Furniture CEOs support safety but say regulations add costs
Heath E. Combs -- Furniture Today, October 20, 2013
HIGH POINT - Top furniture industry executives are happy to comply with any government regulations that result in safer products.
However, they question standards that they believe do little or nothing to increase product safety, while layering on additional costs.
To help bring clarity to the growing confusion resulting from numerous state and federal product safety regulations, industry leaders met with Furniture/Today at a CEO Roundtable on the eve of the High Point Market to discuss the challenges - and cost - of compliance.
The panel, moderated by Furniture/Today's Thomas Russell, included CEOs Todd Wanek of Ashley Furniture, Paul Toms of Hooker Furniture, Jeff Young of Schnadig, Karel Czanderna of Flexsteel, Kurt Darrow of La-Z-Boy and Kevin O'Connor of Samson Marketing.
The group stressed that the compliance issues represent an industry-wide challenge that must be addressed by every link of the supply chain including retailers, wholesalers, manufacturers and raw materials suppliers.
La-Z-Boy's Darrow said that while many regulations start with good intentions, they sometimes don't work as intended and create confusion by the time they are implemented. He pointed to California's Proposition 65, which imposes a labeling requirement on products containing certain chemicals the state considers unsafe.
"It's a moving target and it's hard to keep up with," Darrow said. "So you have to segregate your product and evaluate the cost of (complying with the rule) nationwide as opposed to just California.... It adds administrative costs. (And) the effort to notify all your retailers and tag all your product is massive."
Confusion involving Prop 65 was also evident when the conversation focused on labeling product sold in the state of California. Some participants have received legal advice that they don't have to label the product on the grounds that they are fully compliant. Others, while maintaining their product is compliant, continue to label their products.
The national rule requires furniture makers who laminate composite panel in-house to perform an additional round of batch testing, something not required in California's rule. Underscoring the roundtable's theme, the cost of compliance, Wanek said the national composite panel rules are burdensome and don't add value to end consumers - but could add about $28 million a year to Ashley's costs.
"We have a chain of custody established going back and certifying the board and certifying the board manufacturers. Now they want us to go and certify the finished product," Wanek said. "We've had our product tested ... to an independent third party, and our product passes with flying colors."
Schnadig's Young said that furniture suppliers are testing their products more frequently these days for compliance, not just relying on their suppliers.
For manufacturers always on the hunt for exotic materials and decorative ornamental applications, Young said it's vitally important to stay away from conflict minerals and/or wood subject to Lacey Act illegal logging restrictions.
Underscoring the investment manufacturers make to be compliant, Toms said Hooker has four people who primarily deal with compliance. Other staff also does some audit work in the area.
Meanwhile, Wanek said, Ashley has created jobs to interpret laws and defend the industry, working with the American Home Furnishings Alliance and others to make sure positions are properly defined."We don't feel you can reverse-engineer product. You can't go back and say, ‘Now I've got to worry about regulation.' You've got to start at the very beginning with purchasing, engineering, quality - all those functions need to be really intertwined with the regulations," he said.
While compliance is sometimes unwieldy even for the biggest suppliers, O'Connor said smaller companies, or retailers sourcing directly from overseas factories, may have less resources to face the challenges of the regulatory landscape.
Suppliers and retailers seldom talk about regulatory compliance, and retailers often assume - but don't necessarily know - that their suppliers are taking an active role, he said.
La-Z-Boy's Darrow said that whether compliance comes up or not, it's built into in the price of product.
"Make no mistake, it is in the cost," Darrow said. "None of us are making so much money that we can just absorb all this ... it gets into your fixed cost and it's there."
And the time dedicated to staying ahead of compliance is time that isn't spent innovating better furniture, Flexsteel's Czanderna said.
"Every time one of these rules changes, making sure that you've got everything buttoned up in time, it's just work that you wouldn't be doing if you were working on cooler product to sell," Czanderna said.
There has to be a deeper understanding of regulations and a broader coalition of industry involvement, Ashley's Wanek said.
"As the cost of a sofa goes up the affordability goes down and your customer base shrinks. And that's what is happening to our industry," he said.
"You're going to see the cost go up to a point where the furniture industry becomes smaller, because these regulations are going to raise the price. And as the price goes up people buy less. And the cycle of getting new furniture is going to increase. Instead of being every seven or eight years, it's going to be every 10 or 12 years."
When the group discussed next steps, they agreed the industry needs to have a louder, more unified voice on the issues. Some suggested partnering with related industries such as contract and hospitality furniture while others suggested learning how industries outside furniture have dealt with regulatory issues.
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