The news has been full of stories about the return of manufacturing to the U.S. Yes, high profile companies like Apple and General Electric have invested in new plants here.  Walmart has reiterated its commitment to buy more Made-in-the-USA products. As a result, a number of companies are investing in U.S facilities to make bicycle helmets, light bulbs, flat screen TVs, car tires, and other products. If successful, Walmart’s initiative will create jobs for Americans.
But extrapolating a tidal wave of reshoring from these events is simply misguided. The fact remains that where a production facility is located depends on a number of factors, each of which holds a different priority in each circumstance. For some, production needs to be near the end user market to enable customization and fast delivery. In the furniture world, for example, upholstery firms that offer such services are largely based in the U.S. to service customers here. For others, location is determined by the availability of highly skilled labor. And most obvious, many choose to locate plants or source products where lower costs can be achieved.
For most U.S. wood furniture companies the cost factor continues to drive the decision. With material and overhead costs roughly equivalent worldwide, reducing costs means locating where labor costs are low. Enter China in the 1990s with wage rates a small fraction of the $2,000 then paid monthly to U.S. furniture workers. The decline of domestic wood furniture making was underway.
But economists tell us that Chinese wages have risen by 12 percent annually since 2001. At that rate wages there have quintupled since the turn of the century. Unfortunately, that multiple only pushed the minimum wage in China to about $280 per month. The average monthly wage in Chinese furniture factories is now less than $400. Some Chinese producers are re-locating to the country’s interior to tap the lower-priced labor resource there. Wages in Vietnam are less than $1 per hour. Even with U.S. wages recently growing at just over 2 percent a year, the wage gap is closing very slowly if at all.
But what about labor productivity? Offsetting higher wages, the unit output of Chinese workers grew by 11 percent annually between 2007 and 2012. In the meantime U.S. productivity has averaged a dismal 1.3 percent growth per year since 2005. Any gap in productivity is closing to the benefit of Chinese furniture makers.
At the end of the day, products like mass market, highly styled wood furniture simply require an ample, cheap and productive work force. For that reason, China and other Far Eastern countries remain the current locations of choice for manufacture of such products. Even domestic upholstery makers have seen their market share slip.
 For proof just look at the data:
The percentage of furniture products sold in the U.S. but produced offshore continues to grow.
Product Category 2004 2013
Wood 57.7% 74.4%
Upholstery 24.6% 42.1%


   Source: Mann, Armistead & Epperson
Imports continue to grow – In 2014 furniture imports totaled $21.36 billion, up 8.3 percent versus 7.8 percent the year before.
In 2014 China remained the number one source country with U.S. shipments totaling $12.22 billion, a 57 percent share of U.S. imports. Vietnam, the primary beneficiary of U.S. anti-dumping duties on Chinese wood bedroom furniture, ranked second with $2.62 billion in shipments, a 12 percent share of U.S. imports. Other Far Eastern countries in the top ten ranking include Malaysia, Indonesia, and Taiwan.
Smart Far Eastern producers recognize that improving their operations is the key to maintaining their share of the U.S. market.  Others are investing heavily in state-of-the-industry equipment to lower production costs and reduce order fulfillment times. Lacquer Craft Furniture recently announced a three-year $30 million program aimed at transforming their Chinese factories. Plenty of headroom exists throughout the Far East to reduce costs and shorten delivery times.
As The Economist recently noted, “With its bounty of labor and capital, Asia has already built up a huge lead in manufacturing. It only stands to grow.”
The willingness of Far Eastern furniture companies to invest in their factories contrasts sharply with the history of U.S. wood furniture makers. In the 1990’s when domestic production remained viable, the percentage of industry revenues invested annually in manufacturing assets averaged 2.8 percent. In the first decade of this century that percentage dropped by nearly half as U.S. furniture executives adopted stronger import-based strategies. The lack of investment caused an ever-increasing loss of efficiency in the industry’s factories. As imports gained sway, over 350 U.S. furniture plants have been shuttered since 2000.
Consider too that much of the industry’s skilled work force has disappeared, and those remaining are rapidly aging out. Even if the economics shifted drastically in favor of domestic production, there are few plants and workers left to produce re-shored wood furniture. And efficient state-of-the-industry plants capable of competing cannot be conjured up out of thin air nor are entrepreneurs waiting in line with buckets of capital to fund such ventures.
The best hope for domestic makers of wood furniture is the adoption of strategies based on customization and rapid delivery. Far Eastern manufacturers cannot provide those purchase attributes. Satisfying those features by employing lean manufacturing techniques and modern production assets has allowed U.S. cabinet makers to hold imports’ share of their market to under 6 percent.  
Bottom Line: If you want to produce wood furniture in the U.S., don’t choose to do battle with imports. Rather develop an alternative founded on benefits that can accrue only to U.S.-based companies.  A sizeable number of consumers want more than just low prices.

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