Richard Magnussen

October 31, 2007  by in UnCategorized   

By Home Furnishings Business in Case Goods on November 2007 Anyone looking for an object lesson in how a company can use the globalization of furniture manufacturing to transform would do well to take a look at Magnussen Home. Starting with occasional and accent furniture, and in an effort led by now-President and CEO Richard Magnussen to explore materials, styles and pricing available in the Far East, family-owned Magnussen Home began honing its sourcing chops almost three decades ago.

In 2001, the company put that hard-won knowledge to work with an entry into case goods—a step-by-step process that avoided rushing into a huge number of collections at first in an effort to maintain a reputation for fast service on imports it was determined not to sacrifice. The company now is a key case goods supplier for retailers of all sizes, with a distribution infrastructure comprising hi-tech warehousing stateside, and now in Vietnam, where it’s promoting its ability to mix containers across a broad selection of case goods merchandise.

Richard Magnussen’s father, Ingwer Magnussen, unable to find work during the Great Depression, founded the business in 1931 in Kitchener, Ontario, starting with carved show wood for sofa frames for upholstery manufacturers.

Richard Magnussen joined the company in 1970 at the age of 20, leading Magnussen Furniture to become Canada’s largest supplier of occasional tables. In 1986, Richard founded the Presidential Furniture division to serve the U.S. market. Magnussen-Presidential Furniture began importing from the Orient a decade before fashion trends and design styles in the furniture business made it in vogue to do so.

After introducing case goods in 2001, in 2002 Magnussen-Presidential Furniture became Magnussen Home to reflect its new ability to offer furnishings for an entire household, and in the same year opened a U.S. headquarters in High Point.

Richard Magnussen sat down with Home Furnishings Business during the October High Point Market to discuss sourcing trends in Asia, and the importance to retailers of supply chain management in their import programs, especially regarding mixed containers.

You have decades of experience sourcing goods in Asia, first in occasional, and in recent years a growing case goods business. What do you see on the furniture frontier in terms of potential new source countries, and also underdeveloped regions of existing source countries?

I would start with underdeveloped regions in existing countries by saying that business in China is moving toward the middle and north of China. Some of our Taiwanese friends are considering that.

Certainly all of Southeast Asia is a target for development. The one that’s not producing furniture for export right now that comes to mind is Cambodia. I think they’ll start as China did, as a support source to manufacturers elsewhere, starting with raw materials. Usually the government steps in and says, “We want secondary manufacturing as well.”

That leads to supplying dimension stock and components.

Cambodia’s proximity to Vietnam is key. From our (Vietnam) distribution center, it’s about 40 miles to the border.

Looking back on 27 years of doing this (sourcing), it just makes sense. As fast as Vietnam is getting richer, the neighboring countries see what’s going on, and they want a bit of the action, too.

There are other countries like Egypt and India where furniture is still a cottage industry. They need management to move in like the Taiwanese did in China and Vietnam to take it to a production level.

A new Magnussen warehouse facility in Vietnam for mixing containers is now fully operational. We hear a lot about mixed containers these days. In general terms, what should retailers look for when they hear “mixed containers”? Are there any factors that should raise a red flag for retailers looking for such service from their vendors?

If I’m a retailer looking at this, I think a flexible marketing mix is important. Sometimes a vendor will run two case goods groups in a factory and say you can mix these products. If you’re talking a true mixed-container program, that’s like saying you’re half-pregnant.

A true mixed-container program must allow a broad mix of merchandise delivered quickly.

The goal of mixing containers (for retailers), in my opinion, should be to increase turns. If you have mixed merchandise, but can’t deliver it on time, the retailer can’t get the turns. Retailers should be able to get eight to 15 turns on their mixed program.

One of the problems you sometimes see is that service parts aren’t always available. How a (vendor) handles its service parts is important, and to me, that should be a 24-hour program.

This is specific to Southeast Asia—but that’s where a lot of case goods manufacturing is going—a humidity-controlled environment for storing furniture is very important.

At our (225,000-square-foot, high-cube) facility in Vietnam, we take 340 gallons of water out of the air each hour.

If you’re used to manufacturing in China, this is a new dimension—you have the same thing in Indonesia. Our case goods come into our facility averaging 12 to 14 percent (water content) and leave at 9 percent.

When you’re talking about mixed containers, you’re blending products together from different production runs that take place at different times, and your shelf life on furniture is around 60 days without humidity controls before you start having problems with the product.

The root of a strong mixed-container program is supply chain management, and I’m passionate about that. Sometimes Wal-Mart and those big boxes are a bad word among retailers, but I’m convinced that smaller retailers can incorporate their practices in their business.

Retailers can move toward strong supply chain management, reduce their costs and be more profitable.

The measurement that a mixed container program is working for a retailer is inventory turns. I’d like to see a lot of small and mid-size retailers stay in business, but they need to partner with the right people to get their supply chain in order.

We’re all hearing that China is experiencing increased labor rates and zoning restrictions as the government places greater emphasis on hi-tech industrial development. How is that affecting Magnussen’s sourcing, both now and also down the road?

The (value-added tax) benefit reduction is one problem, and some manufacturers are having trouble renewing their leases—the furniture industry is not desirable in South China right now, but these are general statements. There’s going to be business in China, and we still do a lot of volume there.

The other risk in China is pressure on the currency. Personally, I think that change will be gradual. I’m convinced that a lot of these issues are driven by the government.

Our case goods are primarily sourced in Vietnam, where we’ve opened our distribution center, and I think Vietnam is the hot spot for the next eight to 10 years. Wood and wood products export is high on the government’s list of priorities, in the top three I believe.

We’re overwhelmed by the quality of people in Vietnam and the education they have. The average age is, what, 26? They’re young and aggressive, and want to get their careers going.

Our IT people went over there—IT people tend to have a certain sense of ability and self-confidence—and they were extremely impressed with the people they worked with in Vietnam.

Outside China and Vietnam, which Asian source countries do you believe have the most to offer the U.S. market and why?

Indonesia offers custom manufacturing, which is what we look for, while Malaysia and Thailand are strong for mass production in generic looks.

Cebu offers high-quality, primarily accent pieces. We still do good business in fossil stone out of there, and I don’t know many that are right now.

What is your favorite part of Magnussen’s line and why?

I’d have to say our Seven Oaks bedroom, which is part of our Biltmore collections, for a combination of reasons, going back to when my father started this company in 1931.

I’m fascinated by (George) Vanderbilt and his vision in building that estate, and while you aren’t talking about the kind of wealth the Vanderbilts built, it makes me think of the whole history of our company with my father starting out building furniture on his own.

It’s more than a beautiful group of furniture, it’s a reflection of history and vision. Some of our Biltmore hang tags have our own story, with my father on one side. I think he’d get a kick out of being paired with Biltmore and the Vanderbilts.

What do you like to do in your spare time?

I like fast boats, and I like building homes and decorating. I enjoy the creative side of home building, and while I build to “do it right” rather than for numbers, we’ve sold all the homes we’ve built.

I’m very much involved in church volunteer work and non-profit work. We’re working right now on a drug rehabilitation center, a $25 million project in Kitchener, Ontario.