Furniture Makers Must Adapt

December 12, 2003
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GRAND RAPIDS — He would have bought from an American company — if one could have only gotten the product to him in a reasonable amount of time.

To illustrate his point on what U.S. furniture makers need to do to fend off foreign competition, the editor of a trade publication decided to test the market.

Playing the role of a consumer, Bruce Plantz visited furniture stores in suburban Chicago looking for a cherry dining room set. His key requirement during that week before Thanksgiving was that he wanted the furnishings delivered by Christmas.

In nearly every case, he was told it couldn’t happen and that he’d have to wait eight to 10 weeks for delivery. The lone exception was the store where he found an $8,000 foreign-made dining room set that fit his needs and met his schedule. And the importer promised to have it delivered in two to three weeks.

Plantz, the editorial director for FDM and Cabinet Maker magazines, used the experiment to illustrate how ailing American furniture manufacturers, in order to beat intensifying foreign competition, need to do a far better job in building and shipping products to consumers. Customers, he said, will gladly pay a premium to have their new furnishings delivered and installed quickly.

“The furniture industry is going through a sea of change … but also it’s creating a lot of opportunity,” Plantz said during a roundtable discussion held during the recent Midwest Industrial Woodworking Expo.

“I think the answer for the residential furniture industry hasn’t been invented yet,” Plantz said. “But doing things the same old way isn’t the answer.”

Quick delivery was among the factors that participants in the roundtable identified as keys to competing in an increasingly global economy against lower-cost foreign products made in countries with cheap labor.

Identifying target and niche markets, integrating high flexibility into the operation to meet customer demands, product innovation, mass customization and high quality, and speed in the manufacturing and delivery of goods are crucial to meeting and beating foreign competitors from producers in countries such as China that are steadily eating away at domestic market shares, according to roundtable participants.

And manufacturers need to get away from keeping up with what one speaker called the “Wal-Mart-tization of America” — the tendency to always offer the lower possible price — and instead focus more on the kind of value-added aspects of their businesses that will make customers overlook price.

“There’s too much focus right now on price,” said Steve Lawser, executive director of the Wood Components Manufacturers Association in Marietta, Ga., a trade group representing about 150 component makers.

“That’s what we have to get away from because there’s no end,” Lawser said. “If you’re going to compete on price then you are only as smart as your dumbest competitor.”

There are foreign competitors that in a short time have made sizable inroads into the U.S. market.

Chinese wood furniture imports into the U.S. are growing rapidly, from an estimated $6 billion in 1998 to about $11 billion in 2002, and an anticipated $12.1 billion to $12.2 billion in 2003, said Harold Zassenhaus, an industry consultant and the president of an export management group in Bethesda, Md.

Imports from Vietnam, while a mere fraction of China’s, are growing at an even faster rate — from just $9 million two years ago to about $116.3 million for 2003, Zassenhaus said.

“We are in a very dangerous situation as manufacturers,” said Peter Kleinschmidt, chairman and chief executive officer of Stiles Machinery Inc. in Grand Rapids, a maker of panel processing equipment for the woodworking industry.

U.S. manufacturers are living in an era where capital is transferred “to the four corners of the world at the push of a button,” especially to countries with cheap labor. American companies need to find new business models that play into the strengths of manufacturing in the United States and its highly developed IT networks, supply chains and work force, he said.

Furniture makers must develop products that are less predictable and less price sensitive, as well as reduce their lead times “from months and weeks to days,” Kleinschmidt said.

“The risk of inaction is much greater than the risk of change,” he said.

Rather than fear low-cost foreign competitors, U.S. furniture makers should take an aggressive pro-active approach, speakers said. They too can take advantage of low-cost foreign labor by outsourcing the production of parts and components to China or other countries, while maintaining assembly in the United States.

Like it or not, said Win Irwin of Grand Rapids-based Irwin Seating Co., intense foreign competition is here to stay and U.S. manufacturers need to respond accordingly. Trade barriers are coming down, the pace of globalization is accelerating, and consumers generally don’t care much about a product’s country of origin, Irwin said.

“It’s a new world that we live in today and we see it every day, but we don’t always think about the consequences,” Irwin said. “I would say embrace globalization, understand how those forces are working on your business, and then act.”

Irwin Seating, for instance, has established operations in several foreign markets — China, Malaysia, Brazil, Spain and Canada — to source parts as well as sell into those markets, Irwin said.    

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