Furniture importers struggle with shipping

HIGH POINT — Sharp reductions in shipping capacity have created major headaches for many furniture importers in recent weeks as they struggle to keep merchandise flowing from their Asian factories to their U.S. warehouses.
Importers say space on cargo ships has been increasingly difficult to find, and when it is available, the shipping charges are two to three times higher than they were a year ago.

They say shipping always has been challenging for importers trying to get goods on the water before factories shut down for Chinese New Year begins (this year's celebration started Feb. 14), but the problems were exacerbated this year by significant capacity reductions by most shipping lines.

"The carriers have pulled so many vessels out of service that they created a supply and demand issue that wasn't there before," said Joseph Condra, director of product development and sourcing at case goods importer Cresent Fine Furniture. "What is always a critical time is even worse."

Steve Wolfe, vice president of business development at logistics provider Zenith Global Logistics, said the situation is the worst he has experienced in more than 15 years of logistics work.

"Space definitely is at a premium," Wolfe said. "It couldn't be much worse than it is right now."

What's especially frustrating for Wolfe and others is that, even after a furniture importer has booked shipping space, there's a good chance some of his containers will get bumped off the vessel by an importer willing to pay a higher price for the space.

And with the capacity crunch, there's no guarantee a bumped container can be quickly transferred to another U.S.-bound cargo ship.

"After the containers for Wal-Mart and a few other big retailers are loaded, the rest of the space is basically up for auction," Wolfe said.

Lamont Hope, chief operating officer at Home Meridian International, the parent company of furniture sources Pulaski and SLF, said his company contracts directly with four of the 10 major shipping lines and was able to get priority treatment for about a half-dozen containers that needed to be shipped before the Feb. 12 deadline to beat the Chinese New Year shutdown. Those containers, carrying product samples, are expected to arrive in time for the March 15-16 premarket in High Point.

"I have never seen it this bad," Hope said. "The carriers are in serious financial condition, and they have taken enough volume off line so they can ask for a rate increase and get it."

Adding to this year's problems was a rush to book shipments before a Jan. 15 "emergency revenue charge" of $400 per 40-foot container went into effect, as well as a general push by all importers to replenish depleted inventory.

Importers and logistics providers say a typical 40-foot container was shipped from Asia to the West Coast for about $1,000 last spring. Today, the cost is at least $2,000 to $2,500 to the West Coat and well over $3,000 to the East Coast.

And if an importer has an especially critical shipment such as market samples, they may have little choice but to pay an additional $100 to $1,000 premium per container to ensure the shipment is put on the vessel.

Even then, there are no guarantees of all its containers getting shipped, said Hokeun Lee, marketing director of case goods importer Sunny Designs, which has paid premiums of $150 to $500 per container.

"We are still seeing some delays. Just about every container is an issue. We book two to three weeks in advance and we are still getting bumped," Lee said. "Once we book it, someone pays more and they put a higher revenue container on the boats."

Some furniture companies sensed there would be a capacity problem early this year and ordered more product for their U.S. warehouses. Several said that such a move should allow them to have enough inventory until the shipping situation eases in the coming months.

Case goods and upholstery producer Fairmont Designs began building up its inventory about two months ago, said CEO Jason Liu.

"We planned for it," Liu said. "With almost the whole month of February gone (due to Chinese New Year) we bring in more goods every year. We always increase our inventory here and also build up some overseas."

He also said Fairmont's relationships with its shipping companies also have helped it secure space on ships and also avoid incurring additional container fees. But as it stands, the company already is paying $2,200 per container from China to the West Coast, double the $1,100 it paid a year ago.

Officials at importer Coaster said that in December, they foresaw a challenge with shipping capacity. As a result, the company ordered much more merchandise than normal.

"We just called our factories and said, ‘Let's get everything we can ship out before Chinese New Year,'" said Toby Konetzny, marketing director. "We are just enjoying the fact that we have the merchandise."

To handle the overflow, Coaster has rented extra warehouse space in the Los Angeles area.

Home Meridian's Hope believes that once the Chinese New Year observance winds down this week, the capacity crunch will begin to dissipate. But others are less optimistic.

"We're told it could be at least the end of March before the situation changes," said Wolfe at Zenith Global Logistics. "I'm not looking for any short-term relief."