- 21 March 2018
- 0 Comment
Despite the uptick in US manufacturing as a whole over the past year, furniture manufacturers face a set of challenges that will make it difficult to compete in the coming years. While some of these obstacles apply to manufacturing in general, furniture manufacturing is especially sensitive to price fluctuations, customer demand, and a stiffly competitive environment.
As with all industry trends, proper planning is key to navigating the competitive landscape. In this post, we’ll cover the top challenges currently facing furniture manufacturers and offer tips on how you can prepare to address them.
1. Skilled Labor Shortage
Positive turns in US manufacturing means you may need to step up your hiring this year. A stronger economy coupled with a weaker US dollar has led to an increase in manufactured exports. As confidence builds, businesses are spending more here on US soil. Not only that, but the tax overhaul bill has lowered corporate tax rates, potentially enabling even more spending by businesses.
Despite these opportunities, furniture manufacturers must first overcome an important hurdle: the skilled labor shortage. In the ASQ 2018 Manufacturing Outlook Survey, the majority of manufacturers (41%) reported that their greatest obstacle for 2018 will be finding skilled workers. As key workers move into retirement, furniture manufacturers may struggle to replace positions on the production floor. If, like many companies, you cut on-site training programs during the economic recession, you won’t be developing these important skills within your existing workforce either.
What You Can Do: Be proactive in your hiring, by sending recruiters to schools or starting on-site training programs for interested employees. Use contract workers to alleviate strain during busy waves, or to fill in the labor gap until you can hire long-term employees. Rely on your integrated ERP system to bridge the knowledge gap between the retiring workforce and the incoming workforce by organizing and recording all of your manufacturing processes, data, and operational notes in one place.
2. Increasing Costs
Furniture manufacturing is facing price hikes due to factors both within the industry and outside of it. The increasing cost of materials may force you into a tight space: either eat the costs, or pass them down the chain to your consumers and risk losing business to your competition. Experts in the furniture industry predict that manufacturers will be more likely to have their own business eat the costs, in order to survive in the competitive environment.
Rising costs may also be the result of changing labor laws. Eighteen states saw a minimum wage increase in 2018, with some pushing beyond the “living wage” of $15 per hour. Workers have more leverage because of the labor shortage, which means you may have to offer more generous wages to win over key talent.
What You Can Do: Leverage an ERP system and other data-capturing technologies for a Design-to-Cost approach to production. This process uses real-time supply chain data (e.g. volume pricing and capacity) to reconcile design choices with cost objectives. This will allow your furniture manufacturing company to keep costs low while creating the products your customers need and want.
3. Fluctuating Customer Demand
Cost increases and potentially rising employee wages are even more difficult to manage a time of fluctuating customer demand. Demand in the furniture industry is heavily dependent on consumer housing trends. Almost 37% of households rented their homes in 2016, marking the highest level of renters since 1965. According to a 2015 Deloitte study, single-person homes are expected to increase over the next 15 years. Furthermore, people are turning to “smaller households,” such as apartments and small houses.
These trends have a huge impact on furniture manufacturing. Apartments and small homes call for less furniture, and rented spaces are often furnished with cheaper and smaller furniture. Renters are less likely to invest in large, high-end furniture pieces. Given the more transient nature of renting, items generally need to be easy to move, or inexpensive enough to be disposable upon moving.
What You Can Do: As a furniture manufacturer, try to view these changes as an opportunity to experiment with your designs and product offerings. If possible, switch your focus to furniture that meets the demands of new customers; or, find ways to offer added services to those customers. Collect and monitor data on customer demand in real time, in order to better predict when demand will change and quickly respond to any changes with evidence-based decisions.
4. Supply Chain Visibility and Efficiency
A recent Lectra survey found that boosting efficiency is the top priority among 22.3% of furniture manufacturers. In order to improve the efficiency of operations, you need a bird’s-eye view of production across your entire supply chain — not only within your own plants.
You should continuously engage with suppliers to understand material availability, and with retailers to gauge customer demand. Within your production plants, capture production data to understand pain points in your manufacturing processes and create better workflows.
What You Can Do: Turn to your ERP system to get better visibility across your entire supply chain and improve efficiency of your ordering, inventory management, and other processes. By tracking all data coming in, through, and out of your plants, an ERP system can help your furniture manufacturing company identify new market opportunities, act fast on demand shifts, and reduce costs.
It’s up to you to address today’s challenges and ensure your furniture manufacturing company is prepared for change. Visit our Furniture Industry page to learn more about how Cre8tive Technology and Design can help you navigate the ever-changing manufacturing landscape with our unique ERP solutions.