Q: What mistakes should upholstery manufacturers avoid in 2008?
A: 1. Reduce selling price to gain more volume.
In general, the reported increases in furniture sales hardly cover the normal 3 percent inflation in the market. I believe sales have declined because of the reduced selling prices of imports. Most people still in business are there because of their tenacity. Consequently, your attempt to reduce prices to gain volume will be met with either the same tactics or a more intelligent marketing effort. Your cost of government-mandated rules, raw materials and labor will certainly not decrease. In fact, you should be planning a minimum of 5 to 8 percent increase in selling price. Even those importing will experience substantial cost increases because of energy and chemical costs. Spend a lot of time, effort and resources telling your story of why your product is worth more.
2. Purchase "enterprise" software.
The complexity of the products sold in today's market has driven many companies to consider purchasing "enterprise" type software. This is software that tracks inventories, costs, invoices; manages vendors for purchases, payments, etc.; and then flows all the information into financials.
If your bill of materials is perfect for each product, including labor times, and your customer files are clean, and you have a huge staff that has little to do, you might have a chance to install this software in six months to a year, but I doubt it. If you must budget the installation, multiply worst case by a minimum factor of four.
3. Add more styles to your line.
My favorite story relating to today's idea of home furnishings marketing is about the hunter in his cabin far up in the mountains. He awakens hungry, gets up, grabs his shotgun, blindfolds himself, opens the door and shoots. He then takes the blindfold off, runs around the yard to see if he hit anything to eat for breakfast. If he hit nothing, he goes back inside, packs more shot in his shells and does it all over again.
With the high costs of prototypes, showrooms, advertising, displays, photography, etc., it is of the utmost necessity for the furniture business to become much more professional in its marketing ability.
So, first make a determination of which customer you want to sell. Second, find out by study, research and questioning, what you can do to make that customer more satisfied and more profitable. Then and only then, with your blindfold now removed, develop those products you know will satisfy that particular customer's needs.
4. Save overhead costs by not using engineers in product development.
Many manufacturers don't understand the basic principle of quality. Quality is the exact adherence to specification! This means that you can be in the low-cost product business or the very high-end product business and be a quality manufacturer if you adhere to your engineered specifications.
If you don't have engineered specifications, you can't have consistency or quality, and you don't know what your true costs are. You can only guess, and normally guess low. The problem, from the "bean counter" perspective, is that the engineering effort shows up only as cost. It never shows up in customer satisfaction, consistency of product, correct costs for decisions and ultimate speed of flow of the products through production enabled by the fact that component parts fit. The line people don't have to make decisions with engineered products, just assemble the product. Thus, the left and right arm match, and match products built six months before or after.
5. Make sure all decisionsare "top down."
Ever wonder why a company reached a certain level then ceased to grow? I'm sure you're aware of the old axiom, "If you're not growing, you're going." Top-down management makes all the decisions and is very critical if a staff person makes a decision without prior approval.
In a top-down company, no one is allowed to be as smart as the CEO or owner. Consequently, to keep the business small, refute or belittle any decision made by a staff person. If this can be done in front of their reports, all the better; it ensures all will know the owner is the master of the business. This makes it well known that the CEO has no trust in anyone. These acts will ensure no one makes any decision, and no one will take any ownership in the company other than the owner or CEO. Thus, the company becomes only as large as its CEO.
In fact, today's competent executive must be out and about in the marketplace, reading and studying and looking ahead in order to make the best decisions about the company's direction and future. This competent CEO or owner must surround himself or herself with the most competent decision makers and action takers to manage the velocity of change in the future.
6. Spend a lot more time at work.
I don't know of a report of anyone on their death bed who stated they wished they had spent more time at work. And, if you're considering getting out, you'd better do it in 2008. I fear the tax laws will change dramatically in years following.
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