The 1990s boom in call centres - there are currently 6,000 in the UK employing half a million people - and the surge in IT and telecoms companies came as something of a bonanza to office furniture suppliers.

The many start-ups and fast-growing companies all began to furnish their premises with whole suites of desks, chairs and screens. It was good news for the office furniture manufacturers and good news for those who supplied the basic materials, such as the fabrics for chairs.

"Throughout the 1990s call centres were developing because of 24 hour banking and the internet boom. It was driving demand for office furniture," says Ian Burn, marketing manager with Interface Fabrics, a Yorkshire-based textiles company that occupies 70 percent of the UK office furniture fabric market.

Times were good for Interface Fabrics. Turnover was running at £34m in 2000. As well as its substantial slice of the UK market it has sales across Europe. It even won a Queen's Award for Export.

MOVING INTO REVERSE

"Then the internet bubble burst and September 11 came along. The economy went into a down-turn and office refurbishment became a low priority." Says Burn. Interface Fabrics saw its turnover drop to £27m this year with a net profit margin of four percent. It's not that Interface Fabrics has lost any of its market share... just that its market is shrinking.

That market share, though, is far from secure as the company faces increasing competition from cheap textiles made in the Far East. Cut-priced cloth, made possible because of low labour costs, has tempted furniture manufacturers to look to China for their fabrics. Interface Fabrics counters this by wrapping its product in a package of service and guaranteed quality.

"There's no way on earth we can compete with the labour costs in the Far East. It would be foolish to try," says managing director Paul Goodall. Sales and marketing director Andrew Schofield adds: "We are not the cheapest in the market but we do give value for money and best service. People are always prepared to pay a premium for that even in tough times."

"It's a challenge for us at the moment," says Goodall. "The economy will always have its ups and downs and we have to be flexible enough to ride these."

INCREASING REVENUE AND CUTTING COSTS

Interface Fabrics has to cut its cloth to fit its new environment. It is increasing its revenue by expanding into new market segments selling its range - and new lines - into new industries. It is also cutting its costs. Both measures are essential if it is to retain its share of its rapidly dwindling core office market and e-commerce is playing a key role.

The cost of labour is significant - running to about one-third of the total cost base - and is one area where e-commerce has been used to reduce the burden. The heavily labour intensive section that fulfils customer enquiries and dispatches samples has benefited from an e-commerce makeover.

Customers looking to buy from the Interface Fabrics' range start by ordering a book of samples showing all the styles, colours and textures on offer. The range has to accommodate the different requirements for durability, fire resistance, ease of cleaning and designs demanded by a diverse industry.

The section, therefore, has to keep samples from the company's range of 60 lines in every available colour, resulting in a sample base running into hundreds. As each request arrives at Interface Fabrics' Hopton Mills site in West Yorkshire, the samples are hand picked and packaged.

"The problem," says marketing co-ordinator Helen Munro, "was that because customers couldn't see our range they were requesting samples without being specific. We had to send out all the colours and all the styles. If every customer wanted to see a full pattern book it would cost us £50 a time."

Interface Fabrics has had a website since 1996 but two years ago developed that and launched its online sample service. Now its 1,500 registered users from 30 countries can view and order specific samples (colours and styles) via the internet. It cuts down the time and costs of fulfilling each request.

"Of the 1,200 plus samples posted each day, 12 per cent are as a result of internet requests," adds Munro, "so instead of sending out the full swatch we can send out the specific samples they want to see. It saves us a lot of money."

The online sample service has returned an estimated saving of £15,000 to £20,000 from reduced print and sample costs plus £45,000 from improved productivity by freeing up staff time.

E-commerce is also helping Interface Fabrics develop its overseas markets. It has launched an online site allowing customers to view stock availability, order and then track the status of that order. "We have generated some £10,000 to £15,000 from that alone," says Burn. "For example, we had an order in from Nigeria which we wouldn't have had without the online ordering facility."

E-COMMERCE ROI RUNS AT 300 PER CENT

Together these savings run at around £75,000 over three years, a good return on the total e-commerce investment of £25,000.

There are less tangible benefits too, says Munro. The overall offering to customers is better and faster. This allows Interface Fabrics to provide a high level of service and quality that gives it a strong competitive advantage over its rivals.

In addition to increasing sales and reducing costs, the benefits that Interface Fabrics enjoys from e-commerce run across the board: more effective marketing; better customer service and improved communications both internally and externally.

So important has it become to the future success of the business that last year Interface Fabrics won an e-Commerce regional award. "The textile industry is often thought to be outdated and behind the times, so to win an e-commerce award was a great incentive to carry on the work," says Munro.

The online element is just part of the cost cutting measures which, together with its new revenue streams, forms the basis of the Interface Fabrics' strategy for the coming years. "Markets change very quickly," says Goodall. "Our strategy is to look at the package we offer - the service and the quality."

Those principles - service and quality - have underpinned the company since its creation in Huddersfield in 1974. Founder David Hill saw a gap in the market by providing furniture manufactures with a shorter lead-time for fabrics - the norm then was about six weeks.

He also wanted to offer small lengths of fabric and today customers can still buy anything from half a meter upwards. Hill's company - Cambourne Fabrics - was based on marketing and service. It bought its product from local weavers.

Quick growth saw it move to its current site - an 1812 textiles mill - in the mid 1980s. "Weaving was brought in-house to ensure consistency and quality," adds Burn. In 1997, Cambourne Fabrics was bought by the US-based Interface Group and changed its name a year later.

Interface Fabrics buys in yarn and spins it into the basic thread - getting the right mixture of air and fibre. That is woven and dyed before being washed to remove any impurities. The whole process - including stock management and machine usage - is computer controlled.

Today its 230 staff are split equally between the production (weaving and finishing) and managerial and administration. Production staff are paid the market rate. "We pay what we have to, to get the right skills, " says Schofield. And therein lies another problem. The skill pool for the textile industry is ageing. "School leavers see the mills on their doorsteps and the last thing they want to do is go into textiles." It will inevitably mean wage costs rising as textile companies compete for a dwindling resource.

Interface Fabrics works closely with colleges and schools to address the problem and runs a modern apprenticeship scheme. "Without having the right people and the right skills, we won't take the business forward," adds Goodall.

That's a long-term issue. In the short term, Interface Fabrics is increasing its efficiency. Modernisation has seen a five percent improvement over recent years. Faster machinery (it has just spent £1.5m on new equipment) and the possibility of new shift patterns (increasing its 24 hour shift rosters from five to seven days) will also allow it to increase its weaving capacity - capacity it may need it its excursions into new markets bring in the orders.

NEW MARKETS

"We were struggling to see what would drive demand for office furniture over the next 10 years," says Goodall. "Technology and financial services companies were cutting back on staff and there is a general change in the office environment with more people working from home. We looked at how else we could apply our core capabilities to new markets."

Interface Fabrics is now developing lines to sell to the education, health and leisure industries. "Reception areas, lecture halls, staff areas, canteens, bingo hall and cinemas - that sort of thing," says Burn. It is also looking to sell to the transport sector. As the materials used to cover seats in buses and trains, for example, are thicker and more durable, that decision had to be prefaced by acquisition. "We bought a company in January this year which makes these fabrics," says Burns. The equipment is now being installed at Hopton Mills.

Competitive advantage over its main rival - Gabriel in Denmark - comes from maintaining that initial niche identified by David Hill: the ability to deliver fabric with a very short lead-time. It keeps a large stock and storage is a major cost factor. The company keeps 25,000 rolls of fabric at its Meltham Mills. "If a customer orders before 3.30pm they can have the material the next day," says Burn. The online facility to allow customers to order samples, view stock levels and place an order plays a major part in this drive for new markets.

ENVIRONMENTAL ISSUES

Further cost reductions can come from Interface Fabrics' ongoing environmental policy. Despite using a natural product - wool - the manufacturing process (detergents, dyes and heavy water usage) for its fabrics is potentially harmful to the environment.

"Interface is very switched on environmentally, and that's another key differentiator for us," says Burn. Within the Interface Group its QUEST programme - Quality Using Environmentally Sustainable Techniques - has seen millions of dollars saved, he adds. "Our vision is to become a fully environmentally sustainable company by 2020."

The first step for Interface Fabrics is to ensure, by 2005, that 20 percent of its products are recyclable, compared with just five percent today. One method being deployed to take old fabric - including used army sweaters - and recycling and reweaving the material into a range to appeal to the growing environmentally-aware customer base, predominately in mainland Europe.

Waste has been reduced: detergent usage by 75 percent, gas (33 percent) and effluent (46 percent). Water is pumped - under licence - from a borehole and usage there is down by 38 percent saving £300,000 in five years. It also takes the pressure off the local community's water supply.

As you'd expect from a company with a strong e-commerce awareness, Interface Fabrics uses IT to ensure its environmental credentials remain strong. "We use IT to monitor our usage of raw materials," says Munro. The company also uses IT to control the performance of its looms, monitoring efficiency, workloads and to evaluate causes of downtime.

IT is also used throughout the business from monitoring raw materials bought through to distribution and accounts. In an industry that can trace its roots back over 2,000 years, Interface Fabrics is living proof of how modern techniques, including e-commerce, can deliver quality, service and savings.

Interface Fabrics was the E-commerce Awards 2002 Yorkshire and Humber regional winner in the e-business category.

www.interfacefabrics.com

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