Made in USA: As the flooring industry evolves, the fundamentals of U.S. production take on new meaning - April 2023
By Jennifer Bardoner
The United States has a long history of producing flooring products and today is home to many of the largest flooring manufacturers in the world. Legacy producers like Mohawk and Shaw have grown up here, and as they scaled, it cemented an ecosystem that has drawn others, most recently domestic plants for foreign-based LVT manufacturers. The supply chain challenges wrought by the pandemic have brought renewed interest to domestic manufacturing. But even as the industry has grown and the world has shrunk, a competitive domestic enterprise still largely comes down to the same three things: access to materials, skilled labor and innovation.
ACCESS TO MATERIALS
AHF CEO Brian Carson likes to say that America was literally built on the company’s hardwood products. Its Bruce brand is over 130 years old. Due to the bulk of the raw materials, the legacy provider was raised alongside the country, which is rich with hardwood.
“Lumber tends not to travel very well, so we located facilities in the middle of the sweetest hardwood forests in the world,” says AHF COO Darrell Keeling, noting that AHF produces all of its solid hardwood at its domestic plants. “One thing we know is shipping water is a bad business decision, and lumber, when it’s green, is 50% water.”
In Pennsylvania, AHF has factories that have been manufacturing resilient products since the early 1900s, though initially under the banner of Armstrong Cork Company, the genesis of Armstrong Flooring, AHF’s former parent company. While cork does not grow naturally in the U.S., Lancaster, Pennsylvania became a hub for cork producers in the late 1800s, including Armstrong. Using the byproduct of that initial manufacturing process, Armstrong began manufacturing linoleum by combining the cork dust with other readily available raw materials.
In the 1920s, commercial PVC was invented in the U.S., which led to the establishment of vinyl sheet factories-and ultimately LVT-initially as an alternative to linoleum. “In the late ’60s and into the ’70s, northwest Alabama in particular had a lot of vinyl factories,” says Jeff Collum, president of HMTX Commercial. “In my view, the raw materials dictated that,” he adds, explaining that Georgia and Alabama have an abundant supply of calcium carbonate, used as filler in vinyl flooring.
But as consumption has grown in the United States, so too have imports. “The goal in a capitalistic society is to bring the best product at the best price to the consumer,” Collum says. That could mean engineered wood with enhanced features from Europe or the latest innovations in LVT from Asia.
LVT is quickly becoming the largest flooring category in the U.S. Our sources generally agree that imports account for roughly 80% of domestic consumption and even more for rigid core. Like America, Asia is rich with the raw materials needed and has created economies of scale around the growing category.
“All the cost advantages shifted to Asia,” says David Thoresen, senior vice president of business development for Nox, an OEM supplier based in Korea with a factory in Ohio, as well. “The infrastructure you need to manufacture PVC-based flooring is all in Asia. You can buy PVC more competitively, you can buy the equipment more competitively, and the labor is obviously cheaper.”
Since LVT was originally developed in Asia, the category’s entrenched manufacturing base has also spurred advancements in technology and product features that offer a competitive edge. “LVT still has a large footprint outside the U.S. because of how rapidly the manufacturing technology is evolving,” says Steve Sieracki, vice president of residential hard surface for Shaw. “As the category matures, it is likely the industry will see more onshoring of LVT manufacturing. With all things being equal, being closer to the customer is a strategic advantage for consumer goods. Of course, products will need to be cost competitive to win in the market in all flooring categories.”
Creative Flooring Solutions (CFL) is one of seven or so foreign LVT producers that recently opened facilities in northwest Georgia. “If you only look at the last few years, the pandemic, geopolitical changes, tariffs and freight issues all had significant impact on our industry,” says Thomas Baert, president of the China-based manufacturer. “Hence, having domestic production set up in our most important market has significantly helped eliminate obstacles for us and our customers. The USA factory allows us to have a strong focus on service and stability, with stock availability right here in Calhoun, to reduce price fluctuations and working capital requirements for our customers.”
Coupled with 25% tariffs on Chinese imports-which were upheld in a March ruling-logistics challenges wrought by the pandemic gave domestically produced LVT a competitive edge as ocean shipping rates soared and delivery times stretched and became uncertain. While the price gap between imports and domestic goods narrowed, the value of a more stable supply chain grew.
“Nox was very popular during that timeframe,” Thoresen says, referencing the supplier’s Ohio plant. “Now, things are falling backwards. You can get a container for $2,000 now, and people are forgetting what they went through in some cases and saying, ‘I’m back to sourcing from Asia again.’ Right now, you’re looking at a deficit in pricing if you’re manufacturing in the U.S., so people really have to specify they want ‘Made in the USA.’ That is where most of our business comes from today. They like the low lead times.”
He recounts a recent trade show in Texas where the main specification the general contractors in attendance cared about was domestic supply. The commercial and builder markets, both single- and multifamily, are timeline driven and, with so many different dominoes in play, are prone to challenges related to budget, product availability and scheduling.
AHF chief commercial officer Jennifer Zimmerman says the company augmented its own inventory with a domestic OEM supplier amid the pandemic to help outfit its builder client base with SPC, residential sheet and engineered wood. “Our customers really like having the domestic supply and shorter lead times, especially in single-family home construction,” she says.
With rigid core’s rapid growth in the residential market and the fragility of long supply chains exposed, more producers are also seeing the value of domestic supply. The concentration of foreign investment is targeted at this category, and Mannington and Engineered Floors (EF) are in the midst of ramping up domestic rigid core production as well. EF is building out a facility that COO James Lesslie expects to become operational this summer, while Mannington is working to get its new Georgia production facility fully up and running.
“Domestically, it makes the most sense for us to produce SPC,” says Steve Ehrlich, vice president of business and operations for Novalis, a longtime Chinese producer of the category that opened a U.S. factory two years ago. “It is the most automated product that we can produce and the fastest growing in the rigid core category.” Thoresen estimates that North America and Europe account for 80% of the global demand for resilient, with most of the Asian capacity consumed in America, noting that Europe has already built factories to help meet its demand.
Echoing sentiments from other manufacturers, Zack Zehner, president of Mannington’s residential operations, says, “One thing we’ve learned over the last five years is the outside forces coming at international sourcing are not likely to stop. We believe that being able to control the whole supply chain, the whole service model, allows us to control our own destiny and drive value to our customers and, ultimately, the consumer or commercial end user, with superior service in a lot of cases and with quality that we’re confident in. Even with the adjustments in landed costs on sourced products, we still think it makes sense to manufacture some of our rigid line here for the stability and service reasons mentioned. But the flooring industry is dynamic, and we recognize that we’re going to have to both make it domestically and source from overseas.”
When determining where to produce or source a product, manufacturers consider cost, capacity, lead times and capabilities, weighing those against the client’s needs. According to CFL’s Baert, “Our strategy has always been Vietnam for cost-efficient product solutions, due to its lower labor costs and the absence of tariffs; China for innovation, thanks to its flexibility; and the USA for real-localized designs and superb service solutions for our customers due to its low lead times,” noting the increasing relevance of domestic supply in light of rising interest rates and the amount of imported inventory required to keep things running smoothly.
With more domestic production of LVT, suppliers of the component materials needed to produce it are expected to follow. Print films, for example, are still largely imported, impacting timelines as well as bottom lines.
“I think because of the pandemic, more people are taking a look at manufacturing here; the challenge is really in the infrastructure: How do you get PVC here at a competitive price and other components that go into the product at a competitive price?” Thoresen says. “We have some U.S. suppliers for these things, but even they would admit they don’t produce as competitively as they do in Asia. It’s going to be a long road to get to that point.”
Like all manufacturing, flooring production requires human resources in addition to the raw materials. In the case of hardwood production, access to natural resources led to the creation of a workforce trained to develop trees into residential flooring, but in the case of carpet, it was the evolution of machine tufting technology that fed the establishment of the industry in northern Georgia, known to this day as the “carpet capital of the world.”
Beginning around the turn of the 20th century, a cottage industry focused on hand-tufting bedspreads led to the development of automated broadloom tufting technology and the creation of machine-tufted carpet. Fiber mills followed, perpetuating the growth of the industry and related innovations. In the mid-1930s, DuPont invented nylon, propelling the category to become a staple of both American life and the industry of northwest Georgia, which remains the flooring capital of the United States in large part due to the established labor pool that has existed since those initial carpet boom days.
As plants have closed or been acquired, that workforce has dwindled. Meanwhile, increased domestic demand and competition from overseas have ushered in advances in process through automation. “I’ve been in factories all over the world, and they look a lot different today than they did 25 years ago,” Collum says. “It changed dramatically in the ’90s when U.S. factories really couldn’t keep up with demand, and in the early 2000s, imports of LVT just kept growing and growing and growing, and that led to many U.S. factories not being able to make competitive U.S. products.”
As more low-cost sources of global production come online, automation has begun replacing labor-intensive jobs in U.S. plants. “We pay higher wages in the U.S., so you have to make sure your labor is very productive,” Lesslie says. “Automation was once viewed as an evil corporate thing where you were taking people’s jobs away. Now, it’s doing jobs, quite frankly, that most people don’t want to do.”
“With automation, we have been able to enhance jobs that are traditionally more physically demanding and repetitive,” says David Morgan, executive vice president of operations for Shaw. “We continue to work with our associates to find solutions that make their jobs more rewarding and enjoyable.” Keeling notes that in some cases, such as lumber ripping operations, automation also makes the work environment safer.
EF has switched to robotics for its carpet tile packaging and is exploring options for warehousing and loading creels for tufting machines. At Mohawk’s Aladdin carpet mill, the company is investing in automated cutting equipment. AHF is incorporating tens of millions of dollars in upgrades across its facilities, including automating scanning, chopping, sanding and stacking operations at its solid hardwood plants.
Lesslie estimates automation will at most displace 3% to 5% of the workforce at such factories. With open positions “a way of life” at many of them since the pandemic, those employees are being redeployed across the company, he says.
Such is the case at Tarkett as well, which has yarn and dye, finishing and extrusion facilities in northern Georgia and resilient plants in nearby northern Alabama. “Automation is key to driving down costs and improving capacity, which allows us to compete with the cost structures coming out of Asia,” says Ben Elliott, director of LVT product management for Tarkett. “Obviously, the cost reductions come at the expense of headcount. At Tarkett, we have been able to reallocate that headcount to other areas where we had shortfalls. With such a tight labor market, we have not seen automation impact head count or wages.”
Zimmerman reports that AHF still employs roughly 1,000 people across its three U.S. solid hardwood operations (it also has three domestic vinyl plants and two domestic engineered wood plants). CFL, which brought its domestic LVT factory online two years ago, has hundreds of employees despite building that facility with automation in mind.
“Automation, in the first place, is a necessity in the U.S. as there is virtually no unemployment, and certainly not with people with knowhow in the flooring industry in Georgia,” Baert says.
In addition to helping keep labor costs competitive, automation makes it easier to predict output, capacity and costs, and to maintain quality, Thoresen says. He and other industry leaders also note the impact it has on elevating the skillsets of those who do work in the factories. “It’s a different type of spin on labor, but it really does employ people at a higher level and with capabilities to make more money,” he says. In some cases that can mean engineers, but it can also create opportunities for those already employed there. “We’ve got really good people,” says Keeling, “and the equipment we’re installing is not beyond their capabilities; it’s just a new way of doing the work. Instead of manually feeding something, you’re hitting two buttons on a computer screen.”
As wages increase and labor shortages persist, automation is likely to increase, but it is not the only answer. “The cost of labor is a key input, and being competitive from a labor input is critical,” Zehner agrees, adding, “Innovation driving automation is really relevant, as well as innovations in process: How can you be efficient, eliminate waste and drive efficiencies through process? In many cases, that’s automation, but it could be just your steps in manufacturing, as well. All those things lead to costs.”
In addition to supporting American jobs, sources note that U.S.-made products alleviate growing concerns about forced and child labor. In March, the U.S. Customs and Border Protection strengthened safeguards in relation to the Uyghur Forced Labor Prevention Act (UFLPA). Implemented in June 2022, it prohibits goods manufactured wholly or in part in China’s Xinjiang region or by entities on a federal UFLPA-associated list from entering the United States.
All things being equal, consumers generally will not pay more for American-made products, making the product’s attributes that much more important. “‘Made in the USA’ may not be at the top of the consumer’s must-have list, but it becomes more important if a product also meets their needs relating to style, color and performance,” Ehrlich says. “If they narrow their top choices down to a few but can receive a Made in the USA product faster, it’s much more likely that they’ll choose that product, so it’s more appealing in that respect. Supporting domestic manufacturing is an extra perk.”
Jeff Meadows, president of residential sales for Mohawk, notes that visuals are the main purchase driver, followed by performance. “Whoever has the best visuals wins, so your product has to look amazing,” he says. “After that, it gets into product features: no denting, no scratching, waterproof.”
Still, there is a limit to how much consumers will pay. Lesslie estimates most customers may pay 50% more for a premium product versus a base-grade one. This is especially relevant for LVT, which has the most competition from low-cost overseas producers. As such, most U.S.-made LVT falls in the “better, best” part of the market. Meadows says the sweet spot for domestic LVT is currently $2.99 to $4.99 at retail. Before inflation, that range topped out at $3.99, he says.
“To be able to compete on a transaction-by-transaction basis, it has to be cost competitive,” says Zehner. “That may mean cost competitive when looking at an innovative product that is difficult to obtain from sourced supply.”
As companies seek technologies and attributes to set their products apart, various avenues of differentiation have opened up. HMTX was one of the first to add PVC-free products to its portfolio of resilient options, and Nox is pioneering PVC made from 100% renewable materials. Mannington built a campaign around its partnership with Microban, a well-recognized consumer brand that offers antibacterial properties. Mohawk is expanding its ultra-realistic Signature embossing and patented WetProtect waterproof installation system across its portfolio. Shaw has added Soft Step underlayment, made of recycled drink bottles, to its Coretec WPC, offering additional warmth and comfort underfoot coupled with a sustainability story. And Novalis just introduced its Center Bevel, allowing for installation of SPC in a modern straight-stack pattern as well as the traditional brick pattern, coupled with a realistic visual.
“If you build attributes that have value, sure, people will pay for them,” Lesslie says. “They sell a lot of Lexuses, and at higher prices than Kias, but the attributes have to make sense to the consumer.”
Later this year, EF and CFL will become the first domestic companies to offer direct digitally printed LVT, negating the need for print films-typically still imported-and offering greater realism through fewer pattern repeats and digital embossing. In addition to such design enhancements and the production advantages associated with the vertically integrated process, Baert notes sustainability as another differentiator.
“CFL’s decision to buy the digital printing line was driven by our goal to reduce our carbon footprint as well as to become more sustainable,” he says. “Digital printing eliminates the need for certain elements, including décor films, and thus reduces the total amount of PVC use, reducing plastic waste, as well as the impact of supply chain strains linked to production.”
Lesslie expects the new products to resonate with American consumers, who value quality and service, and potentially jumpstart a new wave of investments and innovations.
“That is going to be the interesting thing-how much innovation can create new factories in the U.S.,” Collum says. “I think our industry has really, for the last 15 years, taken a better position and tried to get the best product to consumers, and not just what they made out back. When I started in Alabama, it was, ‘This is what we can make. Y’all go sell it.’”
Consumers are becoming more aware of environmental impacts, offering a conversation starter and, in some cases, a selling point. On the commercial side, however, it’s a greater distinguishing factor.
“We see on the commercial specified side a growing preference for U.S. products, and part of that preference is tied to the supply chain’s environmental footprint,” Zehner says. “It’s becoming more of a requirement in some cases.”
Copyright 2023 Floor Focus
Related Topics:Novalis Innovative Flooring, AHF Products, Mannington Mills, Armstrong Flooring, Tarkett, Engineered Floors, LLC, Lumber Liquidators, Shaw Industries Group, Inc., Mohawk Industries, HMTX