MONTERREY, Mexico — Mexican furniture manufacturers and companies that build or source product in Mexico are touting its proximity to the U.S. market as a key advantage in a global sourcing environment dominated by issues ranging from China tariffs to COVID-19.
That said, they also realize global competition remains a challenge and one that could separate the strong from the weak moving forward.See related story: Training, pay, culture key to strong workforce
"When we come in and partner up with a factory, we try to bring that factory up to a new level," said Ralph Orozco, president of Horizon Home during an interview at one of the company's six source factories in Puebla. "The market is asking for new product and more up-to-date product, and we try to teach our partners here in Puebla that the competition is not the factory across the street. The competition is global."
This was a key message from Horizon Home and others during a tour of Mexican furniture plants by Furniture Today a few weeks ago. In addition to four case goods plants in Puebla, the tour included two upholstery plants in the Monterrey region, including Palliser and Kuka.
All these companies have made, or are making, major investments in Mexico primarily due to its proximity and resulting speed to market.
Indeed furniture manufacturing is a major industry in Mexico and has been for decades. In 2019, Mexico shipped $1.2 billion in product to the U.S., up 5% from $1.1 billion in 2018, placing it fourth in importance behind China, Vietnam and Canada.
In order, the largest categories it shipped last year were miscellaneous wood furniture, wood-framed upholstered seats, wood-framed upholstered chairs, metal framed upholstered seats and wooden bedroom furniture.
Yet, unlike China and Vietnam where much production is clustered in specific regions, Mexico's production is countrywide in cities ranging from Tijuana and Durango, to Guadalajara, Chihuahua and Mexico City.
Furniture Today's tour focused on Monterrey due to the presence and expansion of upholstery plants in the region, including Palliser's stationary and motion upholstery plants and Kuka's new custom upholstery plant just outside Monterrey.
La-Z-Boy also has upholstery operations in this region, but declined Furniture Today's request to visit its facilities.
Kuka Home: Diversified production
Kuka is building a 130,000-square-foot plant about 45 minutes north of Monterrey that will produce custom upholstery. Set to begin shipping in May, the facility will employ about 250 initially and as much as 1,500 in five years. It will ship 20 truckloads a month of finished goods initially and 40 to 45 per month by the end of this year. In five years, it is expected to ship 650 truckloads a month.
The location of the facility about 8 kilometers from I-85 provides a direct link to the border in Laredo, Texas. "Which is about two, two-and-a-half hours away," said Steve Lush, president, Kuka Home North America. "So it is a very convenient location."
The plan is to ship custom orders in as little as four weeks from the time of order, which compares with 12 to 14 weeks it is currently shipping from China. Retails on basic frames out of Mexico are expected to be $699 to $849 for a fabric sofa to $999 to $1,299 for a leather sofa. This is about the same price as similar product coming out of China, including tariff and freight charges.
"It is a fairly large percentage of our business, but a lot of our key customers have told us if we want to continue to grow with them as we have in the past, it is critical that we supply our custom orders with a much faster turnaround," Lush said.
"It is a matter of us diversifying our manufacturing base. It is really to supplement what we are doing in China, not to replace anything we are doing there," he added. "It is really a different consumer looking for fast custom orders, so we see this as a nice add-on business to what we already do."
The target audience is middle- to upper-middle-price dealers that do enough special orders to flow trucks consistently, Lush noted.
"It wouldn't be for everybody, but it would be for a large segment of our customers," he said.
Palliser: Mexico makes sense
Palliser already has a custom manufacturing model for both stationary and motion furniture with stationary upholstery produced in its Saltillo plant and motion furniture produced in its Las Colinas plant, both in the Monterrey region. These facilities are supplied by its cut-and-sew plant in Matamoros.
When the company first began operations here in Saltillo around 1980, Mexico made sense due to its proximity to the U.S. market and lower production costs. It also had a capable work force along with well-established supply chains. Those same benefits continue to this day.
With the exception of its Pinnacle line produced exclusively in Winnipeg, the Mexico plants builds finish goods across a wide range of price points, including upholstery for the company's licensed Sarah Richardson line.
"Here we produce across our entire line," said Madi Cash, senior director, brand and marketing, at Palliser. "Because we are servicing our customers out of here, there can be no difference in quality, and there can be no difference in any of our processes."
"Our products, by and large, are made with higher attention to detail, the quality levels are superior to a lot of our competition, and we have great warranties and customer service," Cash added. "Those are all elements that come together to create a value proposition that allows us to sit slightly above the middle of the market where most of our competitors are sitting.
"The other unique advantage we have is every piece we produce is made to order. We are not stocking or pulling from inventory."
Being in Mexico also allows the company to ship custom orders quickly, Cash noted.
"What helps us is that some of our competitors do offer customization, but they offer customization from China or Vietnam," she said. "And that customization is eight to 12 weeks. So how great is it to get what you want and get it within 30 to 40 days? It's wonderful."
Cash added that Palliser offers 350 fabrics available on tens of thousands of SKUs factoring in many different configurations across the stationary and motion lines. "So we think that becomes our sweet spot, and we have seen through all of our experience in the industry that when you can get to that sweet spot, you really start to see the gains."
Officials noted the ability to ship quickly also depends on the speed and efficiency of the supply chain. While it keeps plenty of raw materials in stock — and even cuts its own foam — the company depends on the smooth flow of these materials, whether they are coming from in or outside Mexico.
"The biggest part of it is supply chain: getting all the materials and getting all the parts," said Shailesh Patel, vice president, global manufacturing, for Palliser. "If you have all the parts, I can make the product in one day.
"The challenge has been making sure the supply chain is efficient ,and we are looking at reducing those cycle times," he added. "That is the biggest challenge. Our goal is to get 85% to 90% of our customers delivered within 30 days. And we have made significant progress in the past few months."
Nero Lupo: Product evolution
Furniture Today visited four plants in the the Puebla region based on its strength in wood production and also its emphasis on exports.
This included case goods producer Nero Lupo, which is adding about 100 workers at its new upholstery plant in Cholula, Puebla, expected to begin production in April. The company sells primarily through Urban Roads, which will debut the new line this spring to coordinate with its line of occasional and other wood furniture.
"Right now, I don't think anyone comes close to that model," said Tom Halasz, president and CEO and co-owner of Urban Roads, of this type of whole home approach in Mexico. "I don't know of any other factory that can also build the upholstery that matches the occasional tables and has a sophisticated finish to go with it.
"We are very excited right now," he added. "This has been a long evolution, and it takes a long time and a lot of work to do something like this."
"The idea is to make something different in the market," said Fernando Rodero Candela, owner of Nero Lupo, noting that finishes and styling of wood components will coordinate between upholstery and case goods. "My upholstery will always match with all my different furniture. We can make all the sets that you want."
Today the wood plant, which employs about 700 workers and produces bedroom, dining and occasional furniture, produces about 200,000 pieces per month, officials noted. The 100,000-square-foot upholstery plant employs about 100 workers and will produce about 18,000 pieces per month. Fabric sofas are expected to retail around $599.
Again, officials said the proximity to the U.S. market will be a major advantage over Asia.
"Mexico is a very good partner to the U.S.," Halasz noted. "It is a bordering country, so you are basically talking about sending trucks to your customers instead of a container over the water. We are about 75% faster."
IFD: Consolidated facility
Another company that has invested in its operations in the Puebla region is case goods manufacturer International Furniture Direct. Last year the company completed a new, nearly 700,000-square-foot plant that consolidated production into one location, from five previously.
"Four years ago, the ownership decided to buy the land and started building the facilities from the ground up. It took us four years to get where we are right now," said Miguel Ochoa, general manager, noting that the land and building costs alone were about $7 million, not including new equipment.
"It was a lot of work, but we now we are stable. And we have doubled our production (capacity) from what we used to produce four years ago."
The 650,000-square-foot plant — roughly the same size as a sister plant in Guadalajara — is spread over five buildings on campus, including a metal production area and three wood production facilities. The campus also includes a building devoted to finishing, plus a consolidation warehouse.
Ochoa said the company went from producing about 800 pieces a day — of bedroom and dining room furniture to occasional and home entertainment — to producing as much as 1,200 a day today. Total capacity of the plant is about 1,600 pieces per day.
With a line that features pieces made with solid Brazilian, Chilean and Ponderosa pine, the company ships on truckload in a matter of weeks from the time of order.
"There is still competition with Asia, but the main advantage that we have is that for our customers, if they put in an order today, they can get it in five weeks, not three to four months," Ochoa said. "We can do truckloads, half trucks and can mix and match SKUs. So we are very flexible. The price (from Asia) is a little lower, but the quality is totally different."
He added that another factor making the company more competitive in the marketplaces is its multiple U.S. warehouses including Atlanta, Chicago, Phoenix and Houston, Texas, which ship orders in a week or less. These are in addition to its two consolidation warehouse in Mexico that ship full truckloads.
"We can respond right away to our customers' needs," he added. "That helps us to compete with China and Asia."
Ochoa and others have noted that truck shipments are getting more expensive from Mexico, an issue that helps diminish some of Mexico's perceived advantages. But based on its volume of 50 to 60 truck shipments per week, Ochoa said, the company has some ability to negotiate better rates.
He added that the company also absorbs the costs of shipping from Mexico to the border, which helps lower the impact on its customers.
Horizon Home: Building on OEM
Horizon Home has taken a different approach. In Puebla, it deals with OEM manufacturers that devote all or most of their production to Horizon Home. Its long-time relationships allow it to work closely with each plant, providing guidance and expertise where it can, based on its understanding of the U.S. market.
Company founder Ralph Orozco first came to the region about 25 years ago when most of the furniture being built was rustic in nature, one of the most successful lifestyle statements at the time and for some years afterwards.
But as the market place evolved, that gave Horizon Home an opportunity to help some factories change and grow with the times, not just in style statements, but also in the use of mixed media elements ranging from metal to stone accents.
"In our case, because we have partnerships with several different factories, we can capitalize on where they can excel in making product," he said. "For some of them, it's just solid wood case pieces, and with some others, we can mix in metal and stone with wood so it is a little more elaborate, a little more transitional and with a little more value added to it.
"Each factory has its own uniqueness," he addd, "but we participate by giving them the engineering, by giving them the design and by placing technical people in the factories."
Like others, the company sees Mexico's proximity to the market as a big advantage even in an environment of rising trucking/transportation costs.
"It is speed in all areas, not just in delivery," said Felipe Orozco, vice president of sales, of the typical four-week shipment times on most product. "It is also speed in development and with it speed to market because it allows us to develop product and show it.
"Let's say we show it in Las Vegas," he continued. "When a customer comes into our showroom what they ask is 'When can I get this?' We say, 'You can get it on your next order.' And they typically do.
So with that kind of speed to react in Mexico vs. the lag that it takes to develop product and bring it to market from Asia, there is a big difference."
Like many other wood resources sourcing or producing furniture in Mexico, Horizon' Home's line is solid wood, specifically sustainable Chilean pine. Its four-piece bedrooms retail from $1,299 to $2,499, while dining sets retail from $799 to $1,699.The biggest challenge it has competing with Asia price wise is the price of dining chairs, Felipe Orozco noted.
"It's not so much the tables, it's the chairs," he said. "So the design has to carry the price point out of Mexico. That's why whenever we do dining, we don't do standalone dining. It's all part of a collection. So if the collection has perceived value, it allows us to justify the price of that group vs. what you would see in a comparable set out of Asia."
Santa Fe Rusticos: Bench-made value
But part of this value also lies in the bench-made nature of production in Mexico at factories large and small alike. At every factory visited, there were plenty of hands on the finished product, ranging from the construction of chair frames to the carving and finishing of wood components.
No more was this evident than at Santa Fe Rusticos, which produces a solid wood line of bedroom, dining room, entertainment and occasional furniture. Finishing is one of its core competencies as many pieces bore multi-step, hand waxed finishes reminiscent of finishes seen in upper end lines such as Lorts, Chaddock and Habersham.
It also does these in small quantities that can be delivered in a matter of weeks.
"First we feel that it is our quality: The quality is different being made with solid pine," said Daniel Bonilla Huerta, director and founder. "And the product is really like an antique."
He added that one of its big challenges is price, as some customers compare the solid wood line with cheaper MDF or KD product they can get from Asia.
That said, the company touts its proximity to the market as a major advantage over Asia.
"We can deliver any quantity to the United States in three or four weeks," he said.
"Since we are very near to the market, and we do all handmade product, you can decide if you want 20 items of one SKU or 10 of another so we don't have minimum quantities," said his daughter Daniela Bonilla Perdigon, sales manager.
"So we think that is an advantage for the customer because they can make whole truck loads with five, six, seven items, instead of having a truckload of the same product. They can turn around their inventory quicker, and they can have new designs every three or four months."
Perdigon also noted that the area has plenty of good suppliers that provide the raw materials necessary to develop, produce and ship product to the market more quickly than if it relied on suppliers outside Mexico.
Proximity to market
Kuka Home, the upholstery manufacturer building its new plant just north of Monterrey also believes that proximity to the market will help it succeed over the long term.
"We have had a lot of inquiries," said Lush. "And we have been very measured in who we are talking with about this; again, we don't want to get ahead of ourselves on this. But we have dozens of dealers that are ready to sign on. I would anticipate by the end of the year we will have quite a few dealers on board. The interest has been tremendous."
He added that the company began planning for this factory before China tariffs became an issue.
"It is just our strategy to become more of a global manufacturer," Lush said. "So it really wasn't all about tariffs. It certainly helps now because a lot of retailers are looking to kind of manage that risk where the supply chain is coming from.
"So in the short term, the value proposition is there because we don't have the tariff to worry about (in Mexico). The value proposition might change slightly, but it will still be a tremendous value coming out of here even if the tariffs go away altogether," Lush added. "Absolutely this is a long-term deal for us."
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