ICT and e-Business Impact in the Furniture Industry - empirica

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ICT and e-business impact in the furniture industry3.3.2 SCM in the furniture industryA complex industry value chainAs highlighted in section 2.3, today's furniture manufacturers face new businesscomplexities. Product demands span a broad range, from commoditized to highlycustomized products. Customer demand is continuously changing, while competition fromlow-cost countries is increasing. Creating brand differentiation and keeping market sharedepend more than ever on understanding customer needs and providing customerservice and sales effectiveness. To keep pace with the customers’ demandmanufacturers are offering expanded product lines and custom options. The wide varietyof dimensions, colours, finishes, fabrics and product options - leaving aside the value ofthe stock, efficiencies in storage and logistics - are placing increased demands oninformation systems to provide the functionality and flexibility required to address all thebusiness requirements. On top of this come the demands by customers for reduceddelivery times. In addition, in some market segments such as contract furnishings,custom orders are the norm. The result is a low volume production environment with verycomplex product development, scheduling, and production needs. This sort of low volumeproduction environment is also very common in high-tech industries such as defence ormedical instrumentation. The difference is that there is considerably more price sensitivityin the furniture industry and little tolerance for missing production deadlines.Flexibility and process efficiency are key success factorsThese trends are accompanied by pressure of maintaining margins and profitability. Vitalto success is, therefore, the ability to control costs and optimize processes. As a result,many furniture companies are focusing on improving supply chain management, onstreamlining operations and optimizing their ability to adapt to a changing businessenvironment.However, at the same time, supply chain improvement efforts are constrained, especiallyamong smaller players, by a fragmented and disparate ICT infrastructure, poorlyintegrated solutions, including legacy systems, manufacturing execution systems, and anassortment of custom applications. Not only does this mean high integration costs, butmore importantly, it means impaired visibility into supply chain processes.SCM and internal process automationA major technological issue is that SCM applications rely upon the kind of information thatis stored in ERP software or in other applications used for internal processes.Theoretically, SCM applications could be fed with data from legacy systems (for manysmall companies this means Excel spreadsheets spread across the company) but thisinevitably would impact on the quality of the outputs. SCM applications benefit fromhaving a single major source for information, ideally ERP. It can be concluded, therefore,that the successful implementation of supply chain integration can hardly be achievedunless internal process integration has been previously and effectively achieved.The two areas, intra-enterprise integration (mainly represented by ERP) and interenterpriseintegration (mainly represented by SCM) are strongly intertwined and havevery similar features.55
ICT and e-business impact in the furniture industryThe CATI Manufacturing Survey 2007 provides a detailed picture of how and to whichdegree these solutions are adopted in the sector and especially among SMEs.The high percentage of micro and small enterprises composing the European furnitureindustry could be the reason of the relatively low penetration of e-business softwarepackages shown in Exhibit 3.3-2: just about 21% of firms use enterprise resourceplanning systems (a percentage that grows to 71% in large companies), a percentagethat decreases to 10% when supply chain management and document managementsystems are involved.Exhibit 3.3-2: Adoption of e-business software packages in the Furniture industries - Part 3(2007)ERP SCM DMSWeighting scheme: % of empl. % of firms % of empl. % of firms % of empl. % of firmsFurniture (EU-7) 39 21 15 10 25 19NACE 36.12+13 38 19 16 8 31 21NACE 36.14 40 22 15 11 22 19Furniture – USA 20 16 24 18 21 28Furniture by size (EU-7)Small (10-49 empl.) 16 9 18Medium (50-249 empl.) 41 15 22Large (250+ empl.) 71 23 38Other sectors (EU-7)Chemical 68 38 39 17 38 22Steel 59 33 27 14 27 20Base (100%) all all AllN (Furniture, 2007, EU-7+USA)761 761 761Questionnaire reference A7a A7b A7dERP = Enterprise Resource Planning; SCM = Supply Chain Management;DMS = Document Management SystemsThe survey of 2007 was conducted in 7 EU Member States (DE, FR, IT, ES, PL, SE, UK) and in the USA.Source: e-Business Surveys 2007 by the SeBWInsights from literature and interviews carried out for the present analysis indicate thatCAD/CAM tools are increasingly popular, a finding confirmed by the industry survey data(see exhibits 3.2-2 and 3.2-3). In this industry one of the greatest challenges is to findways in which they can be successfully integrated in a cost-effective manner in such anenvironment. The skilled workforce and general purpose manufacturing equipmentemployed in the industry means the shop floor is usually quite flexible to changes inproduction requirements. What is typically less responsive is the product design andmanufacturing information needed for production. An important goal is to find ways ofmaking the enterprise more capable of responding to increasing demands for more timelyand accurate generation of the information needed for production of new furniture pieces.An outstanding example in this industry is represented by the well-known Ikea group;although primarily a retailer, it has developed a distinctive competence in the overallsupply chain management.56
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