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STRATEGY

Obits: Computer Woes Unhinge Furniture Maker

This End Up reached success with its folksy furniture and affordable pricing. But a poorly implemented computer and distribution system forced the company to close up shop for good.
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The business: Furniture retailer and manufacturer
Opened: 1974
Closed: February 2000
Cause of death: Poor implementation of distribution system

In April 1998, This End Up Furniture Co. flipped a switch at its sprawling new warehouse in Benson, N.C., activating a state-of-the-art computerized distribution system. The moment marked a milestone for a company whose name and history evoked rough-hewn simplicity. Known for the furniture it fashioned from shipping crates, This End Up, a retailer and manufacturer based in Richmond, Va., was carrying out an ambitious plan to diversify its product line and centralize its national distribution network. The company had, among other things, built the $6-million, 250,000-square-foot warehouse in Benson to replace nine regional facilities serving about 175 stores.

At the heart of the improvement was the $1-million computer and logistics system. That level of modernization represented a break from tradition for a company that, until roughly three years ago, was manually scheduling its trucks' dispatch from its warehouses. This End Up had "to completely reinvent itself from a merchandising and logistics standpoint," says Rob Kemeny, who had become CEO in 1994.

Reinvent the company Kemeny did, but his plan didn't work out as he had envisioned. "The results of our industrial reengineering brought us to our knees," says Caroline Hipple, This End Up's former executive vice-president.

Kemeny, 45, a seasoned manager who had experience in retailing and manufacturing before he signed on with This End Up, had inherited not just the reins of a company but also a legend. This End Up cofounders Randy Ward and Steve Robertson had started the business serendipitously, after a raucous party left a couch in shambles. Ward and Robertson crafted a replacement out of shipping crates. Soon they were making more couches and selling them, taking their company's name from the print stamped on the crates.

Even as it mushroomed in size to 240 stores and $100 million in sales by the early 1990s, This End Up stuck to folksy ways and a few products. The homespun spirit had prevailed for years, even after the company's sale to a conglomerate.

In a 1996 buyout financed by New York City-based Citicorp Venture Capital, the furniture company's management team took control. They hired Hygrade Integrated Logistics Systems Inc., an operations specialist based in Secaucus, N.J., to help design the centralized warehouse and related software. Unfortunately, the computer system already in place for This End Up's stores was not compatible with the warehouse software, creating what one former top executive called "constipation." The warehouse software read many orders incorrectly, causing delays and errors in deliveries and infuriating customers.

Several former This End Up executives, including Kemeny, acknowledge that the furniture company was largely to blame for the debacle, although others point to Hygrade as being mostly responsible. Hygrade CEO Richard Merians denies that his company was at fault. Merians adds that This End Up "could not control" its production and aggravated its plight by continuing to stock its regional distribution centers rather than using them entirely as staging areas.

This End Up's attempt to remedy its troubles cost the company $14 million in the fiscal year that ended in May 1999. That outlay contributed to a loss of $22 million for the year, contrasted with profits of $360,000 the previous year. The company filed for Chapter 11 bankruptcy in February 2000.

Kemeny (who left This End Up Furniture last year) defends the system upgrade but concedes that it should have been implemented gradually, leaving a margin for error. Had the system worked, concurs Wallace W. Epperson Jr., a furniture-industry analyst with the Richmond-based consulting firm Mann, Armistead & Epperson Ltd., "the company would have been more profitable than ever."


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