Case goods sources compete on looks, value
Thomas Russell -- Furniture Today, August 12, 2013
HIGH POINT - For years, U.S. promotional wood producers succeeded largely on the low prices they offered in categories from bedroom to ready-to-assemble home office and entertainment.
More recently, they have been competing head on with imported veneered products with better perceived values in terms of looks, quality and price.
As imports grew less expensive, American promotional producers have not only had to become more efficient in their manufacturing. They have had to come up with higher value offerings that mix style and innovation at a price point.
The transition has not always been easy. Some have had to pare down their work forces and achieve higher automation in their plants. In addition, they have had to change their manufacturing mindset to develop work flows that better align with post-recession order patterns.
Today, these producers say they are well positioned to compete with low-priced imports. They also believe they can thrive in a marketplace that is seeking more domestically made furniture and demanding more prompt service in deliveries and repairs.
One big domestic player is Ashley, whose laminate bedroom line largely includes five piece sets that retail around $799. Today this is produced in Arcadia, Wis., where the company is based. Starting next year the line also will be made at its new Advance, N.C., plant.
In 2011, the company took its domestic line to a new level by announcing a $40 million investment in a product launch called New Millennium. This contemporary line offered high gloss looks often seen in high end European contemporary product, but at a fraction of the cost. With five-piece sets retailing at $2,199, they also have innovative features such as headboard and footboard storage and nightstands with built-in charging and docking stations.
"This is better, high-end style contemporary, and it has all the bells and whistles," said Ashley Furniture Chairman Ron Wanek, noting that domestic wood production represents about half of the company's case goods sales. "This is not stripped down."
Wanek said the new Advance facility also will produce this line using the same 3D laminate press technology that manufactures high-gloss and textured looks.
"We made a substantial investment in that equipment about two to three years ago. It is doing well, and we will probably expand that in Advance, N.C.," Wanek said.
Standard Furniture also is using 3D technology on its domestic wood line. While company President Todd Evans declined to reveal the amount invested in 3D laminate machines and other improvements to its Bay Minette, Ala., plant, he said the technology is adding an enhanced "quality and durability element" to the domestic wood line.
To improve its efficiencies, the company also has consolidated operations. In May, it announced it was closing its Frisco City, Ala., plant and combining the operations into its larger Bay Minette plant. Evans said this alone will save more than $1 million in the cost of moving goods between both facilities. Bay Minette also has a cellular manufacturing process, which improves efficiencies.
Based on these and other improvements, Standard has been able to lower wholesale prices of its domestic bedrooms by $50 for a four-piece set, which translates to $100 for the consumer. A four-piece $699 set will now retail around $599 while a $599 set will retail at $499.
"We think is critical from a competitive standpoint," Evans said.
With half of its bedroom revenues coming from the domestic line, he said this helps the company compete against imports, which also continue to sharpen prices.
Sandberg Furniture, another major U.S. producer of laminate bedrooms, also has invested in technology to make its product more competitive in fashion and pricing. This includes heat transfer technology that allows laminates to be applied in a seamless manner to shaped edges.
The company also applies laminates that duplicate wood grains in a consistent manner to avoid streaks and discolorations found in veneers. Laminate bedrooms are even available in lighter whitewash finishes that company President John Sandberg said low-cost competitors can't duplicate with the same consistency.
"Grain color and clarity - those are primary advantages we have," said John Sandberg, president.
He added that the company can apply the latest fashion and design trends to its line. Some of its new youth sets, for example, include colorful LED lighting beneath beds.
"Because this is a fashion industry, we are able to deliver on a cost basis more bang for the buck," Sandberg said. "We can put in more bells and whistles based on what the consumer is looking for. We have been tied in to that consumer for decades and have a good sense of what the consumer is looking for and what sells to the consumer."
With four-piece sets retailing from $499 to $1,299, its prices also are competitive.
To remain price competitive, Sandberg and others must keep labor costs in check.
RTA home office and home entertainment specialist Sauder Woodworking has accomplished this over the years through automation, said Kevin Sauder, president and CEO. Today, the company employs 2,100 workers in a four-million square foot, three-shift operation in its hometown of Archbold, Ohio. Due to the highly automated nature of the facility, Sauder said, lab or accounts for only 8% of the cost of finished goods.
"That has been a part of our competitive advantage ever since my grandfather invented the first piece of RTA furniture in 1953," Sauder said. "He was all about automation and making product that the masses can afford. He figured out how to make things better, faster and cheaper."
Today, he said, Sauder has some of the largest edge band, boring and laminating lines available.
"It creates a very consistent product that doesn't require very much hand labor," he said, noting that the plant's automated nature helps it afford to pay good wages.
"We also have very bright people in maintenance and engineering areas, and have a bright Ohio work force that understands quality and consistency," Sauder said
Sauder said the company also has remained competitive by staying on top of trends in electronics and making product compatible with the latest technologies. Price has been another advantage. Its products range from $29 bookcases to $399 entertainment centers, with $49 to $199 its strongest price points.
Another advantage Sauder and other domestic RTA producers tout is their proximity to market and domestic warehousing capabilities, which help sharpen lead times. This is particularly important for Internet and bricks-and-mortar retailers ranging from Wayfair. com to home office superstores such as Office Depot.
Sauder's facilities include a 1.4 million-square-foot warehouse that ships in three or four days.
Warehousing and distribution are also key for Ashley, and will be a major component of its new Advance, N.C. campus.
"I would say in the past, (made in the USA) hasn't been really important, but it is becoming more important," said Wanek. "They (customers) can get it faster and there is a lot of talk about costs going up overseas and them becoming less competitive. That has caused a new awareness to made in the USA. People want make sure they will have supply."
Marc Force, director of sales for Haleyville, Ala.-based promotional case goods manufacturer Harden Mfg., said a benefit of buying American made goods is that they often have fewer issues than imported items.
For example, retailers can have "widowed" or unbalanced inventory - where imported groups from containers in a retailer's warehouse might be missing key elements due to damages or shipping or sales nuances.
American-made items keep inventories balanced, Force said: "The retailer's not standing in the back with nightstands and no beds."
Another way Harden keeps retailers balanced is by building to order, so retailers who place an order this week get it shipped the next and can carry less inventory, Force said.
Bill Bevec, northern sales manager for Higdon Furniture, said promotionally priced American producers have shorter lead times than their overseas counterparts - one reason they've been able to maintain a competitive advantage.
While there is value in more premium goods shipped by container, freight costs for shipping promotional goods from overseas can negate the low cost of a large quantity of sets ordered, Bevec said.
He added that with damaged goods, which can throw the balance of inventory off, domestic retailers can also act more quickly to solve problems.
Bevec said Higdon has a respectable construction story using MDF board and engraved laminate. The company also delivers via its own trucks or retailers can visit its warehouse and pick up orders.
"(If) you're sending a truck to our plant, he's not sitting there waiting while we're pulling it out of racks and everything. When we have an order and someone makes a dock appointment, we have it staged so we're not tying up your truck either," Bevec said.
Highly automated domestic production allows Cramco to compete with overseas freight and lead times, according to Dave Shock, national sales manager. Cramco has been producing in Philadelphia since 1949 and its current facility has 75 full time employees.
Merchandising of its domestic line is twofold, Shock said. One of the company's strengths is promotional, with three-piece dinettes starting at about $99, five-piece sets ranging from $199 to $499, and seven-piece sets start at $299.
The other part of Cramco's domestic strategy is dedicated to medium priced tilt-swivel caster armchair sets. Five-piece groups range from $599 to $1,099 retail.
When Cramco decided to reenter this tilt-swivel category, it spent a year developing the program with a capable overseas factory and almost introduced it as an offshore program, Shock said. But it decided to do it in the U.S. for the same reasons the domestic production was already working for other products, he said.
While it imports some raw materials for the program, the final manufacturing, finishing, welding, assembly and packaging is done in its factory.
"The biggest advantage of producing tilt-swivel chairs domestically is quality control. There are many moving parts on these chairs and tolerances and quality of tilt-swivel mechanisms, casters ... are paramount," he added.