Thomas Russell — Furniture Today,
Expansion underway at Shanghai facility


SHANGHAI, China — As with any new investment, Ashley Furniture took a risk by establishing a cut-and-sew operation here in January 2001. 

But from all indications, the investment appears to be paying off.
During a tour of the facility in September, Ashley Chairman Ron Wanek said that growth in both export and domestic markets is fueling an expansion expected to be completed by the second quarter of 2014.

Wanek said the expansion will house both manufacturing and warehousing space and other on-site facilities, including a dining hall that can seat 1,000 workers, double the capacity of its existing cafeteria.

Today, the 1.2 million-square-foot operation employs about 5,000 workers who make cut-and-sew kits used mostly for leather and fabric upholstery produced at Ashley’s U.S. factories.

Another area of the factory produces frames and finished upholstery for international markets, which include 113 countries around the world. The plant also produces top-of-the-bed sets sold under the Ashley brand, but that product segment accounts for less than 5% of the goods produced there.

In terms of unit volume, fabric kits account for most of the plant’s production, according to Brent Koslo, executive vice president of upholstery operations. However, Koslo said that leather actually represents a higher dollar volume.

The success of the operation has not come without challenges.

During the tour, Wanek said it took Ashley about three years of planning before it broke ground on the facility, which is entirely owned by Ashley Furniture Inds.

Ashley worked hard to find a location that is close to ports and good roads. The 100-acre site it chose in Kunshan is within an hour of the main port facilities in Shanghai. Wanek said that good logistics are critical given the amount of raw materials that come into the facility for processing and the finished goods that get shipped out.

Ashley also wanted to make sure it chose an area that had plenty of good, reliable workers.

“If an attitude of an area wasn’t right, we wouldn’t go there,” Wanek said, noting that the company did plenty of research to get a sense of the local work ethic. That included visiting other area factories to see if they were experiencing difficulties with the local work force.

During the tour, Wanek indicated he is pleased with the quality of the workers. In many cases, they have a very competitive spirit that helps dictate their productivity and pay. For instance, Wanek said, before a shift begins workers will crowd around a chart in their work area that tracks how much they produced and earned in relation to other workers.

But sometimes, this competitive nature encourages workers to find other, better paying jobs. Those opportunities exist in the area, which had more than 900 companies from 38 different countries operating there as of September 2002, according to an economic development Web site touting Kunshan.

“There is competition for a skilled work force,” Wanek said. “In a lot of cases, people just stay a year and leave to try and double their salary.”

As with other parts of China, local salaries have become more competitive. In the past five years, Wanek estimated that the base labor rate has risen 50%.

One factor helping the facility to stay competitive is its proximity to schools and training programs. Kunshan has a number of vocational schools in the area as well as job fairs that attract workers for various industries. Companies such as Ashley also attract workers who migrate to the region from other parts of China.

The facility itself has state-of-the-art manufacturing equipment and a quality control lab that tests the durability of various fabric samples. That helps ensure that the fabrics processed there meet Ashley’s standards, said Koslo. 

Three on-site generators enable the plant to stay operational in the event of local power shortages.
Despite the challenges of running an offshore operation of this size, Wanek believes it provides the company a level of control it wouldn’t achieve sourcing from another plant.

“We can totally dictate our schedules,” Wanek said. “When you deal with somebody else, it becomes more difficult.”