Currently, the furniture industry is still exposed to significant uncertainty. Having recently travelled around multiple furniture factories, I have seen manufacturers in countries like Poland and Sweden suffering from decreased demand. The decrease varies from 15 to as much as 50%.
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But of course, that isn’t the only trend we currently observe in the furniture supply chain. Let’s oversee the other ones and discuss what influences them the most.
1. Change in furniture demand
As I have already mentioned, the change in furniture demand is drastic. Some major manufacturers admit having never faced such a fall. The numbers vary, but I have personally been told that certain orders have been reduced by 50, 43 or even 73%.
2. Focus on product improvement
Naturally, with such a decrease in demand, manufacturers look for ways to improve their products or, in other words, maximize lean manufacturing. This means minimizing unnecessary expenses while retaining product quality. Changes vary from looking for ways to reduce the use of material, swapping certain parts for others, selecting different coatings, and so on. However, maintaining quality remains a priority.
3. Energy saving
Highly increased energy prices are forcing manufacturers to look for ways to save on energy. Luckily, the warm winter in Europe contributes to this goal. However, warm weather is simply not enough, and companies are still looking for ways to minimize their energy use. Some of the most popular methods include performing professional audits on energy consumption, using state aid, regular unit maintenance, and so on.
4. Changes in people management
With reduced demand and increased costs, companies are also looking for ways to save through the management of people. Many employees are being laid off or sent on holiday for a week or even a month. It comes as no surprise that the furniture industry has faced multiple protests from dissatisfied employees when manufacturers try to save at the expense of people.
Complex issues
While it is fairly easy to determine separate trends, it is worth noting that most of them are caused by the same – although complex – reasons. These include a complicated geopolitical situation (the main reason for increasing energy costs and, thus, overall living costs) and a climate crisis, which can affect thew supply chain significantly. That being said, it’s the same climate crisis that is causing an unusually warm winter, thus somewhat helping save on energy. Although by no means should we rejoice in it – as the past suggests, we are likely to pay for it with hurricanes, floods, droughts, or other catastrophes that can cause further disruptions.
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It is only fair to mention that certain furniture manufacturers are already looking for ways to reduce their carbon footprint and thus contribute to solving the climate crisis. So far, the most popular approach is incorporating recycled materials, which reduces waste and, in turn, carbon footprint. However, companies like Henkel are taking things a step further by introducing furniture elements made of entirely different, environmentally friendly materials. In Henkel’s case, it was adhesives – made using the “mass balance” approach, they reduce the carbon footprint of the adhesive and ensure that furniture can be made with fewer fossil-based elements.
My belief is that this will soon become the new normal – with more and more consumers regarding environmental impact as a strong influencing factor, companies will be forced to look for sustainable solutions, thus pleasing potential buyers and minimizing harm to our environment.
In economics and game theory, writers have traditionally used the term “widgets” to refer to objects of variable characteristics in production and, to a certain extent, transport. A widget can be of any shape, size, or make, and can have any other characteristics that suit the question that’s being posed or the point that’s being made. Since the advent of personal computing, the other definition of widget (an application or interface) has in many circles become more widespread, supplanting the original meaning.
This is a point of annoyance for some economists, who feel that they can no longer use the word as intended, but it should be cause for celebration for those in the furniture industry. Why? Because most furniture is too big, too complex, and too strange to be reduced to a widget. The furniture industry as a whole has a very special set of challenges and requirements that virtually demand that planners take their thinking out of the abstract and into the nitty-gritty particulars. With that in mind, let’s take a look at the unique place the furniture industry holds in the world of supply chain management.
Fighting the “Amazon Effect”
For decades, the furniture industry was one of the leaders when it came to offering product customization, letting customers pick the specs that worked best for their homes or offices. This has had and continues to have real ramifications not just for production, but for shipping and transport. Because customized products are not interchangeable (or, if they are, they’re interchangeable with far fewer other items), this has meant that production plans have to be fairly granular and disruptions can be frequent and hard to manage.
With the rise of Amazon, and the so-called Amazon Effect (which refers to the recent increase on customer expectations for fast, on-time, and highly visible deliveries, even for customized or otherwise atypical products), these existing challenges are becoming more pronounced. If a business is trying to procure office furniture for its workspaces, they increasingly expect the experience to be more like an Amazon transaction—delivery estimates should be short and accurate, and the product should fulfill its need precisely or else be taken back. At the same time, manufacturing processes are rapidly undergoing a seismic shift as a result of the Industry 4.0 revolution. There is immense pressure to digitize processes and perform supply chain integration in order to boost visibility inter- and intra-operationally. How can businesses adapt to these new realities in a productive, efficient way?
Unique Logistics Challenges
The context we outlined above might seem daunting, but it might also seem a little non-specific. After all, the Amazon Effect and Industry 4.0 are disrupting a whole host of industries, not just furniture production and distribution. As is happens, there are a number of unique facets of the furniture supply chain that complicate the usual responses to these trends. For instance, while most value chains are structured so that products move from the production line (after reaching a more or less finished state) to a warehouse or other inventory storage site to await distribution, furniture manufacturers often skip this intermediate step, moving disassembled couches, tables, and chairs straight from production lines into trucks. This, on the one hand, is the epitome of lean manufacturing. On the other hand, the lack of buffer stock makes any potential production disruptions hard to cope with. By the same token, furniture logistics processes, in addition to trying to move the right good to the right place at the right time in the right condition, often need to account for complex loading and unloading processes, plus installation or even full-on assembly at a given item’s final destination.
For both of the reasons alluded to above, then, we can see the unique set of constraints that makes furniture manufacturing and logistics so difficult to optimize. Transport logistics processes need to keep track of much more information than is required in most industries, and they need to do so with a high level of visibility into and alignment with production planning flows, since the two processes really represent one continuous activity. Thus, from the moment a customer orders a set of ergonomic office chairs, you have to be able to effectively track that order through the sourcing, production scheduling, production, transport, and potentially assembly processes at a granular level of detail, or risk letting down a customer whose expectations have been raised by years of Prime two-day shipping.
Keys to Optimization
Totally daunted yet? Don’t be. While Industry 4.0 is raising expectations, it’s also growing the number of tools that supply chain managers have at their disposal when it comes to meeting new challenges and demands. Thus, at precisely the same time that customers are demanding new levels of visibility (in the form of tracking numbers for packages, etc.), advanced analytics processes are emerging that can turn increases in visibility (i.e. increases in data) into improved demand forecasts. In this way, furniture manufacturers, even those offering a high degree of customization, will be able to better align their production plans to emerging demand realities; this may make it easier to shorten the time between order creation and shipment, just as it stands to smooth out the relationship between production and transport. In the same way, the added connectivity of Industry 4.0 is making it easier than ever before to align these two processes. If, for instance, there is a machine breakdown on the factory floor, smart technology is capable of automatically informing transport planners, and even adjusting transport plans autonomously to reflect new realities.
Thus, you wind up with smarter processes that are constantly being adapted to changing realities of demand, production, and transport. If your fleet is sufficiently well connected, the same thing happens to your route and tour planning. Just as your trucks are ready to load (perhaps even using 3D, digital load optimizations) at the precise moment the product is ready, you’re able to adjust your routes on the fly as new information about traffic and weather become available (all of which is tabulated within the realities of existing customer requirements—not to mention real-time updates on variable activities like product assembly). Not only, in this way, do you help to preserve on-time delivery, you make it possible to keep your customers apprised of exactly when they can expect their goods. This, in turn, makes for happy, repeat buyers. This all may sound a little futuristic, but if you’re a supply chain manager trying to approach furniture logistics, this vision of optimization could become the norm a lot sooner than you think.
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