**North America**: Furniture supplier Flexsteel navigates the complexities of tariff-related challenges while expanding sourcing options and maintaining quality. Despite uncertainties, the company reports strong sales growth, reflecting a dynamic response to changing market conditions and fostering robust supplier relationships.
Furniture suppliers faced significant challenges in managing relationships and logistics amid persistent uncertainty surrounding tariffs. This is especially true for those operating in North America, such as Flexsteel, which has been sourcing products from Mexico for the last 20 years. The company’s reliance on Mexican production is substantial, with approximately 40% of its entire product line originating from that country, while the remainder largely comes from Vietnam.
The operational dynamics at Flexsteel primarily focus on upholstery, which includes both stationary and motion furniture, all sourced from their Mexico facilities. The company has expressed that their production processes are intrinsically linked to specific quality commitments, complicating any attempts to pivot operations quickly should tariffs be imposed. “We’ve had mitigation plans in place if tariffs were to have happened, but there’s only so much that can be mitigated,” noted David Crimmins, Vice President of Sales at Flexsteel, when discussing the company’s preparedness for potential tariff changes. He indicated that while plans exist, the rapid fluctuations in regulatory environments make strategic decision-making challenging.
As part of their response strategy, Flexsteel is considering introducing Vietnam as a dual-sourcing option for high-demand stock-keeping units (SKUs), although Crimmins cautioned that most production would remain in Mexico to uphold quality standards. The company is also deliberating on how to cope with potential cost increases due to tariffs, with discussions about absorbing costs internally or passing a portion onto suppliers and consumers.
Despite these challenges, Flexsteel’s performance has been promising, recently reporting its fifth consecutive quarterly sales gain. The company has revised its projections for annual growth upwardly to between 5.5% and 8%, in contrast to the earlier forecast of 3.5% to 6.5%. However, CEO Derek Schmidt acknowledged the “dynamic” nature of their operating environment, influenced by tariffs and fluctuations in foreign exchange rates.
Schmidt articulated that the company is proactively engaging in short-term and mid-term plans to mitigate tariff risks. He expressed confidence in their capacity to adapt and optimise the supply chain in response to any structural changes in global trade policies. This adaptability is essential as the balance of power between suppliers and customers evolves, especially in the face of increasing competition and changing economic conditions.
The recent Las Vegas Market showcased strong attendance and engagement from large customers, as reported by Crimmins. He noted that larger retailers were notably interested in their operations, contributing to higher traffic and a sense of optimism in the industry. “January was a strong month. Retailers were more decisive,” Crimmins said, remarking that concerns regarding tariffs were less prevalent among customers than anticipated. “Our big customers want to know our plans, but I think most just trust us,” he added, reflecting the importance of effective supplier relationship management (SRM) amidst the complexities of the current market landscape.
Overall, the ongoing shifts in supply chain dynamics highlight the necessity for furniture suppliers like Flexsteel to remain agile in their operations and proactive in fostering collaborative relationships with their customers.
Source: Noah Wire Services
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