Industry collaborates on solution to supply chain issues
By Reginald Tucker—The well-documented supply chain disruptions originally caused by the novel coronavirus pandemic—now further exacerbated by inflation, runaway energy prices and other major global events—have impacted virtually every level of the flooring industry. Small and large firms alike are not immune to the wide-ranging repercussions that supply logjams, delivery delays and personnel shortages have wrought on the industry. In short, everyone is in the same boat.
But that doesn’t mean suppliers, distributors and retailers are throwing up their hands in defeat. Rather, they are working together more closely than ever to come up with solutions to at least ease the pain of these supply chain delays and disruptions until business conditions normalize.
“There are ordinary issues we’ve all dealt with over the years with regards to this aspect, that everyone simply makes minor adjustments and then move forward,” said Jeff Striegel, president of Elias Wilf, a top 20 distributor. “Then there is what has occurred with the COVID-19 situation. The impact has been historic in that it has literally impacted every category within flooring in some aspect of strained availability. Quite frankly, since there is little that has been done to fully remedy the situation, the best advice would be to do as we all have done over the past year—continue to adjust our expectations and adapt.”
It would be an understatement to say that product delays have frustrated distributors like Elias Wilf, which partners with a small core of vendors who source both domestically and globally. “No matter what my issues have been, my cancellation rate with my customers is less than a half a percent on stuff I haven’t shipped for four and five months in some cases,” he said. “At this point of the game, what we’re dealing with are issues that none of us can control or influence.”
Interestingly, Striegel said the end-user consumer segment has probably done a better job in making the mental adjustment when it comes to dealing with delays in obtaining a host of products, including flooring. “I have friends who have been waiting 12 weeks for an appliance,” he said. “They know they have to wait because they can’t get it anywhere else anyway. Consumers have adjusted better than some of the dealers we serve. It’s pointless to scream.”
At the end of the day, Striegel said the single best path for flooring retailers to better position themselves for success in these challenging times is to partner with those distributors and manufacturers that are aligned with their business interests. “This allows distributors to better develop programs and merchandising alongside those partnered retailers,” he said.
Of course, so much depends on a distributor’s or manufacturer’s size and scale. Take MSI, the $2 billion hard surface distributor/supplier, for example. The company leverages its experience and strengths in the marketplace to be a better partner for its retailers. It all starts with the cost and access of raw materials. “We’re using volume; so whether that’s in our ability to source from the right country, manufacturer or factory that uses the right technology to produce products with the best looks, best shapes, most trendy and at the best value,” said Raj Shah, president. “We’re able to use our leverage with shipping companies, with logistics providers, put it together with our own trucking, amortize all of that over lower overhead as it relates to sales, marketing, merchandising and logistics costs. All of that put together as volume goes up benefits the retailer.”
Another critical aspect of MSI’s approach to mitigating supply chain challenges lies in built-in flexibility in sourcing. But in order to leverage that flexibility, the company needed to expand its capabilities, particularly in the areas of shipping and domestic production. “We’ve seen trade wars, supply chains being severely challenged, whether that’s related to shipping issues, drayage issues, trucking issues, port issues,” Shah explained. “Domestically we’ve seen raw material constraints. So we need to have ultimate flexibility within MSI and for the retailer. It’s our job to keep the supply chains open for the retailer and product continuing to flow. And to do that, we can’t be making big bets on what will happen in the future but rather have the flexibility to handle whatever we are dealt. I don’t know where the next trade war is going to go. I don’t know where the US relationship with China will go. I don’t know what will happen to supply chains, if they’ll ever get cleaned up. But I do know what we have is our ability to build flexibility and adaptability into our model.”
For example, if the situation with China worsens, MSI can pivot and bring in LVT and tile from numerous other countries. “Whether it’s India, Turkey, Brazil, Mexico, Italy or Spain, we have ultimate flexibility,” Shah explained. “So if one turns off, we can turn another one on. With supply chains, we did charter our own vessel. That’s not going to take care of the vast majority of our needs, but it does control a certain portion of our requirement and builds adaptability into our system.”
As for trucking, MSI is following the playbook that many distributors/importers are taking by not only investing in its own fleet, but also the underlying technology that supports the logistics. “We’ve invested more and more into our own fleet so we have not only the confirmation that the product will move, but we get full transparency as to where it is, and we can provide that to the retailer,” Shah explained.
Across the industry, distributors and logistics providers are enhancing their operations to better service customers in these trying times. Case in point is Xpress Global Systems (XGS). Long before the industry began feeling the pain of the current supply chain crunch, the company had already favored enhancing its services and logistics capabilities. Whether it’s providing less-than-truckload (LTL) services or access to strategically placed warehousing facilities, XGS helps both its manufacturing partners and retailer customers achieve greater agility and efficiency in managing their flooring shipments and inventory.
“The XGS Warehouse Management System (WMS) has positioned us to be a premier floor covering provider offering world-class warehousing and inventory management capabilities,” said Mark Poindexter, director of warehouse operations for XGS. “With our automated WMS, we are able to track items real-time from receipt through shipping. This enables us to better utilize labor hours and improve efficiencies. Reporting capabilities also offer our customers a variety of options from summary SKU reports to individual piece reports by bin location. WMS gives our customers peace of mind and allows them to focus on their core competencies while we manage inventories.”
“Whoever has product wins the game,” is the expression of the day in the world of floor covering. With the bulk of the challenges surrounding supply chain issues centered on imported resilient products, several companies—including Wellmade, CFL, Huali Floors and Novalis, to name a few—have ramped up their efforts to scale up their domestic flooring production plants. Wellmade recently started producing rigid core out of its new, 328,000-square-foot manufacturing in Cartersville, Ga. The plant was built in 2020 with equipment arriving from China in February 2021, and by November, product was rolling off the lines for testing. At the time the additional capacity was designed to feed the needs of an existing box retailer; in retrospect, in light of the current delays in rigid core shipments, the move seemed prescient. “Wellmade realized it needed to get bigger and expand capacity to service its growing fold of large channel retailers,” said Dick Quinlan, senior vice president of sales and marketing.
Same can be said for CFL, which broke ground on a resilient flooring plant in 2020. Fast forward to today, the plant is now fully operational. Novalis dedicated $30 million to shore up its rigid core plant in Dalton. Not to be outdone, Mohawk continues to invest heavily in its laminate manufacturing facility in North Carolina, and Shaw is making progress on its resilient plant in Ringgold, Ga.
So, when can the industry realistically expect that these supply chain disruptions will subsidize? The answer varies widely depending on who you speak to. ITR Economics, for example, predicts a return to normalcy in the supply chain channel by early to mid 2023. Why the reason for the optimism? The forecasting firm is already beginning to see some breaks in the logjam, citing data that shows the supply chain is holding up well despite the current predicament.
Other industry observers are also hopeful. “The good news is that improvement is just around the corner,” Elias Wilf’s Striegel said.