Brief on the Malaysian furniture industry History

Market comparison

Lets move on to comparing ourselves with our neighbors who share similar attributes as us. In the ASEAN region, Malaysia had long been regarded as a powerhouse and leader in furniture manufacturing and export. From out of the 5 countries namely, Indonesia, Malaysia, Philippines, Singapore and Thailand, we had traditionally been in the No. 3 position after Indonesia and Thailand. We slowly worked our way up and was in the top position for a number of years as ASEAN’s No. 1 furniture exporting country.

Regrettably, we have constantly faced competition from the other countries and in recent years, we had surrendered the top spot back to Indonesia and with Thailand just a whisker away, our No. 2 position may also be in jeopardy if we are not careful.

In global terms, we were languishing in the 11th – 20th section of the world’s top 50 furniture exporting countries. We had worked our way up the ladder slowly and this had culminated in the year 2000 when Malaysia was recognized as the 10th largest furniture exporter in the world. This was the first time that we had reached the top 10 but regrettably again, we surrendered the position and in 2001, we were only No. 12th.

The figures for 2002 are not out yet, although it would be very interesting to see where we stand. The figures are expected to be released any time now from Italy. With the downturn during 2001 resulting in the 13.8 % decline, we are anxiously awaiting to find out how badly were we affected as compared to our competing countries. An interesting point to note is that Malaysia is now exporting her furniture to more than 160 countries around the world, more than 100 of which actually turns up at every MIFF.

OEM or ODM or OBN?

As mentioned earlier, I would like to spend some time on the concept of Original Equipment Manufacturing (OEM), Original Design Manufacturing (ODM) and Own Brand Name (OBN).

Whilst some say that our industry had been a formidable OEM supplier, this may not be so in the eyes of the buyer nor is it necessarily the type of OEM that we want.

Buyers have long taken advantage of our manufacturers and manufacturing facilities. In fact, whilst we had enjoyed good growth over the years at least in Ringgit terms, buyers have thronged to our shores because they know very well that only here in Malaysia, they are able to purchase good quality products and at very low prices.

This was not helped by the fact that Malaysian manufacturers had been played around by the buyers and ended up competing among ourselves, and without our own designs, the only way they can compete is by lowering prices, much to the delight of the buyers.

The OEM that we have known is not healthy. Buyers bring designs for us to quote but at the same time, they are also dictating that whatever price quoted cannot be higher than what they are already purchasing at from another supplier, and very often, it was another Malaysian supplier.

What we should strive for is the genuine type of OEM whereby the Malaysian manufacturer works together with the buyer from day one until the time the product is marketed. This means that the manufacturer is involved from the product development stage right up to the marketing stage.

Only through this way are we able to achieve the technology transfer so desired in terms of designing and production know how, as well as being able to obtain a higher price for our products.

Popularly misconstrued is the OEM which we are used to but in other countries, OEM of the genuine type is far advanced.

ODM is the next stage after graduating from OEM. This is where we begin to manufacture products of our own design and later marketed by ourselves into the international market, on our terms and our prices. To achieve this, we must have the designing capability and that is why today’s seminar is so important to us.

OBN is the final stage where after ODM, we are ready and established to market our own brands with new designs in concept series frequently refreshed to suit the changing trends and tastes of the markets. This is the stage where premium prices are enjoyed especially in the brand conscious markets.

I hope that with the above explanation on OEM, ODM and OBN, we are now in full agreement and comprehension of the terms as well as the direction where we, as a Malaysian industry should head. Whilst we aim for the OBN stage, it must be realized that we would necessarily go through the first two stages systematically for best results and to establish a strong foundation.

Why is design so important ?

Let us now look at the crux of the matter. From the points raised earlier, it can be seen that design is critical for our future. Without designs, we cannot hope to achieve any of the OEM, ODM nor OBN stages. Without designs, we cannot proceed beyond the current type of OEM which is quickly diminishing due to the shifting of buyer preference to other lower cost producing countries. Without designs, we would not be able to create nor identity a niche for us.

Design without technology is also not possible. This is because today’s furniture design and production technology is so far advanced that one must possess the necessary skills in order to survive and succeed. Technological knowledge will enable us to keep abreast with the latest techniques which are mainly aimed at increasing productivity, improving quality and incorporating product innovation and thereby creating changes in trends and tastes. As such, design and technology are complementary of one another in order for the industry to move into the medium and higher market segments.

We must realize of this need to change away from our present position and practice. Gone are the days where we can wait and buyers will come to us. Today, buyers are going elsewhere and we are now the ones who need to chase after them. Even if we manage to catch them, if we do not have new designs nor the technology, what are we going to sell to them ? Putting it the other way round, what is there that they could buy from us ?

Realizing the need for change alone is not enough. We must go a further step by accepting that changes are inevitable. We must be ready to adapt to the needed changes so that we would be in the position to produce and offer. We must be prepared to make investments and sacrifices in order that we can implement these changes. We must move away from the current mind set and accept that market conditions and business practices are different today compared to when we first started.

What can we expect for the future

From all the above, what can we expect ? Simply put, I would only suggest two words, “survival” and “progress”. If we do not have designing skills nor the technological know how, we would not be in any position to compete with even the low end producers today.

Here we are looking to survive in the low end market, and not being able to do so, we are telling ourselves that we must move away from the competition and try to penetrate the medium end market lest the high end market.

I would like to pose the questions again, what have we got to offer that others do not have and why should buyers buy from us and not from others ? Have we anything special ? Cheaper prices, they can get elsewhere, new designs they can get elsewhere and technologically advanced factories, they can also get elsewhere. So why should they come here ? Would you, if you were a buyer, buy Malaysian ?

As such, only with design and technology can we expect to “survive” and “progress”. Simply put again, without design and technology, we would not be able to “survive” nor “progress”, what would that mean ? I am for one, personally scared to think beyond this point.

By moving away from the competition in the low markets, we are actually aiming for the medium to high end markets. This means that we want to achieve better prices for our products and this means that we must produce better products than the rest. Only with these can we be considered to be ready for the niche markets. The fact of the matter is that we cannot hope for better prices with the same products in the higher markets.

What needs to be done

We have come to the end of my presentation today. After all that I have said, one may ask, so what needs to be done ? I am sure that this is the question on everybody’s mind at the moment and I am sorry to say again, that although we have some ideas, we are not yet in the position to determine the best course of action.

Some answers are hoped as a result of this seminar. However, for sure we know that we need design and technology. For sure we know that we do not have most of the former and much of the latter. So the simple answer would be “we must obtain both these attributes within our industry and very quickly too”.

At the MFPC, although recently set up a few months ago, we have already embarked on a number of projects for market enhancement and also in the advanced consideration stages of some design related projects.

We too, are hoping that these projects would be able to start the ball rolling to inculcate the ideas of change to the industry so that when we lay out future plans on a longer termed basis, the industry would be ready to participate and support.

There must and will be short and long termed strategies in order that the damage or potential injury can be neutralized. We should not even think of trying to come up with a big and ambitious national plan which is theoretically workable but would take years to implement for I am afraid that by then, all could be lost.

We must take a micro approach to arrest the decay right now and at the same time, these immediate steps should fit into a macro picture, of a long termed objective. It is my sincere hope that today’s seminar would provide the perfect platform to initiate such changes and strategies.