Vendors finding few alternatives to China
Gary Evans -- Furniture Today, September 3, 2011
HIGH POINT — Upholstered furniture makers say they're hoping to rely more on domestic sources for fabrics, but that doesn't mean the love/hate, price/value relationship with China is close to being over.
Rising wages, increased cost of transportation and a host of other problems are changing the game plan for U.S. upholsterers who have been getting most, or all, of their textiles from mills in China. As troubles mount there, and problems with the economy and high unemployment linger here, the cry for "Made in America" is becoming more frequent.
The big problem is that a number of U.S. mills are gone, with the exception of companies like Valdese Weavers, David Rothchild, Chambers and a handful of others. If U.S. upholstery vendors went heavily domestic, most executives think the mills here wouldn't be able to handle it.
"The challenge people are going to have is that we've abandoned the infrastructure," said Dennis Valkanoff, a former executive with England Furniture and now a founder in the start-up upholstery company 45th Parallel. "We don't have the equipment."
Cheap labor in China drove prices down over the past decade, causing a number of U.S. mills to go out of business, including the giants Quaker and Mastercraft. Prices are still cheaper in China, but the gap is narrowing and a series of events has put U.S. reliance on China in a tailspin.
"Dealing with Chinese fabric mills has gotten much more difficult in the last couple of years," said Roy Calcagne, president and CEO of Craftmaster. "Prices have gone up dramatically. From November through the first part of the year, they went up anywhere from 10% to 30% or 40%, and it was virtually all overnight. We were caught off guard."
Wage hikes and the shortage of labor is a starting point for a wave of problems in Chinese textile imports.
Hit by both flooding and drought, world cotton supplies diminished, causing cotton prices to spike from around 60 cents a pound to over $2. When manufacturers moved to polyester and cotton blends, those prices escalated also.
"Years ago, if you sold something deep and big, all you had to do was call somebody 30 miles away and squeeze them a little bit. The next thing you know, you're getting fabric in three or four weeks." |
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"It's a disruptive, almost dysfunctional, part of our industry." |
"Compare today's fabrics sources to 10 years ago when we had Quaker and Mastercraft and all the domestic mills, and this would never have happened," Calcagne said, saying those mills would have controlled raw material costs.
Now converters, who buy from Chinese sources, "don't have a lot of control," he said. "They (Chinese) say, ‘That's your new price today. If you don't want it, don't buy it.' In the past, if materials went up ... your yarn went up ... you could control your destiny better if you were making it yourself. (Now) it's a disruptive, almost dysfunctional, part of our industry."
Now that cotton prices have dropped to around $1 per pound, "no one is calling back with a price decrease. That's one of the challenges. When oil comes down, gas comes down. But not in fabric, apparently," Calcagne said.
In addition to pricing issues, other events are affecting business with China, several manufacturers told Furniture/ Today. Transportation costs have risen. The yuan is appreciating against the U.S. dollar. A number of smaller mills have gone out of business and as business shifts to other mills, more quality problems have occurred. With the rise of the Chinese middle class, domestic consumption is increasing at a rate higher than exports.
It's not unusual to hear upholstery makers talk about a move to "Made in America" and a commitment to using more domestic fabric. Manufacturers through the price spectrum have tried to wean out offshore sources, but with limited success.
"There are certain things I can't avoid getting from China," said 45th Parallel's Valkanoff. Those include 100% polyester knits and the hottest cover going, bonded leather.
"Nobody's doing these domestically. That's what's driving me nuts," he said.
Jay Foscue, Klaussner's senior vice president of sales and marketing, said the company cut its direct imports to 15% or less and keeps other fabrics in stock so it doesn't have to wait out the eight- to 15-week shipment period.
"We still run into an out-of-stock situation on any little surge in orders," he said, adding, "Everybody keeps a lot less in the pipeline than they did before.
"We really buy from a very narrow group of vendors when we buy direct so that we have consistent flow," Foscue said. "We've tried to pre-qualify everybody the best we can who can service us like we need."
He said fluctuation of sales "is the biggest thing we struggle with. Years ago, if you sold something deep and big, all you had to do was call somebody 30 miles away and squeeze them a little bit. The next thing you know, you're getting fabric in three or four weeks. Today that is just not the reality."
To remain true to its 21-day delivery promise, Klaussner is going through its core line of 400 fabrics and ranking them in importance to come up with a subset that can be ordered and stocked deeper, Foscue said.
Some sourcing has been moved to places like Mexico, and there is talk that fabrics may be sourced out of places like Bangladesh, Indonesia, and India. But since textile production is more equipment-intensive (large looms, finishing equipment) than labor-intensive, that kind of shifting may be difficult.
Some domestic mills have proven they can make body cloths at comparable, or better, prices than their overseas counterparts because they are high-volume SKUs. But the U.S. mills still have a sizable price disadvantage in other fabrics.
Whether U.S. mills will see an expansion in interest will depend on how much disparity there is between them and their Chinese competitors in pricing, quality and delivery.
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