Question & Answer

Thursday, February 28, 2002

ATLANTA - In a decision one top executive says the company had no choice but to make, Graham-Field has announced it is outsourcing the production of several key product lines. A casualty of the move is the closing of Graham-Field's plant in Bay Shore, New York, eliminating nearly 200 jobs.

Citing the closure and outsourcing as necessary to regain profitability, Chief Operating Officer Michael Crouch said external contractors will be used for production of several Graham-Field lines, including bath safety, ambulatory and pressure management equipment. The lines will be rolled up and marketed under the Lumex flagship brand, he said.

In the wake of the outsourcing decision, Crouch spoke with HME News about what it will mean for the company in the future.

HME: Who are the new suppliers for Lumex? Are they offshore?

CROUCH: I can't disclose specifically who they are - we do business with a number of domestic and offshore suppliers. We were already on an outsourcing initiative, so we're taking on more. It's hard to say how much is being done domestically and how much is being done offshore. If I had to guess it would probably be 50-50. Typically it is the commodity items that are made offshore, while the high-end products like LaBac (rehab technology) are made in Denver, Fond du Lac (Wisconsin) and a plant we own in Guadalajara, Mexico. High-end products that need a high level of customization are not usually outsourced.

HME: Is pricing pressure the sole reason for the decision?

CROUCH: For low-end items, price is the driving factor. We have to focus on the competitive nature of our business and that means being competitive on pricing. Our competitors have done this and are competitive. However, that doesn't mean our customers don't want quality.

HME: What are the disadvantages to outsourcing ­ especially to offshore companies? Logistics? And do you have concerns about quality?

CROUCH: In our restructuring, we've focused on delivering high quality products at a competitive price to our customers. We not only want to be price competitive, but quality competitive, too. We routinely test the products to ensure they meet our standards and specifications. We have been using plants in the Pacific Rim as well as Europe, so we have a truly worldwide initiative. Logistically, there is concern any time you're dealing with a country that is far away because it takes time for the product to get here. But we're dealing with a multitude of suppliers. And we are careful in our inventory management so that we have the right amount of products. I wouldn't call it a disadvantage, but it's another item you have to be aware of. Quality varies from plant to plant, no matter what the country. You just have to specify how you want things made.

HME: Any word on when Graham-Field will emerge from bankruptcy? Corporately, how close to profitability are you?

CROUCH: We are several months away from profitability. I don't want to give a date. It could be sooner, it could be later. Hopefully sooner. Emerging from bankruptcy is tricky because you don't automatically reach profitability even as you come out of it. HME