WHETHER OR NOT we like it, furniture makers are competing for American consumers who are much smarter and much more
influenced by their work environment. They are computer literate and
quite at ease with e-mail and the Internet. What's more, they are
becoming more comfortable with the notion of making purchases
electronically in their home environment.
On top of that development, big stores such as J.C.
Penney, Montgomery Ward and Sears are, forcing a direct market change by
electronically placing a customer order directly with the factory and
bypassing their own warehouse. This establishes a direct electronic link
between the customer's credit card, the retailer and the manufacturer.
The product is shipped directly to the customer's front door via UPS,
FedEx or other carrier.
All the elements are already established in the
marketplace: Electronic payment, electronic selections via the Internet
and electronically controlled delivery. Yet, in spite of all this new
e-commerce infrastructure, many furniture manufacturers are still doing
business the old-fashioned way. Too many are not lean and productive
enough to compete in the New Economy, let alone prosper in the wake of
furniture imports that reached more than $8 billion last year and are
still growing.
Combat Plan for Success
The combat plan
for success begins with furniture factory owners changing their old way
of thinking. They may be adept at reacting to what their two to five
nearest competitors do, but what about the new competitors from
overseas, many of which they have never even heard of'?
Worldwide
competition is exactly the force that will likely steal their next
order. This is not a time to duck and cover. This is a time to act.
In helping
readers map out a successful combat plan, I offer the following five
rules.
Rule #1 - Know the worldwide competition and what they
do.
Raw material is
plentiful in North America, yet lumber-rich Canada makes little
high-tech woodworking machinery, and even in the case of the United
States, most high-tech equipment comes from countries that have little
precious timber. Furniture manufacturers in Europe and Asia and other
areas must make do with less expensive substitutes that capitalize on
new finishes, vinyl and paper laminates, soft-formed edges, and product
styles to fit new, high-speed factories and machines built in Italy,
Germany and other countries.
Rule #2 - Know the high-tech woodworking equipment
worldwide to make your product for the lowest cost to you.
Bar-coding is an
American invention which was immediately applied in warehouses, big
distribution chains and supermarkets to keep tens of thousands of items
numbered and inventoried on a daily basis. If an item is mislabeled, the
mistake is usually corrected the next day.
The U.S. woodworking industry has been slow to adopt
bar-coding on the shop floor. I ask you, how many bills of material (BOM)
exist in your furniture factory? I visit furniture factories every week.
I see many bills of materials that go uncorrected for a week, a month or
even a year. Stop and think. Doesn't it make sense that the furniture
industry could easily benefit from bar-coding, just as supermarkets do?
Automation and technology with precision tooling are 60 percent more
efficient when used on bar-coded parts. Using these technologies makes
productivity soar.
Rule #3 - Never start up a new factory, division or
workcell in your plant without providing barcode technology for machine
set-up, parts control and recording labor content for each cell.
Two major
reasons why offshore manufacturers have been successful with exporting
to the United States is that they enjoy significantly lower labor rates
and have been clever in finding ways to reduce their transportation
costs.
Material costs
are high in every country, even in Indonesia where labor rates are 27
cents per hour compared to 25 cents per minute in the United States. How
else can we compete, if not to automate?
The combat plan for success begins with the furniture factory owner
changing his old way of thinking
What's more,
many furniture importers transport an inventory of machined parts to a
facility in the United States where they are assembled to order.
Assembly in the United States requires relatively low labor content.
With lots of inventory on hand, ATO (Assemble-to-Order) short ship
cycles at the importer's U.S. factory location take place in days not
weeks.
What this means,
is: far too many U.S. furniture manufacturers have 8 to 10 week delivery
times, with high labor content and relatively high material cost due to
poor optimization of materials and poor labor productivity. If they are
to compete with imports, they have to move product out the door much
faster with far less labor content.
Rule #4 - Cutting your cost to the bone must include
material and labor content optimization (the amount of labor minutes
spent on a product) combined with quick delivery in days, not weeks, to
match the import competition.
Standardization
of material thicknesses and materials, coupled with reductions of labor
content via automatically cycled, 100 percent CNC processes, are the
answer to the competitive threat. Product reengineering is essential to
simplify the product assembly process while cutting cost and material to
the bone.
When a machine
operator costs $30,000 to $40,000 a year or 25 cents to 30 cents minute,
you must minimize labor content. You need to use just enough machine
time and labor support to make the right product quickly. Low labor
content, precision accuracy and quick ATO assembly are the hallmarks of
competitive manufacturers of the 21st Century who want to sell their
product successfully.
Rule #5 - Apply labor trained with computer technology
to operate CNC machinery that use high-tech tooling. Use barcodes to
automatically set up machines every time at lower cost.
Applying this
final rule will result in the following:
·
Standardization
that incorporates a high-degree of flexibility to make any product
within reason.
·
Repeated accuracy
every time.
·
Productive,
computer-trained operators.
·
Lowest labor
content possible.
·
Highest return on
your capital investment by intelligently applying your investments in
CNC equipment, high-tech tooling and operator training.
·
Best automation
technology concepts.
Simplify Before You Automate
The need for the correct
process automation concepts are everywhere. Using automation correctly
and on a factory-wide basis will result in a factory that delivers 200
units of different style and size products in any combination in five
days from order entry through shipping.
Never start up a new
factory, division or workcell in your plant without providing barcode
technology for machine set-up, parts control and recording labor content
for each cell.
Furthermore, the
products can be delivered repeatedly with high-quality standards to any
domestic customer, as well as being exported to the global marketplace.
This is better than importers can do with their huge inventory in the
pipeline. It is the only way we will stem the flood of imports to the
United States.
A
half-hearted approach such as using one or two CNC-driven machines or
single-machine concepts without automated material handling, will lead
you to bankruptcy faster. On the other hand, there is the opportunity to
make a 20 percent profit by correctly applying the best available and
affordable automation. Doing so will put you ahead of the competition,
not only down the street but around the globe.
How many more old-fashioned factories will have to go
out of business before true change takes place. I predict the need for
change will not become urgent until more manufacturers "die."
Then, those that see the light will make the necessary changes, and in
the process become strong, successful and very profitable. The fittest
will survive with automation and an Assemble-To-Order system.
