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.