Indonesia helps Furniture Brands
Thomas Russell -- Furniture Today, October 1, 2012
SEMERANG, Indonesia - A multimillion dollar investment that Furniture Brands International has made in a new case goods plant here is not only helping the company better control its sourcing in Asia.
It is also helping boost Indonesia's credibility as a producer of upper end case goods.
While the company hasn't disclosed the specific cost of the project, the plant is probably the largest single U.S. investment in the country in recent years. Given the worldwide name recognition of Furniture Brands and its subsidiaries - such as Thomasville, Drexel Heritage and Maitland-Smith - the factory is boosting Indonesia's reputation as a go-to place for upper-middle to upper-end furniture.
The plant, which started operations in 2011, replaced an older Maitland-Smith facility Furniture Brands operated about 10 miles away. Company officials decided to replace that nearly 20-year old facility because it was in an area prone to flooding and sinking ground, said Kent Grotkjaer, operations manager.
Furniture/Today visited the plant in August during a weeklong tour of factories in Jakarta, Surabaya and Semarang. The facility, Grotkjaer noted, is on higher ground that isn't prone to flooding.
The 490,000-square foot plant sits on a site of more than 1.3 million square feet that is designed for efficiency. For example, the milling of raw timber is done at one of the highest points on the site. From there, the lumber moves down towards 20 computerized kiln dry units and humidity-controlled lumber storage facilities.
On the factory floor, a fully automated rough end cuts this wood into usable sizes and shapes for product ranging from chairs and console units to larger case goods.
As the pieces are assembled into whitewood frames and cases, they make their way toward the finishing line. From there they are packaged and sent to a 30,000-square-foot finished goods warehouse, which is closest to the main road outside the plant.
The former plant was in some respects more antiquated than the new one, said Ralph Scozzafava, chairman and CEO of Furniture Brands International. It also was a leased facility that had only 120,000 square feet of manufacturing space on about 250,000 square feet of land.
The old plant primarily manufactured dining chairs and small accent pieces such as writing desks and mirrors for Maitland-Smith. It also produced wood product for Thomasville, Henredon and Drexel Heritage as well as upholstery for upper-end resource Pearson. All are FBI brands.
It employed about 800, mostly in production, while the new facility has 1,500 employees, 1,200 of which are in production.
The new plant continues to produce dining chairs and small wood pieces for Maitland-Smith, Thomasville, Henredon and Drexel Heritage as well as upholstery for Pearson. Roughly 10% of its output is upholstery, which includes occasional, dining and office seating.
As the plant continues to evolve, it will increase its upholstery output, officials said. It also is getting into larger case pieces, including for Thomasville and Drexel Heritage.
"The focus is the medium high to high end," Grotkjaer said. "That way we can get the quality right and the efficiency as well. We can do things for Thomasville that have never been tried before, but things we have (traditionally) done with Maitland-Smith as well."
Officials said the plant also has done some OEM work for Bernhardt and E.J. Victor and will continue to increase its use for OEM projects. Filling up the plant with both Furniture Brands and OEM work helps increase its efficiency by utilizing as much capacity as possible.
Furniture Brands also continues to source in China, Vietnam and the Philippines, where Maitland-Smith also has a case goods plant. While those remain important source countries, Indonesia is becoming an increasingly important part of its Asian production.
"It is growing and continues to grow," Scozzafava told Furniture/Today. "We haven't gotten to the top end capacity and are still ramping up, but we will fill it with as much (product) as we can. Once we figure that out, we will decide if it gets bigger."
While those issues are unknown at this stage, he said the plant is an important asset in the company's global sourcing and production model.
"These are better goods we are making there and we can really control the quality and we can control the flow," he said, noting that in other factories, companies often have to wait in line for a production slot. "We have been through that and it can be weeks or months."
Due to the automated nature of the plant and its finishing system - including two motorized pallet conveyors and one static finishing area for specialty finishes and decorating - Scozzafava said the plant has "a great flow to it."
The plant also has several CNC routers and laser-operated machines that cut marquetry, Grotkjaer said, noting that the older plant did not have CNC machines.
Officials also say that a key element behind the success of the new plant is the quality of the work force. When the company moved, it retained about 70% of its workers, some of whom have been with the original factory since its early days.
"The work force is pretty stable," Grotkjaer said. "We did what we could to pull people over to this facility because once we train people, we like to keep them."
"We have a great work force," Scozzafava added. "These folks are excellent furniture makers - they are artisans.... Their attention to detail is excellent, and they have experience working with mixed media. The carving and finishing and detailed veneer work they are able to do end up becoming pieces of furniture that are pieces of art."
While employee turnover is low, Grotkjaer said the plant also offers training classes for new and existing workers.
In the plant's carving shop, skilled craftsmen carve intricate designs on pieces ranging from chair frames to table legs. During Furniture/Today's tour, there were 150 of these artisans at work, a figure that fluctuates depending on the workload and is above and beyond the 1,200 production workers. Most of the carvers travel to the plant from Jepara in central Java.
Officials did not reveal the capacity of the plant, but said it is four times that of the original plant, and that it is currently running at about 50% of capacity.
Grotkjaer said the company is looking to expand its level of production in the new facility each year over the next few years. At this still early stage, he is optimistic about those prospects.
"We are getting more into case goods, and as we get better at that, there will be more facility utilization," he said.
While there is plenty of room for expansion, Scozzafava said it's important to fill the plant first before adding on.
"We want to fill it up and burst it at the seams and then we will talk about whether more walls will go out or up," he said. "It's not about building them, it's about filling them.... We want to be measured and smart about it."
He also said he believes the company's investment is good for both investors and retailers of Furniture Brands goods.
For investors, the vertical nature of the facility, combined with the company's Mexico cut and sew operation, is expected to save the company $10 million to $12 million a year by 2014. That largely represents the cost savings from not buying from other manufacturers and other third parties.
Customers will benefit, he said, by receiving product from a facility that's expected to produce high-quality furniture for years to come.
"It is not something that just anyone can make anywhere. It is high quality at a great value," he said. "That is what it brings to our retail customer that wants to sell better goods and have a better-best offering they can feel confident about from a quality point of view."
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