How ERP Software Impacts the Furniture Industry
Furniture manufacturers gather twice a year in a small town in North Carolina (USA) called High Point. Outside of the Spring and Autumn expo’s, High Point is just another sleepy town in the South, a reminder of when goods were made with skills passed down through generations of crafts(wo)men. However, during “Market”, it is a cosmopolitan hub of designers, decorators, distributors, manufacturers, and collectors. High Point comes to life with thousands of people arriving from all over the world to discuss one thing – furniture.
Walking through the halls of the International Market Center, 11 stories of both small and sprawling showrooms, is enough to give one an idea of the gamut of the furniture business today. The first floor counts on innovative new designers, either in concept or materials, who are trend leaders and the first wave of “the next big thing”. Thereafter, each floor going up is a blend of modern luxury, contemporary practicality or traditional sturdiness. Vendors from Italy, USA, China, Singapore, Vietnam and so on display their inventory in showrooms which are either made to feel like you’re walking into your new home, or stacked as if in a shopping center just for sofas, tables, consoles, rugs and décor.
Withum Advisory attended the market to understand how best to serve our Furniture industry clients. As a result, we were able to appreciate that the Furniture industry as a whole is going through some massive changes. For example, have you recently bought a rug from Wayfair, or a couch for less than $600 from Rooms To Go? If so, your purchase is an example of the change in this industry which is placing a fair amount of burden on furniture manufacturers and suppliers. Here are the highlights of current changes in the furniture industry.
1. Delivery Time
Our consumer shift into a “now” mentality has pushed the demand for shorter delivery times of our purchases into an expectation that every vendor must be able to meet to stay competitive. Similar to Amazon’s Prime Delivery standard -either today or tomorrow, or the day after, even items like furniture, refrigerators, and other bulky items, are expected to be available on demand.
2. Cost Reduction
Furniture was once an item families purchased once in a lifetime, and sometimes passed on for generations. Dining room tables and bedroom sets were handcrafted and considered an investment for new homes. The problem is that “handcrafted” is expensive, and our priorities for family budgets have also changed. The furniture industry has adapted by offering lower priced items made of cheaper raw materials (plastic, pressed wood, metal) and with less manual labor required. Currently, for furniture manufacturers to stay competitive in terms of price, items are being manufactured overseas. We talked to many manufacturers or importers who source furniture from China, Singapore, Vietnam, and Thailand. The reason is simple, the cost of labor and cost of raw materials.
3. eCommerce/Online Shopping/DropShipping
Much of the furniture sold today is purchased online, whether it’s direct-to-consumer, or via a distributor. Online retailers such as Amazon, Target, Walmart, Sam’s Club, Rooms To Go, Macy’s, etc… all offer online catalogs with shipment direct to your home. However, not all these retailers actually have the merchandise in stock in a warehouse. So, in order to match the consumer to an available product, a lot of “backend logistics” is required. And the problem is the software and technology required to make these products available are relatively new to the vendors themselves. Whereas traditionally, a salesperson handled a wholesale order that was delivered to a warehouse and then sold on a display floor. Today, it’s possible the retailer never sees the inventory item and it’s sold while the shipment is still in transit on the ocean.
4. Inventory Control
Which brings us to the issue of tracking inventory. When volumes increase exponentially to reach more buyers, added to goods being sold while in transit, the burden of keeping track of inventory is exponential. Again, some retailers were able to track their inventory on spreadsheets or with simple accounting software. But these days, to remain competitive, and to be able to address points 1, 2 and 3 above, a vendor must have a robust tracking system like an ERP. There is just no other way of responding quickly to the ever-changing orders, inventory status, and supply chain demands.
How ERP Software Can Help?
An Enterprise Resource Planning (ERP) software system includes at its core an accounting package, which allows the business to track financial transactions such and buying and selling. These are your simple Purchase Orders (PO) and Sales Orders (SO). But, ERP’s also includes add-on modules that allow for a variety of other functions that are critical to our furniture manufacturers/distributors. These modules include:
- Inventory tracking – tally inventory on hand, back ordered, reserved, in transit, etc.
- Raw materials tracking – tally raw materials procurement, availability, automatic levels, etc.
- Manufacturing tracking – including BOM (Bill of Materials) and Assemblies, etc.
- Time Management tracking – used in projects and for billable by piece or hour type scenarios
- Delivery/Logistics Management – used to track ocean freight, trucks, containers, and packages.
There are many more modules, integrations, and extensions that can be added to an ERP, but those listed above address the particular needs of the furniture industry.
Competition in the sales and delivery of merchandise in the USA is expected to increase quickly in the next few years as it becomes easier for new brands and vendors to enter the marketplace. It is certain that only those who can adapt to the increasing speed and demands of the market will be able to survive. Technology already has been an incredible differentiator and will continue to be a critical component of success.
Author: Christina J. Barea | [email protected]
