HIGH POINT — From dealing with near-unprecedented retail demand since May to adjusting to new production environments impacted by social distancing to new levels of customer communication, upholstery vendors are simultaneously coping with fallout from COVID-19 and setting themselves up for doing business in an economy that remains uncertain moving ahead.
One thing is certain. For now, the ability to deliver goods as quickly as possible trumps price. And while the question remains whether current high demand will continue, most upholstery resources continue to emphasize the importance of strong inventory positions moving into the fourth quarter.
Despite uncertainty about how demand will play out, New Classic Home Furnishings, for example, is doubling down on containers both for direct service and for goods to stock its stateside warehousing.
Senior Vice President of Sales Scott Hill said the company has record numbers of cans on order and on the water in preparation for business in the year’s final three months. The company was gauging COVID-19’s longer term impact before the virus hit U.S. shores, and while it continued orders from its upholstery partners in Vietnam and Asia, the company “pulled in the reins a bit,” Hill said. That’s not happening now.
“We’d thought it might be August or September before retail opened back up, but May and June were phenomenal,” Hill said, adding that plant shutdowns in Asia earlier in the year created production gaps ranging from two to four weeks. A strong inventory position helped New Classic get through that gap, which was exacerbated by tight space on ships from Asia.
“We were in a good position with inventory in multiple U.S. warehouses, but those were getting drained,” Hill continued. “Fortunately we have multiple containers flowing to replenish. Thank goodness we were important enough to those motion manufacturers overseas. We told them we needed to ramp production back up, and they did.
“Right now, we’re working on September, October, December, and telling retailers the need to line up orders for then.”
Leather stationary and motion upholstery importer Leather Italia USA has beefed up its internal systems to improve operations with the addition of new software and the institution of efficiency measurements in all areas of workload contribution.
“We’ve identified areas for more clarity and efficiency from the time product is unloaded and put into our warehouse’s stock lines,” said CEO Michael Campbell. “We have a completely new labeling system and have advanced all our bar-coding and scanning systems.”
That’s led to more timely in-stock reports that feed into retailers’ own systems for greater clarity and visibility of what’s available right now. Leather Italia also reviewed every step in the process from receipt of merchandise in the warehouse to shipments of customer orders.
“We inspected our order entry and how that flows into the data base that feeds our customer-service system,” Campbell said. The analysis included all internal departments for order entry, customer service, parts and warehousing.
“From the time we touch a piece when the item is unloaded, we measured and reviewed every step to when it leaves on a truck F.O.B. to the customer. There’s been a two- to three-day improvement in shipment, without question.”
Campbell said Leather Italia had been shipping orders within five days of receipt, and they’re now leaving within two or three days.
Staying the course
To an extent, some resources have confidence in their existing business model to react to a changing environment and largely stay the course, albeit with some tweaking.
Furniture of America, for example, is standing pat in terms of upholstery product and operations as its business was “reasonably good” through March and April considering the pandemic’s immediate impact on brick-and-mortar retail.
“No one can read a crystal ball, and we had a significant amount of new product coming into all this that hasn’t really gotten a chance at retail,” said Senior Vice President of Sales Michael Genrich. “We had new goods at Las Vegas and a lot lined up for April, and we’re doing a virtual walk-through for that on our website.
“Our business is not suffering unduly,” he continued, crediting strong e-commerce sales during retail shutdowns and release of pent-up demand in May.
Elran U.S. Sale Manager Jesse Lubin likes Elran’s position as a North American manufacturer of custom motion furniture. Lubin, who also manages R&D and marketing, said that model is a good fit for retailers looking to minimize their inventory stake when so much is unknown about near- and long-term business prospects.
“We’re confident looking ahead, since we offer less stress for the retailer,” he said, adding that a major emphasis right now is more analysis on what sells to better anticipate supply needs and ongoing education for sales staff on selling processes.
“We are spending more time having our experienced staff communicate any situation to our customers so there are no surprises. We know that each sale is important, and that is why we always have someone on hand to speak to on the phone or by e-mail.”
Since the start of COVID-19, Elran has been in constant communications with suppliers. Elran relies on Canadian wood and Italian leathers for its line, which has helped the company avoid China tariffs on one hand and COVID-19-related delays in Asia on the other.
Still, the company is hedging on the safe side when it comes to ordering raw materials and mechanisms to avoid impact from delays out of its control. “If we think we need 100,000 mechanisms, we’re ordering half that again to make sure we aren’t short when demand peaks,” Lubin said.
In addition to being a domestic manufacturer producing product in proximity to its market, Best Home Furnishings’ heavy domestic sourcing of manufacturing inputs is paying off particularly well these days. The company has no intention of changing that moving ahead.
“Since the start of the Chinese tariffs and then on to the COVID-19 pandemic, Best Home Furnishings has not had to make any adjustments or re-orient our strategy to adjust,” said Senior Marketing Strategist Eric Vollmer. “Best is and has been very well-positioned to take advantage of the current environment.”
He noted that Best has always emphasized sourcing domestically as many parts and materials as possible, especially essential components.
“Our special order, quick-ship philosophy has demanded that we seek out local sourcing for our products to be produced domestically,” Vollmer said. “We carry high inventories of these parts, so we can build each item specifically for a customer and get it out the door within five working days.”
That allows dealers, many of whom faced a cash crunch coming out of their shutdowns, to flow goods rapidly without carrying inventories themselves.
“As stores began to reopen over the past several months, not only were they demanding a replenishment of goods, but they needed to meet the demands of customers coming to them,” Vollmer said. “We anticipated this demand and have been running at full capacity for quite some time.”
Dealing with new realities
Southern Motion Executive Vice President G Lipscomb believes the full impact of COVID-19 won’t be known for years. For now, a huge demand as retail opens back up has made honest communication with customers more important than ever before.
“Our lead times right now are double what they’ve ever been in our company’s history because of the incredible amount of orders we’re seeing,” he said, adding he knows that Southern is not alone in that regard.
“All you can do is to be as truthful with retailers as you can so they can plan accordingly. You have to be an open book, tell the truth and let the cards fall where they may.”
Labor continues to be an issue for manufacturers. Southern Motion has instituted attendance and referral bonuses to help mollify the need for skilled workers and attract as much labor as possible. It doesn’t help that many people in various industries are electing to collect unemployment.
“If the government keeps extending these benefit packages, it will make it easier for people to stay home instead of work,” Lipscomb said.
Southern Motion and others also deal with social distancing and other safety measures such as taking temperatures and extensive cleaning that cut into the day, but safety demands such measures today.
“Safety is No. 1, and we have put in place a rapid-response team, so that if we had an area where we have a case, it’s dealt with immediately,” Lipscomb said, crediting Environmental Health and Safety Manager Rafael Terry for that effort. “He’s done an amazing job setting up safety protocols.
“We’ve never had anything like this before,” he added. “As a manager, I’m so proud of the creativeness, the ingenuity people have shown. Wearing masks, taking temperatures, social distancing, everyone here has been amazing about cooperating with it all.”
Lemonade from lemons
Companies that used the March-April slowdown at brick-and-mortar to examine their operational practices had an advantage when business resumed. Leather Italia’s soup-to-nuts revision of its order-to-shipment flows is an example.
“The world ‘stopped’ for a while, so we had the time to examine our processes with a fine-toothed comb,” Leather Italia’s Campbell said. “You can’t really do that when everything’s running at full speed.”
Leather Italia also prepared and executed actions with a focus on maintaining domestic stocking levels and ensuring adequate supplies flowing into its five Chinese source plants.
“We didn’t waver from our ordering to support fourth-quarter business when the virus hit,” said Campbell. “We went ahead and pre-purchased Q4 raw materials in addition to holding true to our production forecasts for the period. That’s been a real life saver because business has been brisk.”
Campbell also worked hard with Leather Italia’s factoring group to protect every retail partner’s credit-worthiness when brick-and-mortar retail hit a wall in March. He believes that this action continues to support the company’s customers in their efforts to continue purchasing product for successful uninterrupted flow of goods.
Furniture of America’s broad sourcing structure is paying off. The company currently sources around 50% of its upholstery in Asia — mostly out of China and Vietnam — 30% to 35% in the United States and 15% to 20% in Mexico. Genrich sees those last two coming on strong.
“Our U.S. products that we design and build in about 20 factories across the country is selling very well, mostly truckloads for majors,” Genrich said. “We’re tweaking our supply chain, though. We’re making time to look around for other potential options.”
Internally, FOA is taking a look at sales plans and buying trends to identify the best sourcing options.
“We’ve been able to spend time on product and merchandising analysis, and the best places to put those goods for manufacturing,” Genrich said, as well as how to approach customers with new goods.
“It’s a new game on how you reach customers,” he said, noting that FOA is set to release a new catalog at the end of August. “We’re giving all this new product retailers haven’t seen a good shot. We have 10,000 items in the line, so there’s a lot to look at.”
In talking with retailers, Lipscomb at Southern Motion said delivery trumps price these days.
“I’ve got retailers I haven’t heard from in years seeing if they can get product,” Lipscomb said. “No one is asking about prices.”
He added that Southern Motion’s supply partners have been a constant in helping the company cope with demand. “Our suppliers have been phenomenal partners throughout this entire ordeal,” Lipscomb said.
New Classic is examining how its customers are ordering and increasing its retailers’ buying options. New Classic’s strategic business mix is around 60% container direct and 40% out of U.S. warehouses. While that remains the long-term model, Hill said the company is adjusting to current and anticipated needs.
After retailers slowed container orders and business picked back up in May, New Classic’s ratio for May through June flipped to 70% warehouse and 30% containers. The company wants to be ready to maintain rapid service from stateside inventories.
“It’s a little of a gamble since no one is sure what will happen, but we’re also ordering for the warehouses,” Hill said. “Even if there’s a slowdown, those who have inventory when it breaks will win, and we will have inventory.”
Looking ahead without a crystal ball, upholstery resources are playing to strengths where they can and adapting their model to respond to change.
“It’s not like we have some ‘magic bean’ to tell the future,” FOA’s Genrich said. “Our answer is to maintain the status quo but keep it sharp. I think we’ve learned to be more productive having to work with fewer staff. We know now we can do more with a little less.”