Economic Development, Lakeshore, and Manufacturing

Office furniture industry on ‘solid ground’

Executives have their most positive outlook since 2006.

February 7, 2014
| By Pete Daly |
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The latest survey of the office furniture industry by Michael A. Dunlap & Associates in Holland indicates it is on a “very steady, but improving, trend line.”

Completed in January, the overall index score was 54.36, which is virtually unchanged compared to the October survey, which was 54.35.

“Actually, this is good news,” said Michael Dunlap. “The overall index continues to remain well above 50 and is definitely in line” with the average of the 39 surveys done since 2004.

The score “indicates that the industry is on solid ground and on a positive track,” said Dunlap.

Dunlap’s survey of executives in the industry looks at 10 key business activities, with respondents rating each area on a scale of one to 10. The 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 each respondent’s personal outlook on the industry.

An index score of 100 is the highest possible; an index of 50 is neutral, reflecting no change. Anything lower than 50 is a negative reflection.

Highlights of the January survey are:

  • Gross shipments measured 52.28, significantly lower than the 39-survey average of 57.35, and order backlog was 54.36, slightly lower than the long-term average of 56.45.
  • The employment index of 52.31 is slightly above the 39-survey average of 51.81 The hours worked index rose to 54.47, slightly below the 39-survey average of 55.27.
  • The capital expenditures rose to 56.58 and tooling expenditures slipped to 55.26. Dunlap said these compare to their 39-survey averages of 55.32 and 55.60, respectively.
  • New product development fell to 61.54, below the long-term average of 63.34.
  • Raw material costs rose slightly to 48.33, which is much better than the long-term average of 44.13. Employee costs dipped to 45.61. The 39-survey average is 46.85.
  • The personal outlook index jumped from 57.38 to 64.62 and is well above the long-term average of 54.31. Dunlap noted that this score was the highest since January 2006.

“The declines in gross sales and order backlog index values are somewhat surprising, as both had improved during the first half of 2013,” he said, “but they are still on solid ground. The same is true for the employment levels and hours worked index values. Both manufacturers and suppliers appear to be equally affected.”

“The modest changes in capital expenditures, tooling expenditures and new product development are mixed when compared to their 39-survey averages. The decline in new product development — although solidly in the 60s — is puzzling,” said Dunlap.

He said raw material cost and employee cost are always a concern among industry executives and rarely show much improvement.

“I am delighted to see the substantial increase of the index in personal outlook,” said Dunlap.

The most frequently cited perceived threats to the industry’s success — since the survey began in 2004 — are health care costs and the cost of materials (steel and wood).

Dunlap said more than 61 percent of the responses came from executives who are the chairman, CEO, COO or president of the company.

“Although five out of 10 index values have improved and five out of 10 declined, eight of them remain above the 50 level. I maintain the opinion that the industry will continue on its slow growth period in early 2014, then see a modest acceleration during mid- to late 2014,” said Dunlap.

The January 2014 MADA/OFI Trends survey was sent to more than 750 individuals involved in office furniture manufacturing and suppliers from Africa, Asia, Australia, Europe, North and South America. The companies range from more than $1 billion in sales to less than $10 million.

The next survey will be in April.

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