Forthcoming study: Furniture
This study by the Sectoral e-Business Watch is expected for June
2008.
Rationale
The EU furniture industry is an economically important sector, providing
employment to 1.2 million people and generating a turnover of 109 billion
euros in 2003. In most
industrialised countries, furniture represents between 2 and 4% of
the production value of the manufacturing sector. Most EU furniture
companies are SMEs: 80,000 enterprises have less than 20 employees
and 8,800 enterprises have over 20 employees. Small
enterprises often act as sub-contractors for larger firms (producing
components, semi-finished products or finishing and assembling furniture).
The 2001 edition of the EITO Observatory
presented an analysis of the impact of e-commerce on the furniture industry.
The analysis showed that ICT uptake in the furniture industry lagged
behind with respect to other manufacturing sectors. In particular, gaps
were identified in the adoption of systems that integrate the different
processes within the enterprises and along the supply chain, such as
ERP and SCM. The analysis also showed that the adoption of e-business
in the sector was likely to bring major impacts in the areas of procurement,
logistics and order management.
e-Business W@tch has never covered the furniture industry comprehensively
in its surveys. Small furniture manufacturing firms were included as a sub-sector
in the study of crafts and trade in the e-Business Survey 2004. Other sector
studies conducted by e-Business W@tch in 2005 and 2006 showed that
even in the most traditional manufacturing sectors, such as textile and footwear,
e-business has developed dynamically in those areas that respond to competitive
and organisational needs and are economically justified. It would be
of interest to asses whether these dynamics have taken place also in the furniture
manufacturing industry and what their impact on the competitiveness of European
firms is.
Research objectives
The study will aim at assessing to which degree European firms in the
furniture industry use ICT and apply e-business in their internal and
external business processes. The study will highlight what the main barriers
are to use ICT and adopt e-business with particular regard to constraints
that hinder B2B interoperability. It will assess the impact of e-business
on firms’ employment, productivity and innovation. It will also
provide indications about the implementation of policy measures supporting
e-business in this industry.
The following research objectives are proposed:
- Adoption of ICT and e-business in the furniture industry:
the most common applications of e-business technology in this industry,
and the extent to which these applications are actually used by
companies.
- Analysis of key applications in the furniture industry.
As material and service costs make up more than 60% of the production
value in this industry, ICT tools that can simplify and enhance the
buying processes can be of paramount importance for growth and competitiveness.
Due to the high incidence of transport and logistic costs, the impact
of applications improving shipping and order tracking can also be relevant.
Finally, the set up of applications improving the level of customer
service can be a key differentiating factor in an international scenario
where low labour-cost countries are gaining share. To which extent
are these applications used, what are the expected trends? Is there
a fit between demand and supply of e-business solutions?
- The main drivers and barriers for e-business adoption,
in such a way to provide a sound assessment for policy makers.
- The issue of standards for interoperability will
be analysed. In recent years, efforts have been made for the development
of standards-based frameworks that support the complete product life
cycle in the furniture manufacturing industry. Through
the survey, the level of adoption of open standards will be assessed,
as well as the major constraints to further take-up in the sector.
- Impact on firm performance: What is the impact
of ICT on employment, productivity and innovation in this industry,
in comparison to other sectors?
Sector definition
For the purpose of the study, the furniture industry is defined as those
business activities described by NACE Rev. 2 Division 31 Manufacture
of furniture. The respective NACE Rev. 2 Groups and their correspondence
in NACE Rev. 1.1 are shown in the table below. The names of business
activities refer to NACE Rev. 2.
Business activities covered by the sector study
NACE
Rev. 2 |
NACE
Rev. 1.1 (Proxy) |
Business activity:
The manufacture of … |
| 31 |
DN 36.1 |
Manufacture of Furniture |
| 31.01 |
36.12 |
Manufacture of office and shop furniture |
| 31.02 |
36.13 |
Manufacture of kitchen furniture |
| 31.09 |
36.14 |
Manufacture of other furniture |
The proposed analysis focuses on comparable sub-sectors as for structure,
process automation and uptake of ICT. This excludes the manufacture of
mattresses, which used to be 36.15 in NACE Rev. 1.1 and has now become
31.03 in NACE Rev. 2.
The manufacture of chairs and seats, which used to be distinct as 36.11
in NACE Rev. 1.1, is included in 31.01, 31.02 and 31.09 in Rev. 2. Under “manufacturing
of chairs and seats”, NACE Rev. 1.1 also included seats for cars,
trains, boats, and airplanes, even spaceships, which in the new revision
are under the relevant divisions like 30.20, manufacture of railway locomotives.
Data collection
The following sources will be used for collecting data and evidence on
e-business adoption:
- SeBW Survey on Manufacturing (2007): The furniture
industry will be covered as one of three sectors in the SeBW Survey
on manufacturing industries, besides the chemical and the steel
industries.
- Eurostat Community survey (2006) on ICT usage
in enterprises. The furniture industry is currently surveyed as
part of an aggregate of five manufacturing sectors. Thus, the results
are only indicative for this specific industry; they can be used
as complementary evidence to the SeBW survey results, however.
- Case studies. Ten case studies on e-business adoption
in companies from the sectors covered will be conducted. A balanced
mix of cases in terms of countries, areas of application and company
size-bands is to be achieved. Case studies will be selected according
to the topics in focus.
- Interviews. In addition to the interviews conducted
with firm representatives as part of the case study work, in-depth
interviews with further company representatives and industry experts
will be conducted. This could include Advisory Board members from the
industry and members of industry federations.
- Industry federations. Annual reports and position
papers of industry federations, such as:
Specific topics to be studied
The following suggestion of research topics is derived from other
studies conducted on 'similar' manufacturing sectors. It is also
based on studies carried out over the furniture industry, in
particular as regards technological innovation in the office
furniture sub-sector. It is a preliminary collection of ideas,
for discussion with DG ENTR and industry.
- e-Business for integrating design and modelling of new products
with manufacturing and marketing & sales. Furniture
manufacturers face many challenges when designing and modelling new
products. These include the difficulty in exchanging the information
with the shop floor as well the supply and sales chain. Advanced
3-D modelling tools have demonstrated tremendous potential for improving
the efficiency of generating product information needed for the production
of furniture pieces. Now the key is not only to increase the efficiency
of the generation process, but to link this information with the
product data workflow through the development and manufacturing process.
The potential of e-business in this area is not the same for all
players. The study will assess the level of uptake and the impacts
with particular regard to highly innovative companies, such as those
implementing 'green design'
of environmentally and ecologically friendly materials and processes.
Case studies will be used to highlight examples of successful applications
in this area.
- e-Procurement and Supply Chain Management (SCM): usage and
impact of ICT. The EU furniture industry is an assembling
industry, which employs various raw materials including wooden boards,
metal, leather and glass. Suppliers of raw materials are often very
concentrated which leaves little room for manoeuvre for the furniture
industry itself. Therefore an efficient management of the supply
chain is important. Due to the incidence of material and service
cost on production value, even slight improvements produce significant
cost savings. ICT can also help companies to coordinate and manage
their third-party relationships, for instance with sub-contractors
and business partners. In particular, SCM systems can help furniture
companies to match supply and demand through integrated and collaborative
tools. The study will assess whether it is possible for the smaller
organisations to undertake supplier development activities and whether
sector-specific and affordable solutions are available for SMEs.
Case studies could be used to assess the impact of ICT in this area.
- Distribution issues: order management, logistics
and customer service. The European furniture sector is witnessing
an increasing complexity and concentration of distribution firms.
Distribution channels include independent furniture retailers, buying
groups, large-scale specialist distribution, non-specialist department
stores, furniture specialists, direct sales and building trade, mail
order, do it yourself. In addition, the public sector represents
a significant share of demand. As many of the client industries operate
through central purchasing organisations at the EU level, small furniture
producers risk to be excluded due to their insufficient supplying
capacity. ICT can be used in various ways to support integration
with distribution partners and to develop new marketing strategies.
The study will assess how e-business can support furniture firms
to effectively integrate with their distribution channels and to
reduce order lead times, especially those associated with complex,
customer-specified products. Attention will be paid to the fact that
most EU furniture companies are SMEs with limited financial and technological
capacity. As regards e-business applications in marketing and sales,
attention will be given to those solutions that can enhance customer
service at the point of sale, such as tools to configure and price
products, as well as provide visualisation of the products with dynamic
graphics and layout utilities. The ability to deliver and support
this type of services requires specialised applications and skill
sets that may not be currently available within the distribution
organisation. Case studies could include examples of how the interaction
between the manufacturing phase as well as the distribution and retail
phase is managed with the help of ICT and e-business solutions.
- The sector study will consider the international dimension
of competition in
the furniture industry, notably between European companies and their Asian
competitors. It will be assessed whether e-business developments are likely
to influence the competitive position of European firms.
