Share this on

Supply chain triggers concern

Unexpected rise in sales could tax resources

Ray Allegrezza -- Furniture Today, April 19, 2010

HIGH POINT - A strong and unexpected spike in first-quarter sales has some importers, manufacturers and suppliers concerned about whether the supply chain will be able to keep up with demand.

Suppliers interviewed at the ongoing High Point Market say a confluence of issues has come together that could challenge a supply chain already struggling to adjust to the realities of post-recession demand.

They point to key drivers such as rising costs for raw materials and ocean freight, a shrinking base of Chinese furniture factories, a smaller number of workers in those factories and rising labor costs in China.

However, many say the biggest challenge could come from China's increasingly affluent base of consumers, who are buying record quantities of cars, homes and furniture.

According to one major supplier here, "A short while ago, I would go to visit a large furniture factory and we would have 60% of their capacity. The remaining 40% might have gone to my competitors. But now, we might have 50%, my competitors may have 10% and the remaining 40% is now being sold into the Chinese market."

Todd Wanek, president of Ashley Furniture, agreed. "The shift by China to consume a significant amount of the furniture it was exporting to the United States is very significant," he said.

That shift, coming on the heels of an improving market, is setting the stage for capacity issues, Wanek and others believe. "If the demand stays the same as it did in the first quarter, then I believe this industry will struggle with the issue of capacity for the next year or so," he said.

Michael Amini, CEO of importer AICO, sees the same scenario unfolding. "Lots of Chinese furniture factories have gone out of business due to the struggling global economy," he said.

Factories that managed to survive are finding themselves having to pay more for labor, worker benefits and raw materials. At the same time, Amini said, the standard of living in China continues to improve, resulting in Chinese consumers snapping up more products including furniture.

"All of those things caused many factories to either give up on selling to the U.S. or to struggle to ship to the U.S. Other factory owners opted to just sell in their own backyard," he said.

"A good number of Asian furniture factories shut down due to the economy and that was made worse when many factory workers opted not to come back after Chinese New Year," added Steve Wolfe, vice president of Zenith Global Logistics.

He said the situation is compounded by the fact that fewer trucks are running and fewer ships are bringing containers from Asia. As a result, he said, "If the business continues to spike, it could present serious issues throughout the entire supply chains."

Ocean freight was also on the mind of Scott Cohen, executive vice president at full-line importer Coaster. "They are simply running less ships, so unless you pay a surcharge of anywhere from $200 to $400 a container, you might not get your goods on the boat."

Cohen also said importers would be well advised to seek out backup or alternative suppliers.

Importer Fairmont Designs has kept a close watch on this situation and has sought to solve it, in part, by staffing up.

"We've always had a philosophy of watching our costs, but you can't solve every problem by cost-cutting alone," said Brian Edwards, company president. "What happens when your orders jump from 100 a day to 200 a day? We are ramping up and are looking at all positions to make sure we are ready."

Not everyone, however, sees capacity issues on the horizon.

"We don't see this as a big issue," said Brian Parker, president of leather upholstery importer HTL. "Three years ago, we looked towards the post-recession market and opened up new facilities to be prepared.... In fact, I only hope to outsell our capacity."

Furniture Bands International Chairman and CEO Ralph Scozzafava, agreed. "I'm just not seeing huge disruptions," he said. "There are always challenges but at the end of the day, they are all solvable with the help from great products and great service, which is what we are focusing on."

One retailer at market, Johne Albanese, executive vice president of online seller Furnitureblue based in Delray Beach, Fla., said he has some concerns about the supply chain.

"We've run into a number of instances here at market where suppliers are struggling to get product," he said. "Even so, I'm not saying it is totally their fault, because I don't think anyone expected the spike we've all recently seen."

Share this on

Raw materials costs spiking, say manufacturers

Apr 12, 2010

Douglas Schwartz joins Zenith Global Logistics as VP

Aug 11, 2011

Materials costs spike

Apr 12, 2010

Leather sofa sources expect price increases

May 2, 2011

Domestic upholstery producers optimistic

Apr 28, 2011

Also by this author

Also by Ray Allegrezza

Featured Company

Wright Labels

Bill and Tom Wright founded Wright of Thomasville in 1961 on the idea that printing was a creative medium and the belief that "a promise made is a promise kept." The Wright brothers focused their attention on providing exceptional printing for the... more