Vietnam furniture factories weathering U.S. market slowdown for now

Healthy backlogs help insulate some factories from a major downturn in business at present

HO CHI MINH CITY, Vietnam — Still-high order backlogs are keeping many factories here running at or near full capacity despite reports of a slowdown in the U.S.

Many are now hoping those backlogs don’t shrink too quickly should a downturn in the U.S. become more pronounced with a full-fledged recession.

That certain factories in Vietnam — one of the most important global sources for both wood furniture goods and upholstery — have survived to this point is almost miraculous given the country wide Covid-related shutdown there just last year.

Many came back slowly but steadily once the shutdown was lifted, and reached near full capacity from  late last year to early this spring. Thus they were once again able to flow goods at a more normal pace ever since.

But as goods hit U.S. warehouses in mass earlier this year, retailers either delayed or canceled certain orders, creating a void in demand just as the plants were able to produce  goods and secure containers.

Several manufacturers interviewed recently by Home News Now said while they have seen some slowdown in business of late, it hasn’t been pronounced enough to have a major impact on their operations at present.

Harvey Dondero, chairman of case goods manufacturer H. Nicolas & Company, said that the factory has been busy of late, with a strong backlog and a healthy list of new customers and new product development initiatives.

“To be honest, we haven’t seen any change,” he said, noting that incoming orders remain healthy. “Our customers are retailers which seem to be intent on executing their strategies.”

Due to the strong backlog, the company also continues to also pay overtime during the week and also allows staff to work some Sundays.

Case goods and upholstery manufacturer Starwood Furniture President Thomas Luk said that while the company has reduced some overtime, its production facilities are running at full work weeks at present thanks to a healthy backlog.

However, Luk said that in May the company received some requests from retailers to delay shipments that were scheduled to ship in June. This required the company to cut overtime in June.

“Last year it was  a case of orders not able to ship due to freight constraints and lack of containers,” he said. “For the past two months, it’s been orders being spread out or cancelled due to excessive inventory in the U.S.”

He noted that orders requested to ship in June and July decreased over 30% as customers asked to have them shipped in another three months.

Gabriele Natale, president of motion upholstery resource Man Wah USA, said the company’s Vietnam factory is running at about 50% capacity based on current business demand. He said that the company expects its retail partners to “clean out their over-inventoried position” by the end of summer.

“We are in a position to scale up quickly to fill up the demand,” he said, noting that the current demand is a reflection of a rightsizing of open orders due to retailers being in an over-inventoried position due to logistical challenges. “When the logistics situation went back to semi-normal, everybody ended up with too much inventory on hand.”

He said the slowdown became noticeable in March. Since then, he said the company has cut overtime and slowed down production.

“The benefits of this slowdown have enabled our factories to fill our raw materials inventory and work with our suppliers to prepare for when business gets back to normal levels,” Natale said. “Having this reset in business will make us stronger as we prepare for better business conditions.”

He added that it is hard to compare this period in time to last year due to all the economic uncertainty the industry has experienced the past few years.

“The industry has in the past adjusted to demands and disruption,”s he said. “Man Wah is capable of working and is willing to work around obstacles with our retail partners.”

Ernie Koh, executive director, sales and marketing at case goods and upholstery manufacturer Koda Ltd. said that the company began to see a slowdown in May. However, he noted that the factory still is operating at full capacity compared to 120% to 130% previously with overtime and weekend work.

“Since the economy has started opening up and since travel restrictions are eased, we see that demand for furniture has slowed down,” he said. “This is a worldwide issue, and demand worldwide has eased.”

The silver lining is that with a slowdown in demand, shipping costs also have come down, with a greater availability of containers. Koh also said that materials costs also have stabilized.

The slowdown, he noted, is also not a bad thing for workers or the factory in general.

“We were running a marathon for the past two years,” he said. “It is a good time for my factory to have some breathing space, with some maintenance work and rest for our workers.”

Any slowdown in Vietnam or even the U.S. also could help lower historically high backlogs.

One industry source who works with a major Taiwanese-owned furniture manufacturer with plants in  Vietnam told Home News Now that the company started this year with a case goods backlog that was more than twice what it should be to service customers in 60-90 days, causing it to be 6-8 months out on repeat orders. However for the past six months, the source noted, incoming orders have been less than half of shipments and that there have been some cancelations, although nothing significant to this point.

And while the factory is removing about 15% of its capacity with the closing of one production line for maintenance, the backlog will still take the company into the fourth quarter.

However, the source said that the incoming order rate does “not look good to start 2023” and that more capacity adjustments or extended holiday breaks may be necessary heading into the new year.

On the upholstery side of the business, the source said, the situation was much worse, with a slowdown starting this past November. This resulted in a smaller backlog to start the year (2022) and incoming order rates at 25% of shipments. Thus the factory has removed about 30% of its capacity and may need to adjust further into the fourth quarter.

Still, the source noted, the company has been extremely aggressive in new product development both on the case goods and upholstery side of the business. And even with some slowdown, the source said it is still necessary to hire and work though backlogs “in an aggressive manner.”

Factories also say they are maintaining their work forces as much as possible to continue meeting the needs of their customers.

Dondero, of H. Nicholas & Company, said that while trained and experienced workers are still scarce, worker availability has loosened as some larger factories are experiencing layoffs. To maintain its workforce, he said, the company offers performance incentives, which help boost worker paychecks.

Koh, of Koda, said as customer demand drops, factories are also reducing their overtime and workers, a situation he believes ultimately will be beneficial to employers.

“The movement of workers has eased and we are seeing that it is easier to keep workers,” he said, noting that any further drop in demand across various consumer products will lead to more layoffs.

Tommy Wang, president of case goods manufacturer Touch of Class, said that his factory noticed a slowdown starting this month as there are fewer production orders being received. In addition, there were some order cancellations and a few delays for pending shipments.

“July is typically slower, but we are seeing more requests to delay container shipments as retail is extremely show this summer,” he said.

Still, he noted, the factory was running at nearly 100% capacity this month due to a still strong backlog.

He said that as the factory catches up on its backlog, it will start reducing scheduled overtime. But he sees the labor situation as working in its favor at present as there is less competition in the marketplace for workers.

“Since we are running a full schedule, our workers are happy and other factories are not looking to hire workers,” he said, noting that with some other factories closing, there is available labor to hire if needed.

Luk, of Starwood, said that while some of the company’s workers have left due to less overtime, the company is retaining other employees as many nearby factories are working even fewer days.

Natale of Man Wah, said while the company has trimmed its workforce, it aims to keep as many of its workers employed as possible, by treating its people well and creating opportunities for promotions and pay increases, while also focusing on a healthy and safe working environment.

“Retention is always our focus, which has enabled us to attract the current talent and have local people wanting to work for Man Wah,” he said.

He also is optimistic about growth in the months ahead that will allow it to boost its production and labor pool.

“We believe that business will improve over the next few months and we will be able to scale up our workforce and production quickly,” he said.

Thomas Russell

Home News Now Editor-in-Chief Thomas Russell has covered the furniture industry for 25 years at various daily and weekly consumer and trade publications. He can be reached at and at 336-508-4616.

View all posts by Thomas Russell →

Leave a Reply

Your email address will not be published. Required fields are marked *

Subscribe to our Newsletter for breaking news, special features and early access to all the industry stories that matter!

Sponsored By: