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From SCDigest's On-Target E-Magazine

- March 9, 2015 -

Supply Chain News: Ashley Furniture Keeps Making Many Products in US, with Push to Succeed in China

Striking the Right Balance between Imports and Domestic Production

SCDigest Editorial Staff

Of all the US manufacturing sectors devastated by Asian imports in the 2000s, perhaps only apparel and shoes producers took a bigger beating than the shoe industry.

SCDigest Says:

Ashley for years has been known for sophisticated supply chain programs, especially in terms of postponement strategies and "inventory hedging."

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The Federal Reserve of course tracks manufacturing output by numerous sectors, and its numbers tell the tale. The index for US furniture production - compared to the baseline year of 2007, when overall US manufacturing was at a peak until finally surpassed last July - hit its high mark in February 2006, with a score of 106.7.

As shown in the graphic below, from that point the industry's output fell rapidly, falling an amazing 44 points to a level of just 62.5 by February 2010, in a stunning collapse.

It has since recovered a bit, up to a level of 78.8 in January.

The US furniture industry has simply collapsed, especially with the loss of manufacturing in what was once its center in North Carolina and Virginia.

But Ashley Furniture, operating out of rural Wisconsin, continues to grow its level of US production, even as it has upped its offshoring in some areas at the same time and is investing a lot to penetrate the Chinese market.

A high powered supply chain is one of the keys to Ashley's success. The company now primarily sells in the US through its network of some 460 retail stores.

"While American rivals dithered as imports surged starting in the 1980s, Ashley figured out what could most efficiently be made in Asia and what should be kept at home," the Wall Street Journal article says. "The company now operates what is widely viewed as the industry's most streamlined delivery system to rush products into stores."

A company executive says Ashley intends to grow 7% to 10% annually, more than twice the rate of U.S. furniture-industry sales growth in recent years.

That even as imports' share of the US furniture market rose to some 68.5% in 2014, up from just over 20% in 1996.

(Manufacturing Article Continued Below)

CATEGORY SPONSOR: SOFTEON

The company has been producing furniture in the Arcadia, WI area since the company was launched decades ago by current chairman Ron Wanek, and got the name Ashley Furniture after a small merger in 1982. It was around that same time that Asian imports were starting to have an impact on the US furniture market, and Ashley started doing some imports around that same time, earlier than other manufacturers, gaining valuable insight even as it continued to manufacture in the US.

The company now has plants and distribution centers in Wisconsin, Mississippi, North Carolina, Pennsylvania and California. About 60% of the furniture the company sells in the US is American-made, with the rest coming mainly from Vietnam and China.

Ashley for years has been known for sophisticated supply chain programs, especially in terms of postponement strategies and "inventory hedging," placing orders for fabrics and sewn items from Asia, but with decisions regarding what SKUs should be made using those materials delayed until the last possible moment, reducing inventory costs and need for discounting at the stores.

The company relentless looks for other opportunities to find ways to take costs out of the supply chain. Ashley imports about 70,000 shipping containers of Asian furniture a year, bringing them into Canada through the port at Prince Rupert, from which they are moved by train to Wisconsin. Ashley reduces its total logistics costs by releasing the empty containers to grain farmers and other agricultural concerns serving export markets.

Another example: Ashley goes through a lot of drill bits, and found that it could manufacturer its own bits for just $10, versus $18-20 when purchased from outside suppliers. Ashley is also expanding its use of robots on its factory floors.

At the same time, Ashley has been investing heavily to penetrate the Chinese market - can you imagine, a US manufacturer exporting furniture to Asia? - but it has hit a few bumps along the way.

The Wall Street Journal notes an anecdote of a Chinese consumer saying she likes the look of some of the Ashley furniture, but that many pieces were too large to fit into her small apartment.

"They weren't really attuned to the Chinese market," says one industry consultant who has worked with Ashley.

An Ashley spokesman says demand for the company's products in China has been strong

Ashley is aiming for 1,000 stores in Asia over the next decade, up from its current total of 35. The company also is opening stores in the Middle East and Central America.

Can Ashley continue to be a US manufacturing success? If it can be done in the furniture industry, it should be possible almost everywhere.

Are you surprised Ashley Furniture continues to produce most of its products in the US? How can it be done? Let us know your thoughts at the Feedback section below.

Recent Feedback

We are customers of Ashley Furniture and they do have a world class manufacturing company that knows what to make globally and what to make domestically. I have been in their factories around the world and they strive to implement lean manufacturing throughout their supply chain. It is a challenge everyday, but Ashley keeps getting better and better.

Keith Koenig
President
City Furniture
Mar, 12 2015