BedTimes AUGUST 2009
THE BUSINESS JOURNAL FOR THE SLEEP PRODUCTS INDUSTRY
Disruptive Innovation Why now is the time to foster the process
Survey: Manufacturers facing 4th difficult year in a row Will your insurance company be around when you need it?
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How will CertiPUR-US beneďŹ t your company? s &OCUSES ON CURRENT CONSUMER CONCERNS ABOUT FOAM INVOLVING HEALTH AND INDOOR AIR QUALITY s 0ROVIDES COMFORT AND CONlDENCE REASSURING CONSUMERS ABOUT THE FOAM IN YOUR SOFA s 0ROVIDES A REFERENCE SOURCE WEBSITE FOR YOUR CUSTOMER SERVICE STAFF 9OU DONT NEED AN in-house expert on health regulations and concerns. s $EMONSTRATES YOUR COMMITMENT TO A HEALTHY HOME ENVIRONMENT Based on a similar program in Europe, CertiPUR-US provides added value to furniture manufacturers â€“ and eventually consumers â€” offering peace of mind and answering QUESTIONS TYPICALLY ASKED BY CONSUMERS (ICKORY 3PRINGS IS ONE OF SEVERAL FOUNDING members of the CertiPUR-US program, which was officially introduced in early 2009. To switch to Hickory Springsâ€™ certiďŹ ed CertiPUR-US foam, call 1.800.438.5341 or visit HickorySprings.com. Also see certipur.us.
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12 Shaking things up
Given the challenging world economy, conventional wisdom might suggest companies are less willing to embrace the risk-taking and short-term costs necessary for innovation. But some say now is just the time for innovation that’s particularly bold and “disruptive.”
20 Insurance assurances
Most of us don’t think much about our insurance coverage until we go to file a claim. Will your insurance company be there when you need it? Experts show you how to assess the solvency and financial health of your insurer.
11 Leadership Issues
It’s not enough to expect the unexpected, says leadership guru Larry Wilson. Leaders also must prepare for and practice dealing with unplanned situations.
27 Employee Relations
The reason difficult people continue to be difficult is because others allow them to do so. A management expert shows you ways to confront co-workers, managers and employees to change their behavior and improve the atmosphere in your workplace.
46 Up Close
31 Industry News 40 Newsmakers 42 ISPA News 43 ISPA Advocacy 48 Advertisers Index 50 Classifieds 51 Calendar 52 The Last Word
With a goal of using research-based science to change the way people think about sleep, Robert Oexman has found a good fit running Kingsdown’s Sleep to Live Institute.
5 Editor’s Note 7 Front Matter www.sleepproducts.org/bedtimes
BedTimes | August 2009 |
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EDITOR IN CHIEF Julie A. Palm 336-727-1889 email@example.com SENIOR WRITER Barbara T. Nelles 336-856-8973 firstname.lastname@example.org CONTRIBUTORS Phillip M. Perry Rhonda Savage Dorothy Whitcomb Larry Wilson ART DIRECTOR Stephanie Belcher 336-201-7475 email@example.com VICE PRESIDENT OF SAlES Kerri Bellias 336-945-0265 firstname.lastname@example.org AD PRODUCTION & CIRCUlATION mANAgER Debbie Robbins 336-342-4217 email@example.com COPY EDITOR Margaret Talley-Seijn
BedTimes deadlines Editorial deadlines for the Industry News and Newsmakers sections of the October issue of BedTimes are Tuesday, Sept 1. Volume 137 Number 8 BedTimes (ISSN 0893-5556) is published monthly by the International Sleep Products Association. Periodicals postage paid at Alexandria, Va., and additional mailing offices. Editorial and advertising offices 5603-B W. Friendly Ave. #286 Greensboro, NC 27410 Phone 703-683-8371; Fax 703-683-4503 Administrative and ISPA offices 501 Wythe St., Alexandria, Va. 22314-1917 Phone 703-683-8371; Fax 703-683-4503 Postmaster Send address changes to BedTimes, 501 Wythe St., Alexandria, Va. 22314-1917 Contents © 2009 by the International Sleep Products Association. Reprint permission obtainable through BedTimes.
It’s not too early to plan for Industry Conference
t’s a few months away, but plans already are shaping up for the ISPA Industry Conference and Exhibition. The focus of this year’s event, which will be Nov. 4-6 in Bonita Springs, Fla., is “Selling to the ‘Redefined Consumer’ in a Changed Economy.” Among other things, the focused, interactive program will help you understand today’s consumers, how to best reach them and how to improve the mattress shopping experience. The event will truly be an allindustry gathering, with retailers invited to attend along with mattress manufacturers and suppliers. Though not members of the International Sleep Products Association, retailers play a vital role in the industry and their input and ideas are critical for issues ranging from growing the mattress industry as a whole to expanding recycling opportunities for used components. As attendees have come to expect, there will be numerous suppliers exhibiting their latest products and services. New this year, mattress manufacturers also may exhibit. Networking events and the always-popular golf tournament will round out the event. For more information about all the activities, check www.sleepproducts.org/industryconference. If you are interested in sponsorship opportunities or exhibiting, contact Kerri Bellias, ISPA vice president of sales, at firstname.lastname@example.org or 336-945-0265. Pillow talk In recent years, many mattress manufacturers and suppliers have started producing and distributing pillows, creating a reliable added revenue stream. We are planning a Product Watch on pillows (sleeping, body, travel—pretty much all types except decorative) for the October issue of BedTimes. If you have a line of
pillows, we’d like to hear from you for possible inclusion in the story. Email me at email@example.com or call 336-727-1889. Don’t be left out of Supplies Guide I mentioned this in my column last month, but some things bear repeating. In 2008, we launched an improved online BedTimes Supplies Guide, the most comprehensive directory of product and service suppliers to the industry. The site is more robust and easier to use than the previous version, in large part because of its Google-like search function that gives users the option of a keyword-driven search or a categoryspecific search. Check it out at www.bedtimessuppliesguide.com. We have partnered with MultiView, a publisher of online supplier directories based in Irving, Texas, to produce the online guide and MultiView is currently contacting suppliers about purchasing, renewing or upgrading their listings. A company listing includes a full-color company logo, corporate description, Web site link and email-generation capacity. Banner ads and listing upgrades also are available. You can contact MultiView directly about purchasing a listing by calling 800-816-6710. As always, we will publish a version of the BedTimes Supplies Guide in our December issue. BT
Julie A. Palm BedTimes | August 2009 |
Manufacturers face worsening conditions Companies finding ways to cope while waiting for turnaround By Julie A. Palm
new report on the state of manufacturing in the United States shows “sustained and widening deterioration” of business conditions for the fourth year in a row—all made worse by the recent worldwide recession. “Last fall’s financial system collapse led to a virtual halt in consumer spending. As a result, many manufacturers and distributors—–and their employees—–have been harshly affected. Though we have avoided a global economic meltdown, the economy will move up, down and sideways for several more months. Recovering profitability and maintaining global competitiveness will test the resilience, business acumen and creativity of U.S. industry,” writes Thomas G. Murphy, executive vice president of manufacturing and wholesale distribution, in RSM McGladrey Inc.’s “2009 Manufacturing and Wholesale Distribution National Survey.” RSM McGladrey is a professional services firm providing accounting, tax and business consulting. The annual report calls business conditions “as difficult as they have been in years” and says the pain is spread across industries. But there is some good news: “Survey respondents do, however, see a light at the end of the tunnel. Companies have revisited their strategies, streamlined their businesses and are positioning themselves to emerge from this recession by taking an even larger role in today’s global economy,” the report says. Overall business conditions The percentage of companies saying that they are “thriving and growing” has been steadily declining since 2006,
when nearly 60% agreed with that statement. But it dipped even more significantly this year, with only 9% reporting good business conditions. During the same time, the percentage of companies describing their business as “declining” has risen, with a steep jump from the 2008 to 2009 surveys. In 2006, only 4% of respondents characterized their business as declining. This year, 40% reported their business is suffering. However, some companies, particularly those in the food and beverage and chemicals industries, are not feeling the negative effects of the slow economy, according to the report. Looking ahead, 46% of respondents predict a financial rebound for their companies by the end of the year and 44% anticipate improvements in 2010. But they are less optimistic
about a quick recovery for the overall economy. Some 62% say a recovery won’t come until 2010 and 8% don’t anticipate a turnaround until 2011 or later. Growth strategies Despite changing and challenging economic conditions, companies remain consistent in their strategies for growth. In both 2008 and 2009, respondents reported they planned to grow their business by: ➤ Acquiring new customers (31% in 2008; 42% in 2009) ➤ Increasing sales in domestic markets (28% in 2008; 34% in 2009) ➤ Increasing sales to current customers (22% in 2008; 29% in 2009) ➤ Increasing brand recognition (16% in 2008; 22% in 2009)
Current condition of business 60% 50% 40% 30% 20% 10% 0%
Thriving and growing
Source: 2009 Manufacturing and Wholesale Distribution National Survey
BedTimes | August 2009 |
Growth optimism for 2009 50% 40% 30% 20% 10% 0%
Source: 2009 Manufacturing and Wholesale Distribution National Survey
The No. 5 response changed this year. In 2008, 16% of companies said they were planning to grow their companies by increasing sales in international markets. In 2009, 17% said growth would come from increasing the number of products they offered. Operational effectiveness According to the survey, significantly more companies are reducing their operating capacity and slowing capital expenditures in 2009 than in past years. A little more than one-quarter plan to reduce their operating capacity and a similar number expect to consolidate their operations. Only 15% plan to expand capacity, with companies in the medical devices industry most likely to do so. There were notable differences in companies’ plans based on geography, according to the report. Companies in the Southwest are more likely to say they are contracting, with 42% planning to reduce capacity and 45% planning to consolidate their operations. In contrast, companies in the West are more likely to be growing. There,
8 | BedTimes | August 2009
20% of companies plan expansions. Only 21% expect to reduce their capacity. More than 80% of respondents say their company is planning capital expenditures this year, but three-quarters of those say the expenditure will be less than $1 million. How companies will fund those expenditures also is being impacted by the slow economy. The percentage of companies financing capital expenditures using cash from their operations increased from 78% in 2008 to 84% in 2009, according to the report. Conversely, the percentage of companies relying on bank financing dropped from 51% in 2008 to 47% in 2009. Innovation Companies may be cutting back efforts in some areas, but they are not shying away from innovation. A full 95% of respondents say their companies have plans for innovating products or processes. “Companies that innovate generate new revenue, increase differentiation from competitors and drive down costs,” the report says. “Innovation can
also enhance results for a company’s customers by providing more effective products, decreasing lead times and improving cost competitiveness.” Respondents say their companies are putting a particular emphasis on “green” initiatives, with 53% reporting they are pursuing such strategies in 2009, up from 46% in 2008. Some 62% of companies planning green initiatives say the driving force is “concern for the environment.” “There is growing consensus across the country that green is not a fad, but a long-term trend. On a yearly basis, more companies are adopting green initiatives and more consumers are supporting environmentally conscious businesses,” the report says. “…Environmental concerns are not the only reason for green initiatives: the market is also driving the movement. Green will become a standard requirement not only to enter the market but to stay in the market.” Health care Among other pressing concerns of U.S. businesses is providing health care coverage to workers. Despite rising costs, only 2% of respondents say they don’t offer health insurance. But they are finding other ways to deal with health care costs. Some 62% are passing additional costs onto employees. “Another important trend is to place health care cost decisions in the hands of employees through Health Reimbursement Accounts (HRAs) and Health Savings Accounts (HSAs),” the report says. The 2009 survey is based on the responses of 932 executives of manufacturing and distribution companies who completed an online questionnaire. It also looks at U.S. companies’ involvement in the global economy and issues related to supply chains, margins, tax strategies, information technology and work force readiness. For more information, check www.rsmmcgladrey.com. BT www.sleepproducts.org/bedtimes
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LeadershipLessons Avoiding: ‘Houston, we have a problem’ Like astronauts, leaders must prep for the unexpected By Larry Wilson
n April 1970, Apollo 13 was on its way to the moon. It was supposed to be a routine voyage until the “Houston, we have a problem” mes sage came from astronauts aboard the space craft, shocking a sluggish populace that was already taking the safety of space travel for granted. With the utterance of those terrifying words, the entire world tuned into the drama of three astronauts—three heroes—desperately trying to return safely home to their families. Jim Lovell was the astronaut who delivered that message to the Houston command center when Apollo 13 lost much of its power, water supply and all cabin heat. We know the story has a happy ending, but there was a period of time when no one knew for sure that would be the case. The question for us, as leaders, is “What can we learn from Lovell and his crew that we can apply to our world of work today?” While creating a video for Ford Mo tor Co.’s customer relations department, I was lucky enough to meet and inter view Lovell. The video was titled, “ ‘Houston, We Have a Problem,’ or, How to Avoid Surprise, Panic and Blame.” Hopefully you will never have to make life-and-death decisions like those in charge of Apollo 13, but stop for a second and reflect on your own life and leadership style. How do you react under the pressure of an unexpected prob lem? When a problem hits your desk, do you—never? sometimes? often?— respond by being surprised and panicky? Do you immediately start looking for someone to blame? Or do you calmly choose a new course of action? Let’s look at a more recent example: www.sleepproducts.org/bedtimes
Hurricane Katrina, which devastated the U.S. Gulf Coast in 2005. Many leaders were involved in trying to handle the aftermath of that tragic storm. Unfor tunately, many—if not most—initially responded in the habitual “surprise, panic and blame” pattern. The hurricane’s victims and the country as a whole paid a high price for this less-than-optimal response from leaders. Before we start playing the blame game ourselves, remember that it’s only those among us who have never blamed first and thought later who have a right to criticize others for doing so. That doesn’t leave many of us to do the criticizing, does it? Let’s go back to how Lovell and his team chose to respond to a seemingly impossible scenario. Here’s the question I asked Lovell in my interview with him: “Jim, I read all about the incident, but I want to hear it directly from you. What hap pened?” Lovell replied, “We practiced every single thing we could think of, but the thing that happened? Well, nobody thought of that. But we had anticipated that things would be different than we had planned, so we practiced for that—for the unexpected. That was the practice that saved our lives.”
If you ask me, what Lovell said in that interview is solid gold for every leader—but only if the leader is open enough to hear it and then disciplined enough to practice it. It’s not enough to expect the unexpected. You have to prepared for the unexpected and then practice your response. Leadership under fire often is defined by the cliché, “When the going gets tough, the tough get going.” Here we’re talking about mental toughness, not physical toughness. However, there are similarities. The way to get physically tough is to physically work out. And the way to get mentally tough is to mentally work out. Mental toughness means doing the mental rehearsal that prepares you for the unexpected. Leaders are paid to solve problems. When the unexpected comes your way, think of Lovell. Instead of being surprised, anticipate the unexpected. Instead of panicking, quickly look for ways to solve the problem. Instead of blaming, learn from what happened so everyone can be better prepared next time. Anticipate, problem solve and learn. Think how different things could be for all leaders if we adhered to the lessons evoked by Lovell’s five words: “Houston, we have a problem.” BT Larry Wilson is a pioneer in change management, leadership development and strategic thinking. He has founded the Wilson Learning Corp., Pecos River Learning and The Wilson Collaborative. Wilson works with companies to help them “create the organization that, if it existed, would put them out of business.” His clients include major mattress manufacturers and retailers. He can be reached at firstname.lastname@example.org.
BedTimes | August 2009 |
Disruptive I Why an economic crisis could be the 12 | BedTimes | August 2009
hile globalization has witnessed the decline of U.S. dominance in manufacturing, energy and even finance, one thing had long been presumed unassailable: Good old American ingenuity.
Now it appears that’s not safe, either. China, whose industries have been envied
in the West more for their tenacity than their ingenuity, has established a multiyear framework to become more innovative and, therefore, competitive. So has Singapore. Finland is merging its top business school, design school and technology school to create a multidisciplinary “university of innovation” next year. Council members of the National Academy of Sciences and the National Academy of Engineering have “expressed concern that a weakening of science and technology in the United States would inevitably degrade its social and economic conditions and in particular erode the ability of its citizens to compete for high-quality jobs,” according to a 600-page report from the National Academies published in 2007 and titled, “Rising Above the Gathering Storm.” The wild card these days is what will happen to innovation—the advance of progressive ideas in science, technology and business—now that the world economy is in a tailspin. The conventional wisdom might suggest that business, government and academia will be less willing to embrace the risk-taking and short-term costs that come with the territory of innovating. Yet Paul J.H. Schoemaker, research director for the Mack Center for Technological Innovation at the University of Pennsylvania, suggests that, for some companies, the economic crisis can actually provide an innovation platform. “The crisis has multiple impacts,” Schoemaker says. “Loss of revenue and profit will at first instill a cost-cutting mentality, which is not good for innovation. But if the patient is bleeding you need to stop that first. Then, however, a phase starts where leaders ask which parts of their business model are weak (and perhaps unsustainable) and that, in turn, can lead to restructuring and reinvention.” He also cautions against too much caution—over-reliance on incremental innovation versus transformative, or “disruptive,” innovation. In innovation circles, the two have come to be differentiated as “little i” and “Big I” innovation. “The largest gains in business come from more daring innovations that challenge
Innovation the paradigm and the organization,” Schoemaker says.
time for companies to give it a try www.sleepproducts.org/bedtimes
BedTimes | August 2009 |
The business of disruption While “disruptive innovation” has enjoyed office buzz-phrase status for only about a decade, the idea is quite old: Austrian economist Joseph Schumpeter had it in mind when he borrowed the phrase “creative destruction” to describe his theories of how entrepreneurs sustain the capitalist system. So just how does an entrepreneur or business go about being “disrup tive”? How does one convince inves tors or top brass of a radical idea’s worth? One person who knows some thing about bringing disruptive innovations to market is Jeong Kim, president of Bell Labs at AlcatelLucent and a successful tech entre preneur. He offered some suggestions in a recent presentation titled, “Paving the Way for Disruptive Innovation,” that was part of the University of Pennsylvania’s Executive Master’s in Technology Management program’s ongoing lecture series, “Aligning Emerging Technology and Business.” Among the most critical assets one can possess, he says, is compa nywide recognition that disruptive innovation is actually important. In a company that’s already successful—or one with layers of bureau cracy that hinder new ideas—this can prove difficult. The firm also must commit itself to research. “Disruptive research is absolutely critical, especially in the technology space,” he says. Furthermore, it is not enough to simply have brilliant engineers. Without competent management on the business side, the most elegant technology can wind up on the scrap heap of business his tory, or even worse, usurped by a competitor. “Disruptive innovation is not sufficient,” Kim says. “You can (cite) numerous examples of companies that came up with (new) technol ogy but eventually were displaced by somebody else.” In the innovator’s lingo, these “somebody elses” are known as “fast followers”—that is, companies with
14 | BedTimes | August 2009
better funding has to empha or sharper man size more of agement who an options and were able to ex portfolio strat ploit a technol egy rather than ogy more quickly static NPV ‘Without and effectively in (net present the marketplace value valua competent than the original tion method).” management creator. (“Blue ocean” “You like to be is innovatoron the business the first to devel speak for side, the most op technologies,” unrealized, Kim says. “But and therefore elegant technology the more flexible, uncontested, can wind up on the the more innova markets.) tive in terms of Wharton scrap heap of business business model management history, or even that the company professor Mary is, the longer you Benner sees worse, usurped can maintain the “stick to by a competitor.’ advantage.” our knitting” That point syndrome as gives rise to the impinging on question: What is large compa the best business model for fostering nies’ ability to react to competitive threats. innovation? As it turns out, numerous decision-making tools exist to help “I find that firms’ innovation into firms systematically manage an in radically new technologies or new novation program, says Schoemaker, markets can seem to shareholders co-author of a book titled, Wharton and securities analysts like too great a on Managing Emerging Technologies. departure from their expectations for According to Schoemaker, when it these firms,” she says. “Investors and comes to innovating, the analogy is to analysts often prefer that firms maxi firing a shotgun, not a rifle. Given the mize shareholder value by ‘sticking to high failure rate of innovative proj their knitting.’ The result is that large ects, companies are smart to develop firms, particularly those expected to an array of possible situations and have stable, predictable earnings and contingencies, rather than pin all their dividend payments—i.e., “income hopes on one plan. stocks”—are not likely to be rewarded “Sticking to our knitting” might by the stock market for entering new appear to be a sound business technologies or undertaking radical cliché—it worked for a lot of com innovation, and instead may be pun panies that survived the dot.com era. ished by reductions in stock price and But Schoemaker and other innovation market value.” gurus advocate looking at areas adja A prime example she has found cent to one’s main business as fertile in her own research, Benner noted, is soil for innovative breakthroughs. Verizon Communications, the giant Old-fashioned, linear approaches telecommunications firm. Stock ana that rely on standard measurement lysts questioned Verizon’s large capital schemes are often outdated if relied outlays on FiOS, a high-volume fiberupon solely. optic network intended to counter “By examining a company’s growth a “triple-play” threat to its business gap, developing scenarios, explor posed by Comcast’s cable television, ing adjacencies and venturing more high-speed Internet and voice-overinto blue oceans, companies can reap Internet phone service. greater benefits,” Schoemaker says. “Recent research suggests the “The investment approach, however, stock market is not good at valuing www.sleepproducts.org/bedtimes
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intangibles, uncertain innovation or technological change,” Benner says. “What this means for large, publicly traded firms is that they may face a disadvantage in engaging in radical innovation, and this innovation may instead take place in venture capitalfunded startups.” Indeed, outsourcing of innova tion itself could turn out to be the wave of the not-so-distant future. “Particularly in the pharmaceutical area, there has been a focus on how firms acquire innovation that has been undertaken by small, privately funded firms such as biotech startups,” Benner says. “It may be that the locus of much really radical innovation is shifting outside of the large organizations to small startups.” That points to a big trend emerg ing in product development, so called “open innovation,” according to Wharton marketing professor George S. Day, co-director of the Mack Center for Technological In novation and co-author of Wharton on Managing Emerging Technologies. Open innovation, also known as “crowd sourcing,” entails collaborat ing with partners to solve business problems. The archetype of that model is Waltham, Mass.-based InnoCentive. It matches corporate “seekers” who have science, engineering and busi ness problems with amateur “solv ers” worldwide. The “solvers” then compete—for bragging rights and often token rewards—to provide the best answers to the corporate problems. “Most companies are not look ing for a big innovation they can knock out of the ballpark,” Day says. Rather, they want a relatively quick fix for a specific piece of a larger puzzle. For firms that want the “secret sauce” to always come from in house, previous success can present a huge roadblock to innovation, ac cording to Kim. The problem is that success creates a virtual construct, a paradigm of “how to do things,” inside of which new thinking cannot flourish. Kim calls it “the curse of knowledge.” Cross-discipline team
16 | BedTimes | August 2009
ing “is one way of breaking the curse of knowledge,” he says. Another is “experience pairing,” or matching a senior employee with an individual who has considerably less experi ence, but a fresh perspective on how to solve problems. An incredible opportunity to innovate disruptively lies in the problem of information overload, Kim says. Knowledge is being cre ated at a far faster rate than any one human can ever hope to assimilate. The flip side is that we constantly filter out vast stores of data because we are bombarded with information like never before in history. To prove his point, Kim showed audience members a movie clip that repeated an old psychology experiment. Two teams, one dressed in white, the other in black, dribbled basketballs and passed them back and forth. Audience members were told to count the number of passes made by the black-shirted players. A few of the students missed the
‘Recent research suggests the stock market is not good at valuing intangibles, uncertain innovation or technological change.’
person in the gorilla suit who non chalantly walked through the middle of the scene, because they were not looking for it. “I can assure you that all of you saw the gorilla. But some people processed it, stored it; some people missed it. You were looking for a particular thing,” he says. Seven hours of whitewater rafting The term “disruptive technology” went viral in the late 1990s after the release of Harvard Business School professor Clayton Christensen’s book, The Innovator’s Dilemma. But in prac tice, Bell Laboratories has served as an incubator of paradigm-shifting, dis ruptive innovations since its creation in 1925 as a joint venture of AT&T and Western Electric. Researchers at northern New Jerseybased Bell Labs have won six Nobel Prizes and take credit for an inventory of innovations: The photovoltaic cell, the silicon-based transistor, statistical process control, the UNIX operating system, the C programming language, digital cell phone technology and wire less local area networks are just a few of the better-recognized innovations that have taken shape there. Today, Kim says, Bell Labs research ers are working on similarly groundbreaking technologies. They are de veloping, for instance, a liquid sensor that can be transformed to any shape by applying voltage—Kim envisions it being used as a zoomable lens. The division is also using nanotechnology to create 3-D images. “You have seen, in science fic tion movies, 3-D holographic movie images? It can be done,” Kim says. “It can be done using these technologies today. It’s just not very cost effective.” Kim offered a case study from Alcatel-Lucent—Lucent Technologies at the time—on how to inject a spirit of disruptive innovation into an exist ing and stagnant culture. Lucent’s optical networking divi sion was severely underperforming and the company fired the unit’s top managers. “I was really convinced that the reason I was put in there was that nobody else would do it, and they www.sleepproducts.org/bedtimes
needed somebody to blame,” Kim says. The division was moribund: Financial results were disappointing and morale was low. Kim shook up the management team and took the survivors to an off-site retreat that featured whitewater rafting. “First thing they do is say, ‘Why are we doing this ...?’ After a while, they get really bored,” he explains. The exer cise, intended to foster teamwork and cooperation, was designed with the help of a psychologist. Instead of cooperating, the managers began splashing one another with their oars, “like little kids.” But the exercise-psychology experiment wasn’t over at the end of the rafting run. “After six or seven hours of whitewater rafting like this, they were tired,” Kim says. That evening over dinner, people let their “at-work” guardedness down and spent time learning about one another. The next day included all the off-site strategizing and white-board sessions one might expect, but Kim says the interaction was more genuine and productive than if they had met as they were previously, a group ing of near strangers. In the first quarter following that meeting, he says, the group posted revenues of $510 million, $560 million the next quarter, then $730 million, then $970 million. The point, he adds, is that “teamwork is so critical for the success of a company.” Kim’s advice for jumpstarting disruptive innova tion is not exactly revolutionary, though it can seem exceedingly rare when many companies still think quarter-to-quarter and employees take a similarly short-ranged view. Not even storied Bell Labs, it seems, is immune from the pressure to produce quickly exploitable technology. In a shock to the science world, AlcatelLucent all but shuttered its funding for the Lab’s basic physics research in summer 2008 the summer. Com pany officials said the move was done to align the lab more closely with the parent company’s commercial pursuits in wireless, optics, networking and computer science. Or, as Alcatel-Lucent spokesman Peter Bene dict told Wired magazine in August 2008, “In the new innovation model, research needs to keep addressing the needs of the mother company.” Basic research investigates the most fundamental of scientific questions and has no direct commer cial application. At the same time, it has laid the groundwork for most of the modern technological conveniences we enjoy today, including commercial aviation, the GPS system and lasers. “You have to make an investment in capital, human knowledge and networking,” Kim says. “That’s the way to get ahead.” BT Reprinted with permission from Knowledge@Wharton (http://knowledge.wharton.upenn.edu), the online research and business analysis journal of the Wharton School of the University of Pennsylvania.
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Will your carrier pay off when disaster strikes? By Phillip M. Perry
magine a worst-cast scenario: Fire destroys your business tonight or someone slips and falls on your premises and files a lawsuit. Will your insurance company pay off fully and promptly? Your first reaction is probably “yes.” But have you performed due diligence to make sure your carrier has the financial stability to pay a serious claim? Just as important, will it pay your full recovery amount or attempt to cut its losses by nickel and diming you to death? And how quickly will it process your claim? Will it delay payment just when you need the cash to pay your bills? It’s easy to avoid investigating the answers to such questions. No one likes to think about insurance and most of us don’t—until things go wrong. But recent headlines about www.sleepproducts.org/bedtimes
the collapse of the enormous and supposedly financially secure insurance conglomerate American International Group are bound to give companies cause for concern about the health of their own insurers. Being prudent is a good thing, say those in the business. “If you happen to get caught in a gray period just before or after a carrier goes out of business, claims are a nightmare,” says Scott Simmonds, an insurance consultant in Saco, Maine. Carriers that go into receivership are taken over by the state in which they are incorporated, Simmonds says. That can mean a freeze on the carrier’s ability to pay claims until another company picks up its contracts. And that means you don’t get your money when you most need it to pay your bills. BedTimes | August 2009 |
Getting assistance from a public adjuster Companies Commonly get information about insuranCe Carriers from agents and consultants, but you also can turn to public adjusters. Typically, you call on public adjusters when you need help negotiating with your carrier after you file a claim. But you also can call them for a quick assessment of a company before you sign a policy. Be aware that there are three kinds of insurance adjusters: ➤ Company adjusters They are full-time employees of insurance companies and can have a vested interest that may conflict with yours. ➤ Independent adjusters They are self-employed and represent multiple insurance companies on a per case basis. Again, because they are paid by insurance companies, their interests may conflict with your own. ➤ Public adjusters They represent only policyholders. They are state bonded, licensed and tested. They represent claimants on a contingency fee, usually 5% to 10%. You want to find a public adjuster for advice. One source is the National Association of Public Insurance Adjusters’ Web site, www.napia.com. You also can contact your state department of insurance for a list of public adjusters. And don’t forget the public adjuster’s main role: You may want to employ one to help you get the maximum recovery after you file a claim. “As a public adjuster I am legally licensed to speak to you, the policyholder, after a major loss,” explains Robb Greenspan, senior executive vice president at the Greenspan Co., a public adjuster in Encino, Calif. “I am paid by you to represent your interests against the insurance company. I strategize with the policyholder to determine what the true losses are and how to put forth the claim and then I value what you lost on building, contents and business interruption losses, package it all, submit it and negotiate a full settlement.” One caution: While you may be tempted to encourage a highly aggressive public adjuster in his efforts, this can backfire and create costly delays in resolving issues. As much as you can, foster a spirit of cooperation. Allowing your dispute to end up in the hands of lawyers can be expensive and drag out the process.
Due diligence Protect yourself by finding the answers to these questions: ➤ Is your carrier financially strong? ➤ Will your carrier likely be around when your claim is filed? Let’s take that second question first. Longevity can be as important as financial strength. “Property and casualty insurance is what is called ‘occurrence based,’” says Daniel C. Free, president of Insurance Audit and Inspection, an Indianapolis-based risk management consulting firm that helps companies assess
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insurance carriers. “That means the policy you buy today will respond to claims that happen today but that you do not find out about for several years down the road.” Free offers this example: Suppose someone slips and falls at your business but doesn’t report it right away. Then, two years from now that person comes back and says the fall turned out to be worse than he thought. “Any claim will need to be handled by the insurance that was in force when the accident actually occurred, even if you have switched to a new
carrier since that time,” Free says. That’s why it’s important that the insurance carrier you have today be around later on. A carrier’s longevity can even affect your insurability. “Like many businesses, you may have life insurance to cover partners for buy-sell agreements,” Simmonds says. “Suppose a year from now one partner develops a heart condition and then five years later the insurance company becomes insolvent. You may have a tough time replacing your policy.” Longevity, of course, depends on financial strength. So that brings us back to the fundamental question: Just how sound is your carrier? To begin to answer that question, check the company’s ratings with the traditional assessment agencies such as A.M. Best Co. and Standard & Poor’s. Unfortunately, even the ratings agencies don’t provide the last word on financial stability. Bear in mind that none of them issued warnings about AIG before the collapse of that behemoth. The fact is agencies tend to “grade high” because they receive fees from insurance carriers for the privilege of being rated. Get assistance It’s clear that assessing the quality of your insurance carrier is a little more difficult than looking up a grade on a Web site. But you have limited time to spend ferreting out obscure information. What can you do? One option is to turn to third parties who follow the field and know the inner workings of insurance carriers. Be aware, though, that not every outside adviser is unbiased. Insurance agents can be good sources of information and guidance. However, agents who are employees of insurance companies often offer advice skewed toward the companies that pay their salaries. “It’s better to use independent www.sleepproducts.org/bedtimes
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agents when shopping for insurance,” says Robb Greenspan, senior executive vice president at the Greenspan Co., a public adjuster in Encino, Calif. “They can sell multiple products from various insurance carriers and thus will be able to better match your policy with your needs.” You can find a certified agent near you through www.cpcusociety.org, the Web site of the Chartered Property Casualty Underwriters Society. Another source is the Independent Insurance Agents and Brokers Association. Its Web site is www.iiaba.net. It’s wise to augment the advice of an agent with that of a consultant who specializes in the often difficult and confusing realm of insurance policies. Consultants can provide guidance that is detailed and, usually, unbiased. “It’s good to obtain advice from a fully licensed, certified financial planner who does not push products,” says Kevin O’Brien, a certified financial planner, registered investment adviser and owner of Peak Financial Services in Northborough, Mass. “You want your consultant to identify the strengths and weaknesses of various insurance carriers. Sometimes the solution to an insurance problem is to go back to your agent and shop things around. Consultants can help do this.” One place to find a consultant is through the Society of Risk Man-
agement Consultants’s Web site at www.srmcsociety.org. Consultants enhance but don’t replace agents, who bring their relationships with the players in the market to the table, Simmonds says. “If a broker has a great relationship with Chubb, for example, we will get better coverage and pricing from that individual than if we go through an agent that never works with Chubb,” he says. Prompt payments Whatever your source of information, ask questions that go beyond financial stability and into the area of ethics: How easy will it be for you to collect your money, even if your carrier has lots of cash in the bank? Will your carrier pay your claim in full or look for excuses to trim your recovery amount? Will your carrier use every opportunity to delay your payment? Agents and consultants can be good sources for addressing the reliability issue. But don’t overlook a third source: public adjusters. Typically, you deal with public adjusters to help you negotiate with your carrier after you file a claim. But you can tap their expertise when you are shopping for policies, too. “Before signing up with any given insurance company you can call public adjusters and ask for their insights,” Greenspan says. “How does
Using the ratings agencies
Ratings agencies are in the business of assessing the financial stability of insurance carriers. They include: ➤ A.M. Best Co. www.ambest.com ➤ Fitch Ratings www.fitchratings.com ➤ Moody’s Investors Services www.moodys.com ➤ Standard & Poor’s www.standardandpoors.com ➤ Weiss Research www.weissgroupinc.com One caution: Many agencies are paid by the insurance carriers, which can call into question the level of bias they apply to their ratings. “The ratings agencies have compromised themselves in the past few years,” says Kevin O’Brien, certified financial planner, registered investment adviser and owner of Peak Financial Services in Northborough, Mass. And the ratings can vary from agency to agency. For instance, O’Brien says, A.M. Best Co. gives about 90% of insurance companies a rating of “very good” or higher. At Weiss Research Inc., which isn’t paid by the insurance carriers, only 29% of companies receive a rating of “good” or above. It may be best to get a good cross-sample of ratings from the various agencies.
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the company respond from a claims standpoint? Does the carrier pay claims promptly or use any available excuse to draw out the process? And do the carrier’s adjusters try too hard to whittle down the amount paid?” The downturn in the economy makes this doubly important because insurance carriers are tempted to hold onto cash as long as they can. “The longer insurance companies can draw out the claims process, the longer they can float the money, earning themselves more interest,” Greenspan says. “The result is that some of them take ridiculous positions when it comes to responding to claims.” This is particularly common in claims that are more than $50,000, he says. Be prepared No one expects disaster to strike. When it does, having a robust insurance policy can save your business. “Every year some insurance companies go out of business,” Simmonds says. “Their clients are severely impacted. Claims go unpaid, cash values are lost and annuity payments are reduced or cut off. Policies have to be replaced in a rush, resulting in lower coverage and higher premiums. It’s not a fun time.” What if your insurance carrier goes belly up before you file a claim? How will you recover your loss? There are protections available under state insurance guarantee laws. Insurers pay into a guarantee fund to which policyholders can turn if their insurance companies become insolvent. Unfortunately, there are limitations on how much is paid and who benefits. “State guarantee funds offer only limited protection,” Simmonds says. “Although every state is different, the typical fund will cover only up to $300,000. And some states provide no coverage with guarantee funds if your assets are over a certain amount.” So, how does your own insurance carrier stack up? In uncertain economic times like these, Simmonds says, due diligence can help you avoid a costly surprise: “Five years ago people said AIG would, unquestionably, be around forever.” BT www.sleepproducts.org/bedtimes
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EmployeeRelations Dealing with difficult people Don’t allow bad behavior to go unchecked By Rhonda Savage
any people today have a short fuse. Everyone is stressed. And when people are stressed, they can be difficult to be around. Chances are you work with at least one difficult person in your company. You recognize the behavior—a bad attitude, apathy, difficulty handling change, terrible customer service. Difficult people give you the silent treatment or can be verbally aggressive. If you don’t address this kind of behavior, one of two things will happen: ➤ Employees will become resentful and think less of managers. ➤ Employees will start modeling the behavior of the person who isn’t being corrected. There’s only one reason someone behaves in an unacceptable manner: He gets away with it. So, who’s responsible for difficult people? Anyone who tolerates them. Every time you give in to a difficult person, every time you choose not to confront him, you allow a difficult person to continue his rude behavior. What does a difficult person in your office look like? She may come in late or depart early, leaving her work for others to finish. She might take a longer lunch, talk on her cell phone or pay personal bills during work hours. No one asks her for help on a project because people don’t like collaborating with her. It can be hard to address these issues, but doing so will create a more harmonious atmosphere, leading to increased productivity, improved www.sleepproducts.org/bedtimes
There’s only one reason someone behaves in an unacceptable manner: He gets away with it. morale and a stronger bottom line. You’ll need to set boundaries, expectations and guidelines and then hold the person accountable for his behavior. Here are some tips, whether you are a manager dealing with an employee, an employee coping with a supervisor or a worker dealing with a co-worker: Manager to employee Have you ever had an employee who was demanding, condescending, abrupt or insecure and yet he did an excellent job? Were you worried about los-
ing him because he produced good work? Good work doesn’t make someone a good employee. If you have a person whose behavior is affecting the morale and productivity of an entire department or plant and you’ve already coached the employee on the issue, he needs a formal corrective review. Let the employee know the specific behavior you need to have changed, your clearly defined expectations and a time frame. Have a follow-up meeting within a designated time period to give the employee feedback. Be sure to provide clear oversight. The employee should be given a copy of the corrective review and a signed copy should be placed in his employee file. Employee to manager What if the difficult person is your boss or supervisor? Approach the manager first by saying: “I need to talk with you about something. Is now a good time?” If not, schedule a time to talk.
BedTimes | August 2009 |
Begin by expressing your motives. For instance, explain your concern about a loss of business. Another approach is to talk about how some behaviors are decreasing efficiency. Explain that you’d like to talk about ways to improve certain systems. By first addressing the issues as though you’re tackling an operational problem, you reduce the chance of the manager being on the defensive. Always be tactful, professional, calm and polite. Use the “feel, felt, found” method: “Many of our customers feel uncomfortable when you speak to employees; they’ve expressed how they’ve felt when you left the room.” Employee to employee If you have a problem with a co-worker, the best course of action is to speak directly
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with that person. Don’t talk behind her back. Follow these steps: 1. Let her know you’d like to talk about something that’s been bothering you. Ask her, “Is this a good time?” 2. Give examples of the behavior that bother you using dates, names and times. Be specific. Begin by saying: “I’d like to talk with you about this. This is how I felt when…” Speak only for yourself and about how the behavior affects you. 3. Describe what you would like to see changed. Try to resolve the issue personally and privately. If the situation doesn’t change, request a meeting between you, the other person and your manager. You can’t always choose the people who surround you but you
can try to make them aware of their behaviors. If you have a difficult person at your workplace, set boundaries, explain your expectations and then hold that person accountable. BT Dr. Rhonda Savage is an acclaimed speaker and chief executive officer of a well-known practice management and consulting business. As past president of the Washington State Dental Association, she is active in organized dentistry and has been in private practice for more than 16 years. She is a noted speaker on practice management, communication and leadership. For more information, check www.dentalmanagementu.com or email her at firstname.lastname@example.org.
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IndustryNews Spring Air International relaunching
pring Air International has opened its new headquarters in Boston and is signing a raft of new licensees, said President Rick Robinson. Robinson is an industry veteran who joined the new licensing group from A.H. Beard in Sydney, Australia. Prior to that, he held a number of executive positions at the former Spring Air cor porate entity and at foam bed manu facturer Nature’s Rest, which was later bought by Spring Air. Spring Air International was formed by Ed Bates, the company’s chairman, when he acquired the intellectual prop erty of the bankrupt Tampa, Fla.-based Spring Air corporate entity after it abruptly closed its doors in May. “This is no salvage effort,” Rob inson says.“We are returning to the
core values of a successful 83-year-old brand—local licensees in local markets making decisions locally. Until the rollup, Spring Air was always about local relationships with customers. After the consolidation those relationships got lost in the shuffle. If a customer has a question now, it won’t get lost in the shuffle or run up a flagpole. They’ll pick up the phone, talk to their local guy and get the assistance they need.” Robinson said the company’s goals right now are twofold: Finish getting new licensees on board and operat ing and then making preparations for the upcoming Las Vegas Market in September. He expects to unveil a list of licensees shortly. They number 13 manufactur ers in North America—all of them
well-established, Robinson said—and another 10 licensees in other parts of the world from Asia to Europe. Robinson said the tally includes “many new additions from multiple brand cultures” in addition to the inde pendent licensees in the United States and Canada who remained in business after the original Spring Air parent ceased operations. The new company holds the rights to Spring Air flagship brands Back Supporter and Chattam & Wells. It also will market Nature’s Rest, which Bates purchased and holds under a separate entity. Plans for Las Vegas include the leasing of the old Spring Air space and introduction of a value-driven Back Supporter line, Robinson said.
Judge approves 1800mattress.com sale to Sleepy’s On June 24, the u.S. Bankruptcy cOurt for the Eastern District of New York approved the sale of 1800mattress.com to Sleepy’s for $25 million. Judge Dennis Milton issued a final order on the heels of a letter written by the attorneys for 1800mattress.com, who, according to news reports, pressed the court for the decision, which had been expected in early June. The letter cited the company’s “precarious” situation, and the fact that Sleepy’s affiliate Newco Trading was unwilling to extend debtor-in-possession financing beyond June 30 without confirmation that the sale to Sleepy’s would go through. The bankrupt 1800mattress.com is a multichannel retailer with headquarters in Long Island City, N.Y., that sells mattresses online, through a call center and in brick-and-mortar stores. Mattress retailer Sleepy’s is a privately owned company headquartered in Bethpage, N.Y. It operates 700 stores in 11 states. News reports indicate that the new owner intends to close the remaining 1800mattress.com brick-and-mortar stores, but keep the warehouse and headquarters building in Long Island City. Sleepy’s outbid four other retailers and investor groups in a court-authorized auction of 1800Mattress.com assets.
Names of bidders were not disclosed. Judge Milton’s 19-page ruling states that the bid from Sleepy’s was the “highest and best offer” received at the auction: “The bid was $320,000 greater than the secondhighest bid and substantially greater than the original stalking horse bid of $2.1 million.” Consolidated Group, a 1800mattress.com franchisee based in Windsor, Conn., had filed an $11.4 million damage claim against the franchisor and opposed the sale to Sleepy’s in court, stating that Sleepy’s intended to put Consolidated out of business. The bankruptcy court’s ruling allows the new owner to dissolve 1800mattress.com’s franchise agreements: “The court’s independent review confirms that rejection of the franchise agreements benefits the estate.” The ruling notes that the court had earlier approved Consolidated’s $11.4 million damage claim if its licensing agreements were ultimately rejected. The claim will then be added to the other claims from unsecured creditors. Sleepy’s bid will allow unsecured creditors to be paid 85% of what they were owed when 1800mattress. com filed for Chapter 11 protection in March, the ruling states.
BedTimes | August 2009 |
Hilding Anders increases stake in Slumberland Asia Pacific
eading mattress manufacturing conglomerate Hilding Anders has increased its holdings in Slumberland Asia Pacific Ltd. to 90%. It has been part owner of the mattress maker since 2002. It plans to acquire the remaining 10% of the company from IDS Group in early 2010. Slumberland Asia Pacific operates in China, IndoneÂ sia, Malaysia, Singapore and Thailand, with five factories and 200 retail locations selling the Slumberland and Vono brands. â€œThe Asian market has generally been able to hold up against the economic downturn that has been apparent durÂ ing the last year,â€? said Anders PĂĽlsson, president and chief executive officer of Hilding Anders, which has headquarters in MalmĂś, Sweden. â€œSlumberland Asia Pacific has had a good development during the first six months of 2009, within the retail sector, as well as within the hotel sector. It is an imporÂ tant cornerstone in the groupâ€™s Asian strategy and we expect to be able to use the company as a base for further growth.â€?
Royal Mattress in bankruptcy rOyal MattreSS, a retailer and fOrMer MattreSS Manufacturer based in Burlington, Ontario, has filed for bankruptcy protection. The companyâ€™s Burlington headquarters and six retail stores were seized and locked by bankruptcy trustee Grant Thornton, The Hamilton Spectator reported June 20. The company is owned by Philip Kriszenfeld and his wife, Diane. The news source said creditors are owed more than $1.7 million against assets of $510,000. There are 73 unsecured creditors including Serta Mattress, which is owed about $282,000. Serta began making mattresses for Royal Mattress about a year ago, when the company closed its manufacturing operation. The manufacturing closure was linked to the loss of a major account, Ikea North America, The Guelph Mercury reported in a story about the bankruptcy filing. At its height a few years ago, Royal Mattress employed 70 in its manufacturing plant and six retail locations in Burlington and Hamilton.
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32 | BedTimes | August 2009
Loyal Bedding recalls mattress sets
MiaMi-BaSed MattreSS Maker lOyal Bedding inc. has voluntarily recalled about 2,700 bed sets that fail to meet the federal open-flame mattress standard, 16 CFR Part 1633, according to a notice from the U.S. Consumer Product Safety Commission released June 25. The sets were manufactured in the United States and distributed by Guaynabo Industrial Inc. of Puerto Rico. They were sold exclusively by mattress retailers in Puerto Rico from July 2007 through February 2009. The recall involves “all Loyal Bedding mattress sets” in twin, full, queen and king sizes, according to the CPSC. Labels at the foot of each mattress are printed with ““Loyal Bedding,” “Classic Rest,” “Designer Collection” or “Smart Loyal.” The CPSC said consumers should “immediately contact Guaynabo Industrial for a store credit or a refund” on the mattresses, which retailed for between $165 and $300. No injuries involving the bed sets have been reported, according to the CPSC notice. For additional information, consumers are directed to the distributor’s Web site, www.guaynaboindustrial.com, or the CPSC Web site, http://www.cpsc.gov/cpscpub/prerel/prhtml09/09255.html.
Short Verlo hosts charity event The Verlo Mattress Factory Stores franchise in Fort Atkinson, Wis., hosted its annual Spring Fling to benefit the American Cancer Society. The Relay for Life event included raffles, musical entertainment and a race between several mascots, including the factory direct’s own Mattress Man. Unfortunately for Mattress Man, Milwaukee Brewers baseball team mascot Bernie Brewer outpaced him and won the race. All proceeds from the event, including a percentage of mattress sales, were donated to the charity.
BedTimes | August 2009 |
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Culp posts fourth-quarter sales drop
abric supplier Culp Inc. reported net sales for its fiscal 2009 fourth quarter, which ended May 3, were $47.8 million, down from $64 million for the same quarter of 2008. The company reported net income of $1.7 million for the fourth quarter of fiscal 2009, compared with net income of $2.1 million for the fourth quarter of fiscal 2008. Ticking sales for the fourth quarter were $26.6 million, a 23% decline compared with $34.6 million for the fourth quarter of fiscal 2008. Operating income for mattress fabrics was $3.5 million compared with $3.9 million a year ago, while operating income margin was 13.3%, compared to 11.1% of sales in the prior year. Mattress fabric sales for fiscal 2009 were $115.4 million, down 16.4% from $138.1 million in fiscal 2008, reflecting a decline in demand for mattresses. Operating income for the year was $13.2 million, or 11.5% of sales, compared with $14.1 million, or 10.2% of sales in fiscal 2008. “While the sales environment has been very challenging, we are pleased with the strong operating performance of our mattress fabrics business,” said Frank Saxon, Culp Inc. president and chief executive officer. “The continued solid margin improvement reflects the implementation of the $5 million capital project completed earlier this year, as well as the successful integra tion of the mattress fabrics operation of Bodet & Horst acquired in August 2008. We believe that we are well positioned to effectively compete during this downturn in the bedding industry and to benefit very well from any upside in demand when it occurs.” On a pretax basis, the company reported income of $2.2 million compared with pretax income of $1.4 million for the fourth quarter of fiscal 2008. The pretax results for the fourth quarters of fiscal 2009 and 2008 included restruc turing and related charges in the upholstery fabrics segment of $48,000 and $633,000, respectively. Excluding these charges in both periods, the company reported pretax income for the fourth quarter of fiscal 2009 was $2.3 million, compared with $2.1 million in the fourth quarter of fiscal 2008. Culp reported net sales of $203.9 million for fiscal 2009 compared with $254 million for the same period a year ago. “In spite of a decline in sales, both our mattress fabrics and upholstery fab rics businesses showed improved margins as we continued to realize the incre mental benefits of a leaner and more agile operating platform,” Saxon said. “We have also continued to make important investments in our businesses during the year with a strategic acquisition and major capital expenditures in our mattress fabrics segment, along with product and marketing initiatives in both segments.”
Short U.S. mattress sales down 14% Declines in the number of units and the dollar value of mattresses sold in the United States moderated somewhat in May, but still hit doubledigits. Unit shipments fell 14% in May 2009 over the same month in 2008, according to the Bedding Barometer, a monthly sales activity report from the International Sleep Products Association. The dollar value of mattresses sold fell 14.7% during the same period. The average unit price dipped 0.8%. www.sleepproducts.org/bedtimes
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BedTimes | August 2009 |
Simmons posts first-quarter sales decline atlanta-BaSed SiMMOnS’ net SaleS in the firSt quarter of 2009 fell 19.6% to $222.6 million compared to $276.9 million for the same period last year. U.S. net sales decreased 16.9% or $41.4 million to $203.6 million. Steve Fendrich, Simmons president and chief operating officer, said the company’s sales results were unsurprising, as the first quarter continued to be a difficult environment for the mattress industry as a whole. He noted that the company’s cost reduction efforts were a highlight of its performance. “We have significantly reduced our cost structure over the past year and I am very proud of how the team at Simmons has performed in very tough circumstances,” Fendrich said. “Increasing adjusted EBITDA over what was a very good first quarter a year ago took extraordinary discipline in all areas of our business. We remain focused on providing the most relevant products for our customers and we will continue to develop new products to help make our dealers more successful.”
36 | BedTimes | August 2009
Gross profit for the first quarter of 2009 was $94.9 million, or 42.6% of net sales, compared to $109.7 million, or 39.6% of net sales, for the same period in 2008. For the first quarter of 2009, adjusted EBITDA was $35.3 million, or 15.9% of net sales, compared to $33 million, or 11.9% of net sales in the first quarter of 2008. For the first quarter of 2009, Simmons had operating income of $18.8 million compared to operating income of $22.1 million for the same period last year. First-quarter operating income was negatively impacted by financial restructuring charges of $7.4 million. Simmons’ net loss was $3.2 million for first quarter 2009, compared to net income of $2.5 million for first quarter 2008. On June 30, Simmons announced it had reached agreements with the majorities of both its senior bank lenders and holders of its $200 million senior subordinated notes to extend the forbearance periods from to Aug. 14.
Sealy reports second-quarter loss B
edding major Sealy posted a net loss of $5.2 million in the second quarter of 2009 compared to a net income of $12 million for the same period in 2008. The Archdale, N.C.-based company’s results for the quarter included charges of $11.9 million related to the refinanc ing of its senior credit facility. Net sales for the second quarter fell 20.4% to $298.5 million from $375.4 million for the same period the prior year. Second-quarter gross profit de clined 17.6%, or $26.2 million, to $122.2 million compared to $148.4 during second-quarter 2008. A soft retail environment negatively impacted domestic revenue perfor mance, the company said. Total U.S. net sales were $222.5 million in second-
quarter 2009 compared to $258.7 million in the second quarter of 2008, a decline of 13.9%. International net sales de creased $40.7 million, or 34.9%, from the second quarter of 2008 to $76 million in the second quarter of 2009. Excluding the effects of currency fluc tuation, net sales declined 22.2% from the second quarter of 2008. This decline was primarily due to the weak retail environment in Canada and Europe, the company said. Total operational cash flow was $41.6 million, or 13.9% of net sales, an in crease of 60 basis points on a year-over year basis and an increase of 240 basis points from first-quarter 2009. The sequential improvement was based on
improved gross profit margin perfor mance and continued cost improve ments, the company said. “During the second quarter, we were able to strengthen our competitive position, execute consistently on our strategic initiatives and substantially improve our operating performance compared to the first quarter of fiscal 2009, said Larry Rogers, Sealy president and chief executive officer. “While we expect market conditions to remain challenging, we will continue to take measures to improve our profitability through increasing collaboration with our retailer and supplier partners and the introduction of new products, while aggressively right-sizing our cost struc ture and maximizing our cash flow.”
BedTimes | August 2009 |
GSG offers new mattress machinery
achinery supplier Nähtec, part of Carthage, Mo.-based Leggett & Platt’s Global Systems Group, has introduced the Nähtec NC1200 highspeed zipper attachment machine. It features a newly designed sew ing head and a pedestal stand that enables operators to be better posi tioned within the work station for increased productivity and improved quality, the company said. Another new machine, the Nähtec DST-60 De-Stacker, is a robotlike device that reduces mate rial handling. It can lift a cartload of cut mattress panels and then picks and places each on a serging station. While the operator completes a panel, the machine readies the next one for delivery.
38 | BedTimes | August 2009
Nähtec DST-60 De-Stacker
Gateway Systems, another GSG company, also has unveiled an updated, semiautomatic Mattress Master tape-edge machine. The new machine makes the tapeedge process easier than ever, the company said. The drive motor for
Nähtec NC 1200 high-speed zipper attachment machine
the turning mechanism is reposi tioned to improve workspace com fort and ergonomics. A radial arm responsible for rotating the mattress is now stronger and has smoother movement for better performance.
Wright launches retailer program
graphicS prOductS and ServiceS Supplier Wright Of thOMaSville has launched Showroom Solutions, a new division targeting retailers. Offerings include top-of-bed items and a wide variety of in-store graphics—all designed to assist retailers in creating a consistent brand image, educating consumers and guiding sales associates, according to the company, which is based in Thomasville, N.C. “Retailers were telling us they wanted more involvement in presenting themselves instead of relying solely on manufacturers’ point-of-purchase displays and signage,” said Lou Paige, Showroom Solutions vice president. “I don’t have to explain a lot at initial meetings with retailers. They all have the same reaction: ‘Fantastic! We’ve been looking for something like this and for someone to partner with to make it happen.’ ” Retailer-branded accessories and graphics are designed to complement, not compete with, manufacturers’ point of purchase items, Paige said. Already-popular items in the program include embroidered pillows and foot protectors. Graphics—from banners to floor clings—are available in quantities from a single customized item to an entire program, Paige said. Showroom Solutions will exhibit in a temporary space at the Las Vegas Market in September.
Short New Calif. recycler opens A new mattress recycling facility run by Goodwill Industries has opened in San Jose, Calif. It is run by John Waszily, director for veterans programs at Goodwill San Jose. Rubicon Programs partnered with Goodwill to open the facility. For contact information for this and other recyclers of used mattress components, check the International Sleep Products Association’s “Directory of Used Mattress Components Recycling Facilities” at www.sleepproducts.org.
BedTimes | August 2009 |
NewsMakers Hopf to replace Select Comfort’s McLaughlin When private equity firm Sterling inveStorS completeS its acquisition of the Minneapolis-based airbed manufacturer and retailer Select Comfort, Patrick Hopf will replace Bill McLaughlin as chief executive officer, according to a filing the company made June 25 with the U.S. Securities and Exchange Commission. Hopf is a former Select Comfort executive and one of its original investors. He served on the company’s board from 1991 to 2006 and had two stints as chairman. He was interim chief executive officer from June 1999 to March 2000. McLaughlin assumed his post in 2000, at a time when the company was struggling and returned it to profit-
ability. In the current economic climate, the premium mattress maker is again experiencing challenges. In March, the company announced it was pursuing new financing and in May announced that Sterling Partners would pay $35 million for a 53% stake in the company. Sterling Partners has offices in Northbrook, Ill., and Baltimore. The deal is expected to close in August or September. Hopf’s appointment will require approval of Select Comfort’s board. As part of the stock purchase, Sterling will receive five of nine board seats and, according to news reports, will appoint Mats Lederhausen, a former McDonald’s executive, as chairman of the board.
Industry veterans join new Spring Air
ric Spitzer has been business development with named senior vice U.S. and international licenspresident and Bill Frame ees. He is based in Chicago and has been appointed director reports to Robinson. of manufacturing services at Frame most recently served the newly formed, Bostonas plant manager and head of based Spring Air Internaresearch and development for tional. the former Spring Air compaEric Spitzer Spitzer has had a long ny. There, he led an 18-month relationship with the project installing a software Spring Air brand. He was system that enabled the compresident and chief execupany to go paperless. He also tive officer of Slumberon has held manufacturing posiIndustries, a Chicago-based tions at Serta and Sealy, as well mattress maker that became as in the auto industry. a Spring Air licensee in “Bill’s knowledge of mat1981. He was elected to the tress manufacturing, product company’s board in 1995 development and design and Bill Frame and was named chairman his facility with information in 2001. When Spring Air systems and technologies will reorganized in 2007, he served as vice be a tremendous asset to every Spring president of national accounts and Air licensee,” Robinson said. contract sales during the transition. Frame’s responsibilities include “As we focus our efforts on a local working with licensees in coordinatlicensee model, Eric’s experience as ing new product development, poolchairman during the most significant ing best practices and developing new growth period in the company’s hisvendor programs and services. tory will prove invaluable to the new He also will develop and impleSpring Air International,” said Rick ment quality assurance standards for Robinson, company president. Spring Air products. He also reports Spitzer’s responsibilities include to Robinson.
40 | BedTimes | August 2009
Tempur-Pedic appoints EVP & general counsel Bedding maker tempur-pedic, headquartered in Lexington, Ky., has hired Lou Hedrick Jones as executive vice president and general counsel, a newly created position. She reports to Mark Sarvary, chief executive officer. “I am pleased to announce Lou’s appointment,” Sarvary said. “She brings significant experi ence to Tempur-Pedic, having held senior positions in both global corporations and law firms, ultimately as the general counsel of a publicly traded company. She has a wide range of legal expertise and has led legal organizations both in the U.S. and overseas.” Jones has 25 years of legal experience. Most recently, she was general counsel for Papa John’s International. Prior to that she was senior vice president for corporate and international law at Blockbuster Inc. Earlier in her career Jones was a partner and shareholder at the law firm Thompson & Knight.
From textiles to the links
Bäumer managing director dies
Industry friends gathered at a golf course near Park City, Utah, in June to celebrate Jerry Steiner’s retirement from Blumenthal Print Works. He worked for the New Orleans-based textile supplier for more than 38 years. Of his retirement plans, Steiner says: “My plans are to spend time with my family, including my 15-month-old grandson, play golf, go to yoga classes, take some cooking classes, travel and then the rest I’ll take from there.” Pictured (from left): Jeff Simpton, Jim Nation, Orin Bagley, Frank Rouse, Eric Freeman, Tom Le Duc, Curt Crowther, Steiner and Bob Simpton.
Matthias Schuster, managing director of Albrecht Bäumer GmbH & Co., died June 7, following a brief illness. He was 56. Schuster worked for the Freudenberg, Germany-based machinery maker for more than 20 years and served as managing director since 2003. “Through his work, Matthias Schuster brought important ideas, which contributed to the success and advancement of this company, thus assuring its continuous further develop ment,” said Helmut Kritzler, who currently acts as Bäumer’s sole managing director.
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BedTimes | August 2009 |
ISPANews ISPA expanding options for recycling
he International Sleep Products Association and Rubber Recovery Inc., a solid waste recycler near Charleston, S.C., recently completed successful tests to establish high-volume options for processing and recycling used mattress components. The effort is part of the ISPAEarth Sustainability Initiative. “Helping grow the number of available mattress recycling centers throughout North America promises great benefits for the mattress industry, retailers, consumers and the environment,” said Ryan Trainer, ISPA executive vice president and general counsel. “The effort with RRI provides an excellent solution for processing large volumes of used mattresses, fulfilling our industry’s commitment to the environment
42 | BedTimes | August 2009
and having better controls over what becomes of used mattresses.” For the recent tests, ISPA worked with Greenville, S.C.-based Park Place Corp. and Atlanta-based Simmons, which contributed 200 used mattresses and box springs for RRI to process in June and July. RRI, a tire shredder, is looking to expand into other recycling areas. “Recycling used products is our business,” said Scott Johnson, RRI plant manager. “We want to use our equipment and know-how to reclaim the steel and other materials in used mattresses that could otherwise be wasted. We look forward to working further with the industry in making recycling work for mattresses on a broad scale.”
From tires to ticking The International Sleep Products Association has been working with tire recycler Rubber Recovery Inc. to test ways to recycle used mattress components.
For more information on the ISPAEarth Sustainability Initiative, including recycling efforts, check www.sleepproducts.org/sustainability.
ISPAAdvocacy ISPA members promote HIRE Act
he International Sleep Products Association continues to promote legislation that would provide temporary consumer tax incentives for the purchase of mattresses and other products for the home. The legislation, the Home Improvements Revitalize the Economy Act of 2009, would put money directly into the hands of consumers to buy mattresses, benefiting the entire industry, said Chris Hudgins, ISPA vice president of government relations. The HIRE Act was expected to be introduced in July by Rep. Hank Johnson (D-Ga.) and Rep. Nathan Deal (R-Ga.). ISPA created the American Home
Furnishings and Building Products Coalition to promote such legislation and has encouraged ISPA members to reach out to their representatives in Congress to secure support for the HIRE Act. ISPA members, such as Dave Young, have been making phone calls and sending letters to Capitol Hill requesting that their representatives sign on as sponsors and vote for the HIRE Act. Young is chief executive officer of VyMaC Corp., a mattress kit supplier based in Whitewater, Wis. A recent Young letter says: â€œAs the CEO of Americaâ€™s largest mattress kit supplier, I am writing to seek your support in becoming a co-sponsor of
the Home Improvements Revitalize the Economy (HIRE) Act of 2009, which would provide consumers and businesses tax deductions and credits to offer relief to middle- and lowincome families for the purchase of home furnishings and building products used to improve their homes.â€? Young has requested that franchise owners of his companyâ€™s Verlo Mattress Factory Stores send similar letters to congressional representatives from their states. To automatically send a letter to your representatives, log on to ISPAâ€™s Legislative Action Center at http://capwiz.com/sleepproducts/home. For more information about this and ISPAâ€™s other legislative priorities, contact Hudgins at email@example.com or 703-683-8371, Ext. 1113.
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BedTimes | August 2009 |
UpClose Kingsdown VP: Sleep research is vital
Oexman draws on varied background at Sleep to Live Institute By Dorothy Whitcomb
obert Oexman is on a crusade to change the way people think about sleep and he uses researchbased science to lead the charge. Now the head of Kingsdown’s Sleep to Live Institute, Oexman first began studying sleep in the early 1980s. “When I started, sleep science was not very well-known,” he says. Oexman’s interest in sleep research was first sparked while he was working as a respiratory therapist to put himself through chiropractic school. There he became involved in a study of adult sleep apnea, which triggered an interest in sleep that would only grow. After spending four years in private chiropractic practice, Oexman joined Carthage, Mo.-based components supplier Leggett & Platt. While there, he developed and managed the company’s Ergonomic Research Center, which focused on bedding, furniture and automotive seating. He spent 19 years there, serving at various times during his tenure as vice president of sales, marketing and international sales. He also was awarded several patents for product testing methodology and for products related to patient care and remote patient monitoring. In 2007, Eric Hinshaw, chairman and chief executive officer of Mebane, N.C.-based Kingsdown, offered Oexman an opportunity to pull together all of his previous experience and focus on deciphering the complexities of sleep. “He told me, ‘Robert, I want to be a sleep company. You have free reign—do your thing,’” Oexman says. The possibilities and challenges were irresistible and the job allowed him to stay in Missouri. He has been going full tilt ever since. One of Oexman’s priorities is to offer consumers solid, peer-reviewed research to back up Kingsdown’s
46 | BedTimes | August 2009
Road runner An avid runner, Robert Oexman makes a point to compete in one marathon every year. During his travels to races, he’s had the chance to meet running legend Bart Yasso (above right).
claims about the mattresses and sleep products that it puts on the market. “We are constantly developing new tools to measure sleep and the quality of sleep and can very quickly move from concept to project,” he says. As much as Oexman believes in the ability of science to decipher the mysteries of sleep, he knows that teaching consumers about the value of sleep is equally important. “Unfortunately, sleep happens when you’re sleeping,” he says.“Education is crucial if consumers are to make the right decisions. Right now the biggest source of information that they have is drug company commercials. As an industry, we have to get consumers educated as to what is really important about sleep and we need to educate every consumer who walks through the door.” Kingsdown is carrying out this commitment to sleep education through five Sleep to Live stores, all in North Carolina. Designed by Eight Inc., the
company that helped to develop Niketown and Apple’s retail concept, the high-tech stores lead customers through a series of “discovery zones”—each focusing on different aspects of sleep—before consumers even begin to consider a purchase. A diagnostic bed analyzes each consumer and provides data to help customize her mattress and pillow purchases. Sales associates are trained, Oexman says, to supplement this information by asking questions tied to Kingsdown’s sleep triangle, which includes three components of a good night’s sleep—behavior, environment and equipment. Decision trees allow associates to use the mass of information to provide the right sleep products for each consumer. Oexman finds it all very exciting. The Sleep to Live Institute allows him the chance to apply two of his strongest character traits—persistence and passion—to work he finds extremely meaningful. www.sleepproducts.org/bedtimes
“I think we’re really going to be able to change a lot of people’s lives for the better and that’s very gratifying,” he says. Pet peeve “When I see manufacturers quote research and it’s not peerreviewed, journaled research, that’s a real problem for me,” he says. “In order to be credible, we need to show the world what we’ve done and how we’ve done it.” Zeal for running Oexman likes to ski and scuba dive, but his passion is running. He does it six days a week and competes in a marathon annually. He draws on his varied professional experience to help other runners. “I can talk to them about running injuries and help them biomechanically. As a result, I can also talk to them about sleep and they listen.”
No surprises “I’m an open book,” Oexman says.“I speak openly about everything that I care about—family, work, religion—and I feel sorry for my seat partner on flights to Hong Kong.” Community involvement Oexman is active in his church and has served on the boards of several organizations in Jasper County, Mo., including the county’s Citizens Advisory Board for Probation and Parole.“We mostly work with young offenders, trying to help them change their lives before things get too bad,” he says. Cherished possession Oexman’s father died when Oexman was a child and he still feels that loss deeply.“He was given a gold watch when he finished his term as president of the Carthage Water & Electric Co.,” Oexman says.“Besides his good name, it’s the only thing I have of his.” BT
➤ Bio in brief Name Robert Oexman Company Sleep to Live, a Kingsdown company Title Vice president of strategic development and research Location Joplin, Mo. Age 48 Education Oexman has three degrees. He received a bachelor of science in nutrition and a doctor of chiropractic degree from Cleveland Chiropractic College and a master’s in business administration from Missouri State University. Family He and his wife, Debbie, have two teen-age daughters.
BedTimes | August 2009 |
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48 | BedTimes | August 2009
Costa International Manuel Vazquez 305-885-9761 www.costa-international.com
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Eclipse International 29 & Eastman House Stuart Carlitz 800-634-8434 www.eclipsemattress.com www.eastmanhousemattress.com Enriquez Materials & Quilting Inc. Silvia Enriquez 323-725-4955 www.enriquezquilting.com Global Systems Group Russ Bowman 954-846-0300 www.gsgcompanies.com
Hengchang Machinery Factory Belinda Lau 86-769-83307931 www.hcjixie.com Hickory Springs Mfg. Co. Rick Anthony 828-328-2201 www.hickorysprings.com
John Marshall & Co. Ltd. Peter Crone 64-3-341-2004 www.joma.co.nz
Kenn Spinrad Inc. Randy Weinstock 800-373-0944 www.spinrad.net
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Simalfa Darren Gilmore 973-423-9266 www.simalfa.com
Soltex Inc. Larry Starkey 864-234-0322 www.soltexusa.com
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Aug. 14-16 Tupelo Furniture Market Mississippi & Tupelo complexes Tupelo, Miss., U.S. Phone 662-842-4442 Fax 662-844-3665 www.tupelofurnituremarket.com
Oct. 1-4 ZOW Turkey Istanbul Expo Center Istanbul, Turkey Phone 90-212-3249610 Fax 90-212-3249609 www.zow.com.tr
Oct. 17-22 High Point Market International Home Furnishings Center & other locations High Point, N.C., U.S. Phone 336-869-1000 www.highpointmarket.org
Sept. 9-12 Furniture China 2009 Shanghai New International Expo Center Shanghai, China Phone 86-21-64371178 Fax 86-21-64370982 www.furniture-china.cn Sept. 9-13 Habitare Helsinki Exhibition & Convention Centre Helsinki, Finland Phone 358-9-150-9717 Fax 358-9-142-358 www.finnexpo.fi/habitare Sept. 14-17 Las Vegas Market World Market Center Las Vegas, U.S. Phone 888-416-8600 Fax 702-599-9622 www.lasvegasmarket.com Sept. 18-22 Index Furniture MMRDA Exhibition Center Bandra-Kurla Complex Mumbai, India Phone 91-22-28302870 Fax 91-22-28216140 www.indexfairs.com/ event_mum.asp
➤ Nov. 4-6 ISPA Industry Conference & Exhibition Hyatt Regency Coconut Point Resort & Spa Bonita Springs, Fla., U.S. Phone 703-683-8371 Fax 703-683-4503 www.sleepproducts.org
Feb. 1-5 Las Vegas Market World Market Center Las Vegas, U.S. Phone 888-416-8600 Fax 702-599-9622 www.lasvegasmarket.com
➤ March 3-6 ISPA EXPO Charlotte Convention Center Charlotte, N.C., U.S. Phone 703-683-8371 Fax 703-683-4503 www.sleepproducts.org
IT’S NO SECRET Your #1 source for VOC-compliant spray aerosols is Komar Alliance
When it comes to Sprayway aerosols, we’ve got it all! See our web site for other industry products
Into the desert The Las Vegas Market will be Sept. 14-17 at the World Market Center.
komaralliance.com CHICAGO • DALLAS LOS ANGELES • PHILADELPHIA www.sleepproducts.org/bedtimes
BedTimes | August 2009 |
TheLastWord Putting money in the mattress
Some clever marketerS have taken the idea of putting money in a mattreSS to a new level, creating the Mattress Wallet. The wallet, available for $19.95, features “high-quality stitching” and “authentic mattress materials” and “holds dollars, euro, yen, pounds and I.O.U.s,” according to the tongue-in-cheek product Web site, www.themattresswallet.com. In addition to holding money, credit cards and, as the Web site points out, recipes, the walled also can be used as a little pillow for naps. The product is “endorsed” by such financial luminaries as Bernie Madoff, who is accused of bilking investors of billions of dollars, and Tom Casey, chief financial officer of Washington Mutual, the biggest bank to fail in U.S. history.
Study: Less sleep, higher blood pressure
ad dreams help people process their emotions, but nightmares indicated a problem with emotional processing, according to research published in the April 15 issue of Current Directions in Psychological Science. Unlike bad dreams, nightmares wake you up. That can be a relief from the scare you’re experiencing, but it also can make you think the threat in the nightmare is real, according to study author Ross Levin of Yeshiva University in New York.
52 | BedTimes | August 2009
News on nightmares
iddle-aged adults who don’t get adequate sleep are more likely to develop high blood pressure, according to a new study. For five years, Kristen L. Knutson of the University of Chicago and her colleagues studied blood pressure readings and sleep durations of 578 adults, whose average age was 40. Only 1% of study participants regularly got eight or more hours of sleep. They averaged six hours. Researchers found that, after controlling for factors such as age and race, participants who slept
fewer hours were significantly more likely to have both higher systolic and diastolic blood pressure, according to the study, which was published in the June 8 issue of the Archives of Internal Medicine. For every hour of sleep missed, researchers found a 37% increase in the chance of developing high blood pressure. “Sleep deprivation is associated with increased activity in the sympathetic nervous system, which controls the body’s stress response,” Knutson says. “Over time, this activation could contribute to high blood pressure.”
“Rowing harder doesn’t help if the boat is headed in the wrong direction.” — Kenichi Ohmae, business strategist
We’ve found a much better use for string.
Introducing Cinch-Loc®. . . the new drawstring foundation covering method that can save you $40,000 or more in one year.
Here’s how it works:
Cinch up more savings with these foundation machines from Porter International.
The Cinch-Loc drawstring is added to the border during the serging process. After forming a half-cap box spring cover, the assembly is secured to the foundation unit by cinching up the drawstrings and stapling the cord ends in place.
CMM-45 Continental Miter Machine
The CMM-45 automatically cuts and sews precise mitered corners for foundations. Non-woven material and continental borders are simultaneously fed through the machine with an integral puller and joined together as they pass through the CMM-45. A sensor stops movement at each corner where the border is automatically cut and sewn in miter fashion with the aid of a retractable knife.
Conversion is Easy and Inexpensive Your new equipment investment could be as little as $9,500. Which is an incredible deal when you consider that an average US bedding manufacturer can save $40,000 or more in foundation production costs using the Cinch-Loc method. That’s a 400% return on investment in the first year!
GPT-1000AP 3-in-1 Ruffling Machine
This popular combination machine allows one operator to sew either Pillow Top gussets to inner panels or continental Box Spring borders to non-skid decking – all on one machine.
How much will you save? Call us today for a FREE consultation to determine your personal savings potential and a free demo CD. 800-326-4742 GRIBETZ INTERNATIONAL
www.gsgcompanies.com GATEWAY SYSTEMS
GSG PARTNERS: TEKNOMAC