Industry re-sourcing efforts underway as factory shut-downs disrupt Asia supply lines
LAS VEGAS – A lock-down in Vietnam, rising freight costs and another re-shuffling of the global sourcing deck all outweighed the comparatively low traffic in conversation at this week’s Las Vegas Market here. While exhibitors were split on whether traffic was lighter this week or in April, there’s no question the recent COVID-19 spike caused by the Delta variant, coupled with product shortages and backlogs, conspired to depress attendance.
However, that was overshadowed by the announcement on the Friday before market that Vietnam would be enforcing strict lockdowns in key areas of the country, further complicating an already fraught supply situation there. There continue to be sporadic plant closings and various forms of lockdowns or closures throughout Malaysia, Thailand and Indonesia as well, according to furniture resources, with the result that China is getting renewed attention for an industry desperate for product.
“Factory closings are having the most serious impact,” Scott Hill, president of New Classic told Furniture Today at market. “Freight we all have to deal with, but when factories close down you don’t have a lot of options. We’ve revamped our supply chain and have gone back to China and Europe. Fortunately, we have very good relationships with our factories in China, so we’re getting goods. That has been a game changer for us.”
That sentiment and that strategy are finding their way into industry discourse on a more regular basis, as Vietnam’s existing infrastructure challenges coupled with the pandemic have made it increasingly difficult for companies to rely on factories there as a consistent source of supply.
“I don’t think Vietnam is really going to open up in away that approaches normal until the end of the year,” Michael Amini, CEO of AICO, told Furniture Today. “By the time you turn your orders back on and your suppliers begin flowing materials, between manufacturing, shipping and receiving, I don’t think you’ll see the supply situation out of Vietnam return to normal until next summer.”
AICO’s response, according to Amini, has been to return its sourcing efforts to China where the ability to get goods, even at the higher prices that result from imposed tariffs, are preferable to going without goods altogether. “Tariffs on product out of China is going to affect pricing, but having products is better than not having them,” he said.
In the same way that domestic suppliers opted for a so-called “blended strategy,” mixing domestic manufacturing with globally sourced goods, manufacturers in the current environment are attempting to “blend” goods from myriad countries in order to cobble together supply consistency at a time when no one is getting all the goods they need.
“Diversification is paramount, and I believe it will be for some time to come,” said Christian Rohrbach, vice president of merchandising for case goods resource A-America. “It’s time for companies to re-establish supply lines across the globe.”
Companies in Europe that had been deemed too pricey or too logistically challenging are seeing renewed interest with Italy, for example, which is seeing heightened activity in the upholstery business. Poland, which due to logistical challenges had been deemed a little pricey for moving goods, has seen interest rise and freight costs out of Europe remain dramatically lower than those from Asia.
Vietnam has become particularly problematic in recent weeks as the combination of infrastructure challenges and pandemic-related closings has threatened to push product flow back weeks, even months. “The industry is going to see a 30- to 40-day drought on average where it is going to be very hard, if not impossible, to flow goods from Vietnam and that’s starting right now,” said Jim Ziozis, CEO of sister companies Powell and Linon. “Where we are all going to be challenged is how are we going to deal with items and products that have lower price points. There is a real question about what is the future for those products and categories.”
Manufacturers noted that current conditions, considered temporary when they first emerged, have become almost the normal course of business and need to be dealt with accordingly. “This is a full eight months of rising prices and rising costs,” said Ziozis. “We can’t be making decisions like today’s reality is temporary.”
These issues far outweighed traffic concerns at market, which was further mitigated by the fact that those who came to Las Vegas did so to buy. Exhibitors universally noted that this market saw more actual order writing than had become the norm before the pandemic.
I’m Bill McLoughlin, Editor in Chief at Furniture Today and Editorial Director for BridgeTower Media’s Home Furnishings Division. In the more than 25 years I’ve covered retail I’ve seen tremendous changes in the way people shop and the way companies serve the consumer. My goal is to share that experience and the insights gained along the way. This is an industry made great by its people and I look forward to meeting and conversing with as many of you as I can. Your comments are always welcome and encouraged.
