The Michigan Economic Development Corporation (MEDC) and West Michigan economic developers recently held their first-ever furniture industry symposium, and supply chain disruptions led the list of concerns.
The MEDC, Pure Michigan Business Connect, The Right Place and Lakeshore Advantage co-hosted the Michigan Furniture Industry Symposium last month, and a panel discussion with five industry leaders moderated by Mike Dunlap — founder and principal of the commercial furniture industry consulting firm Michael A. Dunlap & Associates — focused on supply chain issues and myriad other disruptions caused by the COVID-19 pandemic. The panelists also shared insights on how they are responding and recovering from those challenges.
The panelists were Kyle Williams, president, Work Furniture Group, a division of Leggett & Platt in Grand Rapids; Rebecca Boenigk, CEO, Bryan, Texas-based Neutral Posture, which does business in Michigan; Todd Folkert, president and owner, Muskegon-based The BOLD Companies; Les Brand, CEO, Kentwood-based Supply Chain Solutions; and Amy Sparks, owner, president and CEO, Holland-based Nuvar Inc.
Supply chain starter
Dunlap kicked off the conversation by noting although many manufacturers, such as automotive, appliance and technology-based companies, are experiencing supply chain pain points as a result of COVID-19, the furniture industry has had its own specific challenges. He asked Williams and Boenigk to describe theirs.
Williams said at the beginning of the pandemic, furniture makers in particular focused on PPE — how to find, make and supply it — but the biggest challenge Leggett & Platt dealt with in the big picture was managing supply chain disruption that started off as regional (i.e., limited to China), then spread globally.
“Staying on top of all the different areas, both the legal issues and the changes that (went) on in, for instance, supply from Mexico or from Canada or from Poland or from states like Michigan — being able to know what the legal requirements for businesses were there, and how that would affect our supply chain, was really an issue,” he said. “We needed to stay on top of it depending on where our suppliers were. … So I think adaptability in our business was really important.”
Boenigk said Neutral Posture also scurried to make enough PPE for itself and other businesses in Texas, but the larger issue was the sudden impact on pricing, availability and lead times that continues to this day.
“Pricing is going through the roof between the value of the dollar, the increased pricing in petroleum and the fact that there are so many products that we use with it. Every piece of plastic that is used in the furniture industry has petroleum products in it. Some of our fabrics actually have petroleum products in them. Our steel company is giving us new pricing and new lead times every Monday. So, when you look at this, it’s getting more and more difficult.”
She added the foam supplier they use can’t get ahold of certain chemicals, so Neutral Posture had to meet with that supplier and decide how to reformulate the foam using available chemicals.
“When you’re trying to re-engineer a product based on the lack of global raw materials, it makes it very difficult to do that and do it fast enough so that we can replace those products and not run out of foam,” she said.
Top internal challenges
Dunlap asked Folkert and Brand to share what top challenges they are dealing with in their companies.
Folkert cited materials shortages, import and delivery delays, and having to raise prices 20% to 30% due to rising materials costs — but also talent challenges such as absenteeism and mental health issues due to the stress of dealing with moving targets.
“It’s a very dynamic situation each and every day,” he said, noting The BOLD Companies began a partnership with Pine Rest to offer four free mental health visits to employees to help them deal with their stress and anxiety.
Brand said his team also is feeling the pressure of having to work long hours and weekends to meet the numerous business challenges.
“We took a tally a (few) weeks ago on how much time we’re spending tracking and tracing global shipments or domestic shipments for our client base. … Our organization is still fairly small; we’ve got about 150 associates working in a variety of different offices around the globe, but we were spending about 255 hours a week just on figuring out where shipments are for our customers.”
He said the company fast-tracked technology upgrades so it could see real-time information on shipments, freeing employees to do other things. But the underlying problems — rising logistics costs, customers needing their materials and the receivables billing cycle stretching out — are not going anywhere.
“We don’t see this ending anytime soon,” he said. “If we’re looking for any type of relief, it’s going to be at least the second quarter of 2022, as we see it right now.”
Most important lessons
Dunlap asked Sparks, Brand and Williams to share how they addressed the most important lessons they’ve learned during the pandemic.
Sparks said her company confirmed its long-held belief that relationships and being proactive matter, as well as putting in place inventory agreements and forecasting models to be able to better handle the long lead times.
“Every day is a new day and a new battle, so you really don’t know what you’re coming into, but the more prepared that we can be and the more options we have in place to plan for the unexpected, we can pull through,” she said.
Brand said figuring out how to help customers mitigate logistics delays has been a top challenge.
“The first thing we’re suggesting on the short-term basis is increase your safety stock, lengthen your lead times, and try and look for transit time improvements,” he said. “And then long-term … we’re going to start to see, and we have started to see, especially in automotive, nearshoring and reshoring … (of) product supply.”
Williams added he’s learned the leadership team of his large company has to be closely involved and cannot delegate as much right now in order to be proactive and protect its customers. He said the work furniture division has to be careful about stretch supply — sourcing farther away instead of nearby — and cashflow. He said it has been helpful to leverage the knowledge and expertise of all of Leggett’s different businesses, such as the automotive or bedding groups, and using its own foam division as a supplier instead of going elsewhere.
Dunlap asked two panelists to address how they are coping with product price increases.
Boenigk said her company at the time of the symposium was working to negotiate with the U.S. General Services Administration to obtain permission to do temporary commodity and fuel surcharges until things calm down, rather than an annual across-the-board price increase that wouldn’t cover rising costs. She said this request was necessary because Neutral Posture has so many government contracts and can’t just make its own decisions about price increases. GSA did allow fuel surcharges in 2008-09, she said, and her commercial customers understood it was temporary and went along with them.
Folkert said The BOLD Companies is dealing with increases by communicating with customers, shortening the quote window, providing documentation of materials cost increases to customers, and using forecasting. Some of its costs are single-digit increases, and the double-digit increases tend to fall under the company’s project-based work, which poses less of an issue, he said. He said to manage expectations, BOLD Companies, for instance, might offer customers a product price increase of say, 5%, and then pricing will go up again in a month, or it can offer to increase pricing higher upfront, then have costs stay stable for two or three months.
Addressing racial equity
Dunlap asked Williams and Boenigk to describe how they are addressing diversity, equity and inclusion (DEI) within their organizations.
Williams said it created a strategy last year within its executive team and is implementing it across the company through the work of five pillar teams. The strategy includes DEI targets across all relationships, in its core and with suppliers.
Boenigk said her company has high levels of internal diversity, with about a 50/50 male-female ratio, 40% white employees, 33% Hispanic/Latino and 27% Black. She said the harder problem to address is getting government contractors to fulfill their obligations to do business with small and diverse businesses, and getting corporations to source from diverse buyers, as both entities tend to use all sorts of loopholes to say on paper they engage in supplier diversity practices, when in fact, they don’t.
“I think there’s still a lot of work to be done on the supplier diversity side of things,” she said. “… Everybody says they have a supplier diversity program, but what are they truly doing and how much are they truly spending with small businesses?”
Nearshoring, reshoring
Dunlap called on Brand, as the owner of a supply chain management company, to share whether he’s seen a shift in nearshoring and reshoring toward North America and, specifically, to Michigan.
“I thought we’d see a lot more of it with the tariff impact — that whole purpose was to drive this reshoring initiative,” but what has actually happened, Brand said, is a shift from manufacturing in China to other parts of Asia such as Thailand and Vietnam. But he said he’s hopeful that as higher logistics costs and tariffs continue with no signs of softening, manufacturers will begin to nearshore and reshore.
Dealing with OEMs
Dunlap’s final question went to Sparks — “How would you describe today’s OEM supplier relationship climate?”
Sparks said some industries tend to value either strategic partnerships or transactional relationships, and the office furniture industry tends to lean toward the former, more collaborative approach — treating suppliers as if they are just as valuable as customers, which they are.
“The better the relationships you have, the stronger your business is on both sides,” she said. “That goes back to the first question … with the supply chain issues that we’ve all been facing, and the disruptions we’ve had, you need partners throughout the channel to make sure that your supply chains are robust so that our end customers can deliver to their end customers, day in and day out.”
The full Michigan Furniture Industry Symposium webinar — including comments from Deirdre Jimenez, president and CEO of the Business & Institutional Furniture Manufacturers Association, and Justine Burdette, vice president of technical services at The Right Place and regional director at the Michigan Manufacturing Technology Center-West, is available at bit.ly/youtubeMFIS.
