Ethan Allen Has Shown the Way For North American Manufacturing

Ethan Allen’s determination to keep making its furniture in America has become legendary, but that path is becoming even more relevant as scores of other U.S.-based companies now seek to “reshore” and “nearshore” operations, for reasons ranging from geopolitics to a determination to straighten out their supply chains to a realization that costs are rising in China.

Long-time Ethan Allen Interiors CEO Farooq Kathwari began shifting back production to North America from China about 15 years ago, long before the current trend and when some U.S.-based furniture makers still were setting up new sourcing arrangements in Asia. He saw the opportunity to re-establish a manufacturing footprint that relied on North America, including a major operation in Mexico and significant—and ongoing—investments in factory automation to make Ethan Allen’s custom-ordered wood furniture in the United States.

“Today, 75% of our products are made in North America,” Kathwari told Chief Executive. That includes about 800 people in plants in North Carolina and Vermont, and about 1,300 in Mexico. “Today, if you place an order for for custom-upholstered furniture, you’ll get it in about six weeks.”

Here are some of Kathwari’s thoughts about sourcing domestically—and strategically:

• Take the long view. Chinese furniture manufacturing on the nation’s east coast was built on the immigration of many workers from the interior, and that told Kathwari — a Kashmiri national who became an American citizen and has been recognized as an Outstanding American by Choice by the U.S. government — there could be a structural problem.

“I saw that all these folks were coming from the [Chinese] interior to the east, and they were going to go back,” Kathwari said. “And in the last 10 to 15 years, they have done that.” It was one reason Ethan Allen has been shying away from Chinese manufacture.

• Look up — and down. Kathwari has found that a key to Ethan Allen’s ability to maintain North American production has been vertical integration, a structure that he highly recommends especially for consumer-facing categories. For his company, this includes operating its own network of retail stores across North America.

“If we didn’t have the ability to have a vertically integrated company, where we run our own retail, we wouldn’t be competitive,” Kathwari said. “Because we have retail, we’re able to have the advantage of selling through to the consumer.”

• Count on Mexico. Ethan Allen began investing in its Mexico operation about 20 years ago and today runs a 600,000-square-foot plant.

“We ship products to China, Korea and the Philippines from there, and it has helped support our U.S. operations,” Kathwari said. “We have made it one of the best places to work in Mexico, as recognized by the Mexican government. We provide two meals a day, doctors on staff, transportation for many workers. We also have invested in a lot of technology there. When you do all of these things, the level of quality and production is fantastic.”

• Consider other countries. Ethan Allen also was a trailblazer in scouting out other Western Hemisphere sites for manufacturing. About a decade ago, the company purchased a 250,000-square-foot wood-products plant in Honduras. “Today,” Kathwari said, “we have 700 people making wood furniture, but all of the lumber is shipped there from North America.”

• Automate to stay ahead. Making furniture of the quality of Ethan Allen’s still requires near-artisanal care and highly paid labor in its final assembly. So to maintain as much production as possible in the United States, Kathwari has relied significantly on factory automation.

“Upholstered products today represent more than 50% of our business, and 30 years ago it was only 20%,” he said. “It used to be, all that fabric had to be cut by hand. But today, we have lasers and computer-operated technology that cuts all the fabrics. And while our frames on the sofa used to be made by carpenters, today all parts are made by computer-aided machines. They’re all cut in five to seven minutes.”