Furniture importers expect longer lead times as Covid lockdown could drag into September
KUALA LUMPUR, Malaysia – When the Malaysian government extended a Covid-19 related shutdown here in late June, it said it would not be lifted until cases went below 4,000 a day.
Cases on Aug. 11 topped 20,780, for a seven-day average of 19,634.
Based on the previous target, industry officials aren’t expecting a reopening anytime soon. Thus, a shutdown that started in late May expected to only last a month or so could extend well into September.
That’s not good news for retailers that rely heavily on furniture from Malaysia, including promotional to lower-middle priced bedroom, dining room and upholstery.
“There is so much uncertainty as to when they can reopen,” said Jamie Collins, executive vice president at case goods and upholstery resource Homelegance. “What I know is that we have already shipped almost all of our finished goods from Malaysia. It depends on whether a factory is able to operate their shipping department, but most of our product at least has a booking on a container.”
He said that Malaysia remains an important resource for Homelegance, producing bedroom, dining room and upholstery, plus day beds.
Others interviewed for this story also said they have goods about to ship or that are already on the water from Malaysia. The big question is what a three-month lag in production time ultimately will mean in terms of lead times.
If production starts in early to mid-September, observers are hopeful that new product will arrive by year end.
However, that could mean a gap in product availability in early to mid-fall. This shortage is likely to occur sooner than later due to heavy demand from container direct customers and goods shipping from regional warehouses almost as soon as they arrive.
One source said that one particular melamine plant in Malaysia doesn’t expect to ship new goods until next year – meaning next July. In another less dramatic case, the expectation was a 240-day lead time.
While those may be worst-case scenarios, many are still being somewhat cautious in their expectations.
“The best-case scenario is that we will start receiving product late in the fourth quarter,” Collins, of Homelegance, said. “The lead times are super long…The worst-case scenario is that the Delta variant and anything that comes after it causes continued delays and pushes us into hopefully no later than January or February of next year.”
At case goods and upholstery resource Coaster Company of America, Malaysia is also a big resource, particularly for promotional bedroom, including bedroom made with high-grade melamine.
Don Deeds, executive vice president, sales and marketing at Coaster, described shipments from Malaysia as being “very sporadic and inconsistent. Yes, we have been flowing it, but you add on top of that the backlog, and it comes in and goes back out. All you are doing is taking care of what has been purchased and hopefully that takes care of the consumer that has been waiting for it.”
He said that when things have run smoothly, there are typically 60-day lead times. Based on what’s happening now, an order for a direct container from Malaysia placed now might not ship until the second quarter of next year.
A big challenge for Malaysia and other major source countries such as Vietnam – which has been shut down since mid-July – is getting the population vaccinated.
According to Centers for Disease Control and Prevention and World Health Organization data, nearly 58% of the Malaysian population has had a first dose of the vaccine, while 33.7% had a second dose as of Aug. 10. That compares to 1.2% receiving a second dose and 12.3% receiving a first dose in Vietnam, according to the same agencies.
Many believe both governments are doing their best to get people vaccinated as quickly as possible, which will help both countries reopen sooner than later.
Vietnam’s lockdown in the southern Ho Chi Minh City region, started around July 18, has been extended to Aug. 15. Yet sources said that with Hanoi’s lockdown being extended until Aug. 22, they expect another extension for Ho Chi Minh City.
While no official word has reached U.S. sources, officials don’t believe Malaysia will reopen at least until early September.
“It is unbelievable,” said Bill Dominguez, vice president, research, development and international operations at New Classic Furniture, of the extended shutdown. “It was a good thing we had goods already made there for a while. We have been releasing those, but it is not much. It will end up that we will not have anything (from Malaysia) until they open again.”
New Classic mainly receives bedroom and dining room furniture and some upholstery from Malaysia and receives bedroom, dining room and occasional furniture and motion upholstery from Vietnam.
“It is a good thing we have backup in Vietnam, and that is what is flowing into the warehouses in California, New Jersey and North Carolina,” Dominguez noted, adding that the company also was able to release containers before the factories in Vietnam shut down. “We have good inventory.”
How much product an individual importer receives, of course, depends on how important that customer is to the factory. The smallest customers often have to go to the back of the line.
Thus, each company is relying on its buying power to be in a good position moving forward.
Derrick Ng, president of case goods and upholstery resource Lifestyle Enterprise, estimated that about half its wood mix comes from Malaysia. When the factories shut down in early June, he said, his source factories there had a few hundred containers of finished goods ready to ship from their warehouses, which, he noted, put Lifestyle in a good position in June and July.
“Goods were shipping,” he said, noting that the company began to feel the slowdown this month.
The good news for Malaysia factories, Ng and other sources note, is that they can likely restart production more quickly once they get the go ahead. That’s because they rely on foreign workers who live on site and aren’t allowed to return to their home country until they have proof of vaccination.
Thus, as one source noted, they remain on site as they have nowhere else to go.
Sources also note that their Malaysian resources have a good supply of raw materials, including components from China that are in stock and ready to use once production begins.
“The manpower and materials are still there, so it is easy to pick up capacity quickly,” Ng said.
That said, it is easier to predict what lead times will be.
“With everything back to normal in Malaysia, goods shipped (in the fall) could be on floors in November and December,” he said, noting, however, that they could miss Black Friday sale windows.
In Vietnam, most, if not all, workers live off site. As many didn’t want to stay confined to the plant essentially 24/7 during the shutdown, they left work and stayed home. Some fear many might not come back, which will make it more complicated to restart manufacturing, particularly if a plant has to hire and train new workers.
“In Vietnam, the workers are local, so there is a concern a percentage of them won’t come back,” said Collins of Homelegance. “The factories I have talked to…they are making the assumption that they won’t be able to open up right away. There is always a great reshuffling of workers after Chinese New Year and this will be similar.”
But even an optimistic prognosis about when goods will ship from Malaysia could be a best-case scenario, based on several factors.
Dan Kendrick, president of case goods and upholstery resource Progressive Furniture, said about 15% of his mix comes from Malaysia, including most of the dining room and occasional mix. At this point, he said, he is not aware of any of his source factories opening back up any time soon.
“There was the hope that the (August) 16th would be a good date, but I would think we would be lucky if they reopen the second or third week in September,” he told Home News Now.
While existing orders could be shipped toward the end of the year, every week a plant is closed effects the ultimate ship date.
“Things that are supposed to ship in August and September, it can get on the water in October or November, that is what they are telling us,” Kendrick said. “When we sent them new orders back in May, they quoted February and March. I am sure when they start back up, they will be quoting May, June and July for shipping those items.”
Also complicating things is that many containers have been diverted to other countries not facing a lockdown. Finally, sources noted, you have to account for the backup at the domestic ports, which could add another couple of weeks for when goods actually can get on a truck.
“We can’t get them picked up at the port because of chassis and driver shortages,” Kendrick noted. “One container shipped in late April/early May from Asia and it arrived in late June and we just got it last week. It got caught up at the port.”
Thus, while it’s not all bad news for retailers buying goods from Malaysia – or Vietnam – they still need to brace themselves for delays of any sort – at least until things get back to normal.
“We are hopeful it is sooner, not later,” Collins said of receiving goods from Vietnam and Malaysia. “That is assuming there are containers to put it on.”