Office furniture industry continues to improve

October 31, 2011
| By Pete Daly |
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The latest Michael A. Dunlap & Associates Office Furniture Industry Survey of trends indicates the industry and its suppliers are increasing in their optimism, which is now the third quarter in a row reflecting increased optimism.

Michael A. Dunlap & Associates LLC is a business consulting firm in Holland.

The 30th edition of the MADA/OFI Trends Survey, which was completed during October, reports an overall survey index of 56.36, compared to 55.57 in July and 55.38 in April.

"Although this represents a slight increase, it is very modest. The steady index indicates that the industry is still on solid ground and on a positive track," said Dunlap.

The survey focuses on 10 key business activities, with respondents rating each area on a scale of one to 10, with 10 being the highest or best. The business activities are Gross Shipments, Order Backlog/Incoming Orders, Employment Levels, Manufacturing Hours (overtime versus reduced hours), Capital Investment, Tooling Expenditures, New Product Development, Raw Material Costs, Employee Costs and the respondents' Personal Outlook on the industry.

The highest recorded index was 59.72 in July 2005; the lowest was 41.45 in April 2009. The average is 54.36 since the survey started in August 2004.

Dunlap said the unique element of the survey is the establishment of an Industry Index Number to quantify where the industry is currently performing. An index of 100 would mean that the industry couldn't be better, whereas 1 would be as bad as the industry could get.

The October 2011 survey highlights are:

  • Gross Shipments measured 62.50, well above the 30 Survey Average of 57.62, and Order Backlog recorded 59.75, significantly above the 30 Survey Average of 57.78.

  • The Employment Index dipped slightly to 54.32 but is well above the 30 Survey Average of 51.59. Hours Worked also improved, to 58.06, and is also above the 30 Survey Average of 55.62.

  • The Capital Expenditures jumped to 57.75 and Tooling Expenditures were up to 56.49 compared to their 30 Survey Averages of 55.30 and 55.78.

  • New Product Development improved to 61.95 but is below the 30 Survey Average of 63.54.

  • Raw Material Costs improved to 46.67, the best since the 48.33 index in January 2010. The 30 Survey Average is 43.21. Employee Costs also improved to 49.75, its best since the 52.50 index in July 2009. The 30 Survey Average is 46.97.

  • The Personal Outlook Index slipped to 55.87, slightly below the 30 Survey Average of 56.59.

Dunlap said the weaker Gross Sales and Order Backlog index values "are of some concern to me, especially the backlog falling below 60 for the first time in the past three quarters. I am not worried about the very slight dip in the Employment Index because it is bolstered by the Hours Worked value. Both manufacturers and suppliers are hiring on all levels."

Dunlap said he was excited to see the additional improvements in Raw Material Cost and Employee Costs values.

"Although still in the 40's, they are much better than I had anticipated," he said.

"The increases in Capital Expenditures, Tooling Expenditures and New Product Development are encouraging, too. The decrease in Personal Outlook is not alarming, as it is still in positive territory," he added.

The majority of the respondents cite increased energy costs, material costs and increased health care costs as the "largest cost threats to the industry."

Dunlap said 60 percent of the survey responses came from executives whose title is chairman, CEO, COO or president of their organization.

The October MADA/OFI Trends survey was sent to more than 600 individuals involved with office furniture manufacturing and suppliers from Asia, Europe and North and South America. The companies range from more than $1 billion in sales to less than $10 million.

Dunlap began the survey in August 2004.

"I think these strong indicators, beginning with the April 2010 Index and followed by improvements during the past 18 months, demonstrate that we are definitely on the correct track. This industry has come out of this recession more rapidly than was previously predicted, but I think it is led by the health care and education markets" for office furniture.

He said the office building market "trails behind these two. I expect this to continue into 2012 and perhaps into 2013."

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