Vendors invest in future growth
By Michael J. Knell -- Furniture Today, June 2, 2003
Ottawa — Canadian furniture producers are employing a variety of strategies to remain competitive in an increasingly uncertain North American economy.
While the impact of China hasn't been felt as deeply here as it has in the United States, almost every one of the Top 25 Canadian producers has recently made, or is making, big investments in their businesses.
And while only a few are active importers, most are likely to make offshore goods a larger part of their offerings as this decade unfolds.
"We're all becoming more involved with imports," said Art DeFehr, president and CEO of Palliser Furniture. "In some ways, this will be a permanent change because no one is sure where this will work out to in the end."
Today, producers are competing "in a different business environment — everything is about attempting to lower costs both here and offshore," DeFehr added. "The best way to do that is to look for new design directions and product solutions."
Dorel provides a good example of the tricky balancing act that Canadian producers face in managing homegrown vs. offshore products.
"(We have) developed an exceptionally strong capability to source a wide variety of products designed by Dorel and manufactured in Asia," said Jeff Segel, executive vice president/sales and marketing. "This has allowed Dorel to maintain a highly competitive position.
"Dorel will continue to pursue avenues to ensure that we are the lowest-cost producer in all areas of our operations."
At the same time, Segel added, Dorel expanded its ready-to-assemble furniture production facility in Cornwall, Ontario, last year. The plant now covers more than 500,000 square feet.
Unlike their American counterparts, many of whom have moved much of their production offshore, Canadian producers are focusing on lines that they can't make at home.
For example, Shermag launched a new import division about 18 months ago to expand its offerings of labor-intensive, traditionally styled bedroom and dining room furniture. These goods balance nicely with the more technology-driven, casual contemporary furniture that Shermag makes in its factories in Quebec and New Brunswick.
Jeff Casselman, Shermag's president and CEO, said that the company's long-term growth strategy has two major thrusts: find new product categories to expand business with existing channels of distribution, and find new and non-conflicting channels of sales for the existing lineup.
"We're working very hard at product development," said Casselman. "Shermag's line is more diverse than it was two years ago. We're also seeing terrific demand for our product when it comes to casual contemporary — that seems to be the fastest-growing segment of the market right now."
There are also times when Canadian manufacturers don't look to Asia. Durham Furniture is building a new factory in Chesley, Ontario, to support its entry into semi-formal dining. The major obstacle in the plan was finding a chair resource — a component Durham can't make — but the company found a supplier in Italy.
Most executives believe that the early years of free trade created competitive pressures in Canada that are similar to what's happening now with imports in the United States.
"The Canadian industry has survived (imports) a little better," Palliser's DeFehr said. "I think we have a better understanding of the role for domestic products."
Differences in economies of scale have also provided Canadian producers with some shelter that their U.S. counterparts don't enjoy.
"A lot of the things we do here are not of interest to (offshore producers)," said Terry Clark, president of the Canadian Council of Furniture Manufacturers and metal casual dining producer Acme Chrome. "I don't think that the things we saw in the U.S. will happen to the same extent here — our smaller economies of scale will help prevent it."
Free trade forced Canadian factories to adapt modern efficiencies to their operations and become niche-focused. This advantage should hold up in the age of imports.
"What we've learned is that big isn't necessarily beautiful," Clark said. "But we have learned to remain flexible...we have to be able to turn on a dime."
