By Seth Weisblatt, Director of Home Furnishings, AVB/BrandSource
While many of our furniture retail members are busy with the first quarter “tax time bounce,” there are concerns in our industry about what the second quarter and the rest of 2020 will look like for the furniture supply chain as a result of the coronavirus outbreak in China. Here are some factors you need to be aware of now to plan accordingly for your business.
The Chinese government has delayed factories from reopening after the Lunar New Year. While many factory workers were scheduled to return before Feb. 10, the government has forbidden most from returning to the production lines until at least Feb. 17. Health officials are uncertain whether the virus is contained at this point, and industry experts believe the production delays could be extended if the virus continues to spread.
Wuhan, the province that is at the center of the outbreak, is responsible for nearly 5 percent of China’s GDP, according to Fortune. This will have major rippling effects throughout the supply chain for our industry.
As noted, workers have not been permitted to return to the production lines. Yet China is still a major source for many furniture components for Vietnam, Malaysia and other post-tariff export regions. While the tables and chairs are shipped from Vietnam, much of the glue, nails, wood and knobs and other hardware are imported from China. China is also the source for much of the upholstery textiles found in “Made in U.S.A.” furniture.
There’s another aspect to consider regarding Vietnam — a majority of that country’s factories bring in workers from China, as well as quality control and production managers. With the travel bans in place, Vietnam’s factories are lacking both workers and management to ensure that quality products are being built.
As a result of the shortages in materials and manpower, many factories in Vietnam are standing idle, which could lead to a supply chain crisis. As Rob Halsten, Marketing and Sales VP for Chromcraft Revington Douglas, a BrandSource approved vendor, told FurnitureToday, “If this doesn’t get resolved, it will have an effect on anyone that has goods coming out of that area. Vietnam is so dependent on things coming out of China. It’s all the parts and components. You can’t have finished product if you don’t have access to the components or the parts you are looking for.”
For the meantime, some manufacturers, like Leather Italia USA, have already laid in sufficient inventory to carry them through the quarter. As President/CEO Michael Campbell told FurnitureToday, “[The company] is extremely well-stocked and had actually forecasted in double-digit increase levels of stock inventories prior to Chinese New Year. With the expedited production and physical shipping prior to [Chinese New Year], we have in excess of four months of stocking levels available in our North Carolina and California domestic warehouse facilities.”
Still, the reality is that those of us attending High Point Market will likely see fewer new product introductions because the samples and container shipments will be delayed beyond a reasonable timeframe to make the show.
Hopefully conditions will improve in Asia and the supply chain will recover in time to replenish any depleted domestic inventories. But if the virus continues to spread and affect the ability of factories to reopen, the outlook for the retail supply chain will be tight in the second and third quarters.
All of us in the home furnishings industry need to pay very close attention to the situation, and to be prepared with options!Work with your suppliers to understand their supply chain, forecasts, and predictions of how the virus will affect their flow of goods to your store. Open lines of communication with other manufacturers and be prepared for alternative merchandising plans if necessary.
For Wayfair, those options may include layoffs. According to The Boston Globe, the direct-seller of home furnishings may pink-slip 550 employees, or about 3 percent of its workforce, as a result of tariff-related cost hikes, self-admitted “inefficiency and even waste,” and the virus’s impact on product flow from China.
While much of the situation is beyond our control, it is important to remember a few fundamentals to ride the uncertainty ahead:
- Keep in close communication with your suppliers. Understand their stocking positions and make commitments to inventory today that will help protect you for tomorrow.
- Communicate with your staff and let them know the steps you are taking to avoid any disruption to your supply chain.
- If you are dependent upon imports for your store’s product mix, find alternative suppliers —and quick. You will not be the only retailer calling manufacturers. Get on the call, have the accounts open and be ready to pivot if you need to. The best teams are those who excel at defense so that their offense can be efficient and execute effectively.
- Work with your buying group! BrandSource is committed to your profitability and success. We will soon be publishing our 2020 Furniture Vendor catalog, which will feature a few new brands and programs to review. What do you need help with? Please reach out to me directly at email@example.com and let me know how I can help you and your business.
- Execute! Now is not the time to be uncertain. If you can outmaneuver your competitors you will be in better shape going forward. From the book “Execution: The Discipline of Getting Things Done,” authors Larry Bossidy and Ram Charan describe the core components of an effective strategy built on execution:
- Know your people and your business.
- Insist on realism.
- Set clear goals and priorities.
- Follow through.
- Reward the doers.
- Expand people’s capabilities.
- Know yourself.
Stay tuned for more information as we receive it from our vendors. Also, please plan to attend the Furniture Town Hall meeting at the BrandSource Summit, March 10 at 7:30 a.m. in Palazzo Ballroom O. We will cover this and other topics to help you and your business succeed, as we work on the vision for 2020 and beyond.
AVB/BrandSource is a unit of YSN publisher AVB Inc.