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Supply Chain: Industry looks beyond Asia for sourcing – HFN

Whom Home has been manufacturing in Mexico since 2010, where the workers at this plant aim to be “the best in the world.”
By Marc Barnes, Special to Furniture Today
HIGH POINT — The pandemic’s back in full force and, with it, continued challenges in importing inventory, especially from Asia. That’s prompting many to take a second — or perhaps a first — look at other countries for sourcing.
Industry observers say that, as it is, 80% of furniture comes from Asia. Most other places, other than Mexico, can’t hit the low end of the Asian price points, but others— including Poland, Brazil, Russia, India, Turkey and Canada — can be competitive for mid-range pricing and supplying smaller retailers.
The smaller countries can offer quality, workmanship, a better supply chain and shorter lead times, but they often have less capacity and higher prices for the products themselves.
Some, such Mike Campbell, president and CEO of Leather Italia USA, have opted to stay the course and not disrupt the manufacturing supply chains that his company already has in place in China. Instead, Campbell moved forward with the initial tariffs and provided clear planning for its retail partners around the world.
He added that he is aware that India, South America and Mexico have begun pursuing retailers in the U.S., but there may be a learning curve.
“In many cases, my professional opinion is that it will in fact take upwards of two to three years for countries to implement process and procedure that allows them to understand our North American market and possibly have success in it,” said Campbell.
Still, many places are lining up to supply American retailers with inventory.
North America
Jonathan Bass, CEO of WhomHome.com, has long been an advocate for North American furniture retailers to source both on-shore and near-shore.  He says that, now, it makes more sense than ever before to look closer in.
Bass has been manufacturing in Mexico since 2010. He says it gives retailers lower costs and better protection for the environment over sourcing in Asia.
The specifics? A 40-foot shipping container from China may cost $20,000 and take as much as 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, the lead time to a U.S. retailer from a Mexican factory is two to four week, and from an environmental perspective, shipping on a 53-foot trailer rather than a 40-foot shipping container means that 25% of the Mexican load is being transported for free.
Besides the business advantage, Bass believes it was the right thing to do on a more personal level.
“I made the decision a long time ago not to benefit from cheap labor, slave labor, in Asia,” he said. “I didn’t think it was the American thing to do to benefit off of slaves. My people work 48 hours a week; they are home at night, and they are in church on Sunday. They have a life. That’s why I left Asia.”
Bass is moving into a new manufacturing facility that will enable him to produce 1,200 upholstered pieces a day. And accordingly, he is searching to find customers who are serious about the business and interested in a long-term relationship.
“The American supply chain has become lazy, and they want the easy path,” said Bass. “China has provided them with the easy path, and they still do not believe they have to get up in the morning and go to work.”
Matt Harrison, president of Kuka Home North America, has seen a shift from Asia to North America first-hand. His company currently has factories in China, Vietnam and Mexico.
A year ago, Kuka Home opened a stationary upholstery factory in Monterrey, Mexico, to address special order business for some of its major customers that were looking for quicker lead times than possible from Asia. Kuka then doubled that factory in size, which was completed in June.
Because of antidumping fees on mattresses made in Asia, the company also opened up a 250,000-square-foot mattress facility to make mattresses for its North American customers. And plans are to begin construction on more factory space in the first quarter of 2022.
“We are currently looking at all possible solutions to increase production due to the greater demand from retailers looking to spread their buying decisions globally, as well as to become a better partner with our customers as far as quicker delivery and service from a North American facility,” said Harrison.
Both the location — and the talented workforce — work well for furniture production.
“We are currently able to ship in four weeks lead time special orders out of this factory to a few customers,” said Harrison. “Mexico seems to be the hotspot that everyone is looking to open a factory, buy an existing factory or build. Mexico seems to be very good at upholstery and especially sewing for upholstered furniture.
“Kuka has learned over the past year that the proximity of Mexico to our major market in the U.S. is crucial to our growth plans,” he added.
South America
In Brazil, Eric Shupack has been running Furnitech, a flatpack and e-commerce channel, since 2004. He’s thousands of miles away from the price fluctuations in Asia, but the worldwide slowdown in shipping has slowed down his offerings coming from Italy. He says, for now, he is concentrating on his core products from Brazil that sell through.
“The pandemic shut everything down before we knew about the variants,” said Shupack. “We had a short window when the vaccines were available and everything was going right, before Delta. Now, every vendor is rushing to factories and saying that you gotta build.
“They are finishing up production now — they’ve got the production done — and there are no cans to put them in because the steamship companies are offline. They are taking advantage of the situation.”
Then, he said, it only got worse. Ports in Vietnam and China began closing because of the spread of the variant.
“We are in for an economic tsunami the likes of which we haven’t seen for a long time,” said Shupack. “I don’t have a problem with whatever life throws my way; when I enter into a problem or a situation, I get an indication of the beginning, the middle and the end. I don’t have any idea of what the end is going to be.”
Central Europe
Michal Blonski is managing director for Transatlantic Trade For All (TATFA), which has been in the business of servicing U.S. and Canadian retailers for more than four years. It acts as a bridge between North American retailers and Central European manufacturers, 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 exporter of furniture, is a great and still undiscovered sourcing opportunity for the U.S. market,” said Blonski. “Four years ago, when we had initial discussions in High Point, many U.S. companies were saying, ‘Why should I look somewhere else, if I am so comfortable with China.’
“Although we have had hard beginnings, we have managed to establish good relationships with a number of U.S, partners, distributors and retailers,” he said.
Furniture factories in Poland specialize in custom-made high-end sofas, sectionals and chairs, as well as mass production of all kinds of case goods and upholstery at lower price points. The furniture is sold at retailers in both Europe and the United States.
Additionally, from a logistics standpoint, the lead times are five to 10 weeks for wholesale orders. The shipping cost has increased, but it is half what can be found on the open market out of Asia to the West Coast, when compared with shipping from Europe to one of the 11 ports on the East Coast.
“We do see an increase in business from both distributors and top end U.S. retailers as the situation for imports out of Southeast Asia is becoming more and more difficult due to the pandemic and changes in shipping costs,” said Blonski.
Southwestern Europe
In Portugal, Joao Mota Pinto, a director at Portuguese Trade and Investment Agency, said that he has worked to introduce Portuguese suppliers to the market in the United States and furniture retailers in the U.S. 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 U.S. market works and to reach out to U.S. retailers on behalf of Portuguese suppliers.
“We have had buyers from different companies, both on the East Coast and the West Coast, who have approached us,” said Pinto. “We are doing this at the right time. We feel that American businessmen are turning the tide a little bit against the Chinese products and that China has become a big economic enemy of the U.S. And they are looking for alternatives to be less dependent on the Chinese.”
Pinto said that he has identified Portuguese factories that can handle one-of-a-kind custom pieces from CAD drawings and samples from American designers, along with those that can handle mass production at lower price points.
“We have a big opportunity to keep increasing exports to the U.S. market and be successful,” said Pinto. “That’s the way we see it.”
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