Furniture

Overview

Introduction

North Carolina has a long tradition in the furniture industry, but over the past twenty years furniture production has been challenged by the increasingly global nature of manufacturing. North Carolina furniture manufacturers have to rethink their strategies to remain competitive by improving technologies, diversifying markets, and offshoring production. Furniture imports to North Carolina are growing, especially from China and other developing and emerging markets, leading to plant consolidations and shutdowns and raising questions in terms for policy, education, and industry strategy.

In this section we introduce the key sections of the website, including the structure of the industry using a value chain framework, an overview of the industry across multiple areas including the labor market, international trade and policy, and the key trends and dynamics that are shaping this industry now and in the future. In each section the past and present trends in the industry are analyzed from the perspective of North Carolina, the United States and North Carolina’s footprint compared to other states.

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Furniture Value Chain

Furniture manufacturing is broken down into categories that are structured around two dimensions: the materials used in production and the uses for which the products are designed.

Materials:

  • Wood
  • Metal
  • Upholstered
  • Other materials (such as plastics and synthetic materials)

Furniture Types/End Markets:

  • Household Furniture: bedroom, dining room, living room, kitchen furniture
  • Office & Institutional Furniture
    • Institutional Furniture: for schools, hospitals, governmental buildings, etc.
    • Office Furniture: desks, cabinets, office chairs, tables
  • Furniture-Related Products: mattresses, blinds and shades

North Carolina’s traditional strength in the furniture industry has been in the production of household furniture. Over time, the industry has expanded from primarily wood household furniture manufacturing (known in the industry as “casegoods”) to include upholstered and metal household furniture as well as some furniture for the office furniture and institutional furniture markets.

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Overview of the Industry
History

Furniture manufacturing has been a major player in North Carolina’s economy since the seventeenth century, when English artisans began to settle across North Carolina and produce furniture on a small scale. Early industrial entrepreneurs and developers focused on the Piedmont region of North Carolina, especially the city of High Point, because of its abundant wood supply, access to transportation, and cheap labor availability (1). High Point hosted its first regional furniture trade fair in 1909, eventually leading to the creation of the High Point Market, an internationally renowned furniture trade fair that still operates today. By the 1980s, High Point had earned the nickname "The Furniture Capital of the World.”  

In the late 1990s, the NC furniture industry began to feel the effects of increased foreign competition, causing many companies to go out of business, consolidate, close factories, lay off employees, and import from abroad. Yet, North Carolina still maintains a strong presence in the furniture industry and continues to take measures to remain competitive.

Establishments, Workers & Wages

Furniture manufacturing is concentrated in the north-central Piedmont Triad region of North Carolina, especially Catawba, Caldwell, Guilford, Randolph, Alexander, and Davidson counties. Major furniture manufacturing cities include Hickory, High Point, Thomasville, Greensboro, Asheboro, and Winston-Salem, among others.

North Carolina is the largest employer in furniture manufacturing, representing 9.5% of U.S. employment (T3c). It ranks fifth in the U.S. in terms of the overall number of furniture manufacturing establishments, with 5% of U.S. establishments in the furniture manufacturing industries (T2c). North Carolina is the leading state in the household furniture manufacturing segment with 12% of U.S. employment and nearly 5% of establishments in the segment (T3c; T2c). It ranks fifth in office furniture manufacturing, with 5.2% of U.S. employment and 5.6% of establishments. North Carolina ranks fourth in furniture-related products manufacturing (mattresses & blinds), with 6% of U.S. employment and 4.4% of establishments.

Employment in North Carolina’s furniture industry has declined steadily since 1992, with total employment declining 56% since 1992 (T3a; C3a). Employment declined in the household and office furniture manufacturing segments and increased in furniture related products manufacturing and furniture merchant wholesalers. Employment in the household furniture segment has contracted by 61% over the last two decades from 64,528 workers in 1992 to 25,235 in 2012 (T3a; C3a). The pace of decline in household furniture manufacturing employment continues. Employment in the household furniture segment decreased 15% during the 1992-2002 period and 54% during the 2002-2012 period. We expect the pace of declines to slow as the household furniture industry recovers from the 2008 recession and reconsiders its production location decisions.

Production & Trade

North Carolina’s exports grew steadily from 2002 to 2008, increasing from $153 to $300 million. However, during the economic crisis, exports dropped by 38% between 2008 and 2009. Exports from North Carolina have yet to reach their 2008 peak.

In terms of destination markets, Canada accounts for 40% of North Carolina’s total exports in furniture, followed by countries in the Middle East (Saudi Arabia and UAE), China, and Mexico. The overwhelming majority of furniture exports from North Carolina are in the household furniture segment. Major export growth markets for North Carolina over the past ten years have been Canada, China, and the UAE. North Carolina decreased exports most notably to South Korea and E.U. countries (UK, Belgium, Netherlands, and Italy).

Policy

Over the past two decades, the North Carolina furniture industry has faced the difficult production location decisions. Lower production costs abroad make global manufacturing attractive to many companies. Foreign countries are strengthening their capabilities and increasing their hold on various segments of manufacturing, particularly after China's entrance into the World Trade Organization (WTO) in 2001 and the growing role of several Asian countries and developing countries.

The U.S. furniture industry is trying to increase the competiveness of U.S. production, in part by enacting tariffs and quotas. With the help of the American Home Furnishings Alliance, the nation's largest trade organization for home furnishings firms, the furniture industry is trying to increase communication and help create policies that will protect domestic manufacturing and retain local jobs while ensuring continued international competitiveness

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Trends & Developments

In North Carolina, increasing foreign competition has shaped domestic trends in the furniture industry. Leading companies are seeking new ways to stay competitive, especially with new production strategies and an emphasis on high-end segments of the value chain.

New Corporate Structures and Manufacturing Methods

Faced with increasing competition and diminishing profits, North Carolina furniture companies are seeking to operate as efficiently as possible and improve their positions in the industry. Logistics and inventory management are key competitive issues in the furniture industry. While several manufacturers have consolidated operations, laid-off workers, and closed factories to combine resources and reduce costs, other have implemented "lean manufacturing" methods and invested in capital equipment to increase productivity. Minimizing waste, maintaining close links between design and production, and investment in capital and the labor to use them are essential changes that furniture manufacturers and assemblers have taken to remain competitive against foreign competition and offshore production.

Increased Focus on High-Value Activities

Some North Carolina companies are focusing on high-value segments of the value chain, which provide more profit for the company and are less easily duplicated and offshored. These activities, particularly services such as design, distribution, and marketing techniques, depend on intimate knowledge of consumers and domestic markets. International competitors operating in the U.S. may be less familiar with these concepts.

Specialization in Upscale Markets

While still keeping within North Carolina’s traditional niche of household furniture, coming out of the economic recession many top companies in the state are concentrating on higher price-points and customized products. Upscale and customized furniture are much less likely to be offshored because they require more skill to produce, are harder to ship, and lack standardization, thus cutting out a tenable niche for domestic production to remain competitive against foreign imports.

Global Competition

Increasingly, furniture is being produced in foreign countries and imported to the United States. Products are most easily manufactured abroad if they are, among other factors, mature, modular, and highly tradable. These factors, respectively, take into consideration the extent to which the manufacturing process has advanced, the degree of separation between design and manufacturing, and the ease with which a product can be shipped across the world. Some furniture products, especially casegoods, low-cost, and standardized pieces, are increasingly being offshored and produced in other countries. The value of U.S. imports decreased by one-fourth between 2008 and 2012 imports, however imports still represent a large share of domestic supply. In 2012, the value of imports to the U.S. outweighed the value of U.S. exports 5 to 1.

The growth in imports has been a major factor in declining U.S. furniture manufacturing employment, especially in North Carolina. Many companies are drawn by lower total production costs, particularly lower labor costs and more lenient environmental regulations in Asia, especially China, Vietnam and Malaysia. As a result, companies have chosen to locate segments of the manufacturing process—or even the entire production process—in these countries.

China
China dominates U.S. imports, accounting for more than half of total NC furniture imports in 2012. With a large supply of capable labor, low wages, and few regulations, a large portion of casegoods furniture manufacturing has shifted to China. The Chinese threat is compounded as factories become increasingly sophisticated and Americans become more accepting of foreign-produced, ready to assemble (RTA) furniture.

However, domestic companies are beginning to realize the hidden costs of offshoring, such as shipping and inventory costs, long lead times, delayed returns, and the negative impact on innovation caused by the reduced interaction between engineers and factory workers. These factors, in combination with rising labor costs in China, are causing furniture manufacturers to reconsider their production location decisions.

Southeast Asia
Vietnam and Malaysia are increasingly important players in the global furniture manufacturing industry and will most likely play a larger role in the near future. The countries are attracting furniture production from China, especially in the wood household furniture category, due to lower production costs (Vietnam) and abundant availability of wood (Malaysia).

Vietnam: Ranking the 6th largest exporter of furniture in the world, Vietnam exports about 90% of its production, which grew from US$2.6 billion in 2009 to approximately US$4.7 billion in 2012. Its largest markets are the US (39%), China (15%), Japan (14%) and EU (14%). Interestingly, Vietnam imports 80% of timber inputs used for furniture production, primarily from Laos, China, and the United States (2).

Malaysia: Ranking the 10th largest exporter of furniture in the world, Malaysia exports around 80% of its production. With large markets in US, Japan and Australia, Malaysia's has a strong position in the global furniture industry. It reports significant growth of exports to UAE, Saudi Arabia, the Philippines and Russia, Malaysia is now eyeing countries like Algeria, Greece, Puerto Rico and Libya. Malaysia is known for its wood-based furniture, owing to its natural resources. While lower priced Chinese and Vietnamese furniture pose strong competition, the growth in Malaysia has shifted from producing general products towards designing its own, particularly in the middle to high priced furniture category Malaysian furniture sets itself apart with original designs. The government also plays an important role in nurturing the industry through tax exemptions and investment tax allowances. The government has set an annual growth target of 6.5% for wood based furniture, estimated to reach up to RM53 billion (approximately USD 17.7 Billion) by year 2020 (3).

Mexico
While the value of all furniture imports to North Carolina decreased by almost one-fourth between 2008 and 2012, imports from Mexico increased more than 160%. The country only provides about 3% of North Carolina’s total furniture imports and production is fragmented, but Mexico is working on redefining its role in the world furniture market and is a rising player in the industry.

Italy
Italy has traditionally been a global leader in the furniture industry, especially with high-end products. However, its market share in the value of U.S. imports has reduced by half between 2008 and 2012. Especially with unfavorable exchange rates and increasing competition from other countries, the Italian furniture market has compensated by focusing its efforts in other markets.

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References
  1. Cater, J.J. (2005). "The Rise of the Furniture Manufacturing Industry in Western North Carolina and Virginia," Management Decision, 43(6), pp. 906-924.
  2. Binh, D. (2013, March 28). Furniture Industry – Vietnam & Global Market Outlook. Retrieved on March 14, 2014.
  3. MIFF. (2014). Malaysian Furniture Industry. Malaysian International Furniture Fair (MIFF). Retrieved on March 14, 2014.

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