Palliser Furniture Ltd

Topics: North America, Furniture, Decorative arts Pages: 5 (1470 words) Published: August 5, 2013
Palliser Furniture LTD.

1. What are the key global factors influencing the “competitive landscape” for furniture in North America at the end of the case?

The shift of competitive structure for furniture in North America is noted in the case based on the following facts:

⇨ Shift of competitive structure of the furniture market i. China accounting for approx. 40% of the U.S. furniture imports with more and more firms setting up businesses in China ii. Development of manufacturing facility in low-cost sourcing destinations like China iii. Competition from Taiwan firms for home furniture in the U.S. markets iv. Competitiveness resulting from NAFTA for setting up manufacturing locations in Mexico or China

The key global factors influencing the competitive landscape for furniture in North America are:

⇨ Availability of low cost destinations. The drivers of this factor were: i. Availability of Cheap Labor in China ($3 per day) to compared to U.S ($40 per day). ii. No income tax and social costs such as health and insurance in china. iii. Negligible union issues or union pressures and hence no associated cost. iv. No environmental issues and hence no associated costs with leather furniture production in China. v. Efficiency of people in china was higher than people in Mexico and North America as they used to work for more than 10 hours a day. vi. Decrease in market share and margins of firms operating in U.S. ⇨ Availability of comparable product quality and design in low cost destinations. The drivers of this factor were as follows: i. Furniture manufactured in Mexico was perceived to be of almost similar quality as of U.S. vis-à-vis furniture manufactured in China. ii. Provision of specialty products and a complete house hold furniture solution to customers at reasonable cost. ⇨ Regional issue was another key factor that influenced the competitive landscape. The drivers of this factor were: i. Anti-dumping issues raised in U.S. due to low cost of furniture (20-30% cheaper) being imported from China ii. Resolving issues with the taxation practices of specific countries / regions where the manufacturing facility was being set up. For example: Palliser had taxation and legal issues with the Mexican authorities. iii. Exchange rate fluctuations.

iv. Differences in culture between manufacturing locations and the customers for which the products were manufactured. v. Identifying the right partner in low cost countries was a major challenge that influenced the decision of firms to start business in other locations.

2. How important is “supply chain reliability” in the furniture industry as compared with other industries that you understand?

Supply chain reliability primarily consists of on-time delivery and perfect order fulfillment. It is very critical in the furniture industry to have quick delivery and perfect order fulfillment especially in the context mentioned in the case. Since more and more firms were setting up manufacturing locations offshore, the firms were either not able to provide range of product assortment to the customer or they were not able to deliver the customized furniture on time. Hence, the supply chain reliability was a major issue in the furniture industry.

Supply chain reliability in the furniture business might not be very different from other industries like electronics, automobile etc. However, two key differences should be considered to evaluate its importance.

First, the supply chain in the furniture business might not be very systematic and shipment is done primarily based on customer requirements (except for few items that are very fast moving) as compared to other businesses like automobile or...
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