carpet has done a significant amount of business with Engineered Floors over the last four years. “You make more money when you are the first ones with a product, and we’re still making money on it,” Hosko said. “It’s a profitable product.”
As a former quarterback who likes to apply sports analogies to business, Shaw is not taking any bows for Engineered Floors’ success. “We will wait until the game ends. We are not going to do any high fives at halftime … that will just get you in trouble.
“If you can ever figure out where the receiver is going to be rather than where he is now, you have a chance to complete the pass. That’s what we’re trying to do—know where the receiver is going to be.”