Furniture

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 below. The names of business activities refer to NACE Rev. 2.

• NACE 31.01: Manufacture of office and shop furniture
• NACE 31.02: Manufacture of kitchen furniture
• NACE 31.09: Manufacture of other furniture

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.

Specific topics to be studied

The following research topics 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.

• 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.
• 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.