I’m not sure what it is about China, but the word is a loaded term in some industries. Where furniture is concerned, I think most designers have a good concept of what is possible from Chinese manufacturers, but there still is a lot of misinformation—and misunderstanding—rampant among hoteliers.
The million-dollar question is, of course, quality. In some manufacturing areas, “made in China” is practically synonymous with poorly built products. But in our industry, the reality is much more complex than that.
I recently had a fascinating conversation with Alan Benjamin, president of the purchasing firm Benjamin West, about his experiences with Asian sourcing. Benjamin pointed out that when people hear casegoods are made in Asia versus in America, they wrongly assume that the U.S.-made product is higher quality.
“In Asia, there is every range of quality,” Benjamin says. “Some of the highest-end retail brands are made in Asia. There are also factories in Asia that literally do not have a roof on the finishing room. I think the thing that people have to understand is there are probably 1,000 factories in China that could be considered furniture factories. In that range, you go from six-star to no-star. People don’t realize that; they just think, ‘oh, it’s made in China, it’s got to be crap.’”
In fact, Benjamin told me that although his firm spent more than $60 million in Asian casegoods in 2007, he had few problems. There were no delivery issues, and quality was excellent.
But he stresses that you have to know what the company is. Is it a U.S. entity that has exclusive rights with certain factories? Is it a U.S. entity that is owned by one, two or three factories in China? Or is it something else?
“You can have a U.S. brand that doesn’t own any factories in Asia; it has no exclusive arrangements with anyone in Asia,” he says. “The scary thing about that is after they sell the deal, they might shop it to the cheapest factory. … It’s a very small U.S. sales entity, no real assets, no real skin in the game, and they’re literally walking it down the street in China going, ‘who will make this?’”
It’s also important to consider the design itself. The more intricate the design, the better the price difference in going to Asia, as labor is the largest price difference. Raw material costs are not all that different. For a simple design, even if it’s high quality, the price difference between the U.S. and Asia won’t be that large, he says.
No free lunch
If you go direct to China, you might think you’re saving 20 percent. However, Benjamin says, someone has to do the shop drawings and the finished samples. You must have someone here to coordinate with the design and purchasing firms. You must have someone who’s the importer of record. There are duty issues. And so forth.
“By the time you add back all those costs in the supply chain—from the time something is specified to the time it is installed—there’s no savings. … Someone has to do those steps; there’s a cost somewhere. There’s no free lunch.”
Finally, Benjamin says, when you’re comparing price, ask if someone is selling free-on-board China, or F.O.B. major port in the U.S., or F.O.B. the job site.
“There are huge differences in that,” he says. “By the time you add the gross margin and the tariff and containerization, insurance freight—all of that stuff—it can easily add 40 or 50 percent from initial cost F.O.B. China to the cost to get that item to the hotel in Cleveland.”
What are your experiences with Asian manufacturing? Drop me a note, I’d love to hear about them. In the meantime, enjoy the issue.
