Brandon, Vt. — Beset by imports, U.S. wood furniture producers are responding with any of six strategies, each with positive and negative ramifications.
The first three strategies are defensive — graceful ways to admit you don't know how to compete and want to get out of manufacturing.
The second three are offensive, ways to be internationally competitive.
Become an importer
Some companies are becoming predominately importers. This is easy in the short term. However, your marketing functions are just as vulnerable as if you were manufacturing. Companies that take this path will have a great deal of money tied up in the long supply chain between here and, say, China. Purchase orders may well be out three months. You have product being manufactured, product being shipped and product in your warehouse. If the product in the pipeline becomes obsolete, you can be left with a great deal of inventory to blow out at a loss. If you lose control of the design or distribution, you find yourself on a fast track to Chapter 11. The Chinese you buy from can sell around you. They will take lower margins until you are no longer a factor — there is no margin bottom to this. To make this strategy work, you must be on top of your marketing.
Integrate imported parts
Some companies have integrated imported parts and items into their lines, assembling furniture in U.S. plants from a combination of imported and domestic parts. Other companies import boxed finished items and integrate them into their lineups. This strategy works only as long as you have a true partnership with your suppliers. It is probably best if you own a piece of your suppliers.
Become a retailer
Some companies are moving to a purely marketing strategy — becoming retailers. These companies have to keep their foreign plants busy or risk losing a source and creating a competitor.
Offer hard-to-duplicate service
Some companies are providing a service that will be difficult for an importer to duplicate. The best examples are companies with quick-ship programs to gain big delivery time advantages over the imports. This requires staying on top of market research — if you use a large build-to-stock strategy, you have the possible disadvantage of high inventory cost and inventory obsolescence if the market loses its taste for the product.
Market your niche
Some companies have found a niche the importers don't touch. This can be very profitable. It requires good market research to identify and maintain your niche. Profitable markets draw competition, so this strategy usually requires you also to adopt the next strategy.
Become an exporter
Some companies have become internationally competitive through better engineering and programs such as lean manufacturing, a systematic approach to identifying and eliminating waste through planned improvements. This is by far the safest strategy. You can even become an exporter.
Many manufacturers combine or use several of these strategies at once. My company is adopting strategies 4, 5 and 6. The big question is, Which of these six basic strategies fit your company's goals?
