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Competitiveness of the U.S. furniture industry
Urs Buehlmann – Virginia Tech
Matt Bumgardner – U.S. Forest Service
Day of Wood II – Sept. 13, 2018
Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Acknowledgements
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B. Luppold, U.S. Forest Service
A. Schuler, U.S. Forest Service (retired)
M. Snow, AHEC
E. Haviarova, Purdue
Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Agenda
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Statistics
Consequences
Success stories
Success for WH furniture
Innovation
Industry 4.0
WH furniture industry
Summary
Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Statistics
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Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Market share of imports
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Consumption = value of product shipments + imports – exports / Import share = imports/consumption
Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Major sources of imports WH furniture
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Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Production Value 54.8 $69.40 $87.10 $100 $117 $137 $162 $171.40 $177.40 $193.50
Export Value 13.767 17.465 22.617 27.583 25.958 33.723 38.882 49.96 53.1 53.416
0
50
100
150
200
250
China HH furniture production and export
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Source: M. Snow, AHEC; China National Furniture Association
Bill
ion
US$
Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Employment trends – HH furniture vs. cabinets
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Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Average firm size – HH furniture vs. cabinets
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Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Employment indexes for the last three economic expansion periods
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Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Housing market's importance to employment
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Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Proportion of production volume associated with the single family housing construction market
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Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Value of private U.S. construction, 2002-2017
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Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Consequences
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Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Hardwood lumber price index
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Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Eastern U.S. hardwood lumber production
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Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Where the hardwood lumber went...
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Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Success stories
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19 Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
CABINETRY AND OFFICE
Kitchen Cabinets source: Herman Miller
source: Kitchen Craft
Office Furniture
OFFICE FURNITURE EXAMPLE
The story of a successful transformation
Grand Rapids before WWII - the U.S. furniture capital!
source (both pictures): Carron 1998
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20 Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
FURNITURE MOVES SOUTH
the call of the South: - cheap lumber - cheap labor - new technology
… Markets relocate, too…
source (both pictures): Carron 1998
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21 Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
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Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
THE ONES LEFT BEHIND ADAPT
Grand Rapids is adapting - moving into contract…
and office furniture…
source (both pictures): Carron 1998
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23 Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
INNOVATE
innovations keep coming - color choices…
movable walls creating our beloved cubicles…
source (both pictures): Carron 1998
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24 Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
REINVEST PROFITS
allowing industry to make profits…
and to keep plants and employees up-to date and competitive…
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25 Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
source: http://www.buildinggreen.com/hpb/overview.cfm?projectid=27
… AND INNOVATE AGAIN!
going green before anybody else…
…and shifting business to the next areas of growth early…
source: http://www.hermanmiller.com/Healthcare
Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Success also possible for WH furniture
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Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Amish furniture manufacturing
In Ohio 2005/2008:
About 430 manufacturers; 2,700 employees
About 43 MMBF of hardwood lumber use
About $280 million in sales
Updating the numbers now, but growth is likely to have occured
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Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Holmes county – a viable model?
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Customer driven
Customers select style, stain, and species, making each order unique customization
Similar to much of the U.S. cabinet industry
Supply chain
Specialization in production
Many operations use the same set of stains
Outsourcing components locally – aggregate productivity
Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Top 10 WH furniture states 2017
1. Ohio - 4,306 employees (13.3% of U.S. total)
2. California
3. North Carolina
4. New York
5. Virginia
6. Indiana – 1,547 employees (4.8% of U.S. total)
7. Texas
8. Illinois
9. Pennsylvania
10. Arizona 10/17/17
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Source: Bureau of Labor Statistics (BLS)
Hickory/Lenoir, NC = 1,478 emp. Holmes/Wayne, OH = 1,288 emp.
Source: Bamberger and Davidson. 1998. The Closing.
Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
WH furniture employment, selected states
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Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Innovation
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Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Did the WH furniture industry innovate?
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Furniture solutions
Mass customization
Connect with new retail partners
Internet marketing and selling
Services over the lifetime of the product?
Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Mass customization
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Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Services
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Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Online sales furniture 2018 (estimate)
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Source: M. Bradford, Woodworking Network. 2018
Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Is it safe to conclude that...
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The North American WH furniture industry has been whipped out
Competition on price alone is not the way to go
Strategic renewal needed – new business models
Mass customization – the way to leverage our only sustainable competitive advantage:
closeness to our customers!
Digitization of manufacturing
Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Recent woodworking industry survey
Over the last 3 years, have you increased the use of computerization in:
Collaborating with customers
Design
Manufacturing processes
Accounting
Inventory tracking
Supply chain management
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64
59
54 50
30 28
0
10
20
30
40
50
60
70
Pe
rce
nt
of
firm
s
Source: Bumgardner et al. 2018
Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
We are at the threshold of the 4th industrial revolution...
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1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
Deming's 14 points
Lean Production
1900
Scientific management (Taylor)
Buyer's market
First standardized
processes in
ship construction in Venice
Assembly line (Ford)
Quality control (Radford)
Standardization of work (Taylor)
1770 1450
Mechanical loom (Jacquard)
Toyota Production System (TPS)
Steam engine (Watt)
Programmable logic controller (PLC)
(Morley)
2010
Industry 4.0
Large scale outsourcing
Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
The vision
Industry 4.0 will:
bring change at a speed, scale, and force never seen before
affect the very essence of our human experience
allow system-wide, radical innovation
create realities previously unthinkable
"Industry 4.0 [...] will improve the state of the world [...]" (source: www.wef.ch/4ir)
Video at: https://www.youtube.com/watch?v=SCGV1tNBoeU
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source: http://www.nydailynews.com/news/world/watch-japanese-store-robot-greet-customers-article-1.2192946
Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
The pillars
Big data and analytics
Autonomous robots
Simulation
System integration
The Internet of things
The cloud
Additive manufacturing
Augmented reality
The digitzation of everything
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Source: https://www.gov.uk/government/uploads/syste m/uploads/attach-ment_data/file/255922/13-809-future-manufacturing-project-report.pdf
Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
One view
Manufacturing of the future:
Customer centric
Unlimited personalization
Optimum resource efficiency
Connected production
Global connectivity
Simulation of everything
Zero errors from first part
"[...] No two cars will ever be alike again [...] (Bosch 2016)"
Video at: https://www.youtube.com/watch?v=ISk64bJ35yM
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source: Bosch 2016
WH furniture industry
Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Processes - past
Processes until the 1990s:
Sequential process steps
Large batches
Work-in-process (WIP) inventory between process steps
Long lead times
Quality issues
Inflexible system
Mass production
No customization
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Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Processes - present
Processes now:
Still sequential process steps
Reduced batch sizes
Minimized work-in-process (WIP) inventory
Shorter lead times
Quality systems
Customized mass production
Selected customization
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Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Processes - future
Processes in the future:
Administration, design, material management automated
Batch size one
Work-in-process (WIP) inventory non-existent
Short lead times (hours not days)
Quality part of the process
Complete customization – each piece is unique
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Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Batch size one – mass production
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source: IMA 2018
Video at:
https://www.youtube.com/watch?v=5tsCYOqxRWs
Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Summary
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Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Summary
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Almost 80% of WH furniture consumed in the U.S. are being imported
The remaining U.S. WH furniture manufacturers are either protected or produce only selected products
The digitization of manufacturing (Industry 4.0) offers opportunities to create new business models
Remember our sustainable competitive advantage:
closeness to our customers!
Copyright 2018 • Urs Buehlmann / Virginia Tech • All Rights Reserved
Thank you!
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