Q: How do you define made in America as it applies to Century Furniture?
A: This has become a much more complicated question with parts and materials coming from all over the world. Right now, over 70 percent of what we do (even if you include parts) is made in America. We get parts or elements of things that we can't do competitively here, or are exotic components indigenous to special places, from about 40 different countries. That being said, we do have a bias to first try competitively to accomplish what we can in our factories. All our employees are shareholders and we have a deep commitment to the community and the needs of our customers.
It is fair to say that we do not have a "Made in America" strategy per se. We have a strategy to differentiate ourselves with speed, quality, innovation and customization. We can deliver on those promises because we are made in America.
Q: So for Century Furniture, part of the made in America is the assembly and putting the final touches on the furniture?
A: Right. For the remaining 30 percent of the things we don't make in their entirety here in Hickory, our personalization translates to custom finishing, delivery of individual items (not containers). But everything is designed here. Design is the essence of what we do here and that's something I couldn't see us outsourcing.
More and more [upholstery] textiles are coming from China and India. That's the most costly part of a sofa, yet virtually everybody would say those sofas are made in America. A lot of people are interested in what's coming from China. Over the last year or two we have probably bought more textiles in Europe because they allow us to get at looks and differentiate ourselves with designs that we can't get in other parts of the world.
We're looking at a pretty simple formula that says: How do we create value and capture value? What allows us to differentiate ourselves? Looking at that dimension kind of defines where we're going with our manufacturing.
Q: How does a made in America commitment affect Century's ability to compete with companies that produce some or all of their products overseas?
A: Our commitment is to give customers what they want and to differentiate ourselves. If we can do that, and our first choice of action is to do it with our U.S. assets, that's fine. But we're not blind to globalization; you can't be. We use whatever reinforces our business model. Our preference is a strategy that captures value, hopefully it's here in America, and we're having a good go at doing it and differentiating ourselves with a made in America mostly story.
Q: What do you consider when you decide to outsource part of your process, such as solid wood decorative chair frames?
A: For years, we manufactured the bulk of our [solid wood decorative] chair frames in the United States, in our facilities. We just couldn't be competitive on that part of the process. We stepped back and asked where again do we add value and differentiation? It was with our extraordinary finishes, our broad styling choices, with exceptional service, with the 2,500 fabrics we offer. It's in handling the customer's own material (COM) . . . quicker and more reliably than our competitors. We felt that those points were a bigger opportunity to differentiate ourselves than continuing to support making the frames here.
Q: What are Century's strengths?
A: There are three things we've built our lean manufacturing efforts around that we think are important points of differentiation. Innovation, and that's both product innovation and innovation on the factory floor. Exceptional experience; it's not just exceptional service, it's exceptional experience in dealing with Century. Lastly, speed.
We're known for great designs, great quality, lower lead times, broad selection with our products and the ability to personalize and customize. We're a total resource for many of our customers in the design community and with retailers that have a design focus.
We're a case manufacturer, a decorative chair manufacturer, upholstery manufacturer, and now we're even in the outdoor business. A significant strength is our strong brand and our reputation, both with the traditional retail channel and with designers.
A strength that we're finding more and more is the fact that we're privately held, and being family owned is reflected in our culture.
Q: How do you see that as a strength?
A: We're not driven by quarterly earnings. Sometimes you've got to put in place things that are going to be strategically significant, but long term in coming. A family owned company or a family controlled company that buys into that has the luxury of that longer time frame.
Q: How do you plan to change your manufacturing processes during the next three years?
A: The first three things we're going to do are lean, lean and more lean. We've been into lean for about three years; we think we've got a long way to go. We think there are tremendous advantages yet to be had with that process.
You'll see more things put in place whether it's investment in equipment or methods or utilization of lean to allow more customization and personalization with our product. We might even evolve totally to a whitewood strategy, where we manufacture the wood to a point, in low lot sizes and rapid replenishment of those lot sizes. [We'll build] cases in whitewood and finish them quickly, to order, with lots of different choices.
We're going to utilize speed to get everything we do down within [a three-week] time frame. We've had great success in driving our return on the capital invested in our business and in inventory reduction versus people who have long supply chains, who have to guess 16, 18 weeks out as to what is going to sell and make massive commitments to warehouses and inventories. Our model is just the opposite.
We've always had a track record for great quality. We're not satisfied with that. We want truly exceptional, out-of-the-box quality. More and more business is driven by designers, and they want to open the box in someone's home and "Voila," it's perfect.
All of those drive the word we're using more and more, and that's "confidence." Our customers can look to us in virtually any metric and be confident that we're going to deliver.
Q: What are the major challenges of maintaining your commitment to establishing customer confidence?
A: One, the cost of government regulations. The National Association of Manufacturers claims that the cost of government regulations is in effect a duty penalty on American manufacturers of 27 percent that competitors bringing in product manufactured out of the country don't have. We're not ones to say that you ought to pollute the environment or that you shouldn't have a safe workplace, but there's a cost to that, especially when you get into some of the things that don't make sense, like the flammability proposals that are being knocked around.
Health care is the single biggest line item expense outside of labor. It's also an expense that goes up double digits every year. Keeping America competitive and having that kind of a health care burden is really difficult.
On the free trade side of things ensuring that it is free trade, that we're not making a free trade agreement that allows a fixed currency or dumping or things like that. That's a highly political area, but there are a lot of places that, just through a trade agreement, are given an advantage.
In my view, the thing that has affected business the most is the traditional retail furniture channel turning furniture into a commodity. Who has the lowest price, who can sell it for no interest and no payments, and the fact that the largest seller of furniture in the United States is Wal-Mart. I think you're not going to satisfy that part of the market with a made in America product.
We have a very strong belief that there's a vibrant design market, that there's a vibrant luxury market. The last four years have been unprecedented for luxury in virtually every category except maybe furniture.
Q: How do you create the perception in your customers that your product is a luxury item?
A: By great design, by exceptional service, by personalization and customization, by our brand, the attention to detail and the use of exotic materials that inherently have a luxury element to them.
Q: What do you think is the future of furniture manufacturing in the United States?
A: It depends on the business model of the people selling furniture in the United States. It's excellent for creating value that's not related to just a price-driven business model. If you're going to create value by service, by an experience, by exclusivity, by customization, personalization . . . at least parts of the process being done in the United States makes perfect sense.
Q: Any final comments?
A: We just closed out an excellent year and our strategy is working. We're not the biggest guys on the block. We're a very small part of an $80 billion industry, but what we're doing works for us.
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