Dive Brief:

• Demand for La-Z-Boy products continues to outpace production, a dynamic that is pushing backlogs and lead times even higher despite capacity increases over the last year, CEO Melinda Whittington said on the company's latest earnings call.  
• Current lead times range from 4 to 9 months compared to the brand's 4 to 6 week normal. And backlogs are eight times higher than before the pandemic and 16 times higher than at the close of fiscal year 2020, Whittington said. 
• La-Z-Boy recently opened a facility in Parás, Mexico, to produce more fabric. The idea is to increase the site's capacity over time, executives said. But so far, all of the company's efforts to expand capacity have been offset by prolonged supply chain challenges, increasing material costs and supplier shortages. 

Dive Insight:

The "long tail" for production and deliveries — that Whittington explained in February was due to supply chain issues — is not shortening. It's actually getting even longer, complicating La-Z-Boy's goals to improve lead times and gradually emerge from its growing count of backlogs.

Company executives acknowledged earlier this year that getting back to normal inventory levels and delivery would take time, as it focused on "making moderate, sequential improvements in capacity throughout the first part of 2021." But those capacity improvements have yet to result in the improvements needed to move the needle forward on production flow. 

La-Z-Boy is far from the only company that has had to contend with supply chain issues impacting inventory and lead times. Walmart extended its lead times to better handle high demand and avoid stockouts. Clorox upped production, but still was unable to meet demand for multiple items. 

In a similar move, La-Z-Boy added more production cells, employees and facilities to increase production, but was not able to make a dent in backlogs or prevent lead times from increasing.

The company is now focusing on its facility in San Luis Río Colorado, Mexico, to meet demand, especially for the West Coast. The space was built up faster than originally planned and is a part of the company's "long-term strategic footprint to better service," Whittington said.

La-Z-Boy is also looking to further "flex" operations to try and catch up with backlogs, she said. Though the brand continues to look for other long-term solutions, maximizing space and securing labor is the immediate strategy.

"A lot of it is about enough floor space and enough people well trained to continue to be able to flex that volume ... in some of these Mexico locations as well as a lot more shifts, overtime and all in our U.S. plants," said Whittington.  

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