18June2010
Posted by Roger under: Industry Trends; Pricing.
The Associated Press
Furniture companies are raising prices despite fears that higher costs could kill off a rebound just as recession-shocked shoppers appear willing to spend.
Furniture makers are blaming higher labor and material costs for producing in Asia as well as trans-Pacific shipping fees. Industry insiders expect more news of price hikes after buyers and producers gather in High Point for the world’s biggest furniture trade fair, which began Saturday.
“I’m aware of a lot of manufacturers that are considering price increases in this upcoming April market. They will announce a price increase and they will see if their major retailers are willing to take it, and if not they’ll back off,” said Bob George, president of Atlanta-based Impact Consulting Services Inc., which advises furniture manufacturers and retailers.
One big factor driving furniture prices is the rising cost of shipping from Asia to the United States.
Last month, the Federal Maritime Commission, whose mission includes protecting U.S. maritime commerce from unfair foreign trade practices, started investigating whether a surge in shipping fees could strangle the budding U.S. economic recovery. The average price of shipping a standard 40-foot container from Hong Kong to Los Angeles, for example, jumped 61 percent in the first week of April compared with the same time last year, according to data from London-based Drewry Shipping Consultants.
Another culprit is that more than two-thirds of the wood pieces sold in the U.S. are made abroad, and rising living standards in China and Vietnam are bidding up factory wages, said Rob Sligh, chairman of Sligh Furniture.
http://www.ajc.com/business/furniture-prices-heading-upward-470155.html
28April2010
Posted by Roger under: Industry News & Events; Shipping & Ocean Freight.
If your in the furniture industry and dealing with American customers, yet haven’t yet heard of the Lacey act, get ready – you soon will. Though around for quite some time, it was amended in May 2008 and makes it a federal crime to trade in illegal wood products. Under a phased in process, industry sectors will have to declare both the scientific name and the country of origin (IE where the wood was harvested) for any wood elements used in the said imported products. While this has already been applied to sawn timber, wood flooring and other wood products, the next phase, starting on April 1st, 2010 will apply to the following HTS headings (The phase after that is Sept. 30, 2010 which will include additional furniture related categories):
- Ch. 44 (Wood & Articles of Wood
- Ch. 66 (Umbrellas, Walking Sticks, Riding Crops)
- Ch. 82 (Tools, Implements)Ch. 92 (Musical Instruments)
- Ch. 93 (Arms and Ammunition)
- Ch. 94 (Furniture, etc)
- Ch. 95 (Toys, Games, & Sporting Equipment)
- Ch. 97 (Works of Art)
Essentially this means that your broker will need to file an additional form specifying the wood species used (by latin name) and the country of origin (where the wood came from – not where it was used). For example, a teak chair would need to be specified as Tectona grandis. For now, failure to submit a declaration will not result in prosecution or delay clearance until after the phase in period (Packing materials do not have to be declared). For an industry with complicated supply chains, particularly those dealing in hardwoods this may prove to be a headache, especially for medium sized and smaller suppliers who are sourcing materials through middlemen. Ikea has called it unrealistic and said they would need to transmit 33.6 billion lines of data to the government over the course of a year. But don’t tell that to Gibson Guitars who became one of the first casualties of the Lacey Act, when they were raided last year over imports of rosewood from Madagascar.
| 13. ARTICLE/COMPONENT OF ARTICLE: |
14. PLANT SCIENTIFIC NAME: (Genus and Species) |
15. COUNTRY OF HARVEST: |
16. QUANTITY OF PLANT MATERIAL: |
17. UNIT OF MEASURE: |
18. % RECYCLED MATERIAL |
| Tables made of Mahogany |
Swietenia macrophylla |
Indonesia |
500 |
No. |
0
|
How this plays out in practicality will remain to be seen, however for those importing “one-off” consolidated pieces via a freight forwarder or packing company, an immediate headache will be hunting down the scientific names of each wood species. For look-ups of the latin names of commonly used wood species try the Integrated Taxonomic Information System website or the PLANTS Database on the USDA website.
More information:
Related Reading:
8April2010
Posted by Roger under: Business in China; Chinese Partners.
The following is the first in series of posts chronicling and at times ranting about 
, some of the (often frustrating) experiences we encountered working with some local Chinese partners. While a excellent (though costly) learning experience, needless to say this particular partner relationship has now ended.
Little white lies…
 |
| Anyone have an aspirin? |
Something I found extraordinarily annoying, really hard to stomach, and terribly counter productive, is the tendency for some Chinese partners and suppliers to blurt out what ones knows is definitely a lie, rather then simply state the facts and subsequently determine what to do about them. Sure, we all know telling a white lie in order to preserve face is accepted here in China, but why tell a much bigger lie knowing that chances of it coming back to haunt (in the short term even) you are better then 100%? The focus seemed to be on answering the question as quickly as possible, with the lest effort in a “satisfactory manner” today, rather then address the actual issue at hand to avoid problems tomorrow. And often the mechanism employed was a white lie.
Case in point.
A typical dialogue with our partner (If you speak Chinese, verbalize this in Chinese and it will make perfect sense):
ACF: “How are we coming along with this item. Will it be finished on schedule?
Partner: Definitely.
ACF: How far along are we?
Partner: In the warehouse, already started.
ACF: So, can I assure them it will be ready for transport by Friday?
Partner: Definitely.
ACF: 100% sure?
Partner: 100% sure.
ACF: You really sure? You know it has to be delivered on Friday?
Partner: 100% sure.
ACF: It has to be delivered on Friday.
Partner: No problem!
The next day, in follow up, the dialogue repeats itself. Same conversation. Same assurances. Early on, we learned two things: A) if you need it on Saturday, best to set the deadline for Friday (better Thursday) and B) verification is the key to success. In this case, that means both calling over to the workers themselves and one of our own staff going to the factory to visually inspect progress themselves.
This generally resulted in us determining one or all of the following:
The item in question hasn’t even been started.
Its sitting in the warehouse and has not even been moved into the work area.
What item?!? None of the workers had informed about it nor knew it was to be finished within a few days
It was on the schedule but had been pulled off of it to work on something “more pressing.”
Conversation 2
-
- Partner: Is there a problem?
- ACF: Yes!
- ACF: You told me this was in progress, now I find its not even started.
- Partner: Aiya..!
- ACF: What are we supposed to do now?!?!?
- Partner: You never gave me the paperwork.
- ACF: (pull out the paperwork) You have had the paperwork for weeks. You signed for it on xxx date.
- Partner: Aiya….. (pause)…. When is the delivery date?
- ACF: Friday!!!
- Partner: Aiya…
- Partner: Can they wait a few days longer?
- ACF: WTF?!
- Partner: Its tight but… we can do it… we will have to work fast.
- ACF: How did this happen? You told me 100% this was in process
- Partner: Aiya….. I Forgot….
- ACF: Its on the schedule. Its been on the schedule for ages. I reminded you several times about this. The production staff reminded you several times about this. How could you have possibly forgotten?
- Partner: You know, I am so busy, so many things to take care of.
- ACF: Busy? Yesterday afternoon, I saw you sitting in the office playing poker on QQ (computer). How is that busy?
- Partner: You know, I so busy and have some much pressure on me. Running the factory is a lot of headaches, a lot of troubles. I have to relax sometimes.
- ACF: Really? (sarcastic tone).
- ACF: Really not interested in hearing about your problems. Managing the customers, quality control, orders, accounting, deliveries and the rest of the back office is a lot of pressure and troubles as well.
- Partner: Aiya..
- Partner: I better go and get this taken care of right away! (rushes off…)
Generally the result was a) the order had to be rushed b) problems with quality occurred c) our staff had to work overtime to make sure it was done and d) in many cases the entire order would need to be redone (at our expense) and/or redelivered a second time.
The main issue here seemed to be that the primary goal was always to address the question at hand with the least resistance and as expediently as possible, rather then taking action on the actual issue. It was almost as if, in his mind that by assuring me the order/item was “in process” he seemed to solving the problem! While there were instances where everyone involved was extremely busy where certain things were genuinely overlooked, much of the time, this seemed to be an autonomic ”white lie” response – one conditioned into the brain over the many years: don’t think – just give the “right” answer. Maybe its a problem with different ethical systems?
Thats not to say this is universal – the smart Chinese partner will knows that by getting a handle on things today, you will save yourself loads of time, money and headaches tomorrow.
30March2010
Posted by Roger under: Industry Trends; Manufacturing & Production; Suppliers.
After returning from the Chinese new year, its quickly becoming apparent that this year, the hottest topics being discussed by business owners in furniture manufacturing circles are:
- How many of your workers returned back to work after this year’s holiday?
- How much later did they return from their hometowns?
- How much of an increase are paying them this year as opposed to last year?
In fact, its become almost a greeting of sorts, replacing “hello” or “have you eaten yet” (a common greeting with Beijing folk). Seems every business owner is both concerned about finding workers and amazed at the salaries unskilled / uneducated laborers are now demanding. This includes their willingness to simply “walk” should you not agree to their salary requirements. A few years back, entry level office workers were on average paid more then manual laborers. Currently the reverse has now occured with a master lacquerer or experienced carpenter demanding sometimes twice as much as back-office staff are paid.
Update:
Seems Tom Russell was recently discussing this topic in Furniture Today’s sourcing strategies column.
20February2010
Posted by Roger under: Business in China; Chinese Suppliers; Customers; Pricing; Quality Control (QC).
Having been both involved in the past with furniture sourcing and buying, and more recently operating a retail furniture store and factory (where I now must sell to those same types of furniture buyers), I suppose I can say I truly understand both perspectives. Though I must confess, that for the first time being the supplier, is an enormous eye opening experience – in particular, pertaining to some of the silly things us furniture buyers say and do. And more so, just how uneducated and naive many of us are, when it comes to the environment we are operating in.
Case in point:
This afternoon, the neighbor from the small store next to ours rushes in, asking if we could assist her in translating for an overseas buyer who stopped in unexpectedly to check on the progress of his order. In the spirit of “good relations with the neighbors” I agree (all the while choking back the idea that I should either a) tell the customer in English, that that suppliers product is low quality/low cost garbage and he should just come visit us or b) tell her I am happy to translate for a small fee of course 
). Having stopped by without his local buying agent who would normally translate for him, he’s about as helpless as she is. I introduce myself and explain he should just explain the issue and I will translate it to her.
-
- First Issue: Buyer stopped by yesterday and requested some changes to be made on the screen panels he has just ordered. Because there are more then one, he cannot determine which one the changes have been made to. Quick translation and problem solved (its the one on the far right).
- Second Issue: Apparently the carvings on the screen have not been smoothly sanded enough – in other words “still not up to his standard.”
The look on his face tells me he’s not happy and by now starting to feel a little like he’s being ripped off. He paid a deposit, gave instructions and now the supplier is not delivering. “Whats wrong with these people?!?! He is having trouble comprehending why they won’t just “do a good job.” Now I have been in this situation myself many times before. The look on the vendors face tells me a similar story. “We gave an excellent price, we held the product for him (even though we could easily sell it to another buyer) and we did our best to make the changes he requested.
Its almost always a same/similar situation:
| Buyer: |
Vendor |
| Trying to achieve a certain standard in the product (preferably even a better standard) and within their budget which they believe they have communicated clearly to the supplier (and at the same time, assuming that the supplier of course understands what they are talking about). Travels to China a few times a year for buying trips. Believes they are “proficient” and experience China buyers. Worries about “over paying.” |
Trying to sell a certain type of product, so that it can be paid for and shipped as quickly as possible (and assumes the buyer understands what standard they can produce at). Has never left China and in fact rarely ventures beyond their shop and factory. Has sold to foreigners before with mixed results. Worries about actually getting paid. |
At first glance, the issue lies in that there is probably a huge gap in the buyers standard of quality and expectations verses what standard the supplier is actually delivering. You want white – they want black – and with a lot of pulling and tugging hopefully you’ll get gray. But is it really that simple? Does it really all boil down to just communication issues?
Taking a closer look at the carved portions of the screen I quickly realize that while they are not sanded extraordinarily well, none the less its not bad. And the carvings are quite detailed as well – carved from camphor wood too – not the most expensive wood but surely not the cheapest either. The “manufacturer side of me” suddenly kicks in and as I am subconsciously calculating the material and labor costs on these screens I ask the guy “well, how much did you pay for these?” His answer brings it all into perspective. While not a rock bottom price, his answer was nevertheless pretty close.
So lets look at the scenario again from a different perspective:
| Buyer: |
Vendor |
| Wants to pay the lowest price possible. Not willing to purchase “as is,” – in other words wants to make further changes, adjustments and refinements to a “ready to go” product. Not willing to pay for such improvements. Unable to assess if purchase price is a fair market price and assumes there is a huge margin in the product. Unable to assess if the vendor is even able (are they capable/willing to invest the time/money) to make the changes requested in the product. Selects a low quality/low margin supplier and attempts to get them to produce higher quality product at the same price point with no incentives (other then the promise of future business). Unwilling to accept delivery of the product until it meets their standard. |
Needs to turnover product quickly. Would like to satisfy customers but within their abilities and budget (realistic to the price points). Needs to complete sale and ship product quickly so as not to take up floor/warehouse space. On low margin/unskilled labor products need to “keep it simple.” Unable to invest large amounts of time on smaller customers/smaller orders. Limited abilities/skill set. Unable to produce higher quality product/unable to climb up the value chain. Has already invested additional time/labor in this relatively small order but still cannot receive payment/ship order. Doing their best within reason. |
Clearly the buyer is just as much at fault for this situation as is the seller. Which leads me to a few things that continue to regularly amaze me about western buyers in China:
-
- China’s been open for business for at least 20 or more years now, and despite a zillion books, blogs, product recalls, websites, and news articles on such topics, many western buyers today seem just as ignorant about business in China as they were 20 years ago and continue to make the same mistakes (over and over again).
- Many wholesaler buyers (particularly small to mid sized companies) continue to source and buy from smaller low quality/low margin suppliers typically run by workers/peasants/former farmers with no high school or college education under the assumption that the low cost of product will equate to a higher product margin.
- These same wholesale buyers continue to be frustrated and surprised when their orders are shipped late, fail to pass their quality inspection standards, or incur other similar problems.
- These same wholesale buyers are foolish enough to believe that a farmer in China with no high school education, who has never traveled abroad, lives in his factory and does not speak English will be able to either a) understand the buyers expectations right off or b) can learn/adjust over a short period of time to meet the buyers expectations.
- These same wholesale buyers still cannot figure out why the supplier will not just “do a good job.”
- Business people still believe the biggest barrier to doing business in China is the language, despite the fact that any long-term China resident will tell you that learning the language is the easiest part of living/working/doing business in China.
Unfortunately this often seems to be the case with both larger buyers and smaller importers. Though the dynamics of each situation change, the perspectives remain the same regardless of the size of the supplier and volume of the customer. As a western buyer in China here is what we MUST grasp before we can be effective buyers.
- Not all products are high margin products – especially labor intensive and primarily hand made products.
- Look at the quality of the product first. On a scale of one to ten, if the supplier is currently producing at a rating of three is no way he is going to be able to achieve a rating of six anytime soon. This is even more so true of you plan to still pay him a rate inline with a rating of three.
- “Yes, I can do that for you,” means “I am willing to try but there is no guarantees.” It does NOT mean you can rest assured they will deliver as promised. “No problem” means there will definately be a problem.
- Make sure you know if what you asking for is possible and if can realistically be done in China. Even more important is can it be done within the price point you are looking to pay.
- Be realistic about what a vendor can do for you and how much of your expectations they are able to grasp. There are a large number of suppliers who were formally farmers and laborers, eventually striking out on their own. Unskilled with little to no formal education, its absolutely unrealistic (and downright foolish on our part) to assume we can effectively collaborate, with these people and/or that they are capable of relating to our needs, expectations and assumptions.
- Instead of going for the “rock bottom price” try paying just a tiny bit extra next time. That might mean changing suppliers. You might be surprised at just how much this can translate into savings elsewhere.
- I speak fluent Mandarin. It hasn’t gotten me much further in business and at times can even be a disadvantage (more BS thrown at me at an exponentially faster rate). What has helped is 13 years of hands on living and working on the ground in China – and that includes many mistakes made and lessons learned. Speaking with other knowledgeable “on the ground individuals,” is invaluable as is regularly reading their own experiences (lots of good blogs on this topic out there).
- Abandon western mindsets – it is after all China, not New York.
- Patience.
- More Patience.
- A bit more patience.
9January2010
Posted by Roger under: China News & Events; Industry News & Events; Shipping & Ocean Freight.
(For more on the snow see “Record Snowfall blankets Beijing – Record Snowfall blankets ACF”)
Original article here:
By CARA ANNA, Associated Press Writer, Sat. Jan 9th 2010
A northern China port that is one of the world’s largest was facing the worst ice conditions in 30 years Saturday, and icebreaking ships were working to keep the path to it open.
Some ships were having trouble reaching the port at Tianjin the port for China’s capital, Beijing, and the third largest in the country, China Central Television said. Footage showed ships on the Bohai Gulf working to keep shipping lanes open.
About 40 people had already been saved from ships in danger from the ice, the state-run Xinhua News Agency cited maritime officials as saying.
The region has been hit by its worst winter weather in decades over the past week, including Beijing’s coldest morning in almost 40 years and its biggest snowfall since 1951.
Temperatures over the next week in Beijing are forecast to remain below freezing.
The sea ice along the coast of the Bohai Gulf was the most serious in 30 years, China National Radio reported Saturday afternoon.
China’s transport minister, Li Shenglin, urged authorities to work to prevent accidents, Xinhua reported.
In 2008, the Tianjin port was among the top 15 in the world in container handling, according to the Web site of its operator, Tianjin Port Development Holdings Ltd. The port 60 miles southeast of Beijing has a sprawling export zone designed to spur the region’s growth.
The past week of bitter cold already has hit China’s power companies, with officials ordering rotating shutdowns of hundreds of factories in central provinces to ensure sufficient power to heat homes.
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