Recently, the president of the Americas for the industry supplier spoke with Home News Now about the importance of nearshoring and use of technology for the industry’s future
SMYRNA, Ga. — Given dramatic decreases in container and shipping rates, sourcing from Asia has become more cost effective once again, particularly on the wood side of the business that tends to dominate imports.
But nearshoring and the opportunities it provides retailers and their customers alike also continues to remain relevant to an industry competing for consumer dollars.
It’s a subject watched closely on the supply side of the business which gains efficiencies, whether they’re shipping materials or equipment to their customers manufacturing in areas ranging from North Carolina to California, and from Mexico to Central and South America.
Recently Home News Now caught up with Leonard Marano, president of the Americas at Lectra, a supplier of highly technical fabric- and leather-cutting equipment and related technologies to the furniture industry. In the conversation below, he shared his thoughts on why nearshoring remains as important as ever and why he believes it’s here to stay. He also talks about how Lectra is making use of industry 4.0 practices to integrate new technologies and data to improve its own decision making, customer service and overall operations.
Home News Now: What do you see as the main benefits of nearshoring?
Marano: When we look at nearshoring, there are three main drivers for it. It’s speed, it’s quality and it’s flexibility. Speed is about being closer to your consumer and getting them the product they want faster. Quality is being able to have more assertion over your quality-control practices. And from a flexibility standpoint, more and more of the furniture base is what I call customized … e-commerce is a huge driver behind that. When you have a six- or eight-week lead time for something that is mass produced in Asia, it is a lot harder to have that flexibility to give consumers the product they want that is going to meet their very specific needs. By having it (produced) closer to them, you have that flexibility.”
Lately when we talk about North American production, we hear a lot about Mexico. How would you define nearshoring?
Marano: We see it in North Carolina, the furniture capital of the Americas, but we see a resurgence of furniture production on the West Coast as well. That has been surprisingly strong for us. So it goes well beyond Mexico.
What are some of the other benefits of nearshoring, particularly related to furniture?
Marano: A lot of producers have migrated to an on-demand model, and that has to do with that customized product I mentioned before and being able to deliver that customized product in a short lead time. And by making it to order, you are not overproducing, you are optimizing your material yield and when you put patterns together to cut, you are using as minimal material as possible which reduces waste. … It is about producing what you are going to sell so there is not a lot of inventory-related waste; it is optimizing your materials usage and it is reducing the carbon footprint by having the production here in the Americas as opposed to offshore.
Does nearshoring result in a higher premium or cost for materials or other products customers are getting?
Marano: Not from what we have heard, and with the technology that is available now, you can make those products with a lot less labor. In terms of the cost of the unit, it ends up being very comparable to produce it nearshore in a minimum order quantity as opposed to mass production. And when you look at your full P&L you look at all that (unused) material that gets destroyed and all of that unsold inventory. … So not only is the cost of producing a unit comparable, but from a P&L standpoint, it can ultimately be more profitable for companies.
There also is the benefit of predictability or reliability in your supply chain. I would think coming out of the pandemic, and seeing just the instability of traditional sources over in Asia, we have seen a lot of customers try to localize their supply chain. And even with the war in Ukraine — I was talking with several furniture manufacturers whose No. 1 and 2 sources of wood going into their furniture were Russia and Ukraine — that obviously stopped, so they have had to localize that as well.
Is Lectra doing anything to add to the value story of nearshoring?
Marano: From our standpoint, it is about providing integrated solutions from the planning through the design and production of upholstered furniture. It is what we have done for the last 50 years. What we are focused on now is leveraging industry 4.0-based technology to help our customers.
You also mention your Furniture on Demand system. Can you talk about how that ties into this concept of nearshoring?
Marano: Furniture on Demand is a whole platform that manages order intake through an ERP system and translates it into producible files that go over to the factory floor. Then we have the equipment and smart services that are attached to that equipment to help actually produce the product. … We have leveraged our cloud-based solutions for on-demand customized furniture and now are taking similar processes and are migrating over to mass production. That is the next horizon and that is what we are focused on.
Are there any capital investments that Lectra has made worth noting that tie into this concept?
Marano: Absolutely. On June 1, 2021, Lectra acquired Gerber Technology and for many years it had a production facility and equipment that is used in the furniture space in Tolland, Connecticut. After several cycles of private equity ownership, that manufacturing was outsourced for several years, but just this year, we brought that manufacturing back in house in Tolland. … We took industry 4.0 manufacturing processes that we had in Bordeaux (France) and translated that into Connecticut where we have a 230,000-square-foot facility. About half that is manufacturing space and we have completely updated the factory. Now it is a state-of-the-art, industry 4.0-based lean factory. So we talk about industry 4.0, but we also practice what we preach when it comes to our own manufacturing plants.
How well is the industry adapting to these concepts?
Marano: The existing client base is moving faster in furniture toward these new automated industry 4.0-based solutions than I even would say in the automotive space. Automotive is a big segment of ours as well and they are usually the first early adopters to this type of technology, but, believe it or not, furniture has led the way.
Any final thoughts on nearshoring and how early adopters to technology can better serve consumers in today’s marketplace?
Marano: We are a global company and 40% of our business is in the Americas, but what we are seeing as well is that a lot of the contract manufacturers that furniture brands have used over in Asia are setting up shop here, particularly in Mexico. You have a lot of Chinese-owned factories that are saying, “We know that a lot of these brands are focused on nearshoring. We have to go and invest where their consumers are going to be if that is what they are focused on.” So they are opening up factories in Mexico and Central America.
And from a closing standpoint, there are a lot of early adopters in the furniture space to new technologies, and what you are going to see is that those that aren’t investing in it are truly going to be left behind. Because when you look at the technology that enables the speed, the agility and the quality, which is also related to nearshoring, those that aren’t focused on those three things are going to end up too far away from the consumer.”