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Inculcating A Design Culture In The Malaysian Furniture IndustryTHE MALAYSIAN furniture industry has made its presence felt in over 160 countries. As the world's 10th largest furniture exporter in 2000, 2002, 2003 and 2004, as well as currently being the second and largest exporter from Asia and Southeast Asia respectively, the sector has been a significant contributor to the country's GDP. To further develop the industry, the Malaysian Furniture Promotion Council (MFPC), was established by the Ministry of Plantation Industries and Commodities (then known as the Ministry of Primary Industries). While the best of Malaysian furniture has been showcased at various fairs and exhibitions across the globe, these furniture although of high quality however, mainly end up in the low price market segment. MFPC Chief Operating Officer, Mr. Paul Wang, in an interview with Timber Malaysia, sees designing skills enhancement and strategic marketing as the ways necessary in helping the industry realise its full potential. Timber Malaysia highlights the roles of MFPC in inculcating a design culture in the Malaysian furniture industry, the level of technology in the industry as well as the situation in raw material supply to the industry.
PW: The Malaysian furniture industry's development from a small industry to a major manufacturing and exporting concern within the last 15 - 20 years has captivated the imagination of many local investors. While this has helped to spur the expansion of the industry, which at present is able to bring in a revenue of more than RM6 billion a year (and targeting RM7 billion by 2005), many members of the industry end up in the less lucrative segments of the international market. Many factors contribute to this scenario. Lack of skills, focus and investment in furniture designing and strategic marketing, both of which could fetch better prices, are the two main challenges in moving the industry forward. While there are also other factors, the MFPC, having identified these two key areas, has based its programmes and activities on a two-pronged approach: Design Enhancement Strategy and Market Enhancement Strategy. Through such strategies, we will be able to lend support to the furniture industry players and at the same time, collaborate with the relevant government ministries, agencies and trade associations. TM: Let's talk about the Design Enhancement Strategy first. As you said, design is such an important issue in furniture manufacturing. Can you elaborate on MFPC's role in inculcating a culture of design in the local manufacturers in order to push them from OEM to ODM manufacturing? PW: We have what we call the Furniture Design Services Programme, which was drawn up to cultivate and nurture young designers as part of our vision to effectively establish Malaysia as a globally recognised source of distinctive world class furniture. Launched in May last year, fresh graduates with a background in interior and industrial design, as well as budding furniture designers are contracted to work hands on with Malaysian furniture manufacturers. The designers are contracted by the MFPC over a three-month period during which they will receive a trainee's salary from the MFPC. The designers are given the flexibility to either be attached to specific furniture manufacturers or work independently at the MFPC or at their own facilities. Each designer will specialise in producing designs for a specific range of furniture such as bedroom, dining, living and office or outdoor sets with the objective of determining suitable product lines and designs that would be appropriate to the manufacturers' interest and purposes. During the first month of the programme, the manufacturer and designer will develop a mutual understanding to acknowledge each party's interests and available resources to fully utilise them for maximum benefits and results. The designers are given the opportunity to explore their ideas and concepts and communicate them in sketches for performance evaluation. Following the evaluation at the end of the first month, qualified designers will be invited to continue with the programme for the next two months. Designers are selected based on a set of criteria including creativity of design, quality, practicality and choice of material used. The sketches evaluated are then developed into designs in the second month of the programme. The evaluation process continues where selected designers are invited to continue with the programme for the following month for prototyping. In the final month of the programme, furniture designs are transformed into full-scale technical drawings with the view to prototype development. Successful prototypes mark an evolution in the furniture design industry where Malaysia can be elevated to a higher level in the international market. TM: How is the industry responding to this in terms of accepting graduating designers after the three-month attachment? PW: Designers graduating from the programme are placed in the industry with appropriate recommendations from the MFPC. Since its launch, the programme has produced quite a number of designers, seven of whom have graduated and been recruited by industry players while three have become permanent employees of MFPC. There are also four designers working independently after their completion of this programme. In the current batch of 12 designers attached to the programme, 10 are on a full time basis, and two are part-timers. We are confident that most of them will be placed in the industry upon their completion of the programme. Malaysian furniture manufacturers now realise that the industry's pillar of support lies in the expertise of furniture designers as changes are constantly taking place in this trend-conscious industry. The only way to keep up with the changing trends and demands of the industry besides competing in a price war is to become a trendsetter. To move away from the low-price markets, it is vital for us to propagate our own designs, coupled with branding and strategic promotional efforts. The industry needs to realise the need for change, and must be ready to accept and implement those changes. As the programme progresses and industry participation increases, more designers will be assimilated into the manufacturing sector and slowly but surely, a design-oriented culture will eventually be inculcated in the furniture industry. TM: Where do the Malaysian furniture manufacturers stand right now in terms of technological advancement to enable them to take a bigger share of the world furniture trade pie? What is MFPC's role in helping them adopt hi-technology machinery and processes? PW: In terms of machinery and technology that is available in the market today, I would think that Malaysia has it all. Our plants and machinery are second to none. The most advanced and hi-tech machines are in Malaysia like the precision machinery and the ones for mass production as well. But right now we are not utilising them to the maximum. This is either due to the lack of knowledge or the factories are not doing well enough to employ the expertise to maximise their usage. It's not necessary for every factory in the country to have such facilities, but we do hope that there will be factories which could adopt strategies that the Japanese and Taiwanese have long adopted, that is of cooperation and outsourcing from one another. This means that technology that's available in Malaysia could actually be shared and made available to everyone. As far as technology is concerned, I don't think there's a need for worry as it is always available in the market and Malaysian furniture manufacturers know where to find it. MFPC will through its design department assist the industry to get the latest information on the new technology that is available. That notwithstanding, we do caution Malaysian furniture manufacturers on the risk of acquiring new technology too much too soon as this could result in an under-utilisation situation. Malaysian manufacturers must know their market potential and turnover before investing in sophisticated or hi-tech machinery or they would face the risk of not being able to cover their operational overheads. TM: What's the level of technology in Malaysia compared to countries like China, for example? What are the technology factors that have contributed to China being able to produce and increase its exports of furniture, from low end to the high end? PW: Malaysia is not comparable to China, simply because when the Chinese furniture manufacturing industry started, they had a lot of help from the Taiwanese, Japanese, Americans, Germans, Italians and others in the form of investments and technology transfer. After these facilities have been introduced, they became available for the locals as well as the Taiwanese to acquire. The Chinese furniture industry that is doing so well now owes it mainly to the Taiwanese investors, besides their own Chinese industrialists, who are carrying on the business with the benefit of the technological know-how and market access brought about by the other foreign investors. In our case, we did not have an influx of the same magnitude or diversity. We only had a small influx of Taiwanese and Japanese investors. It is different for us as we acquired technology on our own, the hard way. The easy-to-work-with and versatile rubberwood (Malaysian Oak) also helped the Chinese furniture industry to expand. TM: You mentioned rubberwood (Malaysian Oak), which is used predominantly in the Malaysian furniture industry. What are yourstrategies in reducing the Malaysian furniture industry's over-reliance on one single species of wood to develop the furniture industry? There are actually so many species out there that we can use. PW: Basically, the dependency on rubberwood has reduced by more than 20%. Wooden furniture used to consist of more than 80% rubberwood, without any veneers or in combination with others, just pure rubberwood. The ratio of wooden furniture against other types of furniture is still about 80:20. However, out of the 80% of wooden furniture now, only 80% is made of rubberwood. That means that now only 64-65% of furniture exports is rubberwood-based. The other 20% is made from a mixture of other wood and wood composites like MDF and particleboard. We are aiming to reduce the rubberwood dependency even further with the usage of other timbers including American hardwoods, American softwoods and also veneers from around the world as laminates. It's hard for me to provide an estimate now but I can assure you that this dependency on rubberwood will reduce. Now you might ask: why American hardwoods and softwoods? It's because they are plentiful and are readily available. We understand that there are 600 species in our forest of which 20 are commercially viable. But out of the 20 commercially viable species, these are usually not cut to the sizes that the furniture manufacturers want. Secondly, consistency of supply and price is uncertain, as the furniture manufacturers have to compete with the other wood-based products manufacturers. Furniture manufacturers need to order raw materials about six to nine months ahead of delivery time, and they will not take the risk if they are not able to confirm whether they can have a particular species in time for future shipment or not. Until the local timber supply situation becomes more stable and regular, the furniture manufacturers will still predominantly use rubberwood, with gradual increased dependency on particleboard and MDF, and imported woods and veneers as well as other raw materials such as metal, glass and plastics. That seems to be the trend for now and the near future. TM: The world trade in furniture is about US$63 billion, and growing at an average of about 8-9% per year. And Malaysian furniture export currently stands at RM6.3 billion. The furniture trade pie has grown bigger, but Malaysian exports have not grown in tandem with the growth in the world furniture trade. What are your views on that? PW: Malaysia accounts for about 3% share of the world export market for furniture. Our exports have been growing between 10 to 15% year-on-year for the last 15 years, with the exception of 2001 when we (in line with depressed global sentiments) experienced a drop in export value. Going by the trend, Malaysia's export is expected to reach RM7 billion by end of this year, and see an annual 5-10% increase until the year 2010. I would not be able to say what portion of the world export market is Malaysia's share going to be then, as I cannot predict the actual future size of the global furniture trade. But export growth can be measured in two ways. While the conventional way of measuring export growth is to see an increase in export value and volume, it need not necessary be so. Now, I feel that increase in furniture export can mean a reduction in production but an increase in prices. Presently, for export worth RM5 billion, about 160,000 containers are needed to ship out the furniture items. If we can export RM5 billion worth of furniture in 140,000 containers, I would see this as an increase in export revenue. And increasing market share need also not necessarily mean an increase in export country destinations. Malaysian furniture is exported to 160 countries currently, and there are not many more new markets/countries that we can export to. New markets can come in the form of different market segments within each export country destination, for example the middle/higher-end markets of the US and Japan, which can be considered as untapped new markets to Malaysian furniture exporters. In this sense, we need not increase our production just to meet the 10% annual increase in export when a 5-8% increase in value would bring about more export revenue. This can be brought about by value-adding and better utilisation of our material resources through better designs and strategic marketing. I'm confident that when this two-pronged strategy is fully implemented, Malaysia will be able to take up a bigger share of the world export furniture market. TM: Although the USA, Japan and UK have consistently remained as the top three destinations for Malaysian furniture exports, our market share in these three destinations has decreased in the last three years. China is said to be the main reason for this. Do you think that this trend will persist and what are the possible implications for our manufacturers and exporters? PW: In terms of market share, yes, we have registered lower percentages over the last three years. But in terms of value, we have actually registered increases as our export to the US increased from RM1.72 billion to RM1.98 billion while that in 2003 and 2004 to the UK went up from RM0.65 billion to RM0.71 billion, and Japan, the increase was from RM0.67 billion to RM0.78 billion, respectively. However, China's growth in furniture export in recent years has been phenomenal, affecting not just Malaysia but other top exporting countries such as Italy. With a total production output of US$31.7 billion and export value of US$9.6 billion in 2004 (up from US$7.3 in 2003), China has replaced Italy as the world's largest exporter. This shows that China undeniably has the capacity to mass-produce furniture with prices that could attract buying interest worldwide as well as cater to the middle- to higher-end segments at the same time. There are several factors behind the strong export growth for China's furniture industry with the most significant being investment by foreign-based as well as local private furniture enterprises since the mid-90's. From a list of more than 20 countries, investors from the west were the biggest investors, and about 60% of China's furniture export to the US was produced by the western investors. Another deciding factor was the investment by Taiwanese furniture companies, more than 500 of which had shifted their manufacturing plants to China to take advantage of the labour cost and abundant raw materials. These Taiwanese companies exported 90% per cent of the furniture produced. The local private-owned companies have meanwhile, also expanded over the years in both export and production. Besides being OEM (Original Equipment Manufacturing) manufacturers, many of them have successfully established their own brands that are registered in countries like the USA, Japan and Australia. Despite these achievements, 2004 proved a difficult year and could become the turning point for China's furniture industry. The anti-dumpling petition filed by some American companies against wooden bedroom furniture imported from China probably sends out a signal that the days of industrial and export boom for China's furniture industry are numbered. And it's an 'open secret' that many foreign investors, including those from the US, Japan and UK who once found China's domestic market promising are being edged out by the local private-owned companies with their better networking and control of the domestic market. Some of these investors are looking elsewhere, including the ASEAN region to invest. This is where we hope to attract them to invest in Malaysia, and through strategic collaborations, we could increase our export share to these markets. TM: Let's look at Malaysia's export destinations closer to home. Furniture exports to Singapore and Australia have increased in the last three years. Why Singapore? Are we selling to traders? If yes, why should we? Shouldn't this be perceived as unhealthy, when we could be selling directly to the countries of destination? PW: As far as Australia is concerned, it's a healthy development as it is an export destination where the demand for furniture is increasing. In the case of Singapore, there are two main factors why Singapore has been gaining prominence as an export destination for Malaysian furniture. Being resource-scarce, it makes economic sense for Singaporean manufacturers and exporters to look towards its closest neighbour, which is Malaysia. Tapping on the cheaper land and labour costs as well as availability of raw materials, many Singapore companies have set up manufacturing plants across the Causeway. To us, this is investment which we welcome. We must acknowledge that Singaporeans have established good marketing networks globally and must appreciate their contribution to the growth of the industry through their investment and promotion of furniture products from their Malaysian-based factories. As most of these companies have long-standing business relationships with shipping agencies back home, they would prefer to export their products through Singapore. The other major factor is, as you rightly pointed out, Malaysian manufacturers selling to Singaporean traders. While most of the well-established or bigger Malaysian companies have their own marketing departments or personnel who deal direct with the end buyers, many late comers to the industry who started in the late 80's or early 90's to take advantage of the furniture industry boom in the country have found the going hard lately. To survive, they tend to take up any offer including those from Singapore traders for the sake of staying in the business. Not only is this undermining the efforts and heavy investment put in by the bigger furniture manufacturers, it is also a waste of our natural resources, especially our Malaysian Oak (Hevea brasiliensis) when they are produced and sold as cheap furniture while we could have added value through better design and marketing. But I don't see this trend of selling and shipping through Singapore increasing as the Malaysian furniture industry is undergoing a natural 'shakeout' where the well-established and more organised companies are in a better position to survive and grow stronger. At the same time, Malaysian ports are very well-equipped these days with the government having invested heavily over the years to improve our logistics capacity, like the Port of Tanjung Pelepas in Johor and Port Klang in Selangor. TM: One of the things MFPC has recommended to bring the furniture industry forward is to identify and develop working relationships with strategic marketing partners from abroad to reposition the industry from existing competitive price segments. Could you elaborate on this please? PW: In the face of global challenges and developments such as the issues we discussed earlier, there is no room for the Malaysian furniture industry to be complacent and to carry on business as usual. Raw materials are getting scarce and expensive, and more exporters from low cost producing countries are entering the already crowded market place, especially the low-end market. To enhance the performance of Malaysian furniture exports, MFPC has launched its Furniture Excellence Programme, or FURNEXPRO, in short. It's primary objective is to reposition Malaysia's furniture export in the middle- to higher-end market segments through collaborations with strategic partners in selected export markets. The programme kicked off with the Japan-Malaysia Furniture Excellence Programme, or JM FURNEXPRO in October 2004 in collaboration with Toyo Furniture Research Co. Ltd. (TFR) to expand Malaysian furniture export to the Far East market, especially Japan. Under the collaboration, TFR has been engaged as MFPC's consultant in Japan. The three-year programme will involve enhancing the image of Malaysian furniture in the Japanese market (with prime focus on the Contract furniture sector) as well as equipping Malaysian furniture manufacturers and exporters with the necessary skills and attributes required by the Japanese buyers. This will be done through various activities including participation in image enhancement exhibitions and road shows, export oriented exhibitions, trade missions as well as study and exploratory missions to Japan, and vice versa. The latter was organised in March this year with the visit of selected Japanese buyers to Malaysia at the invitation of MFPC. During the visit, Malaysian participants were introduced to these buyers to discuss possible collaborations. In addition to that, MFPC has also appointed a Japanese technical consultant to be based in Malaysia. This is to ensure that the Malaysian products appeal to the Japanese taste, conform to their high expectation of performance and spatial context, and comply with their strict requirements. We are targeting to launch the Middle East-Malaysia (MEM) FURNEXPRO in June this year, based in Dubai. It is modelled after JM FURNEXPRO. After which, we are looking at launching similar programmes in the EU, UK as well as the US. I believe FURNEXPRO, together with MFPC's other programmes and activities, will eventually elevate Malaysia's position as a global player in the international arena.
For further information or enquiry on FURNEXPRO, the MFPC can be contacted at: 5th Floor, Bangunan Getah Asli (Menara) |
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TM:
The MFPC has been in existence
for about 18 months now. What programmes have you executed to further develop
the Malaysian furniture industry?
MTC’s
