Supply chain disruptions have caused large backlogs, but the company has a plan in place to lower these to prepandemic levels
HICKORY, N.C. – Like many other resources in the industry, Rock House Farm and its luxury brands have seen unprecedented demand for their respective product lines. For a manufacturer whose brands include Century, Hickory Chair, Highland House, Jessica Charles, Hancock & Moore, Pearson, Cabot Wrenn and Maitland-Smith, this demand from brick and mortar retailers and designers alike is welcome as it illustrates the renewed interest people have in home decor.
But there’s another side to the story too. Due to challenges ranging from supply chain disruptions for certain raw materials combined with labor shortages, lead times for upholstery, for example, have been stretched out to as high as 28-30 weeks on many items, with others coming in a 12-14 weeks compared to a more typical 5-7 prepandemic.
Thus the demand is a blessing and a curse, particularly for a manufacture that is used to delivering much more quickly and on time to customers eager to get product as fast as possible for a design projects or new home. The challenge has been to satisfy those customers without them turning to other products they can buy right off the floor, often at a much lower price.
But the company has a plan in place to lower lead times and deliver more quickly to once again meet customer expectations in the luxury segment. Earlier this month, company CEO Alex Shuford III met with Home News Now to explain what the company is doing to not only reduce lead times, but also create a much more efficient production model in its manufacturing facilities in and around Hickory, N.C.
For example, what used to be a once-a-year effort to review what’s selling and cut slower moving items from the line, now takes once a month to create a more efficient flow through each of its eight factories that currently employ about 1,150 workers
The company is also looking to fill job vacancies as quickly as possible despite ongoing labor shortages and also is looking to add a new upholstery plant to begin production as early as this fall, as previously reported by Home News Now.
Below is an edited version of that conversation where Shuford talks about the challenges Rock House Farm has faced and the steps it is taking across its brands to better satisfy its many customers in the market for luxury home furnishings.
Home News Now: Can you describe for us the challenges RHF and its brands have faced in recent months?
Shuford: Certainly there has been a lot of demand within our product category in general, and at the upper end, there is more production that happens domestically. So you are a little bit insulated from the import container rate rise, but not completely. We have imported components, frames and whitewood, so the reason I say it is not completely an enviable position is we are more of a special order segment. And on the special order side, it is a build based on the availability of a lot of different parts, each has their own supply chain. It’s also access to labor, which has been a nightmare. And in that special order world, that customer is typically a wealthier customer that is not used to waiting. So these longer time frames, once they got out to four or five or six months, a lot of consumers started to consider settling for something they could buy right off the floor somewhere, instead of waiting for a special order. That has been a stressful challenge from a customer service and production service side as well as a concern that we become our own worst enemy on the demand curve.
So how has that impacted the day-to-day environment at RHF and its brands?
Shuford: I have told our team all along as this backlog builds and the demand has been strong, too much business is still a problem. It might not be as big a problem as not enough business – it’s certainly a high class problem – but it’s still a problem. We are operating in a high-stress environment. Our desire as a company, as an industry is to make people happy, to service them well and to build trust. And we can’t because of what’s going on within our production environment…with labor and materials, we can’t deliver on the promise accuracy that we are used to delivering on, and that stress is daily, it’s hourly. It is angry phone calls and people that don’t want to hear excuses anymore. And I get it, but it’s very real, and our people have been operating, as all industries have, for two years in a high-stress environment, it is corrosive, it wears you down. It wears down your buffer between your last nerve and that person yelling at you. We just need everybody to be – I think the word is – graceful to each other. And most of our customers are but they have somebody yelling at them. So within that environment as much I enjoy these big order total weeks, I am sick of seeing order total weeks that greatly exceed our production totals. I would like to see weeks of parity where we are out-producing the incoming order rate. That doesn’t mean I want the order rate to fall, but every time I see an order rate where we have a week with a million dollars more in incoming orders than we have output, I cringe a little bit.
What is the thing you would like to most improve at this point?
Shuford: I think the biggest thing our company, and I would imagine other companies like us are working on, is the accuracy of the (deliver) dates we give people and the timeliness of the information. It not necessarily a reduction of total lead times right now, because that is only going to come with an expansion of the capacity pipe. We need more people and we need more materials, which we are working on every day. On a daily basis I think we are doing a pretty good job just maintaining our workforce levels. But today we probably have between 150 and 175 open job positions that are unfilled…The customers that have asked me about it I have told them lead times are not going to get significantly better this year. It’s not a 2022 improvement – you might see it in Q4 that we shave off a few days, but what will get a lot better in 2022 is when we give you a date – the date we are giving you today is much more likely a date we can hit than the dates we gave you last June because that was right at the tail end of all of the supply chain disruption, the foam crisis, the material availability from container shipments at the ports, when all that was hitting.
What did you try to communicate to customers during these disruptions?
Shuford: For example, when the foam crisis started last year, we thought it was going to last three or four weeks. It ended up being 15-16 weeks. We were telling people, well this could be a problem, but in three or four weeks it will be behind us and we will catch back up. Whenever it went past the 10th week and the 12th week and the 14th week, whatever we told people early was wrong because we had bad information. And then the whole container crisis and port congestion was on top of that. So it really took us to the end of last summer, early fall before we came up with a date, a promise date that was calibrated to what was going on in the world. And up to that point everybody just said, ‘why didn’t you just know?’ Well because each day it changed. And even when we got the date equation figured out early in the fall, we weren’t planning on delta or omicron. They were unknown, they were out of left field. We had days in late January where we had 50 -60 people out of work each day because of omicron. And it wasn’t because they were all deathly ill, at that point in time, they weren’t. But if you were Covid positive, you couldn’t come to work. And when an upholsterer doesn’t show up, every day he doesn’t show up is six pieces to eight pieces you can’t build. So if you’ve got 10 upholsterers out one day there are 60-80 pieces that don’t get built that day, but guess what? They’ve got to get built the next day. And that day was already scheduled to make 60-80 pieces. And all of a sudden you can’t make twice as many and it just has the snowplow effect and I think that is what customers really haven’t understood – every hour of lost production, every day of inefficient production is a plow pushing those orders that should have gotten made in front of it and they just keep piling up and it becomes compounding.
Have things gotten better since January?
Shuford: Fortunately, omicron has settled, and on any given day we are maybe two or three people out of work now. So we are in a much better spot. The last 3-4 weeks have been good steady rhythmic production, which in a factory, if you can get them on a rhythm, there is excess capacity if they are not stressed. We are able to run overtime consistently now, which is a big deal and we don’t have immediate material availability. Problems as we spoke of about Russia and that whole situation could create some issues around a particular board stock that we buy there, but it’s not going to be immediate…So I am optimistic that this year we will get back to being able to tell Mrs. Smith that it will ship on Oct. 15 and we ship it on oct 15. If we tell Mrs. Jones, it will ship it Nov. 1, it ships Nov. 1. Because that’s the first step of healing. Then it’s shorten the cycle time.
So what other steps is the company taking to help improve the flow of goods?
Shuford: There are probably a half dozen different components to expanding capacity, and the first one is to hire more people. We have hiring bonuses, referral bonuses – we are like everyone else around town, we are throwing the kitchen sink at it. But also at our level…we have to have somebody with experience because they are building a pretty high-end product. At Hickory chair we had an order where we were building product with a $1,000 a yard COM fabric. So if somebody miscuts a yard of COM and it’s a 34-yard com order at a thousand dollars a yard – at that level it is worth more than my car. So you have to have a pretty experienced person.
It also sounds like you are working to improve efficiencies within your existing capacity and the people already on board.
Shuford: Yes, the flip side of that is that is creating more stretch in our rubber band for the people we already have so we can get them working on jobs that are more efficient per hour. For example, we have got lots of products in our line that we sell a very few of a year. And when you don’t see that item very often, then you are dealing with the muscle memory of how do I build this job? I have to stop and I have to look at the instructions. It just slows you down. If you are running through your production facility a best seller, you can probably make 15-20% more of those on a weekly basis than if you are running the same number of people on a bunch slow selling items, just because they don’t remember how to make it – they have to slow down, they have to ask for help from a supervisor. So we have been editing our product lines to try to push more of the incoming business to better selling products because we know we can get more through our factories. If I have a chair I sell 500 a year and I can push that to 600 a year versus that extra hundred units spread over 50 other chairs that each sell two a year, I am going to get a lot more productive capacity out of the same number of people, the same number of hours. So that has been a big part of what we have been focusing on. Hope is not a strategy – I hope we get more people, but I can’t count on it. But I know the people that I’ve got can do more if I feed them better and more efficient product.
You also told us of your plans to open another upholstery factory by the end of this year to increase capacity. What about the case goods side of the business? Are you making any changes there?
Shuford: With a case goods factory, capacity it is not so much this hyper competition for people, its truly finding people that still have the skills because a lot of them just got out of the business. But also there is an opportunity in the case goods world to automate and increase some capacity in a way.
How does this differ from the upholstery side?
Shuford: A seamstress is a seamstress and upholsterer is an upholsterer – there is no robot that is going to tuft the back of that Chesterfield. But if you have the wherewithal to invest in high-tech woodworking machinery, that can change over quicker…you can typically find an operator that is interested in coming in and running a machine like that. So that is on our horizon too. We just went through some capex meetings and are now looking at a variety of new woodworking equipment. In case goods that would be more about putting money into our existing footprints.
It sounds like you are already creating a more efficient flow of product across the brands by focusing on higher selling items.
Shuford: Having a broad selection is a great thing. And we are not talking about a future where Century, or Hickory Chair or Highland House are going to have a tight, limited selection. But every company has in the wings things that you hold on to for nostalgic reasons: Gosh there’s that wing chair we had in that collection from 17 years ago and we sell six a year and I hate to drop it – well every time we make one of those six, we could have made many more of some other chair, and that’s where you have to run better fuel for the engine. And doing so, the engine will just run stronger, it will run faster.
What is the response from the customer? Are they concerned you are editing the product line a little too heavily?
Shuford: The designer is looking for speed and accuracy of dates. So a lot of times, a designer, when looking at a selection of chairs, has three or four chairs within that selection that will work equally well with a project. Let’s say they happen to select the one you sell only six a year of. They could have equally preferred the one you sell 100 a year of, but there was no reason not to select the one you sell six of since the price is roughly the same. What they don’t know is on the back side, the factory slows down and can’t output as much product. So I would say for the designer…companies that selectively edit and intelligently edit their product line, and can get more throughput because of that are going to be able to reduce their backlog reduce their lead time, and provide a more accurate delivery date. And if you ask any designer right now, what is the most important thing you need, they would tell you, more accurate dates and shorter lead times.
So you don’t see a little bit more editing as a problem for your brands overall?
Shuford: A lot of what we do too, is especially at the upper end across the whole industry – there are so many options in finish, nail, fabric and other components that losing a random piece that is bogging down the factory is not the concern. Again there is a line you can cross where you cut so much fashion and selection out of your product line that now you’ve begun to harm yourself. But for a company like Century or Hickory Chair or any of our brands, we are so far away from having a limited selection. We are overwhelming you with choice. If we cut our choice of styles by 10 percent, we are still overwhelming you – we just aren’t overwhelming you quite as much. But that 10% of editing might actually increase our output by 15 or 17%… We are just going to get a whole lot more production out of our factory if we just take out the ones that are slow and low selling, machine bogging down, upholsterer retraining every time they have to make one item, of which there are plenty in our product line. A lot of that work we have done over the course of last fall, where we have gone through and edited and now we are actually beginning to realize some of the efficiency gains because the machine is running on cleaner fuel.
Have you begun to see any difference yet?
Shuford: The last three weeks in February, especially at Hickory Chair, have been our three most productive weeks of the last 12 months. Some of that has to do with Covid ebbing, some of that is we don’t have an immediate supply chain concern, some of it is the work we did last fall is now showing up in a more productive work environment. And we are actually getting more through. So we are excited that we are on the tipping point of things are starting to improve. But at a factory, we feel the improvement before a customer feels it. It’s like you are waiting in line to get a table at a restaurant and the chef comes out of the kitchen, saying ‘things they taste so good right now – and things are really running well in the kitchen.’ And you are like ‘I am still in line for an hour before I can get a table. I don’t feel things are better yet until I actually get at the table.’ And that’s the unfortunate part where there is a lag in the industry.
When do you see the backlog coming down?
Shuford: We know we are going to have the same backlog problem six months from now. But if we want things in September, October and November to be better from a stress standpoint and from a production output standpoint in our January, February and March, then we have to do things today that impact those orders that we will be making in September, October and November. Because we have a six-month backlog, those are the orders we are actually accepting today. So stop accepting an order for an inefficient chair that you are going to have to make in October today and trust that you have good alternatives where that customer will say ‘oh you don’t have that wingchair, but you have this other one. Yeah, I was happy with either. I will take B because B was just as good.’ They don’t even know that B is a much more efficient item because you sell significantly more of them – they really don’t care – they just need a wing chair of a certain size that has a certain form and style to it – there have been a lot of times they are agnostic between the two, but when you give them a choice with no other differentiator, then accidentally some people will select the slow selling inefficient item. We are just trying to run cleaner more high octane production through our facilities and really protect our customer from their accidental selection of something that will be a slow build.
Of course a slowdown in orders could help too. Have you seen that yet?
Shuford: A slowdown has occurred in the last four to six weeks. We laugh about it a little bit when everybody says ‘oh my gosh, orders have slowed down.’ But they are still exceeding on a week-to-week basis the same period of 2019. But they are not at this crazy pace that they were in the fall of last year. We haven’t yet had a week in the last 12 months where our output at RHF has exceeded our incoming order rate. Now we have had weeks where they have gotten really close to each other because orders were slightly lower and our output was more efficient. The last three to four weeks have been the best three or four weeks as far as getting close to parity that we have had in the last year. And a little bit of that is orders have normalized, but it is also because we have become more efficient and we are producing and our output has gone up a little bit.
So I think my guess is that we specifically start to get to sort of parity in late spring early summer where our output – even if we are not able to find a location for a new factory – that we are able to get another seven percent out of our existing production environment through more efficient product flows and hiring. Seven percent is not an insignificant number. In terms of dollars, it will be a pretty decent chunk, but if we inch that up and the incoming order rate stabilizes, we think we will get to parity kind of mid-year and then we’ll start chipping away at it. So if we have x incoming, we have to ship 110% of x to chip away at it. You have to do that week after week. So if you chip a day out of the backlog this week, or the lead time, and you do that for five weeks in a row. You have then chipped a week out of your lead time. So we are 30 weeks right now and we want to get back to 10 – we have to chip 20 weeks out of the backlog. So one day per week. And you say, ‘Oh my God.’ It becomes this monumental task – so my point to our people is – how do you eat an elephant? One bite at a time.