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Closer to the Market

3/25/2014 4:00:00 PM
Article by John Howell

Over the past two decades, the United States has lost over 6 million manufacturing jobs to overseas competition. The reasons given have been based on economic considerations such as labor costs, regulations, government incentives, etc.

In 2010, Harry Moser founded the Reshoring Initiative, an industry led effort to bring manufacturing jobs back to the United States The idea is to show companies that if they consider all the costs involved in off-shore manufacturing, they will often see that it now makes more sense to bring this manufacturing back home. This is based on analyzing all costs and can be calculated from the “Total Cost of Ownership Estimator” found on the Reshoring Initiative website.

As it applies to woodworking, by far the most significant loss of manufacturing has been in wood household furniture. It was in deep decline even before the recession hit. Although there has been talk about reshoring in the furniture industry, little has actually happened compared to what has been lost.

I believe there’s more to it than just the basic costs. Most often, market share is lost because the established leaders in the marketplace have given others the opportunity to take a significant share of the market away from them. In the furniture industry, I believe the opportunity was based on production of low quality products along with a lack of customer service. The primary basis for competition then became price points, and cutting costs became the key to survival.

Interestingly, foreign manufacturers of furniture have started the process of opening manufacturing facilities here in the United States. IKEA opened a plant in Virginia in 2008 and now furniture manufacturers from Vietnam and China are planning facilities in Arkansas and Virginia!

This should give us pause to think. How is it that foreign companies can now come into this country to produce and sell furniture profitably and American companies can’t seem to do it? What are we doing wrong?

Maybe we don’t think it’s worth the investment any longer. The profit margins in furniture manufacture have never been great, so many manufacturers didn’t modernize in the last few decades. Apparently, it was more cost effective to just import product. That attitude seems to still prevail today. As a result, available capital goes to other industries where there’s promise of a better return on investment.

I think we need to take another look. Opportunity exists for profitable furniture manufacture in the USA, if it’s done right. Otherwise, why would foreign companies build manufacturing facilities here?

Some good reasons to produce furniture in the USA today are as follows:

·      The cost of labor is rising and expected to continue to rise in China and other countries from which we import a substantial amount of our furniture.

·      Shipping costs are rising significantly, so transporting heavy and bulky items like furniture is more expensive.

·      Recent currency exchange rates are more uncertain and are tending to favor onshore manufacturing.

·      Supplies of high quality hardwoods are readily available in the United States. In fact, we’ve been exporting hardwoods and importing finished products made from them. It’s as if we’ve been playing the traditional role of the third world country.

·      Lead times for customized products are becoming more important. Being closer to the customer allows us to meet this demand more effectively.

·      Quality and customer service problems with imported furniture are becoming well known to retailers and consumers alike. Responding to these issues locally, we have a great opportunity to do better.

We have a history of producing some of the finest furniture the world has ever seen. Although furniture produced here in the 18th century may not have been as ornate as that produced in Europe, the quality was unsurpassed. We understood proportion, balance, graceful contours, and how to enhance the beauty of our abundant woods to their fullest potential. How can it be that we would have trouble competing on building furniture profitably here on our own soil today?

We do need to make a fresh start in many respects. We can’t just continue producing the same mediocre commodity products that we’ve been producing recently. We need to invest in modern technology so that we can be competitive on price but more importantly we need to invest in skilled woodworkers who have the ability to design high quality furniture and produce it efficiently.

We certainly don’t have a history of being second rate when it comes to innovation. If a foreign company can find ways to produce and sell furniture here, there’s no reason we can’t do the same if we have a mind to do it. Our innovation needs to include marketing, design, manufacturing, distribution, and customer service. You know, the kind of things that helped build our country in the first place.

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