Friday, October 5, 2018

UPDATED (10/05/2018): Unit Labor Costs suck profits from mattress manufacturers - and it may be getting worse!

(The main body of this post originally posted on June 1, 2018, but it has been updated in light of new relevant information.)


Here are some highlights from today's US Bureau of Labor press release regarding the American employment situation...

"... Total nonfarm payroll employment increased by 223,000 in May, and the unemployment rate edged down to 3.8 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in several industries...
  • Manufacturing employment has risen by 259,000 over the year, with about three-fourths of the growth in durable goods industries. 


UPDATE 10/05/2018
The September 2018 US Jobs Report show another drop in unemployment rate to 3.7%, the lowest since 1969! Likewise, as suggested in this June 1 post, annual wage growth rate rose to 2.8% over the past 12 months.

Let's repeat, fewer workers are in your area, and higher labor costs are in your future. Read the remainder of the post below for help from GSG.....


Good news for the American worker; wake-up call for the American manufacturer.
More Americans are enjoying better incomes, and hopefully the American manufacturer can benefit when the population spends that extra money on manufactured products - like new mattresses!

But as we've pointed out many times in this blog, as the pool of available workers shrink, labor costs will increase. Employers are forced to increase wages to attract ideal applicants, and keep existing employees from jumping ship for a higher paying job at a different business.

This impacts two key areas of your profitability: Unit Labor Costs (the labor cost to produce one unit of your manufactured product) go up, and Productivity (the amount of value produced per employee) goes down. That's not a good scenario for manufacturers like you.

As explained in a another recent BLS report regarding 2017 Manufacturing Productivity Costs, "... Employers experience increased unit labor costs when hourly compensation growth outpaces productivity growth. Unit labor costs increased in 19 of the 21 manufacturing industries, as hourly compensation growth outpaced that of productivity..."

Based on this most recent May report, Productivity Costs may be worse for American manufacturers in 2018 if employment trends continue this trajectory. 

Efficiency trumps Unit Labor Costs
To combat rising labor costs, you need to cut out waste, and produce more value per employee. Handling and disposing of material scraps from cut and sew operations in the mattress factory is a total drain on profitability! It adds no value to your product, and sucks money right out of your operations. GSG now offers a vacuum-powered automatic waste disposal system from Waste-exit. It literally sucks waste out of your mattress production.




Check out this video see this amazing system at work
and
learn more at our website.

Eliminating the waste is the low hanging fruit for improved efficiency, but there are many other areas to improve upon and GSG has solutions for every area of your mattress plant. Click here to see more new hyper-productive equipment from GSG.



Monday, October 1, 2018

Chinese tariffs and anti-dumping duties offer relief for US mattress manufacturers

Efforts to oppose China's mattress dumping practices in the US mattress market are under way.

WASHINGTON, September 18, 2018 – Corsicana Mattress Company, Elite Comfort Solutions, Future Foam Inc., FXI, Inc., Innocor, Inc., Kolcraft Enterprises Inc., Leggett & Platt, Incorporated, Serta Simmons Bedding, LLC, and Tempur Sealy International, Inc. (collectively, the “Mattress Petitioners”) today filed an antidumping duty petition demonstrating how unfairly traded imports of foam and innerspring mattresses from China are causing material injury and threat of material injury to the US mattress industry. The petition was filed with the US Department of Commerce and the US International Trade Commission. The Mattress Petitioners allege dumping margins ranging from 267 percent to over 1,777 percent. The dumping margin is the difference between the Chinese producers’ US prices and a normal value calculated under US trade law... (read the entire press release at BedTimes Magazine)

The related press release issued by the Mattress Petitioners goes on to say that some adult mattresses from Chinese exports cost a mere $18! Obviously this leads to a damaging cut in the market share for domestic manufacturers.

The International Sleep Products Association (ISPA) encourages all US mattress producers impacted by this to immediately download and complete a questionnaire provided by the US International Trade Commission (USITC). 


80% of the $3.67B in imported bedding in 2017 came from China.
Source credit: ustradenumbers.com
91% of the tonnage of imported bedding in 2017 came from China.
That's a lot of volume of cheap beds!
Source credit: ustradenumbers.com
The graphics above show that the value/ton of China imports is very undervalued compared to other listed importers.

Facing the threat of possibly retroactive duties and a new 10% tariff announced last month, Chinese imports may slow down rapidly. A quick look at the USITC questionnaire focuses on the impact this has had on your capacity and your market share

The mattress import growth from China has been expanding for over a decade, and if you're still using the same machinery of that era, you may struggle to meet capacity demand should your market share rebound. Now is the time to assess your capabilities and your insufficiency too.

If a loss of market share in recent years has forced you to downsize staffing, you probably can't rely on new hiring to meet new production increases. Due to the current record-low unemployment rate, the manufacturing labor force is just not available. You'll need new machines that can produce more volume with less manual labor.

GSG suggests these three key machines for top productivity with minimal labor requirements:
Gribetz V16 1600 RPM quilt machine.
Fastest Tack & Jump quilter in the world!

Porter EST-501 semi-automatic flanger.
Automated turning belts and panel guides make for fast easy work!

Gateway Systems Mattress Master Optima semi-automatic tape edge.
Turning arm and flipping device make this tough task easy and efficient.

Act now to inform the USITC about the impact of mattress dumping, then act fast to assess your changing manufacturing needs with the help of your GSG representative.