Tag: Ashley

OM in the News: A Radical Idea–Own Your Supply Chain

Ashley's plant in Arcadia, Wisconsin
Ashley’s plant in Arcadia, Wisconsin

Most manufacturing companies long ago outsourced their truck deliveries in the belief that outside experts could do the job more efficiently, reports The Wall Street Journal (April 30, 2015). But Ashley Furniture, the largest U.S. maker and retailer of furniture, has resisted that trend. It owns and operates about 800 trucks and delivers the vast bulk of its own products from factories to stores. “We think it is a core competency,” says the CEO.

Ashley employs about 3,000 people in transport and warehouse functions in the U.S., 1/4 of its U.S. head count. Its distribution centers feature racks specially designed to speed loading, and its managers arrange for trucks returning after they deliver their furniture to carry loads for other companies for a fee. About 80% of Ashley’s trucks are filled with other firms’ goods on the way back but Ashley aims to increase that above 90%

It has become very unusual for manufacturers to own transport fleets. Typically, switching to a third-party transport service leads to greater reliability and savings of at least 10%.

Trucks in Ashley’s fleet, from Volvo and Kenworth, average about 2.5 years old. The industry average is about 6 years. Providing drivers with comfortable seats, beds inside the cab and other amenities helps keep them loyal. Ashley also tries to keep drivers happy with predictable schedules allowing them to sleep at home frequently. Its drivers, dubbed Ashley Ambassadors, are also charged with building customer relations. In terms of delivery times and reliability, “they’re unbeatable,” says one furniture store owner.

Classroom discussion questions:
1. Why does Ashley control its own delivery supply chain?

2. What are the advantages of outsourcing instead?

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OM in the News: U.S. Furniture Survivor Goes Global

furniture graphWhen Ron Wanek started a furniture company in Arcadia, Wisconsin in 1970, his chances of becoming an industry giant looked remote, writes The Wall Street Journal (Mar. 6, 2015). Since then, most of the Carolina and Virginia manufacturers have been crushed by Asian competition. Wanek ’s Ashley Furniture Industries is now by far the biggest U.S.-based maker and retailer of furniture, with $4 billion in sales last year  (twice as much as La-Z-Boy and Ethan Allen combined).

Ashley has thrived by churning out low-price furniture, including sofas for as little as $399, at factories in the U.S. and Asia. While American rivals dithered as imports surged starting in the 1980s, Ashley figured out what could most efficiently be made in Asia and what should be kept at home. The company operates what is widely viewed as the industry’s most streamlined delivery system to rush products into its 460 stores. The company now has plants and distribution centers in four states. About 60% of the furniture the company sells in the U.S. is American-made. The rest comes mainly from Vietnam and China. Ashley has 13,000 employees in the U.S., up from 8,000 a decade ago. In the same period, total U.S. furniture-industry employment shrank by 1/3 to 384,000.

Ashley has long focused on the logistics of furniture delivery. The company has its own fleet of 800 trucks, and deliveries to stores arrive in 2-3 days.That saves stores money because they can hold less inventory.

Ashley imports 70,000 shipping containers of Asian furniture a year. Rather than pay to send containers back to Asia empty, it arranges shipments of grain and animal hides. Ashley’s obsession with costs is relentless. Some furniture makers offer customers hundreds of fabric choices for upholstery. Ashley offers 1 to 6, depending on the chair. That slashes inventory and speeds production.

Classroom discussion questions:

1. Why has Ashley survived and prospered?

2. What lessons can be learned from Ashley’s OM function?