by Many producers are getting back to near full capacity, but challenges remain including getting finished goods booked for shipment
KUALA LUMPUR, Malaysia – Furniture plants here are getting closer to normal production following their late-spring to mid-summer Covid-19-related shutdowns.
While the rate varies from factory to factory, industry sources have said that translates into an average of between 60-70 percent of where they were capacity-wise before the shutdown that started in late May.
“The factories have bounced back pretty well,” said John Wampler, president of JGW Furniture, which imports laminate case goods, including bedroom, from Malaysia as well as upholstered beds and accent chairs. “I am glad they all survived. Luckily, our guys had enough capital to weather the storm. They are all back up and back on schedule.”
That’s the good news for retailers awaiting furniture as inventories have already started to decline. Yet for those buying product from those producers, whether through an importer or factory direct, some challenges remain, including the ability to book containers on a vessel for shipment.
Until that happens, some sources say, most factories are unwilling to begin production, fearing finished goods will be tied up at their facilities. Thus, those finished goods could end up not only taking up much needed production space; the scenario also could leave factories awaiting payment for extended periods until those goods actually ship.
“The flow is better, but the container issues are affecting our performance,” said Derrick Ng, president of Lifestyle Enterprise, which primarily imports bedroom and dining room from Malaysia. “There is no problem from a production standpoint.”
Wampler agreed that booking containers is much more of a challenge than production right now.
“The issue in Malaysia is the freight lines,” he said, noting the issue is not necessarily container availability but rather getting those containers booked on a vessel. “It is hard to get containers out of Malaysia right now – It is a battle to get a booking. Space on a vessel is very limited out of Malaysia.”
And while many plants have returned to near full capacity, some say others are dealing with labor shortages that have prevented them from getting anywhere close to a normal product flow.
This reportedly resulted from many foreign workers leaving the country during the shutdown. Meanwhile, sources note, the government has not reopened the doors to let more workers back into the country.
“They are not back to where they were, but relatively speaking, they have good output now,” said Mike Wurster, president of case goods and upholstery importer Elements International, which imports bedroom, dining room and upholstery from Malaysia. “So it feels like their issue is a little bit labor-related and even more so related to container shipments.”
All this has lead times stretched out from three to nine months, or an average of six for inline goods waiting their turn in the production line. Expect to add another three to six months for new goods being produced for the first time, sources say.
“They are doing the best they can,” Wurster added. “They are doing a good job for what they have, but they are still playing catch up.”
Finally, price increases are on the horizon, sources say, as factories are passing along between 5% to 10% of their increased costs for materials such as wood, particleboard, plywood, mdf, paint and hardware as well as cartons and other packaging materials. Increasing labor rates also are said to be an issue, but not as much as the cost of materials and the cost of having paid workers some of their wages during the shutdown.
“They are increasing worker pay a certain percentage,” said Ng, of Lifestyle Enterprise. “But the majority this time is from materials.”
As many have been in the negotiating stage with their factories — with some plants passing along higher rates than others — sources interviewed for this story declined to offer specifics about where they expected to end up from a pricing standpoint.
“It is just a variable from factory to factory,” one source said, while confirming they have been negotiating with certain producers in recent weeks.
This, sources note, could be a difficult process as more and more retailers are said to be not accepting any further price hikes, having already accepted multiple increases for much of this year. Price increases, combined with high container rates in the $20,000-plus range, are also challenge for importers of promotional to lower-middle-priced goods mostly produced in Malaysia.
A key, sources note, is to have good relationships with the factories to be able to manage those cost increases as they occur, particularly at a time when retailers are pushing back.
“There is no doubt about it, there is inflationary pressure in our industry,” said Wampler, of JGW Furniture. “It is odd that we did not have it for so many years, but it is definitely here now.”
