Supply chain: industry looks beyond Asia to source
Whom Home has been manufacturing in Mexico since 2010, where the workers at this factory aim to be “the best in the world”.
By Marc Barnes, Furniture Today Special
HIGHLIGHT – The pandemic is back in full force and with it persistent challenges in importing stocks, especially from Asia. This prompts a lot of people to take a second or maybe a first look at other countries for their supplies.
Industry watchers say that, as it is, 80% of furniture comes from Asia. Most of the other places except Mexico can’t reach the low end of Asian prices, but others like Poland, Brazil, Russia, India, Turkey and Canada, can compete for mid-range prices and supply small retailers.
Small countries may offer quality, manufacturing, better supply chain, and shorter delivery times, but they often have less capacity and higher prices for the products themselves.
Some, like Mike Campbell, president and CEO of Leather Italia USA, have chosen to stay the course and not disrupt the manufacturing supply chains his company already has in place in China. Instead, Campbell went ahead with the initial pricing and provided clear planning for its retail partners around the world.
He added that he was aware that India, South America and Mexico had started looking for retailers in the United States, but there could be a learning curve.
“In many cases, my professional opinion is that it will actually take more than two to three years for countries to implement a process and procedure that will enable them to understand our North American market and possibly be successful in it,” Campbell said.
Still, many places are lining up to provide inventory to US retailers.
Jonathan Bass, CEO of WhomHome.com, has long been an advocate for North American furniture retailers to source both on the shore and near the shore. He says that now it makes more sense than ever to take a closer look.
Bass has been manufacturing in Mexico since 2010. He says this allows retailers to reduce costs and better protect the environment compared to sourcing in Asia.
The specificities ? A 40ft sea container from China can cost $ 20,000 and take up to nine months to arrive. A 53-foot truck trailer from Mexico to Los Angeles costs $ 800 to $ 1,100 and is delivered in four to five hours.
Additionally, a US retailer’s lead time from a Mexican factory is two to four weeks, and from an environmental perspective, shipping on a 53ft trailer rather than a container. 40ft shipping means 25% of the Mexican load is shipped for free.
Besides the business advantage, Bass thinks it was the right thing to do on a more personal level.
“I made the decision a long time ago not to benefit from the cheap labor, the slave labor, in Asia,” he said. “I didn’t think it was the American thing to do to take advantage of slaves. My people work 48 hours a week; they are at home at night and they are at church on Sunday. They have a life. That’s why I left Asia.
Bass moves into a new manufacturing facility that will allow it to produce 1,200 upholstered pieces per day. And therefore, he seeks to find serious clients who are interested in a long-term relationship.
“The US supply chain has gotten lazy and they want the easy way out,” Bass said. “China has made it easy for them, and they still don’t believe they have to get up in the morning and go to work.”
Matt Harrison, President of Kuka Home North America, saw firsthand a transition from Asia to North America. His company currently has factories in China, Vietnam and Mexico.
A year ago, Kuka Home opened a stationary upholstery factory in Monterrey, Mexico, to fulfill special orders from some of its major customers who were looking for faster delivery times than possible in Asia. Kuka then doubled the size of this factory, which was completed in June.
Due to anti-dumping charges on mattresses made in Asia, the company also opened a 250,000 square foot mattress manufacturing plant to manufacture mattresses for its North American customers. And it is expected to start construction of more factory space in the first quarter of 2022.
“We are currently exploring all possible solutions to increase production due to increased demand from retailers looking to expand their purchasing decisions globally, as well as to become a better partner with our customers when it comes to a Faster delivery and service from a North American facility. “said Harrison.
The location – and the talented workforce – works well for furniture production.
“We are currently able to ship special orders from this factory to a few customers within four weeks,” said Harrison. “Mexico seems to be the hot spot where everyone is looking to open a factory, buy an existing factory, or build. Mexico appears to be very good at upholstery and especially at sewing for upholstered furniture.
“Kuka has learned over the past year that Mexico’s proximity to our main market in the United States is critical to our growth plans,” he added.
In Brazil, Eric Shupack has run Furnitech, a flat-pack and e-commerce chain, since 2004. He’s thousands of miles away from price swings in Asia, but the global slowdown in shipments has slowed his offerings from Italy. He says that for now, he is focusing on his flagship products from Brazil which are selling well.
“The pandemic stopped everything before we knew the variants,” Shupack said. “We had a short window when vaccines were available and everything was going well, before Delta. Now every supplier rushes to the factories and says you have to build.
“They’re finishing production now – they’re finished production – and there are no boxes to put them in because the steamboat companies are offline. They take advantage of the situation. “
Then, he said, it only got worse. Ports in Vietnam and China have started to close due to the spread of the variant.
“We are in an economic tsunami like we haven’t seen in a long time,” said Shupack. “I don’t have a problem with whatever life has in store for me; when I enter a problem or situation, I get an indication of the beginning, the middle and the end. I have no idea what the end will be.
Michal Blonski is Managing Director of Transatlantic Trade For All (TATFA), which has been providing services to US and Canadian retailers for over four years. It serves as a bridge between North American retailers and manufacturers in Central Europe, including those in Poland, Romania and Slovenia, with on-the-ground execution in factories, new product sourcing and logistics expertise.
“Central Europe, especially Poland with its $ 13 billion industry and second largest furniture exporter, is a great as yet unknown sourcing opportunity for the US market,” said Blonski. “Four years ago, when we had initial talks at High Point, a lot of American companies were saying, ‘Why should I look anywhere else, if I’m so comfortable with China.’
“Although we had a difficult start, we have managed to establish good relationships with a number of US partners, distributors and retailers,” he said.
Furniture factories in Poland specialize in custom-made high-end sofas, modular sofas and chairs, as well as mass production of all kinds of furniture and upholstery at lower prices. The furniture is sold at retailers in Europe and the United States.
In addition, from a logistical point of view, the lead times are 5 to 10 weeks for bulk orders. The cost of shipping has increased, but it is half of what can be found on the free market from Asia to the West Coast, compared to shipping from Europe to any of the 11 ports on the east coast.
“We are seeing an increase in the activities of high-end US distributors and retailers as the import situation from Southeast Asia becomes increasingly difficult due to the pandemic and the changing costs of ‘expedition,’ Blonski said.
South West Europe
In Portugal, Joao Mota Pinto, director of the Portuguese Trade and Investment Agency, said he had made an effort to introduce Portuguese suppliers to the US market and furniture retailers in the US to sources in Portugal.
He said he has organized webinars, trade shows, social media and traditional public relations to explain to Portuguese suppliers how the US market works and to contact US retailers on behalf of Portuguese suppliers.
“We had buyers from different companies, both on the east coast and the west coast, approaching us,” Pinto said. “We are doing it at the right time. We feel that the American businessmen are turning the tide against Chinese products a bit and that China has become a great economic enemy of the United States. And they are looking for alternatives to be less dependent on the Chinese.
Pinto said he has identified factories in Portugal that can handle unique custom parts from CAD drawings and samples from American designers, as well as those that can handle mass production at lower prices.
“We have a great opportunity to continue to increase our exports to the US market and to be successful,” Pinto said. “This is how we see it. “