Furniture Logistics Finds its Legs
When a production shift from the Midwest to Asia rearranged the furniture industry, it did some interior design—polishing transport operations, dusting off collaboration efforts, and brushing up on new technology. Was this a competitive strategy that wood work?
For years, furniture carrier Wiseway Transportation Services was sitting pretty, smack in the middle of furniture country in Hickory, N.C., with infrastructure and personnel ready to whisk newly crafted goods to retailers in its Midwest service area.
Then came the late 1990s, when the furniture industry quickly shifted much of its production to Asia, among the last major U.S. manufacturing categories to make the leap.
Fortunately, Wiseway operated a second facility in Ontario, Calif., near the Port of Long Beach, where most of the imported furniture started to arrive.
“The California facility was a stroke of luck, and put us in a position to miss not a beat in growth,” says Marcus Cary, vice president sales and marketing, Wiseway. “We still maintain assets in the Southeast, but don't know if that infrastructure will be necessary down the road.”
Some companies in the segment have tried to convert mothballed furniture factories into import distribution centers, not always successfully.
The neck-snapping swing in production strategies still reverberates through the U.S. furniture industry. Manufacturers have become brand managers and logistics experts, retailers have consolidated and forayed into direct sourcing, more brands have opened retail chains, and Asian factories are looking for direct U.S. business.
As they continue to work their way toward developing the most effective logistics strategies, furniture companies, like any consumer goods industry, are challenged by customer demand for near-instant gratification.
Additional hurdles are the unique challenges inherent in moving furniture: manual handling and packing, the absence of pallets, few items per container, and large and costly container use relative to freight weight.
Finally, there's the industry mantra to consider: fewer handles equal less damage. Furniture logistics strategies must minimize touches on the long route from the Asian factory to a customer's home in the United States.
“As a percentage of goods sold, the logistics spend for furniture companies is huge compared to footwear or apparel,” says Bill Smith, director of supply chain management at Charlotte, N.C.-based Globe Express Services, a 3PL specializing in U.S.-Asian trade.
“Companies can gain huge labor efficiencies by sourcing furniture from China, but logistics is a stumbling block to reducing the cost of goods.”
Talking it Over
All that turmoil has brought the furniture industry's transportation and logistics segment closer together, with members surprisingly open to sharing ideas.
Many meet through the American Home Furnishings Alliance's active transportation and logistics group to tackle issues such as packaging, import/export customs compliance, transportation contracting, information technology, and supply chain management.
“We discuss ideas and strategies; but what works for one company may not work for another, including sharing capacity,” says Barry Bailey, director of transportation and logistics, Bernhardt Transportation LLC, Lenoir, N.C.
The venerable 118-year-old Bernhardt furniture brand formed its own in-house 3PL five years ago to develop logistics expertise. Bernhardt produces its casegoods—the industry term for wooden furniture—100-percent offshore, while still manufacturing upholstery and custom products in the United States.
Transporting furniture from overseas in full containers can reduce distribution costs by up to 20 percent. But only the largest retailers can handle orders of that volume.
“Early on, furniture companies sourcing overseas realized they were managing too much inventory as a result of longer import cycle times,” says Smith. “Some furniture manufacturers offer retailers an incentive to let them bypass the 3PL and deliver right to the retailer's distribution center.”
To help smaller furniture companies, some 3PLs and carriers are introducing consolidation centers in Pacific Rim locations, and retailers are forming buying groups to pool purchases and fill containers.
“Shippers across multiple vendors can deliver to our Asian warehouse. Then we do the order fulfillment from Asia, with mixed loads,” Smith explains. This allows furniture brands to sell to smaller retailers at container-level prices.
Using this strategy, West Coast orders can typically be filled in 10 to 14 days; East Coast orders in 21 to 24 days, says Edward Massood, president and COO of MGM Transport, a furniture transportation and logistics services provider based in High Point, N.C.
Similarly, logistics providers consolidate high-end furniture in Europe. Consolidation centers also help manufacturers cope with the furniture's wide geographic distribution, and manage in-country logistics.
As an alternative strategy, Wiseway is trying to convince its retail customers to warehouse furniture at Midwest, East Coast, and West Coast locations in the United States, so they can turn product in two to three days, and more quickly meet customer demand, says Cary.
Furniture companies are constantly scouting out new transportation strategies for moving goods fast once they reach the United States, while minimizing touches and costs. Increasingly, this means skipping the DC.
Some furniture brands use common truckload and LTL carriers, relying on Rule 181, a packaging performance test, to minimize damage. Others choose specialized furniture carriers that use more exacting, non-automated handling strategies and air-ride trucks. Residential delivery is often trusted to last-mile companies offering “white-glove service” into the customer's home.
MGM is among those service providers building a single-source, national presence to manage furniture logistics from point of manufacture to consumer.
Another is TechTrans, located in Southlake, Texas. The 3PL recently launched Furniture Net, a service that combines the use of multiple furniture-only carriers with white-glove delivery companies.
This collaboration lets customers skip the initial warehouse as well as extra packaging, automated equipment, exclusive vehicles, full truckload carriers, or irregular route trucks that might increase costs, damage, or delivery times.
TechTrans claims a less-than-one-percent damage rate. The service is also designed to speed delivery times and reduce administrative and transportation costs.
ClubFurniture.com, an upscale Internet and catalog retailer in Charlotte, N.C., is trying a new, hybrid approach for its deliveries, all from U.S. manufacturers.
Club uses less-costly “loop” carriers that consolidate orders for multiple deliveries in certain major markets, and Furniture Net for outlying customer destinations, where the loop approach would take too long.
“The costs for each service are different,” notes Darrin King, president of ClubFurniture.com. “We lose money on some destinations but make up for it on others. Our model is based on service, rather than squeezing customers for pennies.”
Quality last-mile service is also a priority for retailers as a way to differentiate with customers.
“Last-mile delivery personnel are critical,” says King. "Because delivery personnel interface with the customer, they must be well-trained; use lift gates, gloves, and shoe covers; and have the ability to forecast and meet delivery windows.
“Furniture carriers now recognize the importance of delivery personnel in their ability to stay competitive.”
Another industry challenge is dealing with returns, which account for as much as 20 percent to 25 percent of sales.
“Designing furniture to move through the supply chain and the home more efficiently, improving packaging, and minimizing touches are all steps toward reducing the costly reverse flow of goods,” says Bill Cummings, executive vice president, home delivery, for 3PDelivery, an Atlanta-based last-mile delivery and logistics solutions provider.
“Returns management really starts with manufacturing/procurement and works through the sales process—for instance, stopping customers from buying 'no-fits' and qualifying buyers up front.”
To address these many challenges, furniture companies are starting to leverage technology, and shift their attention from global sourcing to global logistics.
“Furniture companies in the past have not focused on managing the supply chain and developing logistics strategies,” admits Globe's Smith. “But now that they receive quality product, it's time to focus on how they can better manage logistics and differentiate themselves from competitors.”
Adopting new technology has been slow—bar codes are not pervasive, and only the largest companies use in-house or packaged enterprise resource planning systems.
But even large companies are challenged with shifting data feeds from information-rich internal production systems to the more limited information coming from Asian factories.
Progress in automating the forecasting process has also been slow. “Forecasting is weak at best,” admits MGM's Massood. “Purchase orders are based on forecasts, not real-time data,” spurring inventory holding costs, lost sales, and customer dissatisfaction.
More accurate forecasts are key to embracing DC bypass, but non-retail companies find the IT investment hard to swallow.
“Direct import retailers have solid distribution networks in place, and know what they are promoting—350 bedroom sets, for example. Manufacturers/importers, on the other hand, are looking for someone to buy 350 bedroom sets. Manufacturers can forecast all they want, but they need a buyer,” Massood adds.
“The biggest opportunity for the furniture industry is to first do a better job in demand planning, then tackle inventory management and supply chain optimization,” says Karin Bursa, vice president of marketing for Logility, a logistics IT solutions provider based in Atlanta.
“Furniture companies can't afford not to invest in technology,” she says. “Because the business is changing, they need to be more diligent in the way they plan, and more flexible in changing their distribution networks.”
Using software to model the best scenarios is one approach; managing the introduction of new products—as much as 30 percent to 50 percent of brands' product portfolios—is another technology opportunity, says Bursa.
The industry has made some progress, however. Web tracking and EDI/advance ship notices are becoming more common, and GPS systems help track drivers. Route optimization addresses last-mile deliveries and truck loading. And 3PLs market their technology as a draw for those lacking the capital or expertise to invest themselves.
“The furniture industry is transforming,” says Wayne Chan, managing director, Asian sales, for Wiseway. "Early competitive gains from outsourcing overseas were mitigated as the practice became commonplace.
“Furniture companies that can streamline transportation and effectively manage their supply chains will hold the distinct advantage,” he says.