The Globalization of the American Furniture Industry

American furniture manufacturers have struggled with making cost-competitive products over the past decade. Several have closed U. S. facilities and built plants overseas or hired companies to make the goods in foreign countries and ship them here. Many factors have influenced the decision to move production over seas including, labor costs, price of materials, freight costs, time in transit, overall time to make a product and get it to market, and the amount of training needed for employees. A decade ago, nearly 100 percent of the dinette sets, cabinets, dressers, armoires and other wooden pieces sold in the United States were produced here. Today, 75 percent to 80 percent is made in China, Taiwan, Vietnam and other Asian countries. ”

In addition to production, many companies are also outsourcing their human resource functions. "Many companies today view human resource outsourcing as one of the most viable options to save money and improve services while also making a strategic contribution to the business. (Clinton) High Point, North Carolina is often regarded as the furniture capital of the world. Every six months High Point hosts The International Home Furnishing Market, which is the centerpiece to city’s economy. Thousands of sales representatives, buyers, and designers attend the event. The massive trade show is the largest, most well-known, and most important furnishings industry trade show in the world. But, a new study shows that North Carolina has lost nearly 80,000 jobs to China since 2001. Associated Press) Economist Michael Walden recently said, “There is no question that North Carolina has lost jobs - particularly in textiles and furniture manufacturing - due to international trade agreements signed during the last 15 years. Prior to the World Trade Agreement, North Carolina's textile and apparel jobs were protected from lower cost foreign producers. ” To compete some companies are looking to sell their products overseas. A group of high-end custom furniture manufactures created an organization called American Furniture Exporters.

Their goal is to find cost effective ways to export their goods overseas. The idea arose from the High Point market. "We saw some decent (international) traffic in our space with buyers from Venezuela, Greece, Israel, Quatar, Mexico and elsewhere” said Rick Moose the sales manager for Designmaster. (Gunin) La-Z-Boy Inc. , the nation's second-largest furniture manufacturer, faced sales declines with it’s wood furniture, so they terminated much of their U. S. production and moved the work to China.

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In an April press release, the company came out again to announce that they were moving much of their upholstered furniture manufacturing to Mexico. A Mexican-based facility is practical for La-Z-Boy because they rely heavily on custom orders in their upholstered segment and with it’s close proximity to the U. S. , orders will be shipped much faster on land, rather than if they had to travel by ship from China. Speed to market for custom orders is a tenet of our brand promise to the consumer and the strength of our U. S. facilities enables us to deliver on that promise.

We made the decision to transition our domestic cutting and sewing operations while streamlining the assembly aspect of production in the United States. Our new Mexican facility will be able to rapidly supply our domestic plants with cut-and-sewn fabrics and leather for custom orders and will complement the existing cut-and-sew program from China, which supplies our U. S. manufacturing operations. (La-Z-Boy) The U. S. is not alone in the shipping of manufacturing of production overseas; furniture giant IKEA found it to be cheaper to manufacture furniture in Ohio rather than producing it in Sweden and shipping it to the U. S. Ironically, the company IKEA came to, Sauder Woodworking Company, had shipped part of its production overseas to China to stay competitive. The company’s president, Kevin Sauder, said, “We are to IKEA what China is to a lot of furniture companies. ” (Chavez) Many people are fed up with the federal government’s stance on international trade. James Copeland of Copland Industries/Copland Fabrics of Burlington, N. C. said, Deeply flawed U. S. trade policy toward domestic manufacturing is the single most important root cause of the illness.

Every American deserves the right to provide for his family, to own a home and to educate his kids, but our flawed manufacturing and trade policies are taking this away. " (McCormack) Copeland is upset because he is competing against foreign companies who do not have to pay workman's compensation, unemployment insurance, overtime, benefits; nor do they have to deal with Environmental Protection Agency (EPA), Occupational Safety and Health Regulations (OSHA) regulations or abide by child labor laws. None of these things alone drove jobs overseas. But each increased the cost of doing business and made a move overseas just that more necessary for some American companies. ” (Hall) Because we live in a modern, civilized nation we realize that there is a need for laws and rules that protect employees, but we also need to realize that businesses exist for the sole purpose of making a profit. “Increasingly, well-intentioned government regulations also drive up costs—and drive out jobs. ” (Hall) There may be relief in site for the American worker.

During his campaign President-elect Barack Obama expressed support for tax benefits for companies that keep jobs on American soil. Obama introduced the Patriot Employer Act of 2007 in the Senate last year to reward companies that create jobs with benefits for American workers. (Maltby) Much like North Carolina, Mississippi has also been greatly affected by the outsourcing of American manufacturing. Jay Moon, president of the Mississippi Manufacturers Association, hopes that lawmakers will do away with the inventory tax businesses pay on raw materials, works in progress, and finished goods.

Because China using favored-nation status to flood the American market with cheaper goods, such moves would help American manufacturers better compete with overseas companies making the same types of products. (Ayers) There are many other issues affecting the furniture industry, high gas prices increase shipping costs, job layoffs, and most directly, the nationwide housing foreclosure crisis. When people are unable to keep a roof over their head, it is unlikely that they are worried about the furniture in their home.

The logic is simple, “retail stores aren't selling any furniture because people aren't buying furniture," (Ayers) Since I am in going into the field of Interior Design I have seen the results of shipping production overseas first hand. This past summer I did an internship in a furniture store and nearly everyday we received a fax from an upholstered furniture company with a list of fabrics that had been discontinued due to the closing of U. S. mills.

This causes there to be much less selection and variety, which creates problems when one furniture store wants to stand out from another or when a customer wants something new and different than what everyone else has. No one wants to pay a thousand dollars for a sofa when their neighbor can buy a similar one at Big Lots. Our store worked very closely with La-Z-Boy until they began to reduce their warranties and increase delivery time due to much of the production being done in Mexico. It is very difficult for an independently owned business to stay competitive and also provide customers with quality goods.

In our store, we carried both American made products and imports in order to stay competitive and satisfy a wide range of customers’ needs. Many people would ask if we carried American made products, but when they compared the prices they opted for the cheaper imported goods instead. I also noticed increases in shipping costs over the course of the summer, which translated into higher prices for our customers. To cope with the financial strain, we began to only make deliveries 2 days a week and encouraged customers to pick up their items when possible.

An advantage a small business has over large companies or a foreign firm is customer service. I believe that that is what keeps many businesses going, because a locally owned store is more likely to work with you personally and understand your needs. I find myself torn over the issue of outsourcing. Part of me wants to stick with the belief that the best quality goods are American made, but as I grow older and are paying for things myself, I enjoy the benefits of lower costs due to outsourcing.

I think that the United States should take certain steps to improve business here domestically, such as tax benefits for businesses, so that prices can be lowered and more people will buy locally. Because the future of industry and manufacturing jobs in America is unknown, I believe that we should focus more of our efforts on education and training employees in fields that cannot be outsourced, such as teachers and health professions.

Works Cited

1. Associated Press. "N. C. has lost nearly 80,000 jobs to China since 2001, report says. 30 July 2008. Local Tech Wire. 24 Nov. 2008 . Ayers, Jeff. "Manufacturing Takes Hit. " 19 Oct. 2008.
2. Clarion Ledger. 24 Nov. 2008 . Caplan, Jeremy. "Ikea CEO Anders Dahlvig on Surviving a Bad Economy. " 18 Nov. 2008. TIME Magazine. 23 Nov. 2008 .
3. Chavez, Jon. "Overseas competition challenges furniture industry. " 22 Mar. 2007. Toledo Blade. 17 Oct. 2008 .
4. Clinton, David. "Study: 76% Of Major North American Companies Outsource One Or More HR Functions. " 15 Apr. 2006. Rent To Own. 23 Nov. 2008 .
5. Gunin, Joan. "N. C. based American Furniture Exporters makes progress. " 19 Nov. 2008. Furniture Today. 24 Nov. 2008 . Hall, Robert A. "Who sent American jobs overseas? " 11 Nov. 2008.
6. American Chronicle. 24 Nov. 2008 . La-Z-Boy Furniture. "LA-Z-BOY ANNOUNCES MOVES TO STRENGTHEN ITS NORTH AMERICAN OPERATIONS. " Press release. 2 Apr. 2008. 24 Nov. 2008 .
7. Maltey, Emily. "Overseas outsourcing heats up again. " CNN Money. 11 Nov. 2008. 11 Nov. 2008 .
8. McCormack, Richard. "The Free-Trade Debacle: Domestic Manufacturers Vs. Multinationals. " Manufacturing and Technology News 15 (2008).

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