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Sourcing strong: Import strategies take shape

imports ART(Floor Covering Weekly) As uncertainty swirls around the as-yet-to-be-determined tariffs, U.S. importers across all industries are facing challenges on the potential impact of these fees.

“The additional tariffs imposed by the President are certainly putting a lot of pressure on importers who are finding it difficult to absorb those costs,” said Marianne Rowden, president and chief executive officer of the American Association of Exporters & Importers, a trade organization that represents U.S. companies in global trade. “Whatever product you can pick, it’s having an impact.”

U.S. flooring suppliers are hedging their bets while still aggressively focusing on imported products, a key component of some companies’ entire business strategy.

“When flooring products were added to the proposed tariff list over the summer, it generated significant attention and discussion within the industry,” said Steve McLean, vice president, global procurement, Armstrong Flooring. While he noted that Armstrong produces three-quarters of the items it sold in 2017, “Imports play an important role in the flooring industry, in terms of diversifying product mix and serving as a source of additional capacity for popular products.” Engineered wood and luxury vinyl tile (LVT), specifically, are strong areas for sourcing.

Joseph Reddington, director of product management for Swiff-Train, is more bearish about the turn of events. “With President Trump’s worldwide trade war, the state of import trade is on a bit of a roller coaster ride. Many flooring products and innumerable other consumer goods produced abroad are now subject to substantial increases as a result of new tariffs. U.S. consumers are unknowingly facing broad-based price increases on their most costly purchases as well as on everyday necessities.”

Still, the state of importing remains strong and should stay that way, no matter which way the tariff wind blows. “The state of importing in flooring is very healthy,” offered Jim Gould, president and founder of the Floor Covering Institute, an independent consultancy focusing on the floor covering industry.

“The current state of import trade is strong and vibrant,” said Harlan Stone, group chief executive officer, Metroflor/Halstead. “New ideas are coming from all around the world and the U.S. market has a hunger for innovation. New products can come from anywhere, and new ideas do come from everywhere.”

Gould said imports will remain strong, regardless of politics. “The technology is changing rapidly. We can’t make new plants as quickly as we’d like. But even if we could, the plants have to get up and running and then are filled up quickly. We just can’t keep up with changes in [trends] the category.”

A diverse approach
Flooring suppliers take a diverse approach to their importing strategies, based on needs, capacity, and even types of products and plants.

Shaw Industries takes multiple factors into consideration in determining its importing strategy, with a heavy focus on quality, compliancy, human rights and consistency.

“No matter where a product or ingredient is sourced or made, it is held to the same high standards Shaw sets for itself,” said Tim Baucom, executive vice president residential division. “Our supplier relationships center on trust, transparency and sustainability — guided by our commitment to Cradle to Cradle principles and the UN Global Compact. Since becoming a signatory to the Global Compact in 2017, we’ve fostered even greater transparency in our supply chain by embedding the Compact’s 10 Principles in our terms and conditions for suppliers. This helps ensure Shaw and its partners are focused on upholding and protecting human rights, labor, environment and anti-corruption standards.”

He noted that some sourcing decisions are based on materials, some on capacity and some on heritage. For example, some stone products may be sourced from regions where stone is plentiful, while LVT products are often sourced in China to supplement domestic manufacturing in order to meet demand. He added that some international facilities are better suited to serve the markets in which they are located. For example, the company recently acquired Scotland-based Sanquhar Tile Services (STS). This “expanded carpet tile footprint to meet the needs of customers in Europe, which include the bitumen-backed carpet tile that is popular within the region,” Baucom said. STS complements the company’s facilities in Georgia and China.

Armstrong Flooring works with its global procurement professionals in its markets as well. “They identify opportunities for sourcing products in each region,” McLean said. “Working across our product management, technical and quality teams, we qualify and bring to market the products which provide our customers the best value.”

He said the company considers many factors when determining what products to import versus make domestically. “We have strategic relationships with world-class manufacturers that are an extension of both our manufacturing and research and development. Once new product volumes reach a certain scale, we determine whether or not to invest the capital necessary to in-source.”

But he noted that for the most part, Armstrong produces flooring for the markets they are in. “Most flooring produced at the China plant is focused on Asia. However, we do import some of this plant’s product to the U.S. We look to leverage the different capabilities across regions, which enables us to diversify our capital investment into more areas for growth. It also allows us to leverage our innovation talent globally, since a good idea in one region can be a success story in another.”

Relationships are key
For Metroflor/Halstead, transparency is critical. “Our relationships with our manufacturing partners are honest, open, conversational and bilateral; in a word: transparent,” Stone said. “We trust each other, and we know each other, and with that comes an ability to focus on the most important aspect of our job: our mutual customers’ experience.”

Swiff-Train has worked to create international partnerships, sometimes spanning several decades. “Most of these relationships are more than just a business transaction,” Reddington said. “They are personal relationships with people that have developed over many years. We work very closely with all of our suppliers to develop, design, produce and market products that we are proud to put our brand names on.  Because of that, we employ very strict compliance programs, and expect our suppliers to adhere to those policies. Each factory must comply with all local, international and U.S. laws, must adhere to international human rights policies, and must produce products that are environmentally friendly and safe for consumer use.”

Still, he noted that many factors go into deciding what to make domestically versus what to source, including currency issues, financial arrangements, cultural and language barriers, quality control processes, transportation and other issues.

At the core, the determining factor is what the consumer wants and how best to provide it. “Much of that decision is determined by consumer wants, and then product and availability,” he said. “Other products are simply not available to us from U.S. manufacturers, so we are forced to source elsewhere to deliver material to our customers.”

The company notably brings in its EarthWerks line that is made abroad and it’s an arduous process from production to quality control to logistics.

“We are very selective about the suppliers that we work with, and we strive to ensure that we work with the very best manufacturer in each product segment through an established process,” Reddington said. 

Source: http://floorcoveringweekly.com/main/features/sourcing-strong-import-strategies-take-shape-24387.aspx