An Old Company Stitches Together a New Perspective
In certain circles, the name Merrow has been synonymous for centuries with quality, and with quality stitches. Technology and innovation, though? Not so much.
Then Charlie Merrow and his brother, Owen, took control of the company.
The Merrow Sewing Machine Co. “was having a difficult time being a competitive international machine manufacturer,” Merrow said. “The market had been devoured, and Merrow didn’t have an obvious place in the industry. My job was to make it a lot more obvious where we needed to be. When your back is against the wall, in effect, you look to change, and my job was to be a change agent.”
That was almost a decade and a half ago. Since then, the 179-year-old Fall River, Massachusetts manufacturer has shifted from nostalgic analog — bills and materials written on index cards, customer orders filed in cabinets, a fax machine as the primary source of orders — into the digital world with an ERP system. “And it nearly sunk us,” Merrow said. “It made almost every process harder, less efficient, and the reporting around it not only didn’t help us at all, it was full of bad data.”
This is the part of the technology success story not told nearly often enough, Merrow said, “because people spend so much money on software and ERP and MRP, and they make it work.” You spend and spend and, in an effort to justify the financial investment, “figure out a way to kind of muscle through it and make it work.
“Fortunately, we were in a position where the person running the company — me — had a technology background. Instead of forcing it, or throwing money at it, and making it passably productive and probably incredibly vulnerable, we changed. We changed fast. And I think we got lucky.”
As part of the seventh generation of Merrows involved with the company, and its current CEO, Merrow implemented Kenandy ERP and MRP, and Salesforce CRM, along with dozens of smaller custom applications that supported those major apps. The evolution has taken years and transformed the company from little more than an old sewing machine manufacturer to an incubator that Merrow said he can envision someday becoming a holding company for multiple brands.
“We went from trying to figure out how many sewing machines we had sold last month,” Merrow said, “picking through data in the system, Excel sheets being managed by dozens of different people — to being efficient and confident enough in what we were doing that we flipped over to being a start-up incubator in addition to running the core business.”
IndustryWeek: What was the impetus for change back in the early 2000s? And why turn to cloud to move away from analog?
Charlie Merrow: It’s a deceptively simple answer. We like to say that we have all the problems of a major multinational company with the resources of a small business. In a nutshell, there’s the impetus for change. How do you run that? How do you manage that? You can do it by having lots and lots of people who do lots and lots of things, or you can use technology. I came from a world of technology, so my decision, when I bought out the other companies with my brother (Owen is the company’s COO) was to rebuild our business around a narrower focus for product, and through a far more efficient infrastructure to manage what is, effectively, a very complicated company. We have a lot of stuff that needs to be managed, and we needed technology to do it.
IW: Neither you nor your brother was involved with the company when you purchased it back in the early 2000s. Why buy it at all? Just a certain pride to uphold the family name?
CM: I’m probably as narcissistic as anyone you’ve ever met, but (the name on the company) had very little to do with it. The brand strength and product strength are why Owen and I bought the company. The brand is sold into 87 countries, and we have installations in more than that. The brand is well enough known that on Project Runway, they use the term “Merrowing.” It’s an unusually strong brand in an industry that has commoditized almost everything. And we have a product that really is unbelievable. The core product line and the innovation around that product line was significantly underutilized. So it was brand strength, product strength, and customer base. Even in 2003, when we looking at the company, it was remarkable the quality of the customers that existed. Merrow just needed to change what it was doing with those customers in order to have those customers 12 years, 15 years later. And that was really clear.
Manufacturing Perspective and Change in Textiles
IW: What was happening back in 2003, 2004, 2005 before that change?
CM: From a manufacturing perspective, people will probably recognize that when you build a big manufacturing facility up and your business declines because of competition, any company is going to do things in order to keep its manufacturing centers running. What Merrow ended up doing in 2003 was trying to fill up machine hours. The focus had drifted from building some great sewing machines to trying to make anything they could, getting any contract work they could, to run these machining centers. That clearly wasn’t sustainable or healthy.
There was an inflection point, and it had to do with Chinese manufacturing. Chinese machines came into the market and they were the last that catalyzed change. Merrow was either going to get sunk by cheap Chinese manufacturing, or it was going to adjust its business model to add a lot more value to its customers — and run much, much more efficiently.
IW: Your first effort at cloud, though, didn’t do that.
CM: Right around the financial crisis in 2008, we had worked very hard to turn the company around and the center of it — this technical, digital system that we had moved the company to — was sinking us. All the work we had put in to update product, to update branding, to update the relationships with customers, was completely compromised by our inability to see what was really going on with the company. It had almost every division of the company frustrated with their jobs. There was a time when we asked, ‘Did we just do something that compromised our ability to run this company moving forward?’ We needed to change.
IW: So the tech that actually worked …
CM: I found anybody and everybody who had software I could test. I went and threw sample data in and started using it. I got the NetSuite people to let me screw around on their system, I got a Salesforce CRM trial in, anything I could try I did. I even looked at QuickBooks. Anything I could put a sample set of data in, I did, just to see if we could use it to do something better.
I put the Salesforce trial in, and I threw it over to a couple sales guys, and I used it a little bit, and there was something materially different about that from everything else. It was extensible. I know how to program, but if I hadn’t been able to program, I would have been able, in 10 minutes, to change what they were looking at so it was relevant to Merrow. As soon as I recognized that I could customize and build them something that made effective, I gravitated immediately to this platform. People get very confused about Salesforce and what it is. … It’s a stable, data-driven tool set that lets you quickly and efficiently collect data, report on data, and manage data. And there’s a lot of functionality they built on top of that with their CRM program. I could adjust very quickly what the sales people were looking at, what they were talking with customers about, information they were collecting, then give them back that information in the form of reports so they could do a better job the next day.
IW: And you actually programmed a couple dozen custom apps yourself on top of all the basic software?
CM: Companies that make sewing machines and are trying to build new businesses, if they’re not technology-driven businesses, have no right to have a department of programmers. We were able to build it ourselves and quickly adjust it. And it made us better. It made us able to run the company and deliver the product and customer service we knew we were capable of doing. The staff responded really well. Every department was encumbered by the systems we had delivered to them previously, and every department was now empowered by them, and adjusting them. It was a total transformation of the way we ran the company.
IW: You report revenue that has more than doubled during the last three years — in part thanks to this tech shift — and now you’re actually developing other companies as an incubator? That’s a considerably significant shift.
CM: In 2012, our aspiration was to double the company’s size. How were we going to do that when our core business can grow very fast when there’s a fashion change, but tends to be slow-growing? We made the decision to spin up some of these ideas that had been percolating in my head for a while, and we had the resources — the technical infrastructure — to do it, we had executable ideas, and we had the skill set in house to build a technical front end for these businesses pretty quickly. So they are part of our growth strategy. How do you double revenue? You build things that can grow very fast and you spin them off. That’s what we’re doing right now. Probably the best example of that is WoolPRO, the apparel line. That’s turned into a terrific success that might, if it keeps on doing what it’s doing, overshadow Merrow. Building things, bringing smart people in who have great ideas, nurturing those ideas, building businesses around them, then executing on them — it’s all part of our strategy now.
Bigger Visions at the Bicentennial, Beyond
IW: Your advice to other manufacturers who might be in a similar situation, researching to upgrade through tech?
CM: We’ve moved from becoming a company that’s explored CRM, to building out an ERP and MRP system on the cloud, to using that cloud as this repository of information to create actionable and effective decisions. You gotta know technology to do that stuff. I don’t know, sometimes I meet with my peers who don’t know anything about technology and work for businesses that are five times larger than mine, and I don’t think there’s right way to do this.
IW: If you and Owen are still running the company during its bicentennial in 2038, where is it? What has it become?
CM: In 2004, I met with the biggest sewing needle manufacturer in the world, and I asked, ‘When was the last great innovation in the textile business? When was the last time something really awesome happened?’ Everybody scratched their heads, and somebody said, ‘Well, back in ’88, I think that was when the lacing puller came out. That was pretty good.’ I was so disappointed. 1988? That’s the last time something interesting happened? Our job, our mission is to create branded stitching, to create value in stitching, to build machines that add value to sewn products and allow people who build things that are sewn to monetize the stitch. Where I think our core business is at the bicentennial is that we’re a company that is at the forefront of building products that add value to sewn products, and we’re the brand you use to build your products because consumers recognize it and know they’ll get something different, unique, more technical and strategic, and valuable when they buy a product with a branded stitch. Our job is to build the equipment to do that. That’s what a sewing machine is in 21 years — not just a commodity that constructs products. It’s a company that builds value into them.
The company itself, in 20 years, has turned into a holding company for multiple brands. We’ll buy brands, and we’ll build brands, and we use our global network to distribute the products for those brands. We’ll have built up a portfolio of companies that leverage our same distribution to deliver those products and services worldwide under the Merrow brand name, with just a far more diverse set of products and services in and out of textiles.
IW: So you want to develop, at least a little, into a sort of Berkshire Hathaway? They started in textiles, too. (The company was primarily a textile manufacturer from its 1839 founding until the late 1960s, after Warren Buffett had started buying up shares and expanded into insurance.)
CM: We’re working really hard and humbly to try to be a great company that has an inspiration to be like Berkshire Hathaway. I don’t want this to sound stupid, but I’ve been reading Warren Buffett’s annual letter to shareholders since I was 14 years old. The only stock I own is Berkshire Hathaway. This isn’t by design. I’m not trying to run my company to mimic what Warren Buffett has done. I’m running it to be as competitive and effective in this marketplace as possible. I think there’s great value in learning from what people have done successfully, but you also have to assess what your strengths are. Our strengths are our worldwide distribution, our brand, and the management of this company. I’m really proud of my brother. He does an extraordinary job running the operations of this company. I can throw him businesses and he can grow them and make them efficient. If I just give him businesses and technology, I have a lot of confidence that he can make it work.
IW: Takeaways from the first 13, 14 years?
CM: I’ve made a lot of mistakes and we’ve done a lot of things well, but there’s one variable that has remained strong this entire time: the people who we work with, both the employees of the company and the agents who represent us worldwide. No exaggeration, without those people and agents, we would have tripped up and made mistakes that really might have killed us along the way, because we changed so much. They are central to the rebuilding of Merrow.
If we ever get together and have a beer, there are some pretty dramatic stories that influence me saying something like that. When we were learning how to rebuild sewing machines with new methodologies and new bills of material, we were shipping them out into the market and our agents were literally rebuilding them for us, because we were doing it wrong. Instead of them shipping product back to us, they just rebuilt the machines for us, then either called us up or flew in and said, ‘Something’s gone wrong.’ There were lots of stories like that, where people wanted us to be successful, or wanted to help us be successful, rather than just walking away.
