Polishing the Furniture Supply Chain
Faced with mounting logistics challenges, U.S. furniture manufacturers let specialized carriers and white-glove delivery experts handle the heavy lifting.
It’s a tough time for U.S. furniture brands. New consumer attitudes toward furniture and delivery, complex economic and trade conditions, and mounting transportation regulations are complicating manufacturing, sourcing, and supply chain decisions. Sales channels have multiplied to include dealers, big box stores, interior designers, trade showrooms, e-tailers, and corporate stores—each with its own requirements.
With these factors challenging the creativity and resourcefulness of all players in the furniture supply chain, logistics managers from several U.S. furniture manufacturers have banded together with carrier representatives to form the Shipper-Carrier Task Force, part of the American Home Furnishings Alliance‘s (AHFA) Transportation and Logistics Division. The group is working to tackle furniture supply chain challenges.
Although 50 specialized furniture carriers once operated in the United States, today only about 10 serve the industry. U.S. furniture manufacturers are understandably concerned about the remaining carriers’ success. "We’ve got to keep them solvent, keep them in business, and make sure they’re not their own worst enemies," says Barry Bailey, director of transportation and logistics for Lenoir, N.C.-based Bernhardt Transportation LLC, the logistics division of the Bernhardt fine furnishings brand, and co-chair of the task force. "Working together with carriers, there’s no problem we can’t solve."
Furniture Logistics 101
While furniture brands experiment with new sourcing and supply chain approaches, some aspects of furniture logistics are fundamental:
- Furniture ships best with furniture; other commodities tend to damage it.
- Forklifts and other equipment damage furniture, so it needs manual handling.
- Furniture loads are built strategically, creating interlocking sections to enhance stability and accommodate multiple stops.
- As a natural product, wood furniture has inherent flaws. Extended supply chains boost the risk of damage, so furniture must be touched up before it is delivered to the consumer—a process called deluxing.
To meet these needs, many furniture brands rely on the few remaining specialized furniture carriers, as well as a growing array of white-glove delivery companies specializing in last-mile handling. After massive carrier consolidation, some family-owned carriers are re-emerging to serve regional or niche markets. A few drayage companies focus on moving hardwoods to ports, and furniture outbound to customers.
Shifting Consumer Trends
Meanwhile, consumer regard for furniture is changing. The days of saving up to invest in heirloom-quality goods to pass down through the generations are fading. Home design television shows stir consumer desire to redo rooms as a form of self-renewal, and shoppers don’t want to invest in a piece they will likely replace in a few years.
Many in the business never thought they would see the day when furniture—a highly aesthetic, tactile product—would be purchased online. Internet furniture sales have not only bankrupted many brick-and-mortar stores, but changed the way consumers buy: more small, one-piece orders versus whole rooms. Online shopping has also resulted in more returns, because color and quality are hard to assess on a screen.
E-commerce has trained consumers to expect fast delivery. "The furniture industry has been Amazoned to death," says David Purvis, vice president of manufacturing and operations at AHFA. Instead of 10- to 21-day delivery times for casegoods—the industry term for furniture made from hard materials—consumers expect next-day or two-day delivery.
"We’ve been pushed to increase the flow into the supply chain and ramp up inventory so Bernhardt dealers can satisfy customers with estimated shipping dates before they leave the store and look at other furniture," says Bailey. The company aims to fulfill increasingly popular custom upholstery orders in four weeks, allotting three weeks to build and one week to ship via its own fleet to dealers who handle last-mile delivery.
The economic recession has also affected the furniture industry. Household budgets are stretched thin, and buyers need incentives to move forward, hitting margins hard. "The economy exacerbated problems and pointed out inefficiencies," says Alvin Daughtridge, vice president at Lenoir, N.C.-based Fairfield Chair, which makes upholstered seating for the home, office, and hospitality industries. "We have to operate differently than before."
Businesses have also been skittish about furniture purchases, building pent-up demand, then suddenly pulling the trigger on large orders. That means furniture suppliers have to develop production and supply chains to accommodate that volatility, as well as the economic and regulatory changes that impact sourcing and sales strategies.
Furniture supply chain managers and specialized furniture carriers are working to adapt to these challenges. With fewer brick-and-mortar retailers to serve, some carriers that traditionally moved goods from production to retailer are focusing on getting imported goods to white-glove delivery companies, or dropping long-haul service to focus on last-mile delivery. Long-haul carriers are speeding cycle times by using two-driver teams, second-shift unloading, and more frequent shipments.
Some brands have tried shifting shipments to commodity less-than-truckload (LTL) carriers, which are often faster and less expensive than other options. But that strategy has generally succeeded only with low-end product, often shipped in flat packs.
Divide and Conquer
Manna Distribution Services, a carrier based in Mendota Heights, Minn., has crafted three separate logistics brands to accommodate furniture logistics trends: a specialty furniture carrier with seven- to 10-day transit times, a commodity-focused business with two- to five-day delivery, and a white-glove service.
For the commodity business, which serves many e-tailers, the ability to rapidly schedule delivery is critical. "If you get customers scheduled quickly, they are less likely to cancel," says Adam Beck, sales manager for Manna.
Increasing expectations have driven specialized furniture carriers to invest in technology. "We’ve grown more sophisticated in the past few years," says Ray Kuntz, CEO of Sayreville, N.J.-based Watkins & Shepard Trucking, a specialized home furnishings and flooring products carrier. The company uses bar codes to track every piece of furniture and record the identity of its handlers, and relies on cameras built into mobile devices to document damages.
Other manufacturers and carriers use technologies such as GPS, advanced routing systems, and warehouse management systems. Fairfield Chair, for example, is seeking to further automate its billing processes to provide carriers with more detailed and accurate information; standard EDI transactions can only go so far due to the uniqueness of furniture products.
Data mining and business intelligence are keys to unlocking additional cost-saving opportunities for Huntingburg, Ind.-based OSF Brands, which produces commercial furniture. The company operates an in-house logistics service, Styline Logistics, which also serves other furniture companies.
"We know more about our cost structure than we ever have," says Ryan Menke, senior vice president, supply chain, at OSF. "Business intelligence helps us wring out inefficiency and waste, as well as plan growth to offset costs."
After long haul, the next phase of the delivery process is getting furniture into the home. White-glove delivery services are resurging because e-commerce companies "will no longer sacrifice quality for cost," says Pat Cory, managing partner at Seacaucus, N.J.-based Cory 1st Choice Home Delivery, which offers home delivery of fine furnishings, appliances, and consumer electronics. "There is no cheap way to deliver furniture on time and damage-free."
"The home delivery segment is the toughest part of furniture logistics," says Davy Whittington, vice president of logistics, compliance, safety, and environment for Clayton, Mo.-based Furniture Brands International, which designs, manufactures, sources, and retails home furnishings through brands such as Thomasville, Broyhill, and Drexel Heritage.
"Maintaining accurate scheduling is particularly critical in the cabinet business, because contractors plan jobs around deliveries, and need to get customers back into functional kitchens ," says Tom Bolden, director of logistics for Taylor, Mich.-based cabinet manufacturer Masco Cabinetry, which markets brands such as KraftMaid, Merillat, Quality, and Denova.
Consumers are also increasingly vigilant, particularly for high-end purchases such as cabinets. "Consumers are less tolerant of damage," says Roy Szymkowicz, senior vice president at Concord, N.C.-based Cardinal Logistics Management. "Prior to the recession, they were more understanding."
While white-glove resurges, driver shortages are taking a toll. "It takes a special person to drive, lift product, and install and assemble products—while also being personable, dependable, and accountable," says Whittington.
"It’s getting more difficult to replace drivers," says Szymkowicz. Cardinal is coping with the driver shortage by offering bonuses, using incentives and penalties, and making driver recruitment and retention a focus. Site managers spend 25 to 50 percent of their time recruiting , and the company treats drivers well.
Things are no easier on the other end of the supply chain. Furniture manufacturing has long chased low wages: first from the Northeast United States to the South, then to China, then to other low-cost locales. This was particularly true for casegoods.
But those shifts had implications: longer transit times and more hand-offs, resulting in the need for improved packaging; and high humidity levels in locations such as Vietnam, requiring short storage times or humidity-controlled facilities.
Free trade agreements, as well as overseas sales of U.S. furniture, are also shaping decisions about sourcing. OSF Brands, for example, uses postponement strategies to navigate duty taxes and fees in global markets. But swings in consumer preferences, such as commercial customers who suddenly embrace laminates instead of veneers, force rapid retooling of its supply chain.
As a result, furniture brands must frequently revisit sourcing strategies, with logistics a key consideration. "Furniture logistics is a fluid process requiring constant analysis of both demand and cost," says Daughtridge. "Those costs shift, particularly as fuel prices fluctuate."
With ocean container rates no longer predictable past three months out, making smart sourcing decisions is becoming an even greater challenge.
Risk mitigation is another concern. After experiencing port strikes and other disruptions, "We constantly monitor lanes we use to insulate ourselves," says OSF Brands’ Menke.
Thirty percent of the company’s Slovenian suppliers, and 100 percent of its Brazilian suppliers, went under in 2012. "We try to back up critical import components with domestic suppliers," Menke says.
Some furniture companies are returning select aspects of manufacturing to the United States, taking a hybrid or "white wood" approach by bringing in frames or unassembled pieces. While some production never left the United States, what remains, or is returning, is often the final steps: customizing upholstery, finish, trim, welts, and fringe to order.
Postponement has enabled Furniture Brands to cut eight weeks out of its production process, winnowing turnaround to just 21 days for an upholstered chair, for example. Unassembled pieces pack a container more densely than fully constructed furniture, helping ease furniture’s notoriously high logistics cost-per-unit rates.
U.S.-made furniture has actually become a status symbol in locations such as the Middle East, Thailand, Australia, and China. That has made exports a fast-growing area for brands such as OSF.
The United States also remains a rich source of raw materials such as hardwoods, often from the very North Carolina region that once transformed them into furniture. Now those hardwoods may travel across the ocean to become furniture that crosses back through their point of origin on the way to U.S. customers.
While brands and specialized furniture carriers focus on maximizing speed and service quality while containing costs, retailers and consignees have a role to play as well.
For retailers, one strategy is consolidating shipments from multiple manufacturers to a few carriers. That increases the revenue per drop, a key metric for specialized furniture carriers whose routes typically call for multiple deliveries per day. The cost of those stops—which may mean driving 100 miles out of the way for one item—is the reason carriers must charge minimums, to customers’ displeasure.
Kuntz urges consignees to take a more active role in shipping decisions. "They often tell the manufacturer to ship the ‘best way,’ but the manufacturer and the consignee don’t have the same best interests," he notes. "The dealer needs to take more control."
Paying for the Speed They Need
Retailers and e-tailers should consider offering options to help recoup the expense of expedited shipping. "Many furniture retailers have not realized customers will pay for premium delivery, such as Sunday or next-day," Cory says. Flexible pricing lets customers choose the speed they need.
With years of economic turmoil behind them, many furniture companies are cautiously optimistic about the future. Increasing consumer confidence is key to triggering big-ticket purchases such as furniture, and many in the furniture supply chain have spent the slow times becoming more efficient. It may be time for their efforts to pay off.
Narrowing a Shrinking Workforce
With driver shortages already impacting specialized furniture carriers, many in the industry feel the Federal Motor Carrier Safety Administration’s Compliance, Safety, Accountability (CSA) ratings and revised Hours-of- Service regulations will make a rare breed of driver even harder to find.
“CSA is the tip of the iceberg,” says Steve Wolfe, vice president of global supply chain and logistics for Stanley Furniture Company, which makes premium wood furniture for the residential market. “The safety scores, penalties, and limits on driving hours will cut pay for drivers and raise rates for consumers.”
“CSA will change our marketplace,” agrees Gary L. Winstead, president of Wilmington, N.C.-based LoadMatch Logistics Inc., which provides drayage services and intermodal transportation matching that helps get native hardwoods to overseas producers. Winstead anticipates the capacity squeeze resulting from fewer qualified drivers will ultimately show up in rate base increases.
Carriers are seeking ways to minimize the impact, such as using intermodal for delivery to hubs to avoid overnight trips. LoadMatch strategically locates drivers near customers so they can pull a container during the day, drive at night, and deliver to early-morning appointments.
“Carriers are getting creative to maximize driver hours,” says Wolfe. “It takes out-of-the-box thinking. But the Hours-of-Service rules will still result in increased consumer goods costs.”
Not everyone is feeling negative, however. “We hope the regulations keep getting tighter,” says Roy Szymkowicz, senior vice president at Cardinal Logistics Management. “Carriers that play by the rules love it when others that operate on the fringes cannot operate any longer. We’re huge fans of every safety initiative.”
Packing Them In
Fine furniture arrives in homes carefully wrapped in blankets. But that happens during deluxing, just before in-home delivery. Before that, the furniture is often placed in cartons.
In the early days of outsourcing production overseas, packaging was often inadequate for long supply chains. Most agree it’s better now. Guidelines called Rule 181 were created to help, and companies that have focused on packaging have experienced fewer returns and allowances.
But some say there is still room for improvement. “Packaging in the furniture industry has always been somewhat weak,” says David Purvis, vice president of manufacturing and operations at the American Home Furnishings Alliance.
One challenge in carrying goods for e-tailers shipping via less-than-truckload (LTL) is that packaging quality can vary daily, even for the same SKU from the same supplier. Some carriers, finding Rule 181 insufficient, devise their own packaging requirements. But part of the savings of moving furniture by LTL versus specialized furniture carriers can be eaten up in extra packaging costs.
E-commerce shipping direct to consumers may mean an item packaged in Asia doesn’t get unpackaged until it’s in the customer’s dining room. As a result, “packaging has to improve, and manufacturers need to pay more attention to detail as furniture goes into the carton,” says Purvis.
Ironically, notes Pat Cory of Cory 1st Choice Home Delivery, consumers are beginning to perceive blanket-wrapped furniture as a negative rather than a sign of quality and care, thinking that they’re getting a damaged piece because it wasn’t packaged in a factory carton.
Stanley Takes Back Control of Delivery
As the number of brick-and-mortar retail stores drops, furniture manufacturers are delivering less product to DCs and more direct to homes. That means they have more involvement with the customer delivery experience, which reflects on their brand, rather than the retailer’s.
Furniture buyers bring high expectations to that experience, but can also create challenges. “Consumers don’t always give all the necessary information when arranging the delivery,” says Steve Wolfe, vice president of global supply chain and logistics for Stanleytown, Va.-based Stanley Furniture Company. “They may neglect to mention the home has three flights of stairs, or that the building superintendent is only on site from 2 to 4 p.m. Home delivery can contain a lot of surprises.”
Instead of contracting separately with one specialized furniture carrier for line haul and another for last mile, Stanley tried a new approach to speed deliveries: assigning responsibility for the last mile to a delivery agent. The cost was about the same, and the speed improved. But customer satisfaction declined.
“The issue was, we had no control over the delivery agent,” Wolfe recalls. “We didn’t necessarily know who the white-glove delivery agent used, and we couldn’t talk to them.” They didn’t always know the best way to assemble the piece, and some even uncartoned the furniture at the customer’s home, rather than deluxing and blanket-wrapping it prior to delivery.
So Stanley went back to the previous model, in which the company contracts with white-glove services directly. “That model extends delivery time, but it’s much cleaner, with less angst,” says Wolfe. “We saw a measurable increase in customer satisfaction.”