- 19 April 2017
Furniture manufacturers today find themselves in a precarious position, due to the volatility of their raw materials. On one hand, the industry grew by 3.3% in 2017 and is expected to put up similarly impressive numbers in 2018. On the other hand, high shipping costs and escalating trade wars have thrown supply chains into turmoil and made materials expensive to acquire.
This isn’t the first time economic and political factors have dramatically shaken up supply chains and taken a toll on the industry.
In a 2012 survey, 51% of midsized manufacturers ranked the cost of raw materials as their top concern. A spike in material prices challenged the furniture industry in 2010, a similar spike is challenging manufacturers in 2018, and this won’t be the last time it occurs.
When economic factors impact supply chains so drastically, furniture manufacturers often face a tough choice:
- Rely on cheaper and more readily available materials to satisfy orders, even if it means sacrificing quality.
- Or, insist on high-quality materials even if means passing costs on to the consumer or letting orders go unfulfilled.
The good news is that furniture manufacturers don’t have to accept uncertainty about their supply chains, even though you can’t control the fluctuating market factors. With an advanced ERP system designed for furniture manufacturers, you can track when materials will arrive, how much they cost, and even use predictive analytics to forecast changes in price and availability.
ERP enables you to adopt a proactive position and successfully work to adapt to supply chain volatility to keep your business competitive. Here’s how:
Monitor Your Entire Supply Chain
Furniture manufacturers are wholly dependent on their supply chain, but tracking something so vast and complex is challenging. ERP provides 360-degree supply chain visibility, so you can monitor all aspects of your supply. With real-time data about shippers, receivers, schedule delays, and availability, you can anticipate problems sooner and resolve them faster. ERP helps to eliminate the supply chain unknowns that turn minor hiccups into major disruptions.
Predict Demand and Pricing to Manage Inventory
Considering the volatility of raw materials in furniture manufacturing, it’s important for manufacturers to understand exactly how much material to keep on hand at any point in time. When inventory levels are consistently too high or too low, it can cause waste in the process and lost revenue. Determining how much of a certain material to hold in your inventory depends on customer demand, the current availability and cost of that material, the future availability and cost, and anticipated logistics for shipping that material.
An ERP solution runs sophisticated data analysis on every aspect of this operation, using predictive analytics to help you determine exactly how much of each material to order — based on predictions around demand, availability, price, and market factors. With real-time data gathered in your ERP system and the robust predictive analytics capabilities of the software, you can gain more informed predictions of when prices will rise or fall so you can manage your inventory strategically.
Reduce Waste and Redundancy
Material waste has an especially negative impact when prices are high and supplies are low. Lean manufacturing is something all furniture manufacturers strive for, and while some furniture manufacturers are embracing new technology, the relatively hands-on nature of the industry makes it difficult to automate the bulk of production. ERP offers a top-down and fully-integrated perspective on your operations, revealing areas where waste and inefficiencies exist. This enables you to make targeted changes to reduce costs and wasted time across your production processes, inventory management, and materials ordering.
Improve Supplier Relations
Great manufacturers do whatever they can to insulate their customers from supply chain issues, and often this requires having real-time insights about your suppliers so you can react accordingly. The key is in building positive relationships with your suppliers based in trust and communication.
An ERP system helps you create a stronger link between your supplier’s shippers and your receivers by opening up lines of communication, collaboration, and information sharing. ERP will track all information about your history and current business with each supplier in your supply chain. The robust software can also alert you in real-time of changes in a supplier’s process, shipping delays, scheduling errors, and more — so you can reach out in a timely fashion to resolve or work around any supply issues.
ERP helps manufacturers manage and evaluate each supplier relationship, leading to better relationships and higher-quality service over the long term. With the wealth of real-time data at your fingertips, you can identify when new contracts or additional suppliers may benefit your business.
Operate with Agility
The reality is that sometimes materials will be in short supply or prohibitively expensive and there is little you can do to change those facts. In these cases, manufacturers often look for other changes they can make across the company to reduce costs and accommodate supply.
ERP provides you with the broadest possible perspective over not only your supply chain, but also over your entire company. An ERP system stores all data about your internal operations in one centralized system, and gives you the advanced reporting and analytics you need to make informed decisions. If there is the potential to cut costs, reconfigure operations, shuffle staff, shift product lines, or move into new markets, ERP will help you identify it. Armed with real-time data and insights across all departments, you can act quickly and confidently to resolve supply chain challenges (or any other challenges).
There is no indication that skyrocketing prices and breakneck volatility will go away any time soon. The fluctuating nature of raw material cost and availability is a challenge all furniture manufacturers must learn to manage. Furniture manufacturers have a choice: they can weather the market storm and hope for the best; or, decide to get ahead of the storm and take control of their supply chain for good. If you want to stay competitive even amid volatile material costs, contact Cre8tive Technology & Design to find the right ERP solution for your manufacturing company.