Shaw Contract Group guest blogger Dan Levin is a Beijing-based, Mandarin-speaking Newsweek correspondent and frequent contributor to The New York Times, Fast Company and other major publications. With a finger on the pulse of a nation, and the keyboard of his laptop, he provides his take on a nation transformed by design.
With the groundbreaking of Shaw Industries’ carpet tile plant in Nantong, China just weeks away, the impending milestone is especially resonant for those people who work for Shaw and know its dynamic history. When construction commences in July, it will mark a significant step forward for a company that began in 1946 as a small business in Georgia. From those humble roots making dyed tufted scatter rugs at its precursor, the Star Dye Company, Shaw has grown into the world’s largest carpet manufacturer.
Shaw’s rise is a quintessential 20th century American story, filled with risk, innovation and a keen understanding of markets learned over decades. In this century of global supply chains and international markets, Nantong is the latest chapter in the story of a company that is always looking ahead, leveraging decades of business acumen and innovation.
James Jarrett joined Shaw Industries in 1977, when it had already become a $250 million public company with 2500 employees. That success allowed Shaw to acquire the next three largest carpet companies. At the time, no one could have foreseen China’s breathtaking rise that was just beginning, but Shaw’s growth in the U.S. was, in fact, laying the groundwork for the company’s global expansion toward Nantong.
Over the next several years, a technological revolution was growing. In the commercial market, broadloom carpeting, was losing favor with a rapidly modernizing American office culture. Filling the void was the more innovative carpet tile, a system much more adaptable to urban office spaces.
Responding to this shifting market, in 1990 Shaw built a dedicated carpet tile plant in Cartersville, GA. Six years later, with demand exceeding its capacity, Shaw built a new, 750,000 square-foot plant. That collision of economic demands and physical limitations proved a valuable lesson for the company’s future global expansion. “We literally had to service business and move into a new plant at same time,” said Jarrett.
It proved to be a savvy investment — between 1990 and 2011, Shaw’s sales of carpet tile grew 100-fold. In the late 1990’s, Shaw embarked on another major venture, the merging with Queen carpet, just as Shaw opened its first office in Asia, in Hong Kong.
Shaw was not the only one watching the company’s balance sheet. In 2001, the Shaw family met with Warren Buffet, CEO of Berkshire Hathaway. The sale allowed Shaw to refocus on progress beyond quarterly earnings, which was pivotal in sculpting Shaw’s future goals.
“We had always been successful because we reinvested in company and technology, but now we could reinvest in the latest technologies and market share for the long term,” said Jarrett.
Increasingly, the long- term goal became making Shaw Contract Group not just a global brand but also a local brand across the globe. Just as it had in the U.S., local market knowledge around the world would inspire design, inform performance and instigate innovation for Shaw.
Shaw not only weathered the global economic downturn of the mid- and late 00’s, it followed Stanford economist Paul Romer’s admonition that “a crisis is a terrible thing to waste.” Like most companies, Shaw had to rationalize its infrastructure and employment base. But it also acquired new businesses and entered new markets, such as artificial turf. Shaw invested $1B in assets, technology, systems and logistics over five years while also reducing its debt, positioning the company for further acquisitions and investments.
Having first entered Asia in 1996, opening a showroom in Hong Kong two years later, with others to follow. In Shanghai and Singapore, Shaw prioritized growth in this region given its outsized potential.
“Our global strategy was to build smaller plants closer to different markets,” said Jarrett, of Shaw’s carpet tile business. “It made sense to choose China as first step in that global growth strategy.”
Shaw’s experience building a plant in Mexico and opening showrooms across the world suggested a model for that first step – even if the realities of China required adjustments. “What we’ve learned over the past six years had made us able to put newest the technology and thinking into our China plant,” said Jarrett.
China has a different labor structure and higher utility costs than the U.S., which demanded the company recalibrate its investment plans. “We spent lot of time thinking through the most cost effective way to approach that market,” he said. “That’s been part of developing the product and processes for the Nantong facility to be able to be cost competitive and innovative with design.”
The prime motivation for investing in a China plant is speed. While Shaw’s Georgia-made carpet tile require an average of four weeks to cover an American floor, the journey to Asia, from order to installation, takes more like 10-12 weeks. “We just cannot get to the region fast enough from the U.S.,” said Jarrett.
To reduce that time means investing in China, from the ground up, to the tune of $45 million. “We’re making a permanent commitment to the Chinese market,” said Jarrett.