National Floor Trends asked flooring industry leaders to discuss some of the issues that are topping their agenda these days-and how they are dealing with them. Although they agree that the spike in fuel prices is a major challenge, they make it clear that it is, by now, a well-established trend.

National Floor Trendsasked flooring industry leaders to discuss some of the issues that are topping their agenda these days-and how they are dealing with them. Although they agree that the spike in fuel prices is a major challenge, they make it clear that it is, by now, a well-established trend. Instead of complaining about the situation, they see it as opportunity for innovative management. Companies that can develop an aggressive strategy for handling rising manufacturing and transportation costs will enjoy a competitive edge. Those that can produce superior product and figure out an efficient way to deliver it to consumers will ultimately prevail, the executives agree.

The clear consensus: The pace of the industry may be quickening and challenges persist, but there have never been greater opportunities in flooring. Even while the housing market may have cooled, consumers are far more focused on home improvement and more appreciative of the new wave of products vying for attention in all categories.

The executives participating where asked these questions:
  • State of the industry: How would you assess the current state of the flooring industry and what do you see as the biggest challenges and the biggest opportunities moving forward?
  • Energy costs: The price of manufacturing and transporting products has increased sharply as the result of rising energy costs. What steps are your company undertaking to contain costs and maintain your advantage?
  • Housing market: How has your company's strategy changed to reflect changes in the housing market?
  • What drives sales: What in your opinion is driving sales in the flooring market and what role does marketing play?
  • Changes: What changes would you like to see in the flooring industry?

Jeff Lorberbaum, Chairman, President, and CEO, Mohawk Industries

State of the industry: The flooring industry should have a positive year with a lot of opportunity. The commercial channel is expected to remain good as businesses continue to invest. The new construction channel has done well, but is expected to slow as we move through the year.

The redecorating market has been slow, but the high level of existing home sales of the past few years should result in more demand going forward. In addition, when new home sales slow down, people tend to stay in their homes longer and redecorate them at a higher rate.

The biggest challenge continues to be the squeeze on discretionary expenditures caused by high gas prices and rising interest rates. This is offset by an improving economy with a greater number of people working and rising wages.

Energy costs: Energy and oil influence a significant portion of our total costs by impacting the materials and distribution. We are taking many steps to minimize the impact. Unless these costs decline, the consumer will have to pay higher prices for their flooring and other products than in the past.

To minimize the effects, we continue to invest in our manufacturing assets to improve our efficiencies, productivity, and quality. We have reduced our manufacturing waste and variation in our processes. We are reanalyzing our energy consumption and finding ways to minimize its use. In our distribution, we are using computer programs to increase the utilization of our long haul fleet and improve the weight carried. On local deliveries, we are using programs to reduce the distance traveled and to monitor the driving habits of the operators increasing our fuel efficiency and reducing accidents. On the product side, we have introduced lower priced products utilizing lower cost materials such as polyester and redesigning our products to reduce the price inflation.

Housing market: Our strategy has not changed. We are focused on offering a complete assortment of products to all channels and markets. We provide what is needed to meet the requirements of any customer for any project at any budget. Our strategy is to provide not only the products, but also the tools to help the retailer/contractor create value for their customer while improving their product mix and margins. We continue to invest in product innovation to bring new value in durability and ease of maintenance with products like our SmartStrand carpets and our new wood collection with Scotchgard Repel technology. In ceramic, we are offering new stone visuals; and in laminate new wood species and tile looks.

What drives sales: The consumer wants to have her home reflect her lifestyle. Those companies that provide the product styling, value, benefits and service that exceed her expectations will be the ones that prosper in the market. Continuous innovation in styling and product features is a necessity in satisfying her requirements. Purchasing flooring can be an uncomfortable experience because the consumer purchases the product infrequently and does not understand it.

Marketing is the way we provide information to her in a way that informs her of the benefits of one choice over another. It includes brand, product features, merchandising, and advertising. We spend an immense amount of effort to present the product to the consumer so she can be comfortable that our products satisfy her needs. These tools help our customers close more sales and increase profits.

Changes: We need to make the experience more exciting and less intimidating. Investing in a new floor should be fun! The environment for flooring retailers is improving but has significant opportunity to improve. Our salespeople need to help the customer create her dream. We have a tendency to sell price, rather than style and value.

The customer wants the best she can afford and we need to assist her in making her home beautiful. After the sale, we need to make the installation process more professional and improve the experience. We need to raise the quality level of the installer community. We need to train them better and hold them accountable. We have a wonderful product that the consumer wants. This is a great industry which will continue to grow!

Don Gillett, President/CEO, Roppe Holding Co.

State of the industry: Our segment of the industry seems to be on an upswing. We are seeing increases in production, above the standard summer rush. We see the biggest challenges in bringing innovative "green" products into the mix. We have had great success with that in the past several years.

Fresh new products allow us to remain at the top of the market, so we are always looking for more.

Energy costs: At all RHC facilities, we continue to make manufacturing efficiencies a high priority, including rotating production of products to non-peak hours of usage when we can. Owning our own transportation fleet allows us to organize the delivery schedules to maximize our fuel consumption.

What drives sales: Flooring is often considered as a primary design feature in a space, not the blank canvas to cover the floor as it was in the past. Many products allow for great flooring colors with patterns that will mask minor dirt and debris. With damp mopping nightly, maintenance costs can also be lowered. These maintenance programs also provide a great looking floor as they enter the space - and that is what is important.

Marketing is critical because you can have great products, but if you don't accurately tell the story of how they can impact end users, then your products will never get off the ground. Green products also are highly visible in our marketing pieces and Web sites and that is another important feature.

You need to have great products, tell their story and educate others, and that information needs to be accessible.

Changes: As the trend toward more design-oriented products continues, professional installation of these products is critical. We are encouraged that this change toward professional installation for professional products continues. RHC has built strong relationships with organizations that promote and support installer training, in-house installer retention and continuing education on installation and maintenance. RHC brands promote mill trips for training at all levels of flooring decision makers - contractors and dealers, architects and designers and end users. We also actively promote training both in-house and in the field for our distribution network, so each link in the flooring purchase chain is educated on proper installation.

Another change we would like to see, which has already started to take hold, is the desire of the user to be more involved with what is selected for their flooring needs. Ultimately, the user is who deals with the day-to-day implications of what is selected for their floor.

It used to be a question of rubber or vinyl - that is no longer the case. The creation and growth of rubber/vinyl blend products and the proliferation of solid vinyl tiles means there are choices out there and substituting going on. For example, when an end user asks for a true rubber product, they now care that they get a SBR true rubber product and not a Rubber/Vinyl Blend substituted.

Randy Merritt, Exec. VP Marketing, Shaw Industries

State of the industry: The flooring industry has enjoyed a strong environment over the last several years fueled by the strength in the new home construction business and the resurgence of the commercial business after several down years. The industry has successfully dealt with issues concerning raw material cost and supply and the impact those things have had on all products and freight costs. Today, it does seem that the housing market is cooling some which will impact late '06 and '07 but for the long term, demographics and expectations for flooring are outstanding.

Energy costs: Rising costs have not been limited to this year. The last three years have seen continually rising costs driven primarily by rising oil costs and the downstream impact of that. We continue to re-engineer processes with an eye on improving efficiency and energy use. We are focused on more fully using and recycling raw materials and have further backward integrated via the acquisitions last year of Synthetic Industries, Honeywell and Modern Fibers.

In addition to these vertical integrations we have started the industry's first Waste to Energy plant that utilizes post-industrial waste from both carpet and other flooring sources and converts it in to steam to power another plant. These acquisitions and the development of more energy efficient processes give us more complete control of raw material utilization and flow.

On the transportation side, we continue to work with our fleet and drivers to ensure we are running full trucks, developing backhauls, and maximizing fuel efficiency. Even with this, we have been forced to pass higher freight costs on to our customers and ultimately to the consumer/end user.

Housing market: Since the beginning of time, segments within the industry have ebbed and flowed...when one is weak, others are stronger. Our desire is to be a strong, reliable, respected supplier to every segment thereby minimizing the impact of occasional swings in one segment versus another. We have enjoyed an incredible run in the new construction market. While this record pace could not maintain itself forever, we do not think the current situation is going to have long term effects. It is perhaps best described as "catching its breath." The demand for housing continues to be great and, again, the demographics suggest this demand will continue for many years to come.

What is driving sales: Our industry obviously sells product to consumers and end users. Fortunately for us, it is a product that is both desired and required. It is stylish, fashionable, and plays a significant role in the beauty of a home or commercial property. It is also an important functional part of the environment of the space. Flooring contributes many benefits to the particular end use of a space...from the home, to the office, to the school, to the hospitality venue, to the hospital, and more. Selecting a product that is both beautiful and functional is important. Our job via marketing is to help simplify this process for consumers and end users through flooring contractors and dealers. We want to help them understand the product and find the best product to suit their needs.

Changes: Our industry must work together to become more responsible citizens to our overall environment. Carpet litters landfills across the country. We have to take ultimate responsibility for our product at the end of its useful life. At the Evergreen Nylon Recycling facility that was part of the Honeywell acquisition, we have already begun collecting post-consumer product in large amounts. We are diverting from landfills and will reprocess back in to nylon that will be put back into carpet. This will be the industry's first truly closed loop, cradle to cradle, sustainable process for nylon.

Tom Leach, Vice Chairman, Artistic Finishes, Inc.

State of the industry: The hardwood sector continues to be a healthy growth market with demands for both domestic and exotic wood species on the increase.

For the manufacturer, the challenge continues to be cost control and finding reliable sources of supply for the more popular exotic wood species being demanded by customers. Expanded product offerings have contributed to more complex supply chain management issues that have reached global proportions. Many suppliers are just beginning to learn about the challenges of doing business overseas.

Internally, manufacturers are focused on "leaning" their operations to trap and eliminate waste in the manufacturing and distribution process. This also improves our ability to quickly adjust to changing market demands and conditions.

Energy costs: We have committed ourselves to the principles of lean manufacturing throughout our company. This is a practice that involves analyzing our order processing, production flow, sourcing and many other functions, to identify and eliminate waste wherever it is found. Everyone in our company participates. It's a visual method of managing the business that involves setting goals, tracking improvements and sharing the results with everyone involved.

In addition, we are investing in improved finish curing technology that will allow us to measurably reduce energy consumption associated with the finishing process. This too is an outgrowth of the lean manufacturing process.

Housing market: Consumer tastes have broadened considerably over the last few years, driven by the availability of an ever increasing number of wood species, finishes, flooring types and colors.

Our strategies are a direct reflection of changing customer demands. We've invested heavily in pioneering new finishing technologies. Our product offering now includes color coordinated moldings, vents and stair treads, 45 wood species, designer finishes, and over 1500 colors. We now mold many of our own products to accommodate an ever increasing demand for cost efficiency, quick response and custom designs. We've also built an internal capability to produce and ship custom orders quickly and efficiently.

What is driving sales: One of the most significant changes in the hardwood flooring market has been the availability of an ever expanding variety of wood species from all parts of the world. Manufacturers have heavily promoted these new wood species offerings and special finish offerings such as hand-scraped and distressed finishes, creating rapid consumer demand.

The beauty of many of these species is such that it adds a distinctiveness and value to a home which has been reflected in higher resale prices on homes with wood floors. This fact, which has been promoted by the industry, has certainly contributed to added consumer demand and growth in the industry.

Changes: While the number and variety of wood species has increased dramatically over the last few years, the number of finish offerings available from the industry has not increased at the same pace. We would like to see an expanding offering of special finishes available to create added architectural interest and consumer appeal for wood floors.

We feel that the industry needs to improve on its ability to electronically communicate orders, order tracking, inventory position, product availability, and demand forecasts throughout the supply chain. This capability would accelerate response times, improve product availability, and reduce supply chain costs.