Bedtime story Featured

5:22am EDT October 29, 2004
Jim Nation started working in a Miami department store in high school, and in one sense, he never left. The Florida Atlantic University education major moved from the warehouse to the boardroom without ever finding the inside of a classroom as a teacher.

Nation is president and CEO of Spring Air, the fourth largest bedding manufacturer in the world. And somewhere in Florida, a generation of students is deprived of his teaching talents. But as consolation, they may be sleeping well on one of his company's bedding products.

For nearly 80 years, the company founded by Francis Karr has been on the cutting edge of innovation -- not only with its products, but also with its operations.

"I get a lot of attention for doing the unusual or different," Nation says.

He's continuing a long history of innovations -- from Karr's free-end offset coil design, which adjusts to each sleeper's weight and today remains the most copied design in the bedding industry, to Nation's latest design, which incorporates latex foam used in the seats of Rolls Royce automobiles as the primary cushioning and quilting material.

"(Innovation) comes from a blend of two things," Nation says. "Things that we develop here on a national basis from our corporate staff and then, since we're a very entrepreneurial organization, we have a lot of creativity in the field. Sometimes it's top down, sometimes it's bottom up. Ideas are welcome from anywhere."

Nation's next big idea -- an experiment importing mattresses from the Far East -- has its roots in a trip he made to China earlier this year.

Currently, the Spring Air brand focuses on the high end of the market. Imports, Nation says, provide the company with a quick entry into less expensive market segments. But it is still too early to judge the venture's success.

"It comes down to price," he says. "We're exploring whether or not it's a viable strategy. I went over to China, my first trip, and was very impressed. The level of sophistication was much higher than what I had anticipated. They make a lot of products in a lot of categories that come into the U.S.

"The overwhelming reason is they can make a very high quality product and ship it into the U.S. cheaper than we can make it here. That's the bottom line."

 

Tale of a tinkerer

There are still a number of kinks to be worked out in Nation's plan.

It takes six weeks to fill an order from China, three of which are shipping time. With mattresses manufactured in the United States, filling an order takes just one week.

And then there is the issue of whether the supply is predictable or sustainable. But whether it is this venture or another, Nation anticipates that the importation of mattresses from Asia is an area that will continue to expand.

"The automotive industry was bringing in cars from Asia," says Nation. "Did it become important? Let's get a little closer to home -- the furniture industry. Probably 40 (percent) or 50 percent of it has moved to Asia, so that is important. If you can ship a sofa across the ocean and distribute it, and it ends up at a lower retail price for the consumer than what it would be if it were made in the U.S., can you do the same with a mattress?"

Setting up the import process was a challenge.

"We have a couple of suppliers who have relationships and factories over there," Nation says. "They were able to help us, but it is not easy. It's not like you call up your travel agency and book a trip. It requires more documentation than that, more permission than that. It's not hard, just time-consuming."

No matter how the experiment works out, Nation says Spring Air is not considering outsourcing its manufacturing work to China or shuttering its U.S. facilities.

"We're not entertaining that we're going to close our factories," he says. "We're not doing away with workers. What we will do if this works -- and I don't know that it's going to work -- but maybe in our assortment we make part of it and we import part of it. Maybe we import and distribute the very low end, where frankly we don't do a very good job anyway. If I did that, I'm not taking any business away from my factories; I'm going to take it away from other people's factories."

And Nation knows a thing or two about other people's factories. His rise to the top includes a stop at one of his much larger competitors, Sealy. He worked under Ron Trzcinski, president and founder of The Original Mattress Factory, who is famous for tearing apart competitors' mattresses to show customers the insides. Nation says Trzcinski doesn't do that with Spring Air products.

"If you go into his stores, you'll see he tears apart Sealy and Simmons," he says. "He never tears apart Spring Air because I'm a better match for him."

All of this tinkering has paid off. While Nation does not disclose financial information, Spring Air did nearly $475 million in business in 2001, according to figures from Hoover's Online (the latest year for which figures were available). And being privately held makes Nation's job just a little easier than it would be if he were running a publicly held firm.

"We don't have the same requirements a public company has," Nation says. "It has to be easier to run a privately held company than it does a publicly held company. We have shareholders, but I'm not open to the financial community. Each of the licensees is a shareholder. Currently in the U.S. we have 13 shareholders."

While Nation is beholden to those shareholders, he must also please another constituency -- the consumer. That means delivering a quality product at a quality price, and for Nation, the innovation is in effectively managing his supply chain.

Shopping for a mattress is different than shopping for, say, a car. Nation explains it this way: "All of a sudden (consumers) reach a point where they decide it's time to get a new mattress, and they're only in the market for a very short period of time. Probably 85 percent of them buy and 15 percent will postpone.

"Lifestyle changes affect the purchase of mattresses, and those lifestyle changes are things like number of married people, new family household creations, someone coming out of college who is going to have his first job. Divorces create mattress sales. Of course, the housing industry has been very good for a number of years, so that helps."

That can make it difficult to plan for the amount of material to order. Too much inventory can leave the company with obsolete and wasted products; too little translates into disgruntled customers and lost sales.

"Most of our materials are delivered to us on a just-in-time basis," he says. "Probably half of our business is on a quick-trip turnaround, meaning just a few days. And we produce to order, so we don't have a big backlog.

"If you go into a JCPenney store and buy a mattress, they do not have that mattress in stock. They'll place the order for us; we'll get it that night. Typically, we'll make that mattress the next day. It's available to you on the second or third or fourth day, depending on where you live."

That kind of operation requires a tight grip on the company's supply chain. A single disruption in the flow of materials can wreak havoc with the process, which produces about 3 million mattresses every year.

Spring Air nearly had one such disruption when one of its licensees, Spring Air Partners North America, filed for bankruptcy. Nation was able to get other facilities to ramp up production until the stumbling licensee got back on its feet.

And the supply chain has become more complex because Spring Air distributes bedding internationally. The company has plants in the United States, Canada, Mexico, Ireland, Australia, the Middle East and Argentina.

"We do a very nice job in Mexico," Nation says. "Actually in Mexico, Spring Air is the No. 1 brand. We do okay in Canada, but really our best success story is Mexico."

 

A well-rested competitor

Nation isn't just focused on innovating his supply chain with new techniques. He's also keeping an eye on a couple of upstarts in the bedding specialty market -- Select Comfort, which boasts a sleep number and a cushion of air, and Tempur-Pedic, which offers a memory foam that conforms to the shape of the sleeper.

Nation dismisses Select Comfort as a direct marketing company with an "upholstered air mattress."

"They actually struggled for many, many years," he says. "And then, without changing the product -- just changing their marketing to having a dial that had a number on it, so that each person got to select their own number -- the marketing of that has helped them tremendously."

Tempur-Pedic, on the other hand, has a bit more credibility in Nation's eyes.

"They may only be 4 (percent) or 5 percent of the units," he says, "but they are a sizable percentage of the beds sold above $1,500. At the high end of the market, they are having an impact. We do have a lot of products that are in the same category as theirs."

But that's where the similarities end, he says. The companies' selling approaches are drastically different. Tempur-Pedic is primarily a direct marketer that has recently begun to sell through retailers. Spring Air does not own any stores, selling through department and bedding specialty stores.

That's one thing that has helped Spring Air continue to grow during difficult economic times.

"The economy has been down, the industry has been down the last few years, but we've had double-digit increases every year," Nation says. "We are selling more and more retailers each year. And the acceptance of our product has become very high. What we're finding is people prefer our product over others. Our product and our distribution have helped us immensely, and we didn't have a downturn in our business.

"If I take the industry last year, all of the growth came from four manufacturers -- Spring Air, Select Comfort, Tempur-Pedic and Simmons," Nation says. "If you add the growth that those four companies had, that is equal to the growth of the entire industry."

And with that kind of innovative success, it's no wonder that Nation sleeps very, very well at night.

HOW TO REACH: Spring Air, 847-439-4399 or www.springair.com