8JULY 2023OPINIONIN MYDECADES LONG BATTLE FOR LEAD-TIME SHRINKAGE IN THE FURNITURE INDUSTRY AND ITS IMPACT ON GLOBAL SUPPLY DURING A PANDEMIC ­ WHAT'S NEXT?In ultra-competitive markets companies often look for ways to differentiate themselves to sustain brand viability and growth. Companies often find themselves in decade long battles with competition that often can seem insurmountable to obtain but must stay in the fight or get left behind. Battles such as price leader, technological advances, quality, and fast fulfillment such as short lead times from order placement. We can look at companies such as Amazon that set such standards in fast moving markets. This battle is well known in the furniture industry, and it's the never-ending fight for short lead-times to supply a market that has seen immense increase in demand following a Pandemic, stimulated demand due to federal funding to consumers, as well as supply shortages that have increased the urgency and has conditioned consumer mindsets to get in line and place their order in fear of facing even longer fulfillment times. We know this concept all too well, this is directly tied to the supply and demand laws, as supply dries up and becomes constrained demand will increase naturally. This natural occurrence is magnified staring at the face of stimulated demand and the impacts of inflation as consumers rush to buy low before prices increase.The Furniture industry, as well as many other industries that supply consumer goods,especially those who have moved to primarily offshore manufacturing since the late 20th century have been fighting this battle and it continues to this day. As the playing field levels with stock levels are at an all-time high, and as warehousing space and storage of supply now at a premium, what impacts does this fight for lead time supremacy have on the global supply chain for the foreseeable future and what steps can companies take to make sure they aren't over buying stock and tying up capital in inventory to stay liquid.Many Furniture companies will coin phrases such as "Quick Ship" to emphasis that they have products in categories that are available faster than other companies in similar space. Where this gets tricky is a domestic manufacturer who sources parts and material from overseas might have a more competitive advantage over a 100% finished goods manufacturer who imports products. Although the flow of materials needed to manufacture can get tricky to maintain,most domestic manufactures can control flow of finished products a little easier and can control their state side finished goods inventory better than an imported manufacture can. As a standard rule of thumb, finished goods inventory has always been calculated based on inventory sold and shipped to consumers times the amounts of weeks it takes to supply, from PO placement to shipped to a consumer if retail/distributor from the given manufacture. Most companies will maintain safety stock levels a % of this calculation so they never run out of stock and will use an average of the demand calculation to smooth out any volatility.By Matthew Waugh, Executive Director of Finance & Operations, Furnitureland South, IncMatthew Waugh
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