Strategies for the

New American Furniture Industry

I—Introduction We are building a new furniture industry almost
from the ground up!
North Carolina’s traditional casegoods fur- Consider the weak points of the traditional
niture industry, based on large, vertically inte- furniture manufacturing business. The industry
grated factories, is largely gone, with furniture developed around the biannual High Point mar-
manufacturing moving to offshore locations. ket and typically spent months developing newly
Many experts claim that mass-produced case- designed groups to send to market, hoping
goods furniture manufacturing is lost forever to for sufficient orders to make the group viable.
U.S. companies, but savvy manufacturers could Bottlenecks in design and engineering resulted
prove them wrong. Domestic businesses that in a lengthy development process. If enough
follow a focused strategy combining strategic orders were placed during the market, then a
advantages with recent advances in design large production run created warehouse stock
software, coupled with modern manufacturing for retailers to order. Factories had been built
methods, can reclaim market share and become to produce large batches of new product and
leaders in the new furniture industry. as a result, they did not handle small batches
This section examines the advantages of efficiently, nor could they be flexible. Even when
manufacturing in the United States and con- new equipment was introduced it operated in
trasts the traditional furniture industry with “the isolation, and upgraded production lines contin-
new furniture industry.” Section 2 introduces ued to operate with high inventory levels. The
the important concepts of Modern Manufactur- whole effort remained slow, inefficient, expen-
ing Methods relevant to furniture manufactur- sive, and risky.
ing. The furniture Design/Build manufacturing
approach is presented in section 3. Factory Advantages of Manufacturing in the
management using the key concepts of maxi- United States
mizing profit, balancing production with sales, U.S. manufacturers have the advantage of
and streamlining production-floor management being close to the consumer and consequently
is discussed in section 4. Marketing strategies of can better service the market. A shorter pipeline
the new, smaller furniture manufacturer will dif- to the market means that inventories can be
fer from the traditional mass production industry much smaller. Administrative costs are generally
that builds today’s imported furniture, as dis- lower than those incurred when doing business
cussed in section 5. The final section examines outside the country. As manufacturers abandon
different business strategies for the new furniture traditional marketing methods, they will find it
industry. unnecessary to invest in large showrooms that
are unused most of the time. The domestic furni-
The Traditional Furniture Industry ture manufacturer will be able to quickly provide
The traditional large-factory, mass-production a customized product using enhanced modern
furniture industry has largely disappeared. Do- manufacturing methodology.
mestic furniture manufacturing in the future will Although overseas producers can adopt the
hardly resemble yesterday’s furniture industry. same methodology, because of the distances
involved they will not be able to provide a timely, cus- more than one species and thickness at a time. Raw
tomized product. In addition, the domestic modern materials will be on hand as standardized parts, stock
manufacturer will be able to incorporate new technol- plywood panels, or glued-up lumber panels to support
ogy developments into the manufacturing process to the product lines offered. The machine room can be
serve the market even faster. The domestic manufac- set up with short production lines for each type of part
turer will meet changing market design and needs or subassembly needed for the finished goods, but al-
quickly. Finally, addressing the demand for a custom- lowing each machine center to operate independently
ized furniture market—using technology and modern when needed. Assembly and sanding operations
manufacturing methodology to hold down costs—will can also employ the short production line approach.
actually create a new market opportunity. Finishing can occur before assembly on flat-line opera-
tions. Alternatively, standard color cases can be fin-
Comparing the Old Industry Model to the New ished on a conveyor line, and custom color cases can
Furniture Industry be finished off line using carts. The new factory will
The new domestic furniture strategy will focus require very limited inventory because finished goods
specifically upon customers’ needs. This is not the are immediately packed and shipped. A flexible pack-
commodity producer of yesterday that employed aging system capable of providing corrugated boxes
hundreds to manufacture in batches of thousands. that precisely fit the various product sizes will also be
The departure of those companies from the domes- essential. Small companies may be able to forgo the
tic manufacturing scene provides an opportunity for expense of boxing and packaging by blanket-wrap
energetic, smart entrepreneurs with a keen sense of shipping directly to the customer.
the market and a knack for manufacturing organiza- Finally, how people are managed in the new furni-
tion to prosper. The new furniture companies are likely ture industry will contrast sharply with the old indus-
to be much smaller, energetic enterprises prepared to try. In the past, large casegood plants employed 300
seize new opportunity in the marketplace by profitably to 500 low-skilled employees. The new casegood
manufacturing in batches of one. plant will be considerably smaller, employing 50 to
The technology and manufacturing methods to 250 people. Because the new workforce will be bet-
quickly provide a customized or semi-customized ter paid, more empowered, and self-motivated, it will
product to the customer exist today. For example, a be able to create a flexible workplace with minimum
company could offer a standard product line with rap- support or management supervision. Factory floor
id order completion, yet also offer a limited number of management will be open and visual, using simple
options (configurations), sizes, and finishes beyond the computer networks accessible to production workers
standard product for a slightly higher price. This busi- to track production and visual techniques to improve
ness strategy contrasts sharply with the old industry, flow throughout. No longer will the supervisor keep
which mass-produced large batches with no customi- the schedule on a piece of paper in his pocket. Table 1
zation. Being able to communicate face-to-face with compares the old manufacturing concepts to the new
customers and responding to their needs will be a factory manufacturing concepts.
branding attribute of the new industry, focused on Casegoods manufacturing is not limited to resi-
customer service, fast product delivery, and the ability dential furniture segments, but includes the contract
to say “Yes!” to customer requests. The new factory furniture industry servicing hotels, nursing homes, and
concept includes constant innovation capabilities that educational markets. Using innovative marketing and
add shapes and features easily and at low costs. This manufacturing techniques, the new casegoods furni-
domestic industry will also be able to leverage a grow- ture manufacturers will seek to recapture the American
ing niche market demand for sustainable, green, solid market by offering:
wood products by using domestically grown woods.
To offer customized products, factories will operate • Faster delivery
very differently from the traditional furniture industry. • A focus on service (readily available repair parts)
Many tasks will be accomplished in the design and • Better value for customer’s dollar
engineering department using 3-D software to design • Customized product offerings
and modify pre-engineered products, generating a bill • Better quality of workmanship
of materials and instructions for operations personnel • Use of environmentally sustainable materials
and equipment. Since more tasks will be accomplished
quickly, it is essential that people be adequately
trained. The rough mill will differ from its predeces-
sors by having the flexibility to process (cut and glue)

2 Strategies for the New American Furniture Industry

 Traditional Concept New Concept
Main Bottleneck Design and Engineering Plant Capacity
Quickness to Respond to Change Very Poor Very Agile
Investment in Raw Materials Large Small
Investment in Work-In-Process Inventory Large Small
Investment in Finished Goods Large Small
Investment in Equipment Large Moderate to Small
Investment in Facilities Large Moderate to Small
Cost of Sales Force Large Moderate to Small
Cost to Design/Engineer Products Large Moderate to Small
Labor Productivity-in Sales $/Employee Low Moderate to High

Table 1. Comparison Between the Old Casegoods Furniture Plant and the New Furniture Plant.

Two Successful Paths for Domestic Casegoods idea generation to production and marketing. Ways to
Furniture Manufacturers do that include:
The large mass-produced casegoods furniture manu- a. Use pre-engineered designs that present differ-
facturers can set up large, modern production centers ent styles.
in their former home areas within North Carolina and b. Offer a variety of products (SKUs) that share
Virginia. In nearby locations, a supply chain network components. For instance, a chest of drawers,
of support vendors can establish operations to provide vanity, and nightstand in the same style will have
lumber and plywood products, finishes, hardware, many common parts (same drawer sizes, parting
packaging, and other related goods and services. The rails, etc.). Using standard-sized parts and panels
next section details how these large plants, with their will facilitate the design process, as they will be
local support networks, can successfully compete already available in the parts library.
globally. c. Offer set options on a basic model that vary the
The second successful path involves following a style or configuration, and set up a menu or
business strategy of setting up a Design/Build shop to chart that allows clients to choose quickly.
serve a local or regional area with semi-custom furni- d. Incorporate 3-D design software that automates
ture produced on a made-to-order basis. Section 3 dis- the modification of pre-engineered products and
cusses how a small, locally owned shop can use stock creates a bill of materials and part drawings from
materials to offer a wide variety of casegoods products the user’s choices. A seed library of previously
designed around a common theme. constructed designs will provide a base prod-
uct that can be reused or easily modified using
dynamic designs. At a minimum, the software
II—Modern Manufacturing Methods Can will provide manufacturing support that will
Rebuild the Mass Market Casegoods automatically or semi-automatically create bills
Furniture Industry of materials, a detailed parts listing, and job cost
estimates.
Modern Manufacturing Methods will allow a case-
goods factory to quickly manufacture and deliver a 2—Flexibility and Flow. The old casegoods lumber
semi-custom or custom product to the customer at a cut-up operations were designed to handle large
low manufacturing cost. The controlling principles are volumes of the same lumber, cutting the same thick-
efficient material and information flow and manufac- ness and species for hours or days. In the modern
turing flexibility throughout the process. The major manufacturing factory, we want to flow parts and
Modern Manufacturing Methods will help North components through as quickly as possible and to
American factories take advantage of their close prox- speed needed information from order entry to the
imity to raw materials and markets. floor. Fast Track Engineering will accomplish this rapid
flow of information. The design of the new factory will
1—Fast Track Engineering. The goal of this concept is need to allow process flexibility so that quick changes
to eliminate the design and engineering bottleneck of can be made. For example, lumber cut-up operations
traditional furniture plants and decrease the time from must be able to process more than one species and

North Carolina Cooperative Extension 3

thickness at a time. Multiple lines or workstations in boring machine. Short production lines provide a
the assembly area will allow more than one item to be higher part quality because production can be better
produced if needed. Finishing can use either standard monitored when work isn’t scattered across mul-
spray booths or flat-line finishing, depending on the tiple workstations. Higher labor productivity, shorter
product. Thus, finishing might be complete prior to throughput time, reduced scrap parts, and greater
assembly. Rather than having a long conveyor line, it customization can be achieved by carefully using
may be more flexible to use carts to apply stains and short production lines in machining, assembly, and
a short conveyor to spray clear finishes. Two practices finishing operations.
necessary to develop factory flexibility and flow are
short production lines and reduced set-up time. 4—Reduced Set-Up Time. Quick set up creates flex-
ibility for the casegoods furniture manufacturer. Small
3—Short Production Line. The old casegoods facto- batch sizes are possible only when set-up times are
ries were set up for large runs exemplified by the long eliminated or significantly reduced. Smart fixturing
conveyors used on the assembly and finishing lines. To can speed set-up times on manual and Computer
achieve the flexibility previously discussed, the modern Numerical Control (CNC) equipment. Converting
furniture factory will be organized for small runs of several manual operations to a single CNC machining
high variety SKUs using short production lines. Flexible operation is a simple method to reduce overall set-up
processing lines or work cells will eliminate material time. Modern Manufacturing Methods are only pos-
handling and load movement by combining opera- sible when set-up time is significantly reduced.
tions. Figure 1 illustrates a short production line for
parting rails that will allow both combined or indepen- 5—Quality Improvement. The elimination of large
dent operation of the moulder, tenoner, and vertical batches and development of short production lines

Figure 1. Example of short line production for parting rails (red arrows indicate parting rail process flow). This arrange-
ment allows each machine to work independently when needed for a single operation or as a complete line to make a
fully machined part.

4 Strategies for the New American Furniture Industry

will result in a close-coupled process. Manufacturing strategies will be to produce orders in two weeks or
problems will surface and be corrected earlier, and the less (Figure 2). This will be accomplished by flowing
reduced inventory will make it easier to locate parts products quickly through the factory and by flowing
and less likely that they will be damaged in transit and information quickly, as well. The design process will
storage. Simplifying and streamlining the manufactur- be quick, will be linked to the manufacturing process,
ing process will eliminate much of the rework, repair, and be facilitated by the use of pre-engineered de-
and replacement. Interrupting jobs to generate re- signs that allow fast processing through design and
placement parts required in assembly will become the engineering. In addition, stock panels of plywood and
exception rather than the rule. Quality improvement solid lumber will eliminate delays associated with plac-
will greatly reduce manufacturing costs and increase ing purchase orders and delivering raw materials, and
throughput. The philosophy of Modern Manufacturing these materials will require minimal processing. Orders
Methods will support “make one and make it right.” will be scheduled for processing and shipment within
(Note: Because the emphasis is on short production two weeks of receipt. The manufacturer will organize
lines and work-in-process inventory reduction, equip- so that products can be produced at the same pace as
ment reliability is critical. Consequently, preventive incoming orders.
maintenance will be a requirement for success.)
8—Eliminate Most Finished Goods Inventory. The
6—Lot Sizes Small But Profitable. The modern manu- make-to-order manufacturing strategy eliminates
facturing factory will produce a customized, high-end all finished goods inventory except those products
product. The high average value of each unit will awaiting shipment at the loading dock. This offers an
not require large daily volumes to support profitable advantage over the manufacturers that have abundant
manufacturing. The operation will be streamlined with inventory tied up in warehouses and container ships.
a flat management structure, more efficient engineer- The future furniture industry should initially focus
ing, standardization of parts and panels, increased on satisfying the market for customized products—a
manufacturing flexibility, reduced rework and repair, need the industry is currently not addressing. Because
and elimination of finished goods inventory. These effi- the future factory will streamline manufacturing and
ciencies will allow manufacturers to produce a limited, management costs, the customized product will be
customized product in much smaller lot sizes. available—and affordable—to most buyers. Satisfy-
ing the demand for customized, quality furniture with
7—Cycle Orders in Two Weeks. In addition to offer- rapid order completion strategies will create a new
ing a customized product, one of the major marketing market for furniture.

Customer Concept MANUFACTURING

Concept Development
Manual Parts Pack
Marketing Design and
and Engineering Ship
Assembly

Sanding and
CNC Parts
Production Finishing
Control

Order Entry Online

OSP Parts

TWO WEEK DELIVERY

Figure 2. Overview of New Casegoods Furniture Manufacturing.

North Carolina Cooperative Extension 5

 9—Empowered Employees. Effective, skilled employ- finishes or sizes to stock items. This business strategy
ees will reduce labor costs. Though these factory floor serves those wanting lower prices, immediate delivery,
employees will require greater compensation, they will and some customization, as well as those who want
have the responsibility and the information required more choices. In addition, the Design/Build software
to be self-directed. These fully supported employees can create a Web-based customer interface that allows
will be supplied with schedules, directions, drawings, mass customization.
and training to make decisions immediately. High job The market for a Design/Build manufacturer is not
satisfaction among employees will reduce turnover. limited to only the individual end users, but to many
Indirect labor will be reduced by the improved flow of market niches such as interior designers, contract
materials, assemblies, and information, which will re- sales, and retailers.
duce the need for supervision, material handlers, office Software will illustrate the customer’s design and
support, parts storage employees, and repair personnel. automatically pass the information to the design engi-
Improved designs that require fewer operations and neering department for review before being scheduled
smarter machining will reduce direct labor. for manufacture. In essence, the process defines the
customer’s needs and then manufactures a product
10—Visual Shop Floor Management. Think of a that meets those needs.
highway with signs that help visitors determine their The key for the Design/Build manufacturer is the
location and reach their destination. Similarly, the vi- ability to quickly design, build, and deliver a custom
sual shop floor will use visual indicators to quickly and product. Some of the components of the Design/Build
effectively communicate the production status, inven- concept include: 1) design software; 2) stock materials
tory levels, materials placement, and order schedule program; 3) common design platform; 4) parts stan-
and commitments. The goal is to create a workplace dardization; and 5) limited service area.
where problems are immediately obvious and which
employees can quickly correct. Design Software
Design software development has been driven by
Applying Modern Manufacturing Methods to the automotive, aerospace, and other high-capital
casegoods manufacturing can allow a new breed of industries. Engines, transmissions, airplanes, and
domestic U.S. manufacturers to successfully compete other high-value products require software that can
domestically and globally. Modern Manufacturing handle a high degree of detail. Although learning all
Methods can eliminate most of the facility, equipment, the capabilities of this software takes time, furniture
and inventory costs borne by the former large-factory can be successfully designed using relatively little of
casegoods industry and create a new casegoods the software’s overall power. Alternatively, software is
industry offering high quality, high labor productivity, available that targets the value added wood products
quick delivery, low capital and inventory investment, industry. It is generally simpler to learn and produce
and high profitability. The next sections will examine designs quickly. The ability to design quickly has value.
alternative business models, profit management, and The software package employed should bolster the
marketing. Design/Build business concept by using simple, quick
techniques to design furniture and provide support to
the manufacturing floor.
III—The Design/Build Furniture Design software cannot replace salespeople or de-
Manufacturing Concept signers, but it can help them do their jobs by present-
ing an image of the customer’s selected options. A
What is Design/Build? It is the process by which cus- visual 3-D representation of the furniture (Figure 3)
tomers design the custom (or semi-custom) casegood placed in a virtual room similar to that found in the
furniture they want, either alone or with the help of a customer’s home could help sell the item. The design
designer or marketer, using design software. Design/ software presents the customer with a seed catalog
Build establishes a streamlined connection between or library of furniture cases. The parametric or rules-
the customer and the manufacturer and helps the based software will design the total case, unlike many
manufacturer complete orders quickly. Customers CAD programs where each part must be specified.
benefit by receiving a product that more closely meets Changes can be made quickly by the customer, sales
their specific needs. representative, or designer. Customization or configu-
The Design/Build process will help the domestic ration options might include the type of legs, mould-
manufacturer to provide fast delivery of a product ings, doors and door styles, drawers and drawer styles,
that includes many options, such as adding different shelves, partitions, and hardware design, all selected

6 Strategies for the New American Furniture Industry

 Small Table Created in 3-D Software 2-D Support Drawings Created in 3-D Software

Figure 3. Software can present a 3-D picture of the finished design to the customer and provide support drawings to
the manufacturer.

by the customer. Once the customer’s design informa- stock. They will also use quality control in front of the
tion is captured, the software will perform other tasks CNC operation to eliminate defective parts before they
such as ordering parts or hardware selected from an waste CNC time; 3) Design and engineer the parts so
Internet supplier library, or generating a cutlist, buylist, that all machining takes place on one side without flip-
2-D support drawings, sales proposal, and CNC code ping the part on the table when possible; 4) Purchase
if required. and use the appropriate software, taking time to learn
Correct CNC machining can help the Design/Build how to set up the software to match your machine
manufacturer flow parts and components through the configuration and avoid repeated programming errors
plant as quickly as possible, and efficiently flow and that must be corrected at the CNC.
translate information from the order entry process into
instructions on the floor. The accuracy achieved with Stock Materials Program
Design/Build, used in conjunction with CNC machin- The Design/Build strategy requires that parts and
ing, will speed assembly because the parts fit together material be available quickly. This can be accom-
precisely. It is essential, however, that the manufac- plished by implementing a stock materials program.
turer have well-trained employees who understand Narrowing the number of product lines will reduce
the software and hardware capabilities, and that these and simplify raw material inventory throughout the
employees be supported by supervisors who under- plant. For example, the company may keep a lim-
stand the new business strategy. ited number of wood species in stock. When offering
In those situations where CNC machining is part of products containing solid lumber or straight-grain
the process, four guidelines are recommended for suc- panels, a limited stock panel program can be estab-
cessful implementation: 1) Combine operations and lished in which one size of stock panel serves multiple
minimize set-ups by performing as many operations at products and allows for the fast processing of orders.
the CNC as possible. This must be carefully balanced Or a plywood component supplier might lay up faces
because the CNC could become a production bottle- on previously made core stock only when the furniture
neck. The goal is to make CNC technology as flexible manufacturer orders the finished panels. Similarly, the
as possible; 2) To use CNC time effectively, workplace most popular hardware designs can be kept in stock,
design should allow for rapid loading and unloading and customers can use a menu to make their selec-
of parts, dust, and scrap. Pre-positioning jobs and job tions. A set number of finishes will be available, or the
kits may require a planning coordinator to help the manufacturer may offer a wider variety using some
operator with scheduling, materials, tooling, and pro- of the automated mixing systems available to create
gramming. CNC operators can develop and use flex- custom stain finishes.
ible fixturing techniques to minimize set-up time, and Key to the success of the Design/Build manufacturer
should consider using laser projection to pre-position is a focus on profitable and frequently requested prod-

North Carolina Cooperative Extension 7

ucts. The Design/Build manufacturer needs to reduce choice of species, customization options are available
the number of product lines offered by imposing within these constraints.
self-limits that define its operating parameters. This is, An example will help clarify the purpose of a com-
in effect, implementing the familiar 80/20 rule, which mon design platform. The customer of the Design/
focuses on the 20 percent of product lines that gener- Build furniture manufacturer can purchase a chest,
ate 80 percent of sales. Typically, companies will add cabinet, table, chair, or whatever is being manufac-
products to but never remove any from their offerings. tured and marketed. The customer can specify width,
Using the 80/20 rule will target and eliminate prod- height, and depth, and change the configuration of
ucts that have a low sales volume, a high overhead shelves, partitions, mouldings, doors, and drawers.
because they are difficult to manufacture, and offer The manufacturer will have previously established a
little future potential. Some business will undoubtedly fixed set of parameters that control how the piece is
be lost, but by carefully selecting a limited number of manufactured: material, joinery, insets, standard draw-
product lines, the manufacturer can focus on those er construction, available mouldings and trim, size
that are most profitable and excel in manufacturing limits, four finishes, and so on. The process is similar
them. to purchasing a Dell computer online, where you can
select specifications from a limited number of options.
Common Design Platform Depending on the product and the market, the pro-
As discussed, customers may be presented an initial cess may be even simpler. A menu of pre-engineered
case from which they can launch their design ideas. designs from which customers can choose the item’s
This gives them a springboard to get started, and it size could enhance the furniture-buying experience.
also provides pre-engineered designs to guide the Today’s furniture showrooms, filled with imported fur-
design process. The software will offer design flexibility niture of similar appearance, are depressing consumer
and constraints, so the manufacturing process is not interest and, as a result, discretionary money that
hampered. Although the manufacturer may limit his could be spent on furniture is being spent on more
product line to a certain style of furniture and a limited exciting purchases.

Figure 4. The Design/Build

Interaction Between the Cus-
tomer, Design, and Manufac-
turing.

8 Strategies for the New American Furniture Industry

Standardization of Parts IV—Using Factory Focused Management
Standardization of parts will begin during the design Techniques
process. Every designer that serves a company will
agree to use common sizes on some components Does your plant operate according to a schedule?
to lower manufacturing costs. Standard sizes will be Is it a good schedule? Do you know if your factory
offered for units and components so the product will be profitable this month? If you cannot answer
can be manufactured in a timely fashion using fewer “yes” to these questions, you should learn about Profit
inventory dollars. A standard-sized rail width will ac- Scheduling.
commodate very different products such as tables, The previous three sections have discussed strategies
face frames, and chairs. Similarly, a standard selection and methods that the new domestic furniture industry
of moulding will provide limited variety that can be will employ. This section will focus on Factory Focused
inventoried. Designers will need to understand that Management, a strategy that embraces three key
standardization is driven by the need to service the concepts:
customer quickly. However, nothing precludes designs
that require non-standard items, but the customer 1) Using production scheduling to manage profit;
should understand that extra cost and time might be 2) Balancing manufacturing, engineering, and sales;
incurred. 3) Superior factory floor management.
Standardization of parts and panels should help
establish processing centers that manufacture these Using Production Scheduling to Manage Profit
common items quickly. Manufacturers should develop A proactive approach to profit management can
cooperative relationships with suppliers to lower costs increase the bottom line of a wood products operation
and delivery times. A simple flow schematic for the significantly compared to the company that waits until
Design/Build strategy is shown in Figure 4. the end of the month to determine profit or loss. Profit
management uses budgeted factors for weekly labor
Servicing a Limited Area for Greater and overhead costs, and job material costs to estimate
Profitability weekly expenses based on a production schedule. The
Instead of trying to cover a national market, the De- schedule provides an estimate for sales revenues based
sign/Build operation can service an area that meets its on product prices and sales quantities. These estimates
business goals. It can avoid many of the expenses that for revenues and expenses can help calculate weekly
former large furniture manufacturers carried, includ- profitability.
ing expensive market showrooms, independent sales Profit management systems can work well in a wide
representative commissions, and large inventories for variety of wood products operations where there are
raw materials, work-in-process, and finished goods. clear beginning and ending dates for jobs. This system
The lowest marketing and distribution costs will be can be started with the following information:
incurred by focusing on a limited, local service region,
and the product can be sold at the full retail price. 1. Revenues—average daily revenue figures can be
A 100-mile service area radius in a medium-density obtained by dividing the job’s total revenue dollars
population area in the eastern U.S. should be more by the number of schedule days the job requires.
than sufficient to support the typical Design/Build 2. Material costs—the average daily materials cost per
business. Two factors should help determine the exact job can be obtained by dividing the total materials
size of the service area. First, the business should cost for the job by the number of schedule days the
identify an area that will generate significant volumes job requires.
of orders. Second, that area should be easily accessible 3. Direct labor costs—the budgeted direct labor dol-
for deliveries and parts replacement or repair. lars per week or the projected payroll dollars can be
In summary, the objective of the Design/Build pro- used to find direct labor dollars per week. For most
cess is to flow information throughout the manufac- wood products operations, the weekly direct labor
turing, purchasing, and assembly process to provide expense should fluctuate little if the schedule is
the customer with a high-quality, customized piece of consistently full.
furniture quickly and at a competitive price. A success- 4. Overhead costs—the budgeted annual overhead
ful streamlined operation requires that information be cost divided by the number of weeks per year will
entered once and that the resulting cutlists, buylists, provide a weekly overhead dollar cost. Total over-
and CNC code be generated without error. head costs for the factory and the office should
be used, although they can be split into separate
expense categories.

North Carolina Cooperative Extension 9

 Example Profit Management $10,000 Per Week Job Capability Company With Expense Control and Scheduled Profitability

Job Revenue Material $ % Materials Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 Week 9 Week 10 Totals
Job 110 $ 14,000 $ 6,720 0.48 $ 10,000 $ 4,000 $ 14,000
Job 111 $ 9,000 $ 3,780 0.42 $ 6,000 $ 3,000 $ 9,000
Job 112 $ 17,000 $ 8,670 0.51 $ 7,000 $ 10,000 $ 17,000
Job 113 $ 5,000 $ 2,300 0.46 $ 5,000 $ 5,000
Job 114 $ 13,000 $ 6,760 0.52 $ 5,000 $ 8,000 $ 13,000
Job 115 $ 6,000 $ 2,880 0.48 $ 2,000 $ 4,000 $ 6,000
Job 116 $ 22,000 $ 9,460 0.43 $ 6,000 $ 10,000 $ 6,000 $ 22,000
Job 117 $ 32,000 $ 14,400 0.45 $ 4,000 $ 10,000 $ 14,000
Revenue $ 118,000 $ 54,970 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 100,000

Expenses
Materials $ 4,800 $ 4,440 $ 4,830 $ 5,100 $ 4,900 $ 5,120 $ 4,500 $ 4,300 $ 4,380 $ 4,500 $ 46,870
Direct Labor $ 1,900 $ 1,900 $ 1,900 $ 1,900 $ 1,900 $ 1,900 $ 1,900 $ 1,900 $ 1,900 $ 1,900 $ 19,000
Overhead $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 30,000
Total Expenses $ 9,700 $ 9,340 $ 9,730 $ 10,000 $ 9,800 $ 10,020 $ 9,400 $ 9,200 $ 9,280 $ 9,400 $ 95,870

Profit $300 $660 $270 $0 $200 -$20 $600 $800 $720 $600 $4,130
% Profit 3.00% 6.60% 2.70% 0.00% 2.00% -0.20% 6.00% 8.00% 7.20% 6.00% 4.13%

Table 2. Scheduling of Job Revenue and Expenses to Project Profit Management.

Profit Management System—An Example: A case- Together, the revenues and costs are used to project a
goods and millwork company projects the next 10 weekly profit.
weeks of orders. The top half of Table 2 lists the jobs This example illustrates a company that is control-
by scheduled completion during the 10-week period. ling expenses and is modestly profitable. In the second
The projected revenue based on accepted bids is example in Table 3, poor management has allowed
shown mid-table, and in the lower half of Table 2 bud- materials costs to increase by 2 percent on each job,
get information is used to estimate the weekly expens- and direct labor and overhead expenses each in-
es for materials, labor, and overhead. Direct labor is creased by $100 per week. The result was a significant
shown as a constant dollar amount per week based on erosion of profitability so that now the company is
recent payrolls, and overhead costs are based on the operating at near-zero profit.
company’s budget. These expenses could be adjusted A profit schedule can be customized to fit any
up or down based on knowledge of actual expenses. manufacturing situation. Companies do not necessar-

Example Profit Management $10,000 Per Week Job Capability Company With Profitability Problems

Job Revenue Material $ % Materials Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 Week 9 Week 10 Totals
Job 110 $ 14,000 $ 7,000 0.50 $ 10,000 $ 4,000 $ 14,000
Job 111 $ 9,000 $ 4,000 0.44 $ 6,000 $ 3,000 $ 9,000
Job 112 $ 17,000 $ 9,000 0.53 $ 7,000 $ 10,000 $ 17,000
Job 113 $ 5,000 $ 2,400 0.48 $ 5,000 $ 5,000
Job 114 $ 13,000 $ 7,000 0.54 $ 5,000 $ 8,000 $ 13,000
Job 115 $ 6,000 $ 3,000 0.50 $ 2,000 $ 4,000 $ 6,000
Job 116 $ 22,000 $ 10,000 0.45 $ 6,000 $ 10,000 $ 6,000 $ 22,000
Job 117 $ 32,000 $ 15,000 0.47 $ 4,000 $ 10,000 $ 14,000
Revenue $ 118,000 $ 57,400 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 100,000

Expenses
Materials $ 5,000 $ 4,667 $ 5,039 $ 5,294 $ 5,092 $ 5,308 $ 4,727 $ 4,545 $ 4,602 $ 4,688 $ 48,963
Direct Labor $ 2,000 $ 2,000 $ 2,000 $ 2,000 $ 2,000 $ 2,000 $ 2,000 $ 2,000 $ 2,000 $ 2,000 $ 20,000
Overhead $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 3,100 $ 31,000
Total Expenses $ 10,100 $ 9,767 $ 10,139 $ 10,394 $ 10,192 $ 10,408 $ 9,827 $ 9,645 $ 9,702 $ 9,788 $ 99,963

Profit -$100.00 $233.33 -$139.22 -$394.12 -$192.31 -$407.69 $172.73 $354.55 $297.73 $212.50 $37.50
% Profit -1.00% 2.33% -1.39% -3.94% -1.92% -4.08% 1.73% 3.55% 2.98% 2.13% 0.04%

Table 3. Poor Control of Materials, Labor and Overhead Expenses Erodes This Company’s Profitability.

10 Strategies for the New American Furniture Industry

 Bid Projection Scheduling a 5 day Completion Time Actual Number of Days to Complete the Job
Job Bid $ Avg $/ Day 4 days 5 days 6 days 7 days
Revenue $ 12,500 $ 2,500 $ 12,500 $ 12,500 $ 12,500 $ 12,500
Expenses
Materials $ 5,000 $ 1,000 $ 5,000 $ 5,000 $ 5,000 $ 5,000
Direct Labor $ 2,813 $ 563 $ 2,250 $ 2,813 $ 3,375 $ 3,938
Overhead $ 4,063 $ 813 $ 3,250 $ 4,063 $ 4,875 $ 5,688
Total Expenses $ 11,875 $ 2,375 $ 10,500 $ 11,875 $ 13,250 $ 14,625
Job Bid Profit $ 625 $ 125 $ 2,000 $ 625 -$750 -$2,125
% Profit 5.0% 16.0% 5.0% -6.0% -17.0%

Table 4. Bid Projections Based on Allotted 5 Day Completion Time Compared to Actual Number of Days to Complete
the Job.

ily have to use a constant dollar amount per week for engineering, or on the manufacturing floor.
expenses. They can use amounts that range up and Once a bid has been awarded, huge amounts of
down based on expectations of expenses associated time may be lost because the architects or job owners
with specific jobs. Given the ease and availability of are slow to select materials and colors. They mistaken-
computer spreadsheets, managers and owners should ly believe that because the job is not due for months,
be projecting their profitability and communicating they have plenty of time to decide.
the bottom line to sales and manufacturing. The engineering department of the casegoods man-
The profit scheduling method can be adapted by ufacturing company must push to obtain the required
companies that are accustomed to short order times. information from the buyer or architect to avoid
The following example illustrates the importance of rush jobs in the shop and additional manufacturing
using job information to set production schedules in costs and disruptions. When the bid is won, a quali-
advance and vividly points out that profitability de- fied engineer should go through the job and make a
pends upon completing jobs on time. list of needed information such as material selection,
In the example shown in Table 4, a shop bids a field dimension, color, and hardware, and send this
$12,500 job, estimating that it will take 5 days to com- list weekly to the buyer with its current status. A bold,
plete. This shop has 5 employees and annual average large-type disclaimer on the cover status sheet should
sales of $600,000. The manufacturing expenses for this state “THIS JOB HAS NOT RECEIVED COMPLETE,
job include $5,000 for materials, $2,813 for labor, and REQUIRED INFORMATION AND IS NOT ON TRACK
$4,063 for overhead. The job is bid with a 5 percent FOR ON TIME DELIVERY.” When job information is not
profit. Table 4 also shows that the job’s profitability de- in the hands of the shop, the job is stalled, and the
pends upon the shop’s ability to finish on time or early. responsibility for delaying progress should go back to
The right side of Table 4 shows a large difference in the buyer or architect.
profitability between finishing one day early (16 percent On the manufacturing floor, preplanning should
profit) and finishing one day late (6 percent loss). The estimate time by work center. This allows the manager
penalty for running beyond the scheduled completion to move the crew as required and avoids what should
date is $1,375 per day, consisting of $563 in direct be a part-time job from becoming a full-time job.
labor and $813 in overhead. Thus, there is a reward for There should be a pre-job meeting with the crew to
finishing early and a penalty for finishing later, or for review the schedule so they can discuss any issues that
letting the schedule have gaps. would prevent on-time completion. Floor employees
should have access to the schedule and be asked to
Balancing Sales, Engineering, and contribute ideas that will help the shop stay ahead of
Manufacturing schedule.
Casework and millwork companies often fail to send The modern factory has examined flow of product
the job to the manufacturing floor in time to meet the through their operations and made adjustments to
delivery date. Even when a company wins a bid a year minimize material handling and set-up time. Many
in advance, the shop typically must rush to complete companies benefit by adding gravity (non-powered)
the order on time! Why is this so? The cause varies roller conveyors that bring discipline to the manufac-
among companies and may have roots in either sales, turing floor so that the oldest orders are processed first

North Carolina Cooperative Extension 11

 and lost parts are minimized. New or retrofitted equip- Superior Factory Floor Management
ment provides flexibility from job to job and helps The modern manufacturing factory, in addition to
minimize bottleneck impacts. production scheduling and balanced manufactur-
Traditionally, engineering has been a consistent ing techniques, will also employ superior factory floor
bottleneck in the casegoods industry. After the sales management strategies. Two important concepts are
department generates orders, manufacturing opera- to 1) eliminate unnecessary layers of management and
tions must wait because the job has been delayed 2) eliminate unnecessary paperwork. The old factory
in the engineering department. Recent advances in model often had excessive middle management layers
computer design software and databases have im- that added costs to overhead from unneeded support.
proved engineering productivity, but unless enough Eliminating some of these layers results in a much flatter
skilled engineers are provided, delays will continue. As management structure and requires hiring highly quali-
technology simplifies manufacturing, more resources fied, self-directed people and compensating them with
should be allocated to the engineering department a rewarding and attractive work environment and com-
to input design information into the design software petitive wages, all of which will benefit the company
for manufacturing support. It is critically important in the long run. Paperwork on the factory floor can be
that the engineering function be properly staffed and eliminated with multiple computer stations that contain
managed to achieve the needed productivity and also the company’s production schedule. This simple infor-
to create a balance between sales, engineering, and mation system is not supposed to be an MRP (Material
manufacturing. Requirements Planning) or ERP (Enterprise Resource
After understanding the power of profit scheduling Planning) information system that tracks every mate-
and the impact that early or late job completion can rial move and labor unit. Instead, it is simply a replace-
have on profitability, how do you determine which ment for the existing paper system that all plant leaders
jobs to bid on? The sales function plays a key role in use. By sharing the leaders’ information, the company
determining whether profitable jobs are sent to the benefits and information is transferred much more ef-
factory floor. ficiently. All employees will have the current schedule,
Bids can be evaluated based on sales productivity. drawings, and instructions from the production sched-
In the following example, two jobs are bid with the uler and management.
fewest number of shop days projected. The number
of shop days estimated is considered accurate and
reflects the amount of work needed to complete the V—Linking Manufacturing and Marketing
job properly. An analysis of both jobs shows a large
difference in productivity per employee. Although Job As noted in the first section, domestic manufactur-
2 will keep the shop busier for a longer period of time, ers have the advantage of being located in a large and
Job 1 is a higher quality job in that it generates higher affluent market. The new furniture industry will likely
annual sales revenue if sustained. The focus is on cost consist of relatively small companies that have more
control and running jobs as quickly as possible. By direct contact with their customers than today’s big
keeping the job pipeline full of high-quality jobs, an box furniture stores or even yesterday’s domestic, but
excessive percent profit is not required, which in turn now defunct, large manufacturers.
will help win bids. This is a key business leverage point Just as the modern manufacturer will operate the
for the small job shop. Gaps and overloads in the factory differently than in the past, marketing will be
schedule should be controlled as much as possible by different. The new manufacturing process will be more
the sales department, who in turn should be con- closely connected to the customer, essentially with the
trolled by management. market pulling the product out of the factory. For fur-
niture manufacturing, this represents a revolution, not
just an innovation. Small companies who cannot af-
Breakdown Job 1 Job 2
ford the high overhead of a High Point showroom will
Job Bid $ $ 87,000 $ 92,000
be able to address the individual product and service
# Company Employees 10 10
needs of their customers much more readily.
# Shop Days 12 18 The following are marketing advantages the new
Avg. $/Shop Day $ 7,250 $ 5,111 furniture manufacturers can use, based on their
Annual $ Sales/Year $ 1,740,000 $ 1,226,640 customer knowledge, regional presence, sales force
Labor Productivity/Employee $ 174,000 $ 122,664 development, and service capability.
Customer Knowledge. New furniture manufactur-
Table 5. Evaluating Bids Using Per Employee Productivity
ers will devote more attention and support to their
Measurements.
12 Strategies for the New American Furniture Industry
marketing program. Domestic furniture manufacturers delivery and service. The manufacturer may want
will commit significantly more resources to developing to own retail stores in growing metro areas (such as
products that meet the needs of their customers. In- Charlotte and Raleigh in North Carolina). This would
stead of copying the innovators at the last market, the help develop brand recognition and could effectively
new furniture manufacturers will make new products eliminate the high markups of high-priced imported
that were not available at last market and meet the furniture retailers and provide a more competitively
demand for high quality, fast delivery, and competitive priced product.
pricing. The manufacturer will offer a wide variety by Sales Force Development. Though it is common for
using flexible designs from which the customer will a furniture company to use both company and com-
select readily available options that allow choices in di- mission sales representatives, the modern manufac-
mensions, finishes in stain or paint, hardware, mould- turer must be proactive in the marketing process.
ing styles, and carvings. The well-run factory will not The manufacturer must fully support any commission
only provide a high-quality product with competitive representatives that the company hires and ensure
pricing, but good management controls will allow that the commission sales representatives actively sup-
lead personnel to conduct external market research port the company’s goals. If sales are insufficient, then
to improve product engineering and manufacturing. prompt action is required.
This is a tremendous advantage over companies that Servicing the Market. Obtaining repair parts quickly
moved offshore and disconnected their manufacturers presents a serious problem for imported furniture
from product and manufacturing innovations. retailers. Domestic casegoods retailers who solve the
Market research can uncover large niche markets parts problem will realize a huge market advantage.
seeking a different look from that of imported furni- If a domestic manufacturer claimed to be able to ship
ture. For example, imported casegoods tend to have out repair parts in a week, the entire retail furniture
lots of mouldings, carvings, and distressing that give network would notice.
an antique look—and also hide shipping damages. It will not be a surprise, therefore, that the first in-
To many American customers, much of the imported novation is to cultivate a “yes” attitude toward cus-
furniture looks “busy” and is not what they prefer. tomers and retailers. Marketing innovation focuses on
Domestic manufacturers could pursue a simpler look. understanding the market, developing a strong service
Another opportunity lies in the growing interest in relationship with the retailer, and having a strong, pro-
sustainable woods. Furniture manufactured overseas active marketing effort and presence in the region.
might contain a high percentage of endangered tropi- In summary, today an opportunity exists for ener-
cal woods. There will be a niche market for furniture getic entrepreneurs or existing casegoods manufactur-
that is marketed as containing woods from the sustain- ers to produce high-quality, customized casegoods
able, temperate hardwood forests in North America. in the United States that will offer strong bottom-line
North Carolina’s long history of making furniture profitability at high sales levels. Two-week turnaround
and cabinets began with simple adaptations of fur- from receipt of orders can be achieved by streamlining
niture from Europe. The stories associated with such management, manufacturing, and marketing and will
utilitarian yet beautiful pieces offer a branding oppor- provide customer service and company profitability.
tunity. Furniture could be readily modified to accom-
modate today’s modern lifestyles.
Regional Presence. Domestic casegoods manufactur- VI—New Growth Opportunity for Furniture
ers need strong regional sales to be profitable. Manu- Manufacturers
facturers will need to devote marketing resources to
generate a strong retail network in nearby states and At the April 2008 High Point Furniture Market, N.C.
move product onto showroom floors. A consistent, State University’s Wood Products Extension operated
long-term effort will be required to regain floor space a booth to promote less-used (lower valued) U.S. east-
and consequently maintain and increase market share. ern hardwood lumber for furniture manufacture. The
Manufacturers might need to develop nontraditional booth displayed a dozen furniture items made of these
ways to market their casegoods. Marketing directly eastern hardwood species: beech, sycamore, black-
to interior designers would be one approach. Using gum, sweetgum, tupelo, wormy red maple, and hack-
the Internet as an advertising tool is a must in today’s berry. The project’s goals included promoting these
world. At the other extreme is an Internet site where lower-priced U.S. hardwoods, as well as looking for the
the customer “self designs” within limitations speci- next business opportunities for furniture manufactur-
fied by the manufacturer. Internet sales are certainly ers. Extension specialists found an interesting growth
possible, but companies need a local agent to handle opportunity when several importing retailers and

North Carolina Cooperative Extension 13

distributors asked them to find U.S. contract furniture manufacturers should devote significant resources to
manufacturers to replace current Asian manufacturers help employees acquire furniture-making skills, includ-
because of excessive inventory dollar investments, late ing design and engineering, equipment operation and
delivery, lack of repair parts, and quality issues. maintenance, wood products, business and manage-
For one distributor of imported furniture, special- ment, and employee relations. U.S. furniture manufac-
ists located a U.S. manufacturer capable of providing turers should reduce the range of their operations to
the same products using domestic wood species. The decrease the financial resources needed for facilities,
importer reported that the U.S. manufacturer of- equipment, and inventory. Having a strategy that is
fered comparable pricing, lower order quantities, and focused on a limited number of furniture supply chain
shorter delivery times. activities will result in lower operating costs than par-
U.S. contract furniture manufacturers have an excel- ticipating in many furniture supply chain roles.
lent opportunity to increase sales and profitability by
targeting retailers and furniture distributors to replace Defining Business Strategies for New Furniture
imported furniture with domestically produced prod- Businesses
ucts. It is reported that at the April 2008 High Point The many tasks required to build furniture products
Market, there were approximately 2,500 exhibitors include: creating a furniture design, converting that
showing wares that consisted mainly of imported design through an engineering process, making com-
furniture and furniture accessories. A contract furniture ponents and assembled furniture, acting as a furniture
manufacturer follows a focused business strategy that distributor, and selling retail furniture to consumers.
includes design, engineering, and manufacturing, but The traditional, vertically integrated large manufactur-
not distribution or retail sales. The contract furniture er is being replaced by many profitable niche players.
manufacturer can avoid the high marketing costs as- These are summarized in Table 6 in terms of past, cur-
sociated with selling directly to retailers, instead selling rent, and future models. These supply chain segment
to distributors, and thus operate with less investment players include:
dollars and resources than the traditional furniture
manufacturer. 1. The independent furniture designer who cre-
ates innovative furniture designs and sells these
Focused Strategies designs to others.
Many remaining U.S. furniture manufacturers have 2. The support engineering firm that translates the
downsized operations and no longer make all the designer’s ideas into a language that manufac-
products they once produced. Some companies have turers of components and furniture can use to
lost plant and equipment resources, while others are process parts.
losing experienced employees. In the future, furniture 3. The component manufacturer who buys raw

Past Large Today’s U.S. Furniture

Future U.S. Furniture Model
Activity U.S. Furniture “Manufacturer”
(as proposed by authors)
Manufacturer (in name only)
Furniture Design U.S. US U.S. Independent Designers and
Distributors
Furniture Engineering U.S. US or Offshore U.S. Component and Independent
Contract Furniture Manufacturer
Wood Components Mfgers U.S. Offshore U.S. Independent Component
Manufacturers
Furniture Manufacturing U.S. Offshore US Independent Contract Furniture
Manufacturers
Furniture Distribution U.S. U.S. U.S.

Furniture Retailing U.S. Independent US Independent Retailers US Independent Retailers

Retailers

Table 6. Furniture supply chain activities and their location in past, current, and future business models.

14 Strategies for the New American Furniture Industry

 materials and produces blanks and parts ready for designers to meet the specific needs of high-
assembly. volume customers. The contract furniture manu-
4. The furniture manufacturer who processes raw facturer makes products to fill purchase orders
materials and purchased components into as- and normally would not stock finished goods as
sembled furniture items. inventory. Thus, the contract furniture manufac-
5. The distributor who buys furniture from manu- turer would typically operate in a make-to-order
facturers and distributes to retailers. The furniture model.
distributor often performs the design functions for 5. The furniture manufacturer that can create its
the manufacturers. own designs or use those of an independent
6. The furniture retailer who has the storefront and designer or those of a customer, distributor, or
supporting outlets such as the Internet to sell fur- retailer. The furniture manufacturer in the future
niture to the buying public, as well as to contract is much more likely to buy components instead of
furniture buyers. having the plant and equipment resources to pro-
These six roles in the furniture supply chain can be cess the raw materials into parts for assembly. The
combined into many variations to meet the needs of furniture manufacturer can focus on mass-market
the market. The following are typical business models: products that create some volume and economy
in pricing. Furniture manufacturers could stock
1. The independent designer who receives either a a small amount of inventory as finished goods
flat fee or a commission based on sales. ready for immediate shipment. Perhaps the best
2. The design-build company that combines a business model for a furniture manufacturer is to
design office where customers can meet with de- abandon the functions that distributors and retail-
signers, with a small shop manufacturing opera- ers better serve and focus more on running the
tion to make the furniture on site. manufacturing operations.
3. The component manufacturer who converts raw In the future, the strongest business models in terms
materials into blanks and finished parts ready for of profitability will not be the traditional vertically inte-
assembly. grated furniture manufacturer but one of the previous-
4. The contract furniture manufacturer that can ly discussed models that are more focused and require
create its own designs to sell to contract buy- far less investment in plant, equipment, and inventory
ers, distributors, and retailers, or cooperate with resources.
Strategies for the

New American Furniture Industry

North Carolina Cooperative Extension 15

 Phil Mitchell and Harry Watt
North Carolina State University
Raleigh, North Carolina

Published by North Carolina Cooperative Extension

100 copies of this public document were printed at a cost of $400.00 or $4.00 per copy.

Distributed in furtherance of the acts of Congress of May 8 and June 30, 1914. North Carolina State University and North Carolina A&T State University commit themselves to positive
action to secure equal opportunity regardless of race, color, creed, national origin, religion, sex, age, veteran status or disability. In addition, the two Universities welcome all persons
without regard to sexual orientation. North Carolina State University, North Carolina A&T State University, U.S. Department of Agriculture, and local governments cooperating.

3/09—VB —GM AG-712W

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