Oct. 2008, pdf, 1.8MB
This is the final study on the furniture industry of the Sectoral e-Business Watch in 2008. The study informs on how companies use ICT for managing their business processes, internally and in exchanges with suppliers and customers. It identifies related opportunities, possible barriers for ICT adoption and digital integration and assesses the impact of ICT deployment for firms and for the industry as a whole. Possible implications for policy actions are indicated.
Findings presented are based on literature, expert interviews, case studies and the results of an international survey of enterprises on their ICT usage conducted by the SeBW in August/September 2007.
The study addresses, in particular, policy makers (in the fields of innovation and ICT-related policies and in sectoral policy) and representatives of the furniture industry (notably firm managers, decision-makers in marketing, procurement, ICT and e-solutions, and human resources managers).
For the purpose of the study, the furniture sector is defined as those business activities described by NACE Rev. 2 in Chapter 31, namely 31.01, 31.02 and 31.09. These correspond to: manufacture of office and shop furniture, kitchen furniture and other furniture.
The EU-27 furniture industry is an economically important sector, providing employment to 1.4 million people and generating a turnover of 118 billion Euros in 2004. In most of the European countries, furniture represents between 2 and 4% of the production value of the overall manufacturing sector.
The sector is dominated by small and medium sized enterprises. This is both a point of strength of the EU industry, as these companies are generally more flexible and quick in adapting to market changes, and a point of weakness, as they are more likely to lack investment capability.
A quickly changing and highly competitive environment is putting increasing pressure on EU furniture manufacturers. Product innovation and reduced lead times are the key success factors for businesses to respond to such challenges and to remain competitive. A closer link with both intermediary and final customers is also a clue to keep the pace with market changes and provide adequate customer service. Horizontal and preliminary to these factors is the capability of furniture manufacturers to rely on properly skilled human resources.
Furniture firms need to pursue innovation strategies based on creativity, quality and differentiation of products, as well as improved customer service. Investments are made in the areas of design and creation, automation of production processes, advertising and communication.
The quality of furniture companies' basic ICT infrastructure is fairly good, notably among SMEs. For example, the share of small firms (with 10-49 employees) that have broadband internet connections is around 40%.
The diffusion of Wireless LAN (W-LAN) technology is also high: close to 60% of employees work in companies that use a W-LAN. Also, the share of companies that enable remote access to their computer network is about 50%. With regard to ICT and e-business skills, the vast majority of companies do not suffer from a shortage of ICT practitioners. A good share of furniture companies is equipped to introduce more advanced forms of e-business, a major question addressed in this study is the reason why this is not occurring.
CAD and 3D tools are playing an increasingly important role in furniture companies of all sizes and product lines. The analysis carried out for the present report provides insights on how design tools can be exploited for the purpose of customer-driven production and innovation, allowing a cost and timely-effective way to meet customers’ needs. Moreover, design tools can be used to enhance the customer experience at the point of sale, providing virtual visualisation of product options and, ultimately, leading to customer-driven production and innovation.
A further goal would be to increase the efficiency of the design process and foster overall integration with manufacturing and marketing & sales activities. These tools may act as stepping-stones to a wider integration of the product information flow throughout the overall companies’ operations. Results from the CATI Manufacturing Survey 2007, however, indicate that the integration of design with manufacturing and marketing & sales has not occurred on a large scale.
Issues concerning sustainability and “green” design are becoming a very important part of the furniture design and production process. This general trend is driven by national and EC regulation and is fostered by customers’ awareness. In order to effectively respond to environmental challenges, a comprehensive approach is required. Environmental issues need to be taken into account from the product concept and design phase onwards, through procurement, production and post-sales, until de-manufacturing. The analysis carried out in this report indicates that innovative companies have started to adopt environment-friendly strategies, based on ICT tools for the life cycle assessment of furniture products. It is worth noting that these companies succeed in converting the burden of additional costs (due to compliance to strict regulation) into a competitive advantage: the possibility to base communication and marketing on “green” issues that are particularly appealing with the high-end segments of the market.
The furniture industry faces new business complexities. Product demands span a broad range, from commoditized to highly customized products. Customer demand is continuously changing, while competition from low-cost countries is increasing. To keep pace with the customers’ demand, manufacturers are offering expanded product lines and custom options. The wide variety of dimensions, colours, finishes, fabrics and product options -leaving aside the value of the stock, efficiencies in storage and logistics - are placing increased demands on information systems to provide the functionality and flexibility required to address all the business requirements. On top of this, are the demands by customers for reduced delivery times.
The EU furniture industry has made large investments in production and modern manufacturing techniques. Insights from literature and interviews for this report indicate that flexibility of operations and manufacturing process efficiency has been achieved not so much from investment in high-tech robotics and integrated automation, but more relying on skilled workforce and general purpose manufacturing equipment. The furniture industry handcrafting background emerges in the model of ICT and e-business adoption in this sector: mainly system automation for production, but little business management or system integration in the company or with business partners.
In order to sustain competitiveness at an international level, however, the European industry needs to further advance in efficiency and integration of business processes, such as procurement, production planning, warehousing, inventory control. The realisation of extensive cost reductions and time savings, by integrating all aspects of the supply chain, can be supported by the implementation of proper ICT and e-business solutions, such as SCM. This process is strictly dependant upon the effective implementation of internal business processes management systems, such as ERP. However, adoption and usage of SCM and ERP are still limited to larger firms while smaller players face relevant constraints and barriers, such as cost and complexity of technologies. It also appears from the analysis that the identification of priority areas for focused investments is possibly the suggested path for companies embracing e-business.
A main feature of the furniture industry is the number and diversity of business players along the value chain, including handicraft companies and professionals. The diversity of ICT systems in place and of competences is a major hurdle to integration.
In particular, e-business integration is still lacking between manufacturers and independent distributors, due to the characteristics of furniture distribution networks and the complexity of industrial categorisation and coding. e-Marketing and e-sales activities towards final customers are still limited in this sector, and are aimed at providing technical and commercial information rather than actual e-commerce functions.
Furniture manufacturers and retailers may benefit from improved interoperability and standardisation both for integration of business processes and for the development of B2B and B2C commerce activities. The report highlights interesting examples of web-based e-communication and e-cataloguing initiatives supporting selling activities.
Case studies and the CATI Manufacturing Survey 2007 confirm Web catalogues as the most used web-based application. Web catalogues are seen as a kind of customer service and are hardly ever integrated with ordering and production/distribution systems.
It was a consistent finding in e-Business Watch sector studies that ICT play a crucial role in particular to support process innovation, in manufacturing as well as in service industries. This can be confirmed for the furniture sector: enterprises representing about 47% of sector employment said that they had launched new (or improved) products in 2006/07. About 44% of those said that their product innovations had been directly related to or enabled by ICT. ICT play a crucial role to support process innovation across all size classes.
An econometric analysis was conducted, based on the e-Business Survey 2007 for the furniture industry. It allows identifying ICT impacts on selected business dimensions in the furniture industry. It stems from the survey data that ICT-driven innovation process in this industry is linked to the share of employees with university degree and of ICT practitioners and is favoured by the existence of long-standing and electronically-organised relations with business partners. Conversely, the overall impact of ICT on the furniture industry structure is limited. Finally, ICT and make-or-buy decisions are related, although it is not possible to establish the direction of this link.
Case studies presented in this report illustrate the adoption of ICT and e-business solutions in a few enterprises that were selected as they deal with relevant topics. Case studies lustrate the adoption of ICT and e-business solutions investigated through the survey and match some of the hypotheses presented in Chapter 4. Experiences come from different countries and include firms of different size. Examples can be found in the areas of integration of design activities (Danona and RobinWood), supply chain integration (Micuna, Profim, Home Base and Scavolini), outsourcing (Stokke), the usage of the web for communication with customers (Quatuor, Webmobili) and e-sales (IWOfurn).
Policy measures for the furniture industry should address the issues interoperability and standardisation, the creation of a favourable environment for innovation and the improvement of skills.
Policy measures in the area of standardisation should now aim at fostering faster and wider implementation of standards both at sector and at cross-sector level, in particular as concerns the integration with distribution, and the target of SMEs. This would ultimately bring relevant advantages to the whole furniture manufacturing industry in terms of efficiency and responsiveness to the market. One of the most important issues in the area of standardisation is the need for a shared classification and standardisation scheme of products coding of data
Policy measures should aim at creating a favourable environment for innovation. This should include the support to the effective availability of broadband across all European countries in order to overcome situation of e-exclusions. Findings of the report indicate that the innovation activities of furniture firms are linked to the availability of ICT skilled resources and of personnel with university degrees. It is also well known that design and creativity are points of strength of the European furniture industry. Efforts should be made at a European and national level to encourage synergies between design and supporting technology in order to favour cross fertilisation between these two fields.
ICT and e-business are rapidly changing the way business is conducted in this industry. Innovative applications require changes in organisation and working procedures. Skill upgrading and training of personnel are important to assure the successful implementation of new applications; however SMEs may have difficulties to exploit opportunities related to the introduction of new technologies due to the lack of the necessary skills. Policy may have a role in promoting entrepreneurial and managerial understanding of e-business applications, in providing information about e-business and support to decision-making and in encouraging the improvement of skills related to the reorganisation of working processes and procedures and the implementation of innovative technologies.