If you’re like a lot of purchasing officers or housing professionals in higher ed, you might be scrambling to ensure that you can fulfill your purchasing requirements for 2022.
And that makes sense. Furniture supply chains have experienced a perfect storm over the last two years. The global pandemic and its cascading variants. The blockage at the Suez Canal. The US-China trade wars.
Even climate change. For example, who knew that the storms in Texas that froze the power grid earlier this year would also put a deep chill on all the fabrication of foam used in upholstery.
All of these factors are intersecting with soaring demand and a pandemic-inspired labor crisis dubbed by some as The Great Resignation or the Big Quit.
And now, the war with Ukraine is escalating costs as transport routes are abandoned, oil prices surge, and “war risk surcharges” among carriers increase.
You’ve no doubt seen the headlines every other day in leading media outlets trumpeting the disruption. Here’s a recent sampling.
Supply chain chaos is causing ultra-long furniture-shipping delays, frustrating people who just want a comfortable place to sit down. – Bloomberg Wealth
Glimmers of hope emerge in the supply chain nightmare. – CNN
At a Time of Crisis in the Supply Chain, Workers Have Enormous Power. – Jacobin
Ukraine war having ‘global impact’ on supply chains, Maersk says – Financial Review
But there is some good news. For one, there are signs that supply chain disruptions may ease later in 2022.
More importantly, there are steps you can take to insulate your institution from the stressors shaping the supply chain stoppage.
But before we illuminate those steps, let’s define our terms.
What is a supply chain anyways and why should you care? And why is it having such an adverse impact on furniture manufacturing?
Why do supply chains matter?
Let’s start with this definition from Investopedia.
A supply chain is the network of individuals, companies, resources, activities, and technologies used to make and sell a product or service. A supply chain starts with the delivery of raw materials from a supplier to a manufacturer and ends with the delivery of the finished product or service to the end consumer.
When it comes to furniture, that means wood and steel for raw materials, metal hardware, steel, wood, plastic laminate, and components, etc.
There is also the who and the how of the supply chain. Investopedia refers to these as the entities and the functions:
The entities in the supply chain include producers, vendors, warehouses, transportation companies, distribution centers, and retailers. The functions in a supply chain include product development, marketing, operations, distribution, finance, and customer service.
In general, the shorter and more efficient the supply chain—i.e. the fewer suppliers and steps involved—the faster customers can receive their product or service. Shorter supply chains tend to be more sustainable as well.
Long Supply Chains Are Vulnerable
In the context of furniture, many companies import some or all of their raw materials from outside the United States. Much of it comes all the way from China or Southeast Asia.
In an article for Bloomberg, Bain consultancy’s Joe Terino who leads their supply chain division estimates that “some 40% of the world’s furniture is made in China, and the pandemic has added pressure to pain points in the path that furniture takes from the factory floor to a family living room.” Terino adds that, “A big part of understanding what’s going on is that supply chains tend to be very long.”
One example of this is rubberwood. Grown on monoculture farms in Asia, it’s becoming a staple in the furniture industry, but it has to travel thousands of miles to get to America.
That’s just one example of how supply chain disruptions are impacting the furniture industry. The long supply chain creates a real vulnerability.
Short Supply Chains Are Resilient (and Sustainable)
So what does a resilient supply chain look like? And how can your institution ensure that you work with furniture companies with short supply chains?
The primary goal of supply chain management (SCM) is to build supply chains that are as efficient and economical as possible. One way to do that is to create a short supply chain with as few steps and intermediaries as possible.
In a 2020 Forbes article The Coronavirus Pandemic Showed Why We Need Shorter, Simpler Supply Chains, Michael Mandel points out that “one thing is clear: the U.S. economy needs shorter supply chains that can react more quickly in crisis situations.”
What Steps Should You Take?
And that leads us to a key takeaway.
During a global supply chain crisis, you should look for companies with shorter domestic supply chains. And even better, look for companies who own, control, or directly manage the majority of their supply chain.
According to Investopedia, “By managing the supply chain, companies can cut excess costs and deliver products to the consumer faster.” Those cost savings often get passed to you, the customer.
And short supply chains tend to be sustainable supply chains—another benefit for your school. They are more sustainable and mitigate your carbon footprint. According to Mandel:
Shorter, simpler supply chains also help with sustainable production. Long and complicated supply chains require more air and water transportation, generating more greenhouse gases. International shipping alone, especially container ships, accounts for about 2 percent of all carbon dioxide emissions, about the same as Germany.
Furniture companies who own or control their supply chain aren’t impervious to all supply chain issues, but they’re going to be more resilient and agile.
And here’s a second takeaway.
Information flow is another key part of the supply chain. Consider building a direct relationship with a furniture manufacturer because it can facilitate quick decisions and more efficient information flow.
Whatever your unique situation, it’s never too late to peek behind the curtain and get a better understanding of the supply chains that you rely on.
Best case scenario, you learn that your furniture comes from a well integrated domestic supply chain. At worst, you’ll find out that much of the supply chain behind your furniture starts in Asia.
But the good news is that now you know, and you can take the necessary steps to future proof your furniture procurement process.
Are you experiencing supply chain issues with your furniture? Do you have more questions? If you do, feel free to write to us at [email protected]
We originally wrote this article for the Massachusetts Higher Education Consortium (MHEC). MHEC is a not-for-profit Group Purchasing Organization. They have been creating diverse contracts for their not-for-profit members for over 40 years. MHEC contracts make purchasing simple. Their 2000+ members come from Higher Education, K-12, Municipalities (Cities and Towns), Libraries, and other sectors. It’s easy to join, and membership is free.