Skilled labor/Packaging material Availability

Packaging is a very important element because exporters are more concerned about delivering shipments without damaging them. Less attention is paid to presentation. The cushioning material used to avoid breakages is made of blankets, quilt, plastic, shrink wrap, bubble wrap, hard cardboard and rope parts, etc. A lot of work needs to be done to improve packaging material. Though cartons are used, customized packaging needs to be done. If exporters go for standard furniture manufacturing, good packaging is possible. Professional packaging companies should be set up, with specialization in this field. All types of packaging material are easily available. The raw material available is of good quality and rates are reasonable.

The exporters of Chiniot, Gujrat and Peshawar say that skilled labor is easily available in their areas. But according to the exporters of Rawalpindi, Gujranwala, Karachi and Lahore, there is a scarcity of skilled labor in their localities. Quality

The quality of labor is good, but it only has the skills passed on generation after generation. There is no formal training facility available. Labor is not aware of production techniques, world requirements and ways to improve efficiency, etc. They are not trained to use the latest machinery. However, there are (a handful of) people who can produce good quality furniture by following model pictures without any formal training. Quality controls, checks and standardization according to international requirements need to be introduced. Also, there is no concept of training the workforce how to improve their efficiency. Skill development centers should be set up in all regions of the country to counter the situation. According to the exporters of Chiniot, Gujrat and Peshawar, labor rates are reasonable. While in Rawalpindi, Gujranwala, Karachi and Lahore, the rates are high.

Technology Level

Mostly traditional methods are used in the production process of furniture. Local machinery is used by most of the exporters because it is easily available. Imported technology is available too but with an added cost. In the long run, expensive imported machinery would tend to be cheaper as its results would produce much better outputs and savings.

Exporters are satisfied with the use of local technology. However, they would prefer using imported technology, but due to scarce resources, they end up using traditional methods. A general perception exporters have of imported machinery is that it is second hand.

The prices of local machinery are reasonable in comparison with imported machinery’s. But for small exporters, even the prices of local machinery are high. The financial incentive provided by banks is not very easy for exporters to make use of.

The available local machinery is of very basic nature. In other words, no professional machinery is available due to lack of resources/finances. In the given situation, affording exporters should visit machinery shows. To give a comparison of the production output, in Italy, for instance, a company produces 40,000 chairs daily due to the use of latest technology. No labor is involved in the process. This should serve as a guideline for the Pakistani furniture industry to set its goals down the road. China and Malaysia are living examples which started to improve their industry within a small span of around 10 years.

Import countries/Raw Material

The countries from where companies import raw materials are: China, Germany, Holland, Singapore, Italy, Korea, Malaysia, Japan, Africa, America, Dubai, South Asia, Eastern Europe, Germany, Korea and Australia. Mostly import takes place from China, Italy, America and Dubai.

European beach, African timber and partal wood are used very frequently. Local ply board is of very bad quality but the companies have no option, but to use it. A lot of exporters are going towards imported laminated boards of good quality available at a better price. Some exporters have switched over to the imported ones. Locks, screws, hardware, fittings, hinges are though available locally, but they are not of very good quality. Hardware is imported from Taiwan, Korea and Thailand; boards from Malaysia; polish/lacquer from Malaysia and Europe; and glass is imported from China and Saudi Arabia, but it is also available locally. Similarly, foam is available locally, while sand paper is imported.

Local raw materials used are wood (Sheesham, mango wood, acasia and walnut), chemicals, boards (fibreboards, veneer and ply boards), paint and polish, hardware (screws, nails and handles, etc.), fabrication and other essential material (glue, foam and lamination sheets, etc.). Most of the imported raw material used is: wood (beech, teak and ash), hardware (locks,), boards (chipboards, ply boards,), polish (lacquer), fabrication and other necessary material (glass, glues, thumb tags, leather, sand paper and colors) are used.

Availability of raw material

More than 80% of Pakistan’s furniture is dependant on Sheesham, also called rosewood. In the last five years, the Forestry department has noted that the reserves of Sheesham have decreased by 50%. Sheesham is getting extinct day by day. Due to its shortage in the market, its prices are increasing everyday. Currently, very few exporters are using other woods as a substitute for Sheesham, but their use is gradually increasing. Still the use of substitutes is limited because these woods are also scarcely available. Also, the exporters are not very much aware of their usage and treatment. At the same time, the use of imported woods is increasing. Duty structure has reduced considerably. However, those companies that are using imported timber believe that the reduced duty structure has not affected the price structure a lot. The dealers have kept the same prices, with the justification that the prices have increased in the international market, freight rates have increased and dollar value has increased, etc. The industry should assess the demand and import wood in bulk.

Furniture Manufacturing Process

The production process of hand-carved furniture in Pakistan is believed not to differ much from similar products elsewhere. It is a consecutive chain of activities, comprising:

· Raw material and operational supplies procurement (domestic or imported)

· Pre-treatment (log grading, log trimming, cooking (for plywood and veneer peeling)

· Primary processing (into planks, boards, veneer sheets) and their grading and drying

· Dimensioning into suitable components

· Transferring the designs of furniture parts into components, their cutting into shape

· Preparation of joints (tongue and groove) and other structural design features into components

· Hand-carving of components on visible surfaces

· Assembly, fabrication, finishing decoration, and application of paint, lacquer, hardener and polish

· Packaging, warehousing and transport

In Pakistan, in few cases hand carving is done before assembling furniture pieces. While in other cases, carving is done after assembling the pieces. However, the ideal way is to go for carving before assembly. The process of some furniture types requires carving to be done before they are assembled for making beds, sofas, chairs, etc. It has also been noted that detailed master drawings are used in relatively few companies in the Pakistani furniture industry. This may affect the quality of transferring designs to the components as well as the accuracy of component making. On the other hand, in some of the more sophisticated companies, computerized CAD systems are deployed.

For those companies that have reached a semi-industrial or industrial operation, there are possibilities to enhance the process flows and gain better operational efficiencies.

Furniture Distribution Channels

The flock of players in the distribution of furniture consists typically of export agents, import agents, importing companies, buyers’ groups that represent the interests of a larger number of collective importers, wholesalers, department stores and retail outlets of different kinds. The preferred flow of furniture is however from a manufacturer to importer or directly to retailer’s warehouse or chain stores because furniture is not well suited to multiple handling. Sometimes, it may be possible to sell directly to industries and institutions, and occasionally through a local manufacturer if the products complement each other. Some manufacturers sell direct to consumers through brand stores or factory outlets. Also, franchised stores by some major furniture manufacturers have become more common. These are specialized distributors, whose main business line is furniture.

As a contrast, there is also the non-specialist distribution, including department stores, Do – It – Yourself (DIY) stores and mail order houses, to which furniture contributes a minor part of their total merchandising. There are naturally country-specific differences in the importance of distribution channel members.

There is a tendency to shorten the distribution structure by cutting the middlemen out of the business. At the same time, the use of out-sourcing and contract manufacturing has become the new standard operating mode for the large international furniture industries. Flat-pack or knock-down (KD) furniture is a key transportation system to allow the expansion of such mass or middle market furniture business. In general, the transportation of KD items reduces the damage to furniture in comparison with assembled furniture. This has implications to packaging solutions as well.

Pakistan Furniture Exports

Pakistan’s exports of wooden furniture totalled US$12.3m in 2005, over double the value exported five years early. Growth in exports of living room furniture (not categorized under office, bedroom or kitchen) was the main contributor to this change. Pakistan has recently started to export bedroom and office furniture. Exports of these furniture types are gaining ground very rapidly, although starting from a small base. The United States, United Kingdom, UAE, Germany and Afghanistan are important destinations.

The major furniture markets are virtually unprotected. The United States has 0% MFN tariff for all wooden furniture categories. The same applies for Japan with one exception – mattress supports, for which it has a 3.2% MFN tariff but GSP tariff of 0%. The EU applies an MFN tariff for wooden furniture ranging from 0-5% and a GSP rate of 0% across all products. Therefore, one can conclude that Pakistan or any other country should not expect much export boost from the lowering of tariffs in main markets, as this road has been almost completed. On the other hand, its trade with regional markets may still be hampered by higher furniture import tariffs of non-members of WTO.

Major Exporters

There is a handful of large-scale furniture exporting countries in the developing world. China’s exports have been growing 20-30% per year and it is passing Italy as the world’s biggest exporter. China’s export value reached US$12 billion in 2005. The largest European countries (Germany, France, Spain) and Canada are major exporters to their neighboring countries and to the United States.

Other Asian countries like Indonesia (exports US$1.3 billion), Malaysia (US$1.45 billion), Thailand (US$1.0 billion) and the Philippines (US$0.3 billion) have been able to create significant export industries, but have more recently become suppressed by China’s dominant supply position. Vietnam (US$1.15 billion), on the other hand, is increasingly challenging even China in labor cost comparisons, and it has seen its furniture exports surge in the past five years. On the long term, China will champion the mass furniture segment with the help of the abundant labor reserves. However, the availability of wood poses a major challenge to China.

From Latin America, Brazil is the biggest exporter with US$0.78 billion furniture deliveries. Mexico was the second supplier with US$0.68 billion. Both countries benefit from proximity with the United States market. African countries are insignificant in international furniture trade.

Major Importers

In 2005 the United States wooden furniture imports worldwide were worth US$16 billion. The big European Union countries and Japan were the other top importers. Japan and France had increased their intakes between 2004 and 2005, while imports in the United Kingdom and Germany had declined.

In the aggregate, the world’s five largest importers (the United States, Germany, France, the United Kingdom and Japan) purchased US$31.2 billion wooden furniture in 2005. This was 5% more than the previous year. The growth trend in trade was impressive in the United States market in particular.

The United States has continued to grow as the world’s largest importer of wooden furniture. Its imports reached US$16.1 billion in 2005, up by 11% from the previous year. This well reflects the lasting consumer confidence and housing sector strength in the country as well as the domestic producers’ loss of market share to Chinese producers. Housing boom until 2005 was driven in large part by demographics, immigration and affordability. The most recent information shows moderating housing starts, however, as interest rates hike upwards.

The United Kingdom grew up into the second place, before Germany. Both countries imported around US$4.5 billion in 2004. France also steadily increased imports to US$3.7 billion. Japan’s imports grew slightly to US$2.4 billion in 2004 after several years of static trade.

Pakistan reportedly exports to about 80 countries, of which Malaysia, Italy, the United States, Singapore, Japan, Saudi Arabia and Spain are the biggest buyers. Such a fragmented structure in exports indicates small deliveries to whatever market opens up to Pakistani firms. There appears to be very little concentration on developing a few of the key markets for bigger volumes while leaving the others unattended for.

Furniture Design

There are very few developing countries that really can boast of having a distinctive design school of their own. The Philippines is often cited as one of the exceptions, which has in fact made authentic designs and daring material combinations, an image that is a promotional tool in their furniture exports.

Furniture design education throughout Asia is plagued with both a lack of interest and a lack of demand. The fact that the larger Asian furniture industry is embroiled in a low-wage economy suggests that creative activities such as design and new product development, which involves a long period of time before becoming a success, may not be rewarding to most manufacturers. Hence, there is reluctance among the furniture manufacturers in Asia to employ creative design personnel, and there appears to be growing reluctance among the investing fraternity to fund such creative and innovative works. Rather, there is an apparent need for quick results on large, industrially manufactured furniture.

In a survey of design schools throughout the Asian region, it was reported that only 7% of all industrial design curricula actually incorporated some elements of furniture design into their programmes. Furniture manufacturers should encourage potential furniture designers by providing opportunities to take their creative works to the regional furniture exhibitions. A large domestic market will no doubt spur the development of local design talent, as it serves as a good platform to experiment with their creative works. It is therefore imperative that the organisers of the regional furniture fairs pay attention to the upcoming design talent and make avenues for them to exhibit their creative works. This will inevitably raise the standard of design and product development throughout Asia. Another possibility is to incorporate furniture design elements into the existing industrial design and wood technology curricula.

Pakistan's Furniture Types

A similar categorization is being used in Pakistan. Wood is undoubtedly the main material in Pakistan’s exports. But the country also produces some metal (wrought iron rod, steel), upholstered furniture for offices and special medical furniture. Foams are also used for cushioning in upholstered chairs and seating. As mainly solid wood of hardwood species like Sheesham (or Indian rosewood), walnut, oak and similar is used, the furniture is normally quite heavy in weight.

Also common to most developing countries is the existence of sub-segments in their domestic furniture market, such as (a) household furniture for domestic and export markets, (b) “institutional” furniture segment for schools, hospitals and other public premises, and (c) contract furniture to private sector clients in shops, banks and hotels, etc.

The four main styles are antique, mughal, modern (Italian), and oriental. Most items fall in the living room, dining room and bedroom categories. “Other” or “accent furniture” falls outside the basic living, dining room and kitchen furniture ranges. It finds its role in the smaller, casual and miscellaneous items, sometimes referred as “occasional furniture” due to its complementary role in home furnishing. Typical items are side or corner tables, magazine tables, standing small shelves (etageres), chests, nesting and pedestal tables, small chairs and home bars, etc. This category is almost without exception the biggest furniture category in the trade statistics of any country.

According to the websites of importers, Pakistan considerably produces these occasional items. Consumers in the main markets are increasingly liberal in mixing different styles and ethnic designs in their homes, and decorative Pakistani furniture often attracts buyers when they are shopping for small accent furniture for tuning a part of their interior decor. Reproduction of antique furniture is an important niche for Pakistan, as it normally fetches good prices and is favored by consumers with above-average purchasing power.

Global Shift in Furniture Making

Wooden household furniture tends to be a durable good that is highly responsive to personal income expectations. Its purchase often represents a major investment by consumers in household and office furniture, for instance. There is a clear tendency to postpone the purchase when income expectations decline, and vice versa, increase purchase if personal incomes prosper. Consumption is also affected by demographic factors such as birth rates, marriage rates, life expectancy and household size. It is also responsive to the degree of social and geographic mobility of the population.

The demand for household furniture and accessories directly correlate with new residential construction, and office furniture follows trends in non-residential construction. A growing segment, however, is the renovation, maintenance and improvement (RMI) sector, which already accounts for 40-50% of total construction in Western Europe. Increasing mobility of the population is also feeding furniture replacement purchases. For example in the United States, about 40 million people move home every year. This often triggers furniture shopping. Furniture is becoming more a fashion item with shorter change intervals, trend-setting and even seasonal styles. This means that the life cycle of household furniture is becoming shorter, and the collections themselves will have to be renewed more frequently. The key to success in mass markets is flexible and cost-efficient production, with savvy designs.

In summary, the key factors that influence the demand for household furniture include:

· Disposable personal income

· Consumer confidence

· New housing and non-residential building starts

· Increase in the average size of new houses

· Increase in the number of bedrooms in new single-family homes.

Consumers in the United States and the European Union markets have been induced to accept more eccentric and ethnic designs and mixed styles from exotic countries. This is an indispensable opportunity for a “globalised” furniture trader, who sources items from all over the world. Equally, it is the lifeline for “traditional” furniture-makers in the developing countries.

Global Furniture Industry

Historically, manufacturing furniture for exports had remained firmly in the hands of the industrialized nations. Furniture-making by nature is one of the very basic and labour-intensive manufacturing segments that have existed in all cultures as a domestic and household craft. Consequently, the entry barrier to start this industry is fairly low. More recently, many developing economies have followed the previous paths and phases of the more developed economies in developing their furniture for exports. Countries like China, Indonesia, Vietnam, Malaysia, Mexico and Brazil have gradually industrialized and expanded their furniture industry’s operational scales better suited for the main markets, i.e. the United States and the European Union. 

 On the buyer’s side, there are globally operating furniture retail chains and buying groups representing the collective interests of nationally important furniture dealers. Both have stayed in the vanguard for changes in the international market. In fact, these have been important drivers in opening up furniture trade for more trade. They have realized new cost-slashing and earning opportunities in outsourcing labor-intensive manufacturing to the developing countries. As a response, there is an abundant stock of new manufacturing capacity that has been established with the help of government support and tax breaks. Not all of these are, however, profitable or competitive today. 

Furniture Sector in Pakistan

Conceptually, the Pakistani furniture industry may want to consider their world competitors through the level the global flows of wood and also non-wood fibres in a larger system of forest industries. It shows, for example, the relative importance of wood from various sources (types of forests) and it shows where the significant flows on non-wood fibres come into the industry’s system. It also attaches the furniture industry to the downstream processing where close linkages can be made to the builder’s joinery, carpentry and pre-fabricated houses, etc. In the processing and distribution chain, added value is multiplied at each phase of further processing. For this reason, the national trade plans and strategies of timber-producing countries tend to put emphasis on the exports of high value-added products such as joinery and furniture.

The comparative advantage derived purely from resource endowment declines as the degree of processing increases. The economies of scale tend to behave similarly, i.e. the higher the degree of processing, the less there is dependence on plant size as a factor of cost competitiveness. Typically, the relative importance of small and medium-sized enterprises (SMEs) is high in furniture, and they play a key role in satisfying domestic demand. Being labour-intensive, small-scale enterprises tend to make a positive contribution to the general socio-economic development. Industrial policies should recognise the strategic importance of SMEs as a source of employment and income.