Craftmaster avoided raw materials tariffs through sourcing hides in Italy that are cut and sewn in Central America.
HIGH POINT — Domestic upholstery manufacturers are turning the one-two punch of China tariffs and COVID-19 and their resulting disruption on product flow into opportunity.
While upholstery imports have risen in the 2000s, they tapered off last year due to China tariffs and flow issues as offshore producers moved to alternative countries with less experience in the category. Ensuing disruption in import flow from COVID-19 re-emphasized domestic producers’ advantages in lead times and customization.
See related story: Upholstery vendors are figuring out how to reach retailers, consumers in an uncertain environment
Furniture Today reached out to several domestic upholstery makers from middle to luxury price points to get their take the opportunities and challenges they face right now.
Omnia Leather CEO Peter Zolferino said the current environment has only strengthened increased demand the past couple of years for domestic upholstery as retail re-opens across the country. Omnia’s bread and butter is custom stationary and motion upholstery delivered in four to seven weeks. Zolferino sees great interest in Omnia’s model, especially among cash-strained retailers.
“We can help them keep inventory levels down,” he said. “With a little investment on the floor, they can sell the customization we offer. They like the quality, customization and timely delivery without having to invest in stocking product.”
In addition, the time involved in imported goods and now increased cost of ocean freight are affecting retailer appetites for domestic product. In March, for example, trans-Pacific container rates were surging, according to Drewry, with Shanghai-Los Angeles costs rising 22% week-to-week. Many carriers remain committed to higher rates through capacity controls.
“The advantage imports had in pricing is not as strong as it used to be,” Zolferino noted.
Leather looking good
Stationary upholstery, particularly leather, is a hot ticket for Lane Home Furnishings right now. Executive Vice President of Sales Jay Quimby pointed out that first tariffs, then COVID-19 had a big impact on availability of such goods out of Asia.
“In the past 24 months, prices for stationary leather out of Asia have increased, and we’ve seen a real opportunity for our domestic leather business,” he said. “Logistics and freight is such a key component, and having production in California, North Carolina and Mississippi has helped our speed to market. The industry hasn’t seen a second quarter with this level of business in at least 10 years, and retailers are trying to bounce with this economy we’re in. These are uncharted waters, and ‘nimble’ is a word we’re using often here.”
Lane started with four leather frames a couple of markets ago, added another four in October and has just introduced another six frames, establishing a good/better/best position in the category. The company sources leather kits from Asia for domestic manufacturing.
“We’ve found our best value proposition is to source globally and manufacture locally,” Quimby said. “With demand right now, we’re just working to fill orders. Our biggest advantage is that our multiple facilities allow us to be nimble.”
“There’s definitely more interest in domestically made goods with disruptions in the supply chain” particularly in leather, said Craftmaster Furniture President and CEO Roy Calcagne. “We’ve seen demand for our domestic leather product grow substantially over the past 12 months.”
Craftmaster feeds its North Carolina plant with hides from Italy that are cut and sewn in Central America, so it avoided the tariff impact on raw materials.
“We’re also able to shorten lead times by stocking leather in the United States,” Calcagne added. “We’re offering 50 leathers at the same price for shipment within 30 to 35 days of order. That includes custom orders in that time frame versus 12 to 14 weeks from Asia.”
High-end happenings
Bruce Macdonald is founder of Bruce Andrews Design, the design firm he established in 2014 specializing in luxury bespoke furniture that’s made in America. That high-end segment is doing well, he said.
“The people who can afford something at that level were still working with interior designers for customized product,” Macdonald said, noting the design segment could function in a social-distancing environment much easier than typical furniture stores.
That said, the limitations keeping people at home has created some product trends at the high end.
“I’m seeing a lot of interest in media rooms with enormous, over-sized sectionals,” Macdonald noted, adding customization remains a key. “We’re offering more control in fabric choices than a limited arrangement available in many stores. They can get the sofa frames made here that fits their particular space needs.”
Highland House President Nathan Copeland also said demand held up pretty well among the company’s higher-end clientele during the COVID-19 retail shutdowns.
“We do so much business with the design trade, and they seem to be ordering at our price segment,” he said. “They’ve been able to work in clients’ homes or remotely. We deal with a lot boutique retailers, as well, and they’ve been open by appointment. Our segment was still writing business.”
Speed to market presents Highland House’s greatest opportunity as a domestic resource.
“The biggest opportunity for us is that when people want a product, they want it quickly, and they want it customized,” said Copeland. “At the high end, you have to set yourself apart; they want something really special. The options for tailoring, the details, the covers are so extensive, and you don’t have the months of time it takes to deliver that from overseas.”
Building on quick ship
Domestic manufacturers’ quick-ship programs are coming to the fore, as well, with cash-tight retailers wanting smaller quantities quickly, or larger orders to replenish stocks that dwindled with a retail boom as stores reopened across the country. In addition to quick-ship, Lane for example, has used its own truck fleet to serve customers while many LTL carriers had to suspend delivery and to avoid delays now while those carriers are crunched.
While most of its business is custom, Craftmaster’s quick-ship program is paying dividends right now. Craftmaster keeps 16 living room groups in stock for its quick-ship program, which has seen huge growth as stores re-opened.
“When we came back to the plant May 4, we saw immediate need for product,” Calcagne said. “We’ve seen our quick-ship volume double from May to June, up 100% over last year. We’re putting more (finished) goods in inventory with the belief that quick-ship program will be valuable to retailers running out of product.”
mnia Leather’s specialty also is special order, but Zolferino said a focused quick-ship program also positions the company for last-minute needs among retailers and consumers.
“We have six styles with married covers that ship within 24 to 48 hours of order,” he said. “It’s the same made-in-America product we always do, but we took those six best-sellers, married them to strong-selling fabrics, and then pre-build them.”
Tackling constraints
Even before COVID-19, upholstery manufacturers, particularly larger players, have faced an ongoing labor crunch for skilled upholsterers and sewers. The current crisis only exacerbated that situation.
“Labor is by far the biggest challenge right now,” said Lane’s Quimby. “We’re trying to recruit 450 people in Mississippi, 250 in North Carolina and 75 in California.
Lane has broadened its recruiting efforts to include print and television advertising, social media and job fairs.
“It’s a slow process, but we’re getting people in,” Quimby said. “A lot of people are graduating and looking for a career, and we’re reaching out to them in the communities where we operate. We’re showing them we’re an established company where they can have a long career.”
He added that Lane is on a roll and needs those workers for what he sees as sustained growth moving forward.
“We had a record year in 2019, and were on track for a record first quarter when the virus hit and now this current demand,” Quimby said, crediting that boom to Lane’s recent emphasis on a whole-home approach and its branding efforts shifting from United Furniture Inds. to the Lane mark. “Our goal is to continue offering a branded product Americans trust, a value proposition with a good/better/best marketing strategy and ease of use for retailers to buy from us.”
At Craftmaster as well, which is back to running overtime in the plant, it all comes down to labor. The company is looking to hire 30 more upholsterers and sewers.
“Alexander County had the second-highest unemployment rate in the state — we furloughed 600 workers ourselves — but that is going back down,” Calcagne said. “If there are companies that are not seeing robust business right now that have laid off people, we’re still looking to hire.”
He noted that some workers are opting out of the market for the time being.
“The concern is that if the stimulus programs extend past July, there are people who might not come back to work and just take their regular unemployment (benefits),” Calcagne said.
Highland House shut down for three weeks during the initial crisis, but just about all its workers came back after that pause. The company avoided a problem among some manufacturers of employees opting for unemployment benefits.
“Most everyone showed back up. We found most people were happy to get back to work,” Copeland said. “We’ve been fortunate to have a backlog that kept us going after than initial furlough when it hit the fan.”
Bruce Andrews Design works mostly with five factories in North Carolina, two for upholstery, but its flexible model helps find other resources when necessary. Projects can be sent where the skill and capacity exist to keep lead times to weeks versus months for luxury goods made overseas.
“I like the uniqueness of specific facilities and what they can do for us depending on the silhouettes and construction,” Macdonald said, adding that the big issue for him is fine-tuning projects for a very discerning clientele. “You have to be hands-on in the factory; I have to go to North Carolina a lot. I’m in control of my brand, but those people in the factory are the ones who make that brand come alive.”
Macdonald was able to keep projects going throughout the COVID-19 shutdowns, pointing to support from domestic fabric suppliers such as J.B. Martin, who had built adequate stocks.
“They were able to ship product ever week,” he said. “They had to shut down the factory but were able to keep a dispatch unit on hand to cut and sew for us.
“Milliken was making masks to keep the fires burning,” he added, “and they supplied us with 99.9% allergen-free fabrics.”
Omnia paid its employees throughout its shutdown for COVID-19, so its 260 workers all came back on the job when production re-opened. That said, labor needs constrain additional expansion.
“We’re looking for probably a dozen new, skilled employees like upholsterers and sewers,” Zolferino said. “We have the biggest backlog we’ve ever had. We’ll open up a partial second shift when we get those new workers.”
The social distance factor
As they reopened production, manufacturers also had to deal with new social-distancing requirements in the workplace, but those don’t appear to be a major constraint.
“In dealing with this COVID-19 issue, keeping our employees safe is paramount,” Quimby said, noting that Lane benefited from its broad manufacturing infrastructure when a couple of instances of the virus impacted production. “Since we have multiple facilities, it allowed us to be nimble with capacity and move the production around to different locations when we had to.”
Craftmaster requires all employees to wear masks in the building and maintain six feet of social distancing, and has closed its food-service facility. Cleaning in the plant takes place two or three times a day. Those measures haven’t had much negative impact on operation, though.
“There was some grumbling at first, especially about wearing masks. It’s uncomfortable, but I believe everyone gets it,” Calcagne said. “This is still going on, and everyone sees we have to take it seriously.”
Managing supply chains
With upholstery manufacturers often sourcing components, fabrics and kits overseas, they’ve had to make some adjustments.
Omnia has always maintained a heavy stock of leathers, so that hasn’t been an issue, but it’s faced other challenges.
“We do have some things from overseas that have gotten held up, particularly metal parts and mechanisms for motion,” Zolferino said. “Even our local suppliers are playing catch up. We feel they’re getting back up to speed and will get it under control.”
On the fabric upholstery side, Craftmaster’s pre-ordering ahead of Chinese New Year paid dividends when mills in China remained closed due to COVID-19.
“Some of the mills didn’t come back to work, but luckily we’d heavily boosted our inventory on fabric,” Calcagne said. “The mills we deal with have U.S. warehouses where we had product consigned. We just brought it to our own facility sooner than later.”
He added that the company had 20% to 25% more fabric inventory than usual when COVID-19 hit. “That’s allowed us to keep building and shipping when things opened up at retail again.”
Components, particularly metal detail elements, have been a challenge at Highland House.
“Even after they re-opened, overseas foundries we use are working at 30% capacity,” Copeland said. “We’ve had to get creative; is there something else that would work as a substitute.”
To help remedy that problem, Highland House is looking toward domestic foundries as well as looking to sister companies in parent company Rock House Farm such as Century, Hickory Chair and Maitland-Smith.
Highland House was sourcing fabric and leather from all over the world, and that pushed out some lead times.
“We’ve moved to some American vendors, and we don’t do much out of China,” Copeland said. “We haven’t had a major issue yet, we’re just praying there isn’t a second wave (of the virus) that disrupts flow again.”
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