HIGH POINT — It’s been months since severe winter weather knocked out the foam chemical producers in the Gulf Coast region. Pipes have thawed, temperatures have climbed to the other extreme. The chemical producers have long been back online.
And yet the industry’s supply of foam for mattresses and upholstery production remains wanting. How can that be?
The answer, it appears, has less to do with what the industry might call “normal” supply of foam and chemicals for foam than with the relentless surge in demand for product that has yet to abate. Think of it this way, says Steve Rusing, executive vice president and president of U.S. sales for Tempur Sealy International: If the chemical suppliers are running at 100% capacity (some say they are, some say they’re not quite there yet), industry demand continues to run at 120% or 130% of that capacity. The chemical suppliers simply have not been able to catch up.
“The (February) storm certainly was very disruptive because the supply chain has no cushion in it,” Rusing said (no pun intended). “It was really hand-to-mouth. That’s why there was so much pain associated with the storm.”
And it’s still hand to mouth.
Industry analyst Jerry Epperson said he doesn’t know of anybody who was expecting industry foam shortages to be over any earlier than June. And from what he’s read and from the executives he’s talked to in the bedding and upholstery manufacturing segment, all are saying it will be September at the earliest and probably year-end “before we get back to the levels they were (supplying) before those storms hit in February.”
Even if chemical producers are operating at 100% capacity, they’re not meeting those pre-storm capacity levels, which Epperson said were more like 120% of capacity as producers were working their plants over time in an effort to catch up.
“Everything being produced as chemicals is going really quickly into foam, getting shipped right to the mattress manufacturer and being consumed in the manufacture of new product,” said Ryan Trainer, president of the International Sleep Products Assn.
“In a normal situation, you’d have some cushion of inventory at certain places along the supply chain, and you just don’t have that cushion — at this moment, at least.”
And on the demand end, it’s not just the furniture and bedding industries clamoring for more. It’s the appliance industry, the automotive industry, the medical field. They’re all demanding high volumes of a product with no inventory and for which the raw materials are still a bit in short supply. “So all of those factors are weighing on this,” Trainer said.
What’s more, on the mattress side, the industry is feeling pressure in another way. Not only is it seeing strong consumer demand, but the series of anti-dumping petitions brought against seven countries by domestic producers has pretty much dried up mattress imports from the large exporting countries.
“So not only is the consumer demanding a lot more product, but imports are down as well,” Trainer said.
Not everyone is experiencing the foam supply pinch, but even Ashley, reporting its in good shape again, recognized the fragility of the situation.
“We have great suppliers and terrific relationships with them, and we have been out of the woods and doing well,” said Rick Coppola, Ashley’s president of sales for the U.S. and Canada. “That’s not to say that if there was to be another hiccup we wouldn’t have an issue because there is really no safety stock in the supply chain.”
At one point this year, TSI’s Rusing was more optimistic foam supply constraints would have subsided by now. During a videotaped interview for a Furniture Marketing Group session back in March, he said he thought the supply would be back on track in time for Memorial Days weekend promotions and that was despite yet another glitch that had just arisen — when foam supplier Carpenter was temporarily crippled by a cyber attack.
But the industry’s supply troubles have proven nearly impossible to forecast, so Rusing and others are unwilling to take a new stab at guessing when the misery will end.
In late May, TSI circulated a letter to retailers noting, “While our foam supply and production capacity has been restored to Pre-Presidents day levels, as expected, the substantially-increased demand and continued allocation of foam by suppliers has strained the capacity of our Sealy and Stearns & Foster supply chain, impacted our ability to meet current demand levels, and resulted in an increased backlog.”
That led the company to take some unusual actions in an effort to reduce the backlogs. Among other things, it pushed back the launch of new Sealy Posturepedic Plus Hybrid and foam products from after Labor Day, as previously planned, to the first quarter of next year after President Day. It also gave retailers more time to order the old line before transitioning over to the new.
In addition, TSI adjusted its holiday offers, starting with Labor Day by removing some Sealy hybrids from the offer and, among other things, cancelling a Fall Savings Event that was planned for October. Its advertising budget isn’t shrinking, but the focus has shifted to brand awareness. Stearns & Foster, for example, is still working with the biggest media budget in its history — 11 weeks of national TV, but the promotional tags at the end of the spots have been pulled and the focus is now primarily on brand building.
“We’re in a supply chain-constrained environment, and it just didn’t seem prudent to go full-out on promoting those products when we’re working through a backlog,” Rusing said. That would set up a scenario where you’re disappointing consumers and retailers.”
While Rusing no longer wants to guess when the foam shortage will end, he did say there are really only three ways the industry gets there. First, consumer and retailer demand would need to slow, giving all the producers down the line the breathing room they need to catch up. Another way to get there involves expanding production capacity of the domestic chemical supply. But the fruits of that expensive initiative are not expected until some time during the first quarter of 2023.
And the final path to sufficient supply involves producers like TSI sourcing chemicals for foam from overseas, where they are a bit more plentiful, and, indeed, TSI does do this. But even this is proving problematic with its own set of hurdles, including container capacity issues, clogged ports and truck driver shortages.
ISPA’s Trainer agreed the transportation shortages are making the situation worse, noting, “Even if you can get the chemicals made, getting them to the foamer and then getting the foam to the manufacturer is still much more challenging than pre-Covid. The trucking and rail markets are absolutely crazy from what members are telling me.
Trainer also declined to forecast when he thinks things will turn around, saying, “I’m not that brave.” Things are slowly returning to normal, he said, but at the same time, now the industry has to deal with hurricane season, which has arrived earlier than expected. The Gulf Coast region, where most of the foam chemicals are produced, is particularly vulnerable. Another disruption will just amplify the problem.
“Guesses right now are hazardous,” he said. “From my daily contact with manufacturers, the foam industry and the chemicals industry, I think everybody is trying really hard to bring production back up to full capacity as quickly as they can, meet immediate customer needs and then try to build some inventory both on the chemical side as well as on the foam side so we can have a more efficiently functioning market again.”