Article originally published on Furniture Today
ARCADIA, Wis. — Ashley Furniture Inds. is confronting the furniture industry’s challenges head on, unleashing the largest single investment in the company’s 75-year history.
Over the next 18 months, Ashley will spend $1 billion across four key areas — manufacturing and distribution, automation, technology, and talent and future workforce — with the goal of strengthening its signature Gross Margin Return on Inventory (GMROI) model.
The model, which enables the company’s retail customers to minimize inventory carry costs by relying on faster, more frequent and more customized deliveries from Ashley, has been a linchpin of the company’s growth for more than three decades and has helped propel Ashley to the top spot among furniture industry suppliers with 2019 sales in excess of $6.4 billion.
The massive investment comes at a time when furniture industry supply chains are being challenged more than at any time in recent years in an effort to keep pace with exploding consumer demand, shifting global sourcing imperatives and rapidly evolving workplace demographics.
“Ashley’s goal is to build an even stronger supply-chain to meet ever-growing customer demand,” said CEO Todd Wanek. “This is not only a commitment to bringing the supply-chain back to previous levels, but to enhancing the company’s current capabilities to be able to deliver to customers in just days. We are committed to building our infrastructure to support a 95% in-stock and ready-to-ship level of inventory.”
The timing of this initiative is made more significant by the pandemic-induced strains on global supply chains. Many companies, both within the furniture industry and without, have faced massive order backlogs resulting from delays for everything from delivery of raw materials to challenges in shipping finished goods.
While the size of the investment is eye-catching, it’s not the first time Ashley has made a spend of this size. According to the company, over the past three years Ashley’s investments have surpassed a billion dollars. What is most noteworthy this time is the time frame. The investment will be concentrated within an 18-month window, with new improvements being implemented every day.
“We feel confident that, over the next 18-months, our company will be well-positioned for the long-term to service every customer,” said Wanek. “We have a four-pronged approach that will get us to where we need to be.”
One of the most significant of those prongs is focused on increasing capacity of the company’s advanced manufacturing, distribution and fulfillment centers. Over the past three years, Ashley has opened new facilities in Texas and Washington and will open its newest facility in Ohio in late 2021. These state-of-the-art facilities will complement the company’s current operations in Wisconsin, North Carolina, Mississippi, Pennsylvania and California.
The strategy underpinning this plan is to better position inventory closer to the market, allowing faster delivery times for stores along with next-day e-commerce delivery. In conjunction with this, Ashley has expanded and will further expand its storage capacity, allowing it to increase shipping capacity every day.
To keep pace with heightened demand, the company is increasing production of bedroom and upholstery furniture, with upholstery production to increase by an estimated 40% and domestic bedroom production to increase by approximately 20% in Q2, 2021.
Continuous investments have also been made in Ashley’s Asian operations to handle the recent ramp up in business. The company indicated it will now be able to scale dramatically and, based on container availability, increase shipments approximately 20% over current levels. According to the company, recent technology investments have drastically improved the tracking and tracing of domestic containers, ensuring the supply chain is in alignment.
Ashley already operates the largest transportation fleet in the furniture industry and said it is making significant investments into its management process to improve deliveries to dealers. Citing an uptick in delays with common carriers due to the pandemic, the company said it will acquire an additional 225 tractors in 2021, bringing its fleet to more than 1,225 tractors and 4,000 trailers. This investment will allow for better control of the movement of products to Ashley’s customers andallow for faster speed-to-market.
Enhanced Smart Factory
The second prong in the company’s investment strategy centers on automation and equipment improvement. With advancements in manufacturing the company has enhanced its implementation of Smart Factory and automation technologies to improve processes and quality. The term Smart Factory refers to a system of manufacturing that employs computer-integrated manufacturing, high levels of adaptability and rapid design changes, digital information technology, and more flexible technical workforce training.
Ashley already has hundreds of robots supporting its manufacturing operations, and over the next year, the company indicated it will be doubling that amount across all of its manufacturing locations.
These enhancements within this Smart Factory will provide 24/7 monitoring of production data and machine health, which will decrease downtime for machines and people by support teams in real time.
In its distribution facilities, Ashley has implemented the use of Automated Guided Vehicles, using laser navigation to travel autonomously throughout the distribution and fulfillment facilities to assist with long travel routes.
From a workforce perspective, these efforts will provide Ashley’s employees with a more efficient workflow, a better work environment, and reduce heavy lifting and repetitive tasks, according to the company.
Emphasis on technology
The third area of increased investment is in technology, an area that has been a consistent and sustained area of emphasis for the company in recent years. This will include investments in augmented and virtual reality, computer generated imagery, artificial intelligence, the Internet of things (IoT) and connected devices.
For example, the company recently deployed an investment in AsheyDirect.com, enabling customers to have 24/7 access to the information needed to run their business, including improved alert notifications and messaging for Ashley customers.
Another enhancement on Ashley’s list of investments is a new order management system, which will be operational in multiple phases, starting in 2021. This new OMS is equipped with built-in artificial intelligence, allowing for improved management and visibility of customer orders.
According to the company, it was developed to provide customers, independent marketing specialists and customer service agents with immediate information and transparency on any order, at any time. This enhancement will allow for a more focused approach to meeting customer timelines and will also provide complete visibility of the order status from the moment it is processed, loaded, en route and delivered to the customer.
Based on Ashley management’s philosophy that technology is only as good as the people running it, the company recently developed a team focused solely on developing a control tower for supply chain execution. This team will enable faster decision making when changes occur, with a focus on customer fulfillment.
Reinvesting in people
The fourth area in which Ashley will be investing in coming months is its talent base and workforce. In the past five months, Ashley has added more than 4,000 employees to its global organizations, which now total more than 35,000 employees around the globe.
The company describes its philosophy as “great people make great companies,” and to support that philosophy and its increasing effort to develop more advanced manufacturing processes, Ashley has invested in Advanced Technology Maker Centers on its campuses and developed partnerships with K-12 and post-secondary schools, investing in STEM (science, technology, engineering and math), and career and technical education programs.
According to the company these efforts work toward closing the skills gap today in the industry’s advancement and also serve as an investment in the company’s future workforce.
“The investments we’re making in our company are not only significant, but they also demonstrate our willingness to reinvest in our people, our facilities and our machinery to ensure we are well-positioned to meet our customers’ expectations,” said Wanek. “Reinvestment for the Ashley family is a long-term strategy. You can’t stay in business without looking toward the future. We are excited for 2021 and seeing all of our customers grow and succeed.”