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The Supply Chain Manager's Guide to the Furniture Industry

Author: becky

Jul. 29, 2024

Home & Garden

The Supply Chain Manager's Guide to the Furniture Industry

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.  

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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. 

If you want to learn more get your Guide to Industry 4.0:

The Supply Chain: From Raw Materials to Order Fulfillment

What Is a Supply Chain?

A supply chain is a network of individuals and companies that are involved in creating a product and delivering it to the consumer. Links on the chain begin with the producers of the raw materials and they end when the van delivers the finished product to the user.

Supply chain management is a crucial process because an optimized supply chain results in lower costs and a more efficient production cycle. Companies seek to improve their supply chains so they can reduce their costs and remain competitive.

Key Takeaways

  • A supply chain is a network of companies and people that are involved in the production and delivery of a product or service.
  • The components of a supply chain include producers, vendors, warehouses, transportation companies, distribution centers, and retailers.
  • The functions of a supply chain include product development, marketing, operations, distribution, finance, and customer service.
  • Many supply chains are global in scale.
  • Effective supply chain management results in lower costs and faster production cycles.

Investopedia / Michela Buttignol

Understanding a Supply Chain

A supply chain includes every step that's involved in getting a finished product or service to the customer. The steps may include sourcing raw materials, moving them to production, then transporting the finished products to a distribution center or retail store where they can be delivered to consumers.

The entities involved in the supply chain include producers, vendors, warehouses, transportation companies, distribution centers, and retailers.

The supply chain begins operating when a business receives an order from a customer. Its essential functions include product development, marketing, operations, distribution networks, finance, and customer service.

It can lower a company's overall costs and boost its profitability when supply chain management is effective. It can affect the rest of the chain and can be costly if one link breaks.

What Are the Main Supply Chain Models?

The supply chain model that a company selects will depend on how the company is structured and its specific needs.

  • Continuous Flow Model: This traditional supply chain model works well for companies that produce the same products with little variation. The products should be in high demand and require little to no redesign. This lack of fluctuation means managers can streamline production times and keep tight control over inventory. Managers must regularly replenish raw materials to prevent production bottlenecks in a continuous flow model.
  • Fast Chain Model: This model works best for companies that sell products based on the latest trends. Businesses that use this model must get their products to market quickly to take advantage of the prevailing trend. They must rapidly move from idea to prototype to production to consumer. Fast fashion is an example of an industry that uses this supply chain model.
  • Flexible Model: Companies that manufacture seasonal or holiday merchandise often use the flexible model. They experience surges in demand for their products followed by long periods of little to no demand. Using the flexible model ensures that they're able to gear up quickly to begin production and shut down efficiently as soon as demand tapers off. Profit depends on being accurate in forecasting their need for raw materials, inventory, and labor.

What Are Supply Chain Management Best Practices?

Successful supply chain management systems benefit from several practices:

  • They support continuous improvement.
  • They aim for increased velocity.
  • They encourage collaboration among the individual businesses in the supply chain.
  • They seek new technologies that improve their processes.
  • They have metrics in place that allow employees to measure the success or failure of each step in the supply chain.

Supply Chain Management vs. Business Logistics Management?

The terms supply chain management (SCM) and business logistics management or simply logistics are often used interchangeably but logistics is one link in the supply chain.

Logistics deals with the planning and control of the movement and storage of goods and services from their point of origin to their final destination.

Successful logistics management ensures that there's no delay in delivery at any point in the chain and that products and services are delivered in good condition. This helps keep the company's costs down.

What Is the Flow of Manufacturing Costs?

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Efficient supply chain systems can get each piece of the product to the location where it's needed when it's needed. This requires control of the flow of manufacturing costs.

The flow of manufacturing costs is most relevant to businesses that produce products that require many parts from several vendors. A clothing manufacturer might need deliveries of fabric, zippers, trim, and thread that must all arrive at the same time. They must be stored at the business' expense if some supplies arrive too early and the machines stand idle while they wait if some arrive late.

Reliable Suppliers Are Key

An efficient supply chain management process requires reliable suppliers that produce a product that meets the manufacturer&#;s specifications and deliver it on time.

Assume that XYZ Furniture manufactures high-end furniture and that a supplier provides metal handles and other attachments. The metal components must be durable so they last for many years. They must meet the design and quality specified by the manufacturer and they must work as intended.

A reliable supplier will fill the manufacturer&#;s order and ship the parts on time.

Does the Supply Chain Cause Deflation?

The increased efficiencies of supply chains have played a significant role in curbing inflation. Costs decrease as efficiencies in moving products from point A to point B increase. This reduces the final cost to the consumer. Deflation is often regarded as a negative but supply chain efficiencies are one of the few examples in which it's a good thing.

Supply chain efficiencies become more optimized as globalization increases and this keeps the pressure on input prices.

How Did COVID-19 Affect the Supply Chain?

One of the most severe economic problems caused by the COVID-19 pandemic was damage to the supply chain. Its effects touched nearly every sector of the economy.

Supplies of products of all kinds were delayed due to ever-changing restrictions at national borders and long backups in ports.

Demand for products changed abruptly. Shortages developed as consumers hoarded essentials like toilet paper and baby formula. Masks, cleaning wipes, and hand sanitizers were suddenly in demand.

Shortages of computer chips delayed the delivery of a wide range of products from electronics to toys and cars.

Shifting Priorities

A survey by Ernst & Young of 200 senior-level supply chain executives points to three essential findings:

  • The pandemic had a deep negative effect as cited by 72% of supply chain executives. Automotive and industrial supplies companies were hit the worst.
  • Visibility was the top priority. Executives wanted to focus on adding technology such as sensors that gave them a better view of their orders throughout the process.
  • The pandemic accelerated the transition to digitization. Most of those surveyed said that digital transformation combined with increased automation would accelerate going forward.


What Is Supply Chain Management?

Supply chain management (SCM) is the oversight and control of all the activities required for a company to convert raw materials into finished products that are then sold to users. It provides centralized control for the planning, design, manufacturing, inventory, and distribution phases required to produce and sell a company's products.

A goal of supply chain management is to improve efficiency by coordinating the efforts of the various entities in the supply chain. This can result in a company achieving a competitive advantage over its rivals and enhancing the quality of the products it produces. Both can lead to increased sales and revenue.

What Are the Steps in a Supply Chain?

The key steps in a supply chain include:

  1. Planning the inventory and manufacturing processes to ensure that supply and demand are adequately balanced
  2. Manufacturing or sourcing the materials needed to create the final product
  3. Assembling parts and testing the product
  4. Packaging the product for shipment or holding it in inventory until a later date
  5. Transporting and delivering the finished product to the distributor, retailer, or consumer.
  6. Providing customer service support for returned items

What Is an Example of a Supply Chain?

A supply chain begins with the sourcing of raw materials. The raw materials are then hauled to a wholesaler that sells them in batches to manufacturers. The manufacturer uses the materials to create a product which is then delivered to a retailer. Finally, it's sold to a consumer.

The Bottom Line

A supply chain is what lets you plug in your new television or bite down on that hamburger you&#;ve made at home. It&#;s a network made up of producers and manufacturers, vendors, warehouses, transportation companies, and retailers. The process begins when a product is created and it ends when you purchase it. Many supply chains are global in scale.

Each step in the process is complicated by the need to create, prepare, package, ship, and unpack the product at each of its successive destinations but it can result in lower costs when it's done effectively. This benefit can be passed on to consumers.

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