10 Common Risks in Furniture Manufacturing

Deepak Madnani, DeepGreen Design

February 11, 2022

In furniture manufacturing, there are many potential risks of which you need to be aware and prepare for. Although most risks cannot be completely eliminated, many can be managed to minimize their potential impact on your business operations. To minimize the risks that arise in furniture manufacturing, it’s important to understand the most common risks and how they can affect your production flow and profits.

1) Delivery delays
The furniture manufacturing process is lengthy and often unpredictable. Delivery delays are common, and it’s important to keep in mind that a good product isn’t just about appearance—it’s also about being delivered on time. This risk can be mitigated by contracting with reputable manufacturers and making sure to stay on top of delivery dates.

2) Supply chain disruptions
Getting your furniture product to consumers on time is critical to a profitable business. If your supply chain gets disrupted—maybe because of shipping delays, bad weather, or an accident—it can cause you to miss deadlines and end up with excess inventory. This could result in costly expenses for storage and disposal. To prevent supply chain disruptions from impacting your business, create a solid system that tracks orders from beginning to end.

3) Changing user tastes
Furniture is notoriously fickle; what’s popular today might not be tomorrow. While a good product can last for decades, user tastes are always changing. It’s important to keep up on trends, and to change with them when necessary. A truly successful furniture company will have a rich history of making well-made products that suit a variety of different needs over time.

4) Changes to material prices
When furniture manufacturers place orders for raw materials, they do so with a certain amount of confidence. If market forces change drastically, however, that order could turn out to be far more costly than anticipated. The easiest way to manage risk is to pay attention to what’s going on within your industry and consider placing smaller initial orders if prices are unstable. The more granular you can be with your forecasts, and subsequent purchases, the better off you’ll be.

5) Product recalls
A furniture product recall can be a financial disaster, as well as cause a significant loss of business. But before you dismiss it as an unlikely outcome, consider some of these high-profile events that have caused headaches for manufacturers and retailers alike: In 2016, IKEA recalled 29 million chests and dressers following six deaths attributed to collapsing pieces; in 2017, Target issued a recall on 175,000 dressers after multiple reports of them tipping over or collapsing.

It’s clear why all parties involved would want to avoid such incidents from occurring at all costs. Yet assessing each component of your supply chain is only part of what should go into a comprehensive risk management strategy when working with wood furniture. And determining how and where risks occur—both during production processes and at retail outlets—is critical if you are going to minimize them.

6) Cost overruns
It's estimated that 90% of projects go over budget. You can try to be super-meticulous with your planning and project estimates, but you can never be certain what will happen when you start production on a larger scale. It’s difficult to know if your costs are creeping up or if it's just normal fluctuation in material prices. To ensure these overruns don't derail your operation, keep extra capital reserved for situations like these.

7) Labor shortages or strikes
Labor shortages and strikes can delay manufacturing. To ensure a consistent supply of workers, make sure to build relationships with your vendors and subcontractors. Be prepared to negotiate compensation packages that will help you attract and retain workers. If possible, avoid manufacturing during peak seasons or holidays when labor is scarce. You may need to add additional resources for peak times, but these costs will be far less than labor expenses incurred due to shortages or strikes.

8) Seasonal problems If you’re a furniture maker that depends on Christmas sales to make a good year, then you’re going to be faced with an issue. Seasonal businesses can struggle in environments where there are long winters and short summers. If your customers aren’t able to use your product for much of winter, it can lead to drops in sales – which can harm both profits and quality of life.

9) Product defects When developing your product, it’s important to think through how defects might happen and what might cause them. What are common reasons why products can be defective? And how can you minimize those risks as much as possible? Keep in mind that even if a defect is discovered later on, after shipping to customers, it’s still considered a risk—one that you can manage by offering customers free repair or replacement services.

10) Financial mismanagement One of most common risks for furniture manufacturing companies is financial mismanagement. A lot of furniture manufacturing businesses take money from investors who, under normal circumstances, would be expecting a return on their investment. But furniture manufacturing isn’t always profitable, and unexpected losses can make it hard to pay back investors. An example of such a loss could be if you bought raw materials before they went up in price or imported your products from China when labor strikes suddenly made them more expensive.

Conclusion Successful furniture manufacturing demands constant attention to risk management. The tools for managing risks will vary, but with a little research and analysis, there are solutions for most problems. There are some common risks that many furniture manufacturers face throughout their businesses, from ineffective inventory management to lack of employee training. Understanding your business’s possible risks is one way to plan for success and increase efficiency and productivity.

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