The furniture industry in Jamaica - Challenges and Solutions Pt 3

Mortimer McPherson, Contributor

During the past decade, the domestic wood-furniture industry has lost approximately two-thirds of its market share to imports. The problem is spreading to other wood-based industries such as kitchen cabinets, upholstered furniture, wood products and woodcraft items. This segment discusses strategies to help our wood products and furniture industry survive and thrive in a global business environment. The challenge is to identify our competitive advantages and to mitigate our weaknesses.

I make a case for a paradigm shift in the business of designing, manufacturing, marketing, managing and distributing wood furniture, as it is perhaps the most promising vehicle for our industry to sustain a prosperous Jamaican manufacturing base into the future. Furthermore, we need a change in business models - to avoid cost-based competition with low-cost producers such as those located in Asia and South America. We will look critically at benchmarking activities which can be implemented to foster growth and development in this sector.

Quantify the gap

The objective is to quantify the gap that must be bridged if our industry is to become globally competitive and survive. David Kearns, CEO, Xerox Corp (Acord 2000), defined benchmarking as "the continuous process of measuring products, services and practices against the toughest competitors or those recognised as industry leaders". Terry Acord (2000) says we benchmark for two reasons: to gauge where we stand against key competitors, or to learn about (and implement) successful ideas from the best companies.

Demographic trends suggest worsening problems with the skilled labour supply here in Jamaica, while globalisation has created many lower-cost competitors with access to cheap labour and abundant raw materials.

Of the top 10 markets in 2008, Japan was the only market which did not provide some duty preferences to CARICOM furniture suppliers. Therefore, furniture suppliers from CARICOM face one less barrier to trade competitiveness in most of their export-market tariffs. However, these suppliers seem to face challenges in forming linkages to the large regional import-market opportunities that were observed between 2001 and 2008.

Non-quantitative factors, such as managerial ability, entrepreneurial spirit or employing a more appropriate business model, may be more important to becoming globally competitive.

1. The setting up of centres of excellence - a group of interrelated industries, government and private organisations/institutions, research institutes and universities, equipment manufacturers, and consultants that reinforce/support the core industry - must now be recognised as a key competitive factor in establishing and maintaining global competitive position.

2. The formulation of clusters which will serve to foster sharing among like skills and products. These clusters should focus on small and medium enterprises to improve their competitiveness.

3. Creation of regional production structures (hub and spoke). Here, the production centres will produce parts to specifications and the spokes do the assembly and finishing work. In this way, the industry would be design-led, following pre-established standards which will, in turn, foster and ensure consistent production and increased productivity.

There is the need to critically assess the woodwork/furniture curriculum offered in our high schools and at HEART/NTA training facilities. There needs to be greater focus on design, computer-aided designing and manufacturing (CAD/CAM), woodcraft techniques such as carving, marquetry, wood-turning, intarsia, finishing and the chemistry and use of finishes. There is also the need for geometry and trigonometry to be a fundamental part of the curriculum.

'New-trend' investors

There is also the need to create a 'customised economy'. The largest and most influential group in Jamaica remains the 'new-trend' investors from middle and upper class. They know and demand quality/value, and now they can afford it. The Jamaican furniture industry has to figure out how to reach this customer. They will not buy substantial quantities of commodity furniture, no matter how cheap it is. Hence, we believe that there is an opportunity for supplying unique, quality furniture to a large, affluent segment of the population. Can the Jamaican furniture industry do it? Yes, but we will have to change the way we manufacture, distribute and market furniture products, i.e., a paradigm shift is needed.

Jack Welch, former CEO of General Electric, is quoted as saying that there are three options for a business that is not competitive: "Fix it, sell it or close it."

The Jamaican furniture industry needs strategic renewal in the form of a new and more appropriate business model - a paradigm shift - that will include:

(1) A new business model - mass customisation.

(2) New manufacturing strategies - such as strategic supply-chain alliances and global outsourcing.

(3) 'Reinventing furniture' - using design and construction to make furniture manufacturing a more modular product.

(4) New sales channels - including Internet sales.

Whereas no individual action will achieve success in isolation, Schultz (2002) correctly stated: "Foreign competitors enter our markets, not because our wages are low, but because there is an opportunity in the absence of differentiation." Thus, if the Jamaican furniture industry can differentiate its products to customer requirements and deliver them quickly while providing the expected service and quality, the opportunities for foreign imports can be reduced. Not only does such an approach lessen the opportunities of importers, but it also will allow domestic manufacturers to become more successful exporting their products globally. This, combined with the growing demand for better-quality, differentiated products worldwide, has to be seen as an opportunity by the domestic manufacturers.

A business model is needed that leverages our strengths and reduces the negative impact of our weaknesses. Manufacturing needs to become an integral part of the business model. There is a lack of sufficient reinvestment in plant improvement. Many plants are dirty, small, roadside shops, dimly lit, boasting archaic equipment which inevitably leads to outdated modes of operation. An outdated operation does not only imply problems with the actual manufacturing processes, but often indicates outdated procurement, design, distribution and sales methods.

Nearness to market is, in my view, our most important competitive advantage. We can and must devise and implement new methods to speedily deliver unique, high-quality products to our domestic customers.

In this case, and for many situations, outsourcing of standard components is the better alternative. Thus, the industry has to accept that the times of 'one shop does it all' are over with a change to strategic supplier alliances to allow each entity to focus on its core competencies.

Fundamental questions

Manufacturing has to be an integral part of the business model. Fundamental questions regarding the manufacture of furniture should be answered in future debates. Questions include, but are not limited to: What types of furniture can be produced competitively? What market segments should we focus on? And what needs to be done to create/enlarge these segments? In fact, a wide range of furniture seems to have a good chance to be manufactured domestically.

A big part of the manufacturing renaissance has to be mass customisation - using interchangeable, modular components that will facilitate the efficient production of higher-margin, unique furniture products aimed at key demographics of our society.

This brings us to another salient point - attracting large investors from overseas who will seek offshore markets, tool the local industry, employ large contingencies of local skilled labour just like what we had in the '80s with the 'free-zone' type 807/809 manufacturing projects.

The copycat mentality that has dominated the furniture industry in Jamaica needs to go. We are still making European old-style furniture though the styles in Europe have changed. Not to say we must abandon all traces of period furniture, but a careful re-evaluation of the current design and construction of typical Jamaican furniture is necessary.

The statement 'Jamaica is a country of samples' has plagued us for years. This must change and our producers must take the necessary steps to tool and retool to capitalise on the demand in the modern marketplace.

How to take advantage

Industry players need to capitalise on our proximity to the retail market and the source of the most important raw material - wood - for making furniture. How does the industry take best advantage of the opportunities available by adopting modern technologies such as communication technology? We must consider the opportunities and problems inherent in new, evolving technologies, relevant to wood products/furniture manufacturing.

All efforts will be in vain if the industry is not able to attract, educate and retain young individuals who believe that they have a viable future in the industry. Institutions offering education for woodworkers can confirm the difficulties in attracting students to wood and furniture programmes. But this is only one side of the battle. The challenge is to convince smart, motivated students to enrol in an industry with a reputation for stodginess, low pay, and few chances for advancement. Also needed are better opportunities for lifelong learning for the individuals already in the industry.

Governmental support cannot keep the industry alive for an extended period. Nor would it be good for the industry to live in a safe haven, as this would only lead it to completely lose its competitive edge with global producers. Only through fair, open trade can the industry measure its capabilities globally, and strive to become better. However, government can play important roles by setting policy - tax, environmental, educational, and other - with knowledge of the peculiar situation that the industry faces.

The industry is in a difficult competitive position. Most of the problems are of our own making. It is either the industry questions and changes its ways of doing things or it will continue to lose business to more nimble offshore competitors. To put it very succinctly: "We need the ability to anticipate change and the ability to benefit from change." (Rothschild 2002).

Let us hope that the domestic furniture industry does not experience a total collapse, or lose more ground to overseas manufacturers and exporters, that have captured market share through exports here. Let's not allow overseas producers to begin setting up shop here. It is time to prove what is possible: a profitable domestic furniture-manufacturing industry.

Mortimer McPherson is president of the Jamaica Wood Products & Furniture Association. Email comments to columns@gleanerjm.com, jawfa_jm@yahoo.com and jawfa.jm@gmail.com.