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Int. J. Mass Customisation, Vol. 2, Nos. 3/4, 2008

Mass customisation of wood furniture as a competitive strategy Torsten Lihra* Forintek Canada Corp. Québec, G1P 4R4, Canada Fax: (418) 659 2922 E-mail: [email protected] *Corresponding author

Urs Buehlmann Buehlmann Consulting San Diego, CA 92154, USA Fax: (310) 924 4902 E-mail: [email protected]

Robert Beauregard Université Laval Québec, G1K 7P4, Canada Fax: (418) 656 5262 E-mail: [email protected] Abstract: The existence of some segments of the US furniture industry is threatened by imports from offshore countries. Mass Customisation (MC) is discussed as a competitive strategy for US furniture manufacturers to offset their intrinsic production cost disadvantage. Examples from four domestic furniture industry subsectors are used to propose a possible correlation between the level of product customisation (MC) offered and their success in the market. The US kitchen cabinet industry was found to offer the highest level of MC of all subsectors analysed. Interestingly, at the present time, the kitchen cabinet industry is not heavily affected by offshore imports. The wood household furniture industry, on the other hand, was ranked last in regard to MC and was also the one most heavily affected by offshore imported furniture. The study indicates that MC can be used as a successful business strategy for domestic producers competing with low-cost offshore manufacturers. Keywords: Mass Customisation; MC; furniture; business models; furniture manufacturer survey; market globalisation; industrial engineering; lean manufacturing; United States; US. Reference to this paper should be made as follows: Lihra, T., Buehlmann, U. and Beauregard, R. (2008) ‘Mass customisation of wood furniture as a competitive strategy’, Int. J. Mass Customisation, Vol. 2, Nos. 3/4, pp.200–215.

Copyright © 2008 Inderscience Enterprises Ltd.

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Biographical notes: Torsten Lihra is Leader of the Furniture Group at Forintek Canada Corp., Canada’s wood products research institute. He played a key role in creating the Partenariat de recherche sur l’industrie du meuble (PARIM) (Research Partnership for the Furniture Industry), a major initiative for conducting R&D dedicated to the Canadian furniture industry. His research work is focused on marketing and management issues related to the furniture industry. Holding a Master’s Degree in Wood Science, Mr. Lihra is presently working on a PhD project on mass customisation concepts for North American furniture manufacturers. Urs Buehlmann is President of Buehlmann Consulting, an engineering and management consulting enterprise serving the forest products and related industries. He also serves as an Adjunct Faculty at Université Laval, Québec. He was a Faculty at North Carolina State University, where his area of expertise focused on business strategies to successfully compete in a global economy. He holds a PhD, an MBA and an Engineering Degree. Robert Beauregard is Senior Chair Holder of the Industrial Research Chair on Engineered Wood Products for Structural and Appearance Applications (CIBISA). His area of expertise is the modelling of manufacturing systems for the forest industries. He develops comprehensive approaches to the design of business models, taking into account the interactions between the wood resource, process development and innovative products for better business performance. In 1995–1997, he was Research Scientist with the New Zealand Forest Research Institute. From 1997 to 2000, he was at the Eastern Laboratory of Forintek Canada Corp., where he was instrumental in the creation of the Department for Value Added Wood Products.

1

Introduction

Successful competition from low-labour-cost countries has led to serious downsizing in the US furniture industry (Buehlmann et al., 2004; Hilsenrath and Wonacott, 2002) despite a favourable market environment for furniture over the past few years. While the North American furniture market is predicted to continue its growth at a moderate pace based on demographics and income predictions of the US population (Schuler and Buehlmann, 2003), uncertainty about the success of the domestic industry exist. Low-cost offshore countries enjoy a significant price advantage in the US market, but price is not always the main sales argument to satisfy end-user needs and aspirations. Customisation of the product, pre- and post-sales service, and delivery time influence consumers’ buying decisions as well. Schuler and Buehlmann (2003) forecast an increasing market share of customised products in the decades to come (Figure 1). Mass Customisation (MC), for a variety of reasons, is considered a promising strategy for domestic manufacturers to successfully compete in the future (Buehlmann, 2004). While standardised, mass-produced furniture is made more cheaply at similar or better quality in low-cost offshore countries, customised furniture gives producers who are close to the customers a sustainable competitive advantage. Therefore, the domestic furniture industry should be aggressive in exploring and implementing opportunities to manufacture mass-customised furniture. The objective of this study was to review the

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concepts of MC related to furniture and to assess the furniture manufacturers’ opinions towards these concepts of its potential as a profitable business strategy. In fact, the paper hypothesises that the level of MC offered by furniture industry subsectors is correlated with the loss of market share of domestic manufacturers to lower-cost offshore producers. Figure 1

Market share of standardised, mass produced versus customised products

100% 80% 60% 40% 20% 0% 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 Standardised

2

Customised

Mass customisation concept

Stanley M. Davis in 1987 introduced the term ‘mass customisation’ in his book Future Perfect (Davis, 1987). He described MC as a trend towards the production and distribution of individually customised goods and services for mass markets. Pine (1993) considers MC as the historical successor of mass production while Kotha (1995) sees it as a system that may co-exist with mass production. For practical reasons, MC is closely linked to Just-in-Time (JIT) production, as customised products can be sold only to the particular customer who ordered it. Taxonomies for MC and manufacturing without finished goods inventories are proposed by numerous authors (Amaro et al., 1999; Gilmore and Pine, 1997; Lampel and Mintzberg, 1996). Montreuil and Poulin (2005) proposed a personalisation framework containing eight levels, whose framework was adapted for the furniture manufacturing industry (Figure 2). It proposes the following categories: •

Popularising – the mass producer’s solution to customisation, offers a limited number of furniture collections or furniture items that can be stocked by the retailer. Focus on evolving the popular product mix in line with evolving customer needs. These items are sold off-the-shelf and are often positioned at the low end of the furniture price structure.

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•

Varietising – has the objective to offer a broader range of furniture models covering a wide range of customer needs. Retailers pick those they want to offer off-the-shelf and rely on quick delivery from the distribution network for fast replenishment. Most often, variety is achieved with relatively simple changes to the standard product line, such as adding additional colour options or furniture items to a furniture collection.

•

Accessorising – refers to the production of standard core modules that may be personalised by adding accessories from a specified set of options. Particular types of finishing are also considered as an accessory. Final assembly of accessorised products is performed either by the customer, the retailer or the manufacturer.

•

Configuring – offers end-users the opportunity to design furniture from a set of standard components or modules. Configuring may be performed directly by the end user through the use of software tools and samples or it may be realised with assistance of trained sales representatives.

•

Tailoring – product designed/engineered to customer needs. The customer is closely involved in the product specification and realisation process. It removes the strict adherence to a pre-defined set of components. However, limits are defined as boundaries of what can be manufactured efficiently. Tailoring may be offered to end users or to retailers. Furniture manufacturers often offer tailored, exclusive collections to major retail accounts.

•

Servicing – refers to assisting the customer in developing a complete home (room) furnishing concept. Within this concept, furniture may be personalised by any of the seven other options of the model. In addition to the desired furniture, the end user gets the service of a professional designer to add other furniture, accessories, mouldings, colours, or wall paper to match his particular taste or interests. The furniture manufacturer is part of a network of home furnishing producers that offer a complete range of products.

•

Adjusting – product adjusted to customer needs after usage. The product has to be adaptable to offer options to allow for adjustments. An example for adjusting would be a baby crib where side rails may be used as head and food panels for a twin size bed when the baby has grown up. Adjusting may be integrated to create an evolutional furniture item (e.g., adjustable office chairs).

•

Monitoring – refers to the ongoing gathering of data regarding the evolution of the needs of a customer. The objective is to know when to suggest new products or services to a customer. For the furniture industry, this could mean to find the moment in a customer’s life when new furniture that fit the customer’s evolving lifestyle better, might be sought for.

The concept of product platforms (Van Vuuren and Halman, 2001) is strongly related to accessorising and configuring. The authors point out that the underlying logic of a product platform consists of three aspects: (1) modularity, (2) standard interfaces for assembling and (3) design standards that the modules conform to. Product platforms may be considered as enablers for accessorising and configuring.

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Figure 2

Point of customer involvement and decoupling point for furniture manufacturing

Popularising

Retailing

Varietising

Distribution

Accessorising

Packaging

Configuring

Finishing

Servicing

Tailoring

Assembling

Component manuf.

Monitoring

Adjusting

Supply

Engineering

Design

Sale-20 Ship-20 Pack-20 Finish-20 Assembly-20 Make-20 Supply-20 Engineer-20 Design-20 Key :

Point of customer involvement

Decoupling point

Supply chain process

Production flow

Inventory

Personalisation option

2O = “to order”

Figure 2 presents the relation between the eight personalisation levels, customer involvement and the manufacturing processes. This model is based on research conducted by Poulin et al. (2004) and has been adapted to the furniture industry. The production flow direction goes from right to left reflecting that the end customer is the starting point pulling the production process towards him. Depending on the personalisation level, customers are involved at a different point of the production flow. Their involvement creates the decoupling point. The decoupling point marks the beginning of the process that leads to a personalised product. From the decoupling point on, production is strictly to order. Prior to this point, production may be in either push or pull mode.

3

Furniture trade data analysis

If customers pay premiums for customised computers, cars or clothes, furniture products should present similar opportunities. While no conclusive evidence can be offered due to the complexity of such industry-wide analysis, secondary trade data was analysed and results are presented below to support this proposition.

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3.1 Wooden casegoods household furniture (NAICS 337 122) Figure 3 presents total wood household furniture imports from 1997–2005 and imports from the two leading exporting countries to the USA, namely P.R. China and Canada. Total imports are presented in billion $ (left axis) and imports from the leading countries are presented as a percentage of total imports (right axis). US domestic shipments (defined as domestic production-exports) from 1997 to 2002 are presented in billion $ and relate to the left axis. Official domestic shipment data was available to 2002. Import and export data was available to the year 2005. According to Figure 3, domestic shipments of wood household furniture increased slightly from 1997 to 1999 and remained stable until 2002 at roughly $12 billion. China replaced Canada as the number one wood household furniture exporting country to the USA in 2000. These numbers show that the US domestic producers have not been able to take advantage of a growing domestic retail market which grew from $4.2 billion in 1997 to $19.6 billion in 2002. Thus, imports are gaining market share, reaching 63% of the domestic shipments of wooden, residential household casegoods in 2002. Imports continued their increase from 2002 to 2005. By that year, China represented nearly half of all imported wood household furniture. Figure 3

US wood household furniture domestic shipments and total imports in billion $ and imports from the leading countries as a percentage of total imports 100

14

90

12

80

Billion US$

60 8

50

6

40

Percent

70

10

30

4

20 2

10

0

0 1997

1998 Canada

1999 China

2000

2001

2002

2003

US domestic shipments

2004

2005

Total imports

Sources: USITC (2006) and US Census Bureau (2006)

3.2 Upholstered furniture (NAICS 337 121) Figure 4 presents upholstered furniture imports to the USA. The statistics shows US domestic shipments in billion $ between 1997 and 2002 as well as imports between 1997 and 2005. Total imports are presented in billion $ (left axis) and imports from the four leading countries are presented as a percentage of total imports (right axis). The value of upholstered furniture produced and sold in the USA increased from $8 billion in 1997 to

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$10.5 billion in 2002. Overall imports are low, reaching only 15% of domestic shipments in 2002 compared to wooden casegoods household furniture. China took over the leading position as an exporting country from Italy in 2004. From 2000 to 2005, Italy’s share of US upholstered furniture imports shrunk from 44% to 14% while China’s share of imports increased from 10% to 50%. Canada lost import shares from 13% in 2000 to 7% in 2005 and Mexico kept its share stable at around 15%. Figure 4

US upholstered furniture domestic shipments and total imports in billion $ and imports from the leading countries as a percentage of total imports

100 14

90

12

80

Billion US$

60 8

50

6

40

Percent

70

10

30

4

20 2

10

0

0 1997 Canada

1998 China

1999

2000

Mexico

2001 Italy

2002

2003

2004

US domestic shipments

2005 Total imports

Sources: USITC (2006) and US Census Bureau (2006)

3.3 Wood office furniture (NAICS 337 211) Figure 5 presents total wood office furniture domestic shipments between 1997 and 2002 in billion $. Imports are presented from 1997 and 2005. Total imports are presented in billion $ and imports from the leading countries are presented as a percentage of total imports. US production sold domestically increased from $2.9 billion in 1997 to $4.1 billion in 2000. By 2002 it had decreased to $2.7 billion. This may be attributed to the events of September 2001 and the burst of the .com bubble. Canada is the leading wood office furniture exporter to the US market although we can see the trend of Chinese imports growing while Canadian are decreasing in proportion.

3.4 Wood kitchen cabinets (NAICS 337 110) Figure 6 presents wood kitchen cabinet domestic shipments from 1997 to 2002 in billion $. Total imports between 1997 and 2005 are presented in billion $. Imports from Canada and China, the leading KC exporters to the USA, are given as a percentage of total imports. The value of domestic shipments of wood kitchen cabinets increased continuously from $9 billion in 1997 to $14 billion in 2002. Overall import share is low

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at 4% of domestic shipments in 2002. However, imports increased continuously to 2005. Canada, the leading exporter to the USA represented about 90% of the total imports in 2000. Its import share decreased to 69% in 2005 while China, the second most important exporter of kitchen cabinets to the USA in recent years saw its import share increase to 18%. Given the low prominence of imported KC, the US kitchen cabinet manufacturers do not appear to be under particular pressure from international competitors. It appears that the US based companies were able to take full advantage of an expanding US market and grew domestic sales by 56% from 1997 to 2002. Figure 5

US wood office furniture domestic shipments and total imports in billion $ and imports from the leading countries as a percentage of total imports 100 14

90

12

80

Billion US$

60 8

50

6

40

Percent

70

10

30

4

20 2

10

0

0 1997

1998 Canada

1999

2000

China

2001

2002

2003

US domestic shipments

2004

2005

Total imports

Sources: USITC (2006) and US Census Bureau (2006) Figure 6

US kitchen cabinet domestic shipments and total imports in billion $ and imports from the leading countries as a percentage of total imports 100 14

90 80

12

Billion US$

60 8

50 40

6

Percent

70

10

30

4

20 2

10

0

0 1997

1998 Canada

1999

2000

China

2001

2002

2003

US domestic shipments

2004

2005

Total imports

Sources: USITC (2006) and US Census Bureau (2006)

3.5 Discussion of furniture trade data It has to be pointed out that the presented furniture import data includes finished products only. Furniture component and raw material imports are not captured by these numbers. In regard to MC it is worthwhile to contrast two subsectors, the wooden household sector

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versus the kitchen cabinet sector. The former is loosing market share on a large scale (by now, more furniture are manufactured outside the USA than inside), while the latter seems to maintain imports successfully at a low level. Indications exist that MC adaptation of those two industries are one reason for the difference of the market share held by the domestic producers. Indeed, household furniture is sold from inventory with little to no customisation while kitchen cabinet manufacturers make a completely different value proposition to their customers. Different cabinet modules may be configured according to individual customers’ needs. Then, the kitchen is made-to-order and sent to the customer’s home for installation at a predetermined date. Wood household furniture consists of individual furniture pieces. These items are generally not fitted into a given space and manufacturers had less pressure to develop component standardisation and product modularity. This lack of standardisation and modularity is today a major barrier to the development of customisation solutions.

4

Furniture manufacturer’s perception of mass customisation

To shed light on MC as perceived by furniture manufacturers, 23 in depth interviews in the USA, Canada and Germany have been conducted in fall 2005. Emphasis was made on North America. Germany was added as an important furniture producing and technologically advanced country. The interviews conducted in Germany add a European point of view on MC.

4.1 Furniture manufacturer survey data collection For data collection, an experience survey was conducted. An experience survey seeks to obtain insight into the relationship between variables rather than to get a simple consensus on best practices. It is a qualitative exploratory research being characterised by an unstructured methodology based on small samples providing a deeper understanding of the problem setting. To perform the survey, individual In-depth Interviews (IDI) with furniture industry specialists were performed in Canada, the USA and Europe. Judgmental sampling was performed by the author to select the specialists to include in the survey. A total of 23 specialists from 22 different companies were interviewed. Sample characteristics are summarised at Tables 1 to 4. Table 1 presents the company distribution by country. The majority (13) of the 22 companies included in the study were located in Eastern Canada. Four companies were located in North Carolina, USA and five in northern Germany. The present study focuses on high labour cost countries, particularly North America. Germany is an important and technologically advanced furniture producing country and was added to bring an European point of view on MC into the study. The present survey does not aim to be representative of the furniture industry of those three countries. Emphasis was put on the household furniture sector (see Table 2). As previously mentioned, that industry sector is suspected to be able to gain market shares by implementing MC. Five interviews were conducted with people from furniture industry related companies (component manufacturers, software developers, and a furniture manufacturer association). These respondents were included in the survey to get a more accurate picture of MC impact on the supply chain. Table 3 presents the company size expressed by annual sales volume. The furniture industry consists mainly of Small and Medium size Enterprises (SME). There is no standard definition of a SME

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and classification varies across different countries. For the purpose of the present study, SME is defined as companies having an annual sales volume of less than US$50 Million. 14 out of the 22 companies included in the survey fit that definition. The position of the respondent within his companies is presented in Table 4. In one company the owner and the plant manager were interviewed. For that reason the sample size of respondents exceeds by one the company sample size. All respondents were part of the middle or upper management, 40% being company owners. Table 1

Company sample distribution by country

Country

No. of companies

Percent

Canada

13

60

4

18

USA Germany Total Table 2

5

22

22

100

Company sample distribution by industry sector

Industry sector

No. of companies

Percent

10

45

Office furniture

2

9

Upholstered furniture

2

9

Kitchen cabinets

3

14

Furniture components

2

9

Software

2

9

Furniture manufacturer association

1

5

22

100

Household furniture

Total Table 3

Company sample distribution by annual sales volume

Annual sales ($US)

No. of companies

Percent

up to 10 Million

2

9

>10–25 Million

8

36

>25–50 Million

4

18

>50–100 Million

1

5

>100–250 Million

5

23

More than 250 Million

2

9

22

100

Total

A set of 26 open ended questions were used as a survey framework. Interviews were conducted at company locations with the exception of one interview realised at a wood machine show in Germany. Interview durations varied from 30 to 70 min. With the permission of the respondents, all interviews were recorded by a digital voice recorder and transferred to a computer. Additional notes on interview circumstances and any other particularities were written in a survey log book. Answers were transcribed to a text file

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and coded. The coded answers enabled to build a database using SPSS 11.5 software. The qualitative nature of the survey did not permit statistical data analysis but the database facilitated interpretation of gathered information. Table 4

Respondents job title

Job title

Frequency

Percent

Company owner

9

40

General manager

5

22

Plant manager

4

17

R&D manager

2

9

Quality control manager

1

4

Sales manager

1

4

Marketing manager

1

4

23

100

Total

4.2 Results of the furniture manufacturer survey Each company’s value offer was defined by the respondent. The eight level MC model introduced previously was presented to and discussed with the respondents for validation. All respondents shared the opinion that the model represented well the concept of MC applied to the furniture industry. A set of questions addressed the level and type of customisation offered by the furniture industry. End users did not ask for customisation. All respondents mentioned that the initial step towards customisation always came from the manufacturers. Furniture manufacturers first offered product customisation and assessed customers’ perception through sales statistics. After this initial step customers might have asked for further customisation. This ‘try and error’ approach may be explained by a lack of direct communication between manufacturers and end users. Seven out of the 19 furniture or component manufacturing companies had no contact with end users. Seven companies got end user feedback through their retailers or sales representatives and five companies conducted market studies. Conducting market studies was not related to company size. The five marketing study conducting companies were distributed over the range of company sizes. Manufacturers most of the time appear to rely on retailers’ willingness to share information about end user needs. Respondents mentioned that the most valuable feedback came from specialised independent furniture stores. These stores seem to develop a closer relationship with end users and manufacturers. Asked about the type of customisation end users appreciate most, all respondents mentioned colour and finishing options first followed by options on furniture dimension. Furniture configuration and choices of hardware were also perceived as valuable options. All manufacturers agreed that offering more customisation to end users should have a positive impact on their businesses. The interviewed furniture industry leaders were asked to quote the four previously mentioned industry sectors in regard to MC on a 7-point Likert scale (1 = very low customisation level, 7 = very high customisation level). The results presented at Table 5 confirm the hypothesis that the kitchen cabinet industry offers the highest level of

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customisation (6.35) to end users. The small standard deviation highlights that the respondents had no doubt about the leading position of this industry sector in regard to MC. With 3.09, the household furniture sector obtained the lowest score supporting the theory that this industry sector may further develop MC. However, the important standard deviation points out that not all respondents shared the same opinion on the low MC level of the household furniture industry. As a matter of fact, some companies in that industry sector offer a very high level of customisation to their end users. The respondents ranked the office furniture industry second with a score of 4.86. No correlation was found between the variation of the scores, company size and country of location. Distribution channels of professional office furniture manufacturers were described as different from the other sectors. Professional offices are planned by designers, decorators or architects. End users – people who will work in these offices – are generally not consulted during the planning period. The upholstered furniture industry were rated third, the score of 3.33 being near to the household furniture industry. The end users buying process for upholstered furniture, was described as similar to the one for household furniture. Table 6 summarises MC levels and production modes typically found in the four furniture industry sectors in descending order of importance as described by the industry leaders. The MC levels of Tailoring, Servicing, Adjusting, and Monitoring were generally not offered. Table 5

Furniture industry sector ranking in regard to customisation offering

n

Industry sector

Score

Std. dev.

23

Kitchen cabinets

6.35

0.65

22

Office furniture

4.86

1.32

21

Upholstered furniture

3.33

1.32

22

Household furniture

3.09

1.45

Table 6

Furniture industry sector main MC levels and production modes

Industry sector Kitchen cabinets Office furniture Upholstered furniture Household furniture

MC level Configuring Accessorising Varietising Accessorising Configuring Accessorising Varietising Popularising

Production mode Assemble to order Make to order Assemble to order Ship to order Assemble to order Ship to order

Respondents perceived retailers as a barrier in their effort to offer more customisation to end users. The experience of manufacturers revealed that retailers were not convinced that MC would have a positive impact on profits. In-store end user assistance to customised products increases the time per sale ratio and more product knowledge is needed to explain product options to customers. Respondents mentioned that retailers often choose one particular product configuration they offer in their stores without giving end users the opportunity to customise the product. However, one household furniture manufacturer offering product configuration pointed out that a test conducted in a

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furniture store showed that only 40% of the products were sold as presented in the store, while 60% of their products sold in that store were configured differently by the end users. This example raises questions about traditional distribution channels. To overcome the problem it may be suggested that MC furniture should not be presented mixed with standard furniture. Specially trained sales staff could sell MC furniture in a separated part of a store and offer assistance to end users efficiently. Customisation offered by manufacturers to retailers was generally limited to product exclusivity and customised packaging. Exclusive products, (exclusive furniture collections or exclusive items in non exclusive collections) were offered to major accounts. Some manufacturers customised packaging by printing the retailer’s logo on the boxes or by adding special padding to protect furniture from transport damage. Twenty-one out of the 23 respondents were convinced that customised products could be sold at higher prices when compared to standard products. The price premium was expected to depend on the level of customisation. Most respondents shared the opinion that the maximum price premium could not exceed 20%. In regard to lead time, all respondents mentioned that order fulfilment time had to be decreased significantly – for standard or customised products. Up to the Configuring level, respondents did not expect end users to accept longer lead time for customised products when compared to standard products. The majority of the respondents shared the opinion that end users’ design ability was the true limit to customisation performed by end users. A pre established set of options offered by the manufacturer to end users was perceived as the most promising way to offer customisation. All respondents assigned a key role to retailers in regard to MC. General opinion of the respondents was that qualified sales staff should assist end users through the customisation process. A set of questions addressed MC implementation challenges as perceived by the respondents. These challenges were weighted differently by respondents working for companies that started the MC implementation process and respondents working for companies that offered MC for some years. Companies that started the move from mass production to MC perceived industrial engineering as the biggest challenge. Most of the difficulties were related to batch size reduction (e.g., machine set-up time, labour flexibility and work cell integration). MC practicing companies perceived company culture as the biggest challenge. Respondents mentioned the difficulties to keep alive MC thinking – especially on the shop floor and at the middle management level. The long history of mass production had a persistent impact on people’s perception of productivity and performance. Indicators were related to volume and economy of scale. The change to MC and indicators like unit production flow, economy of scope and flexibility required continuous training of shop floor workers and staff. Twenty-one out of the 23 respondents agreed that implementation of lean manufacturing concepts were necessary to support MC. Labour skills were described to be different in an MC environment. A higher degree of technical competences and flexibility were required. Unionised companies had a particular challenge to implement workforce flexibility. The high number of job classes made a rotation of shop floor workers difficult or impossible. To support MC implementation, unions had to be integrated very early in the change process. At the foremen level, more administration and planning skills were necessary to adapt to fast changing production requirements. All respondents mentioned that MC had an important impact on the supply chain. This impact was characterised by smaller order quantities and shorter lead times. To support MC, suppliers had to be carefully selected in

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regard to their flexibility and capacity to adapt to a changing demand. Respondents from supplying companies mentioned their need to get more accurate information on sales forecasts from the furniture manufacturers in order to plan production. That pointed to a need for powerful, flexible, and user friendly Information Technology (IT). IT was mentioned to be one of the most important enablers for MC by all of the respondents. Twenty-two of the 23 respondents shared the opinion that an investment in IT is necessary to implement MC compared to 15 respondents mentioning that investment in production technology is required. No business model was perceived as particularly adequate for MC. All respondents agreed that customer orientation, supply chain management and marketing gain importance. Both, vertical integration and network structure were identified as possible approaches to MC. It was pointed out that the managerial competences were an important asset to successfully implement MC. Respondents expressed their opinion on how they thought the furniture industry may stay competitive in their respective countries. It is interesting to point out that none of the German companies mentioned cost reduction as an important factor. The German companies clearly focussed on increasing end user perceived value. MC, branding, cluster development, service improvement and targeting of niche markets were embraced by those companies. Respondents from North American companies mentioned production cost reduction, MC and faster shipment first followed by service improvement, targeting niche markets and global sourcing. The low weight assigned to cost reduction by the German respondents may be explained by their definition of business strategy which was related to the development of a companies’ ability to be different. Low production cost was not expected to become a competitive advantage for the German companies and was therefore not part of their business strategy. It does not mean that cost reduction was not part of their daily challenges. It seemed to be generally accepted by the respondents that retailers keep control on end user relationship. Under that condition, it was surprising that only two respondents mentioned an improved and tighter manufacturer – retailer relationship as an important asset for future competitiveness. One respondent pointed out that the furniture buying experience of end users has to be improved: “Buying furniture today is generally a boring undertaking. When people will say ‘Let’s have fun today – let’s see some furniture!’ we will have made a big step forward. Offering babysitter services and play sectors for kids, addition of coffee bars to sit down and read the journal, distractions of all kind, attractive presentation of furniture, customer service, customisation of furniture, fast shipment … all these concepts may create a pleasant and comfortable environment that impacts positively end user buying behaviour”.

5

Conclusion

Exposed to global competition and increasing imports from low labour cost countries, North American furniture manufacturers have to revise their business model. Analysis of secondary data showed that not all furniture industry sectors have been affected by imports at the same level. Domestic wood household furniture production in the USA seemed to be weak in regard to their global competitiveness. The US kitchen cabinet industry facing a slight increase of imports took advantage from a growing demand and

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controlled the domestic market. The upholstered furniture and wood office furniture sectors are both less affected by imports when compared to wood household furniture, but they control the domestic market less than the kitchen cabinet industry. It was pointed out that MC might be a potential strategy to increase the value offer of North American manufacturers, thus strengthen their market position. A MC taxonomy adapted to the furniture industry was proposed by the authors. That taxonomy describes eight levels of MC. Five being pre sales customisation levels and three being after sales levels. A survey of 19 furniture manufacturers and three furniture industry related companies was conducted to assess the state and potential of MC as perceived by manufacturers. Respondents ranked the kitchen cabinet industry first and the household furniture industry last in regard to MC. This supports the hypothesis that MC had a positive impact on domestic market strength of those industry sectors. Implementation of MC was perceived as an important challenge. Changes in the production system to become more lean and flexible, changes of a company culture that was used to mass production, and supply chain management were pointed out by the respondents to be the most important challenges in MC implementation. In order to implement MC, the wood household industry has to introduce component standardisation and product modularity. Furniture manufacturers seemed to be disconnected from end users. They got little or no direct feed back about end users needs. Retailers control the relationship with end users and manufacturers rely on retailer information to get end user needs. Manufacturers perceived retailers as a barrier to MC. Retailers seemed not to see evident benefits from offering customisation to end users. This is a critical factor to the success of MC. Traditional distribution channels may be questioned in regard to MC. The development of alternative distribution channels may be necessary to bring MC furniture to the market. The internet offers the opportunity to create a direct contact between manufacturers and end users and represents a tool to customise products. Direct sales of MC furniture through the internet are expected to increase in the future. New retail store concepts adapted to MC furniture may be another alternative to sell customised products. This situation leads to research topics that should be addressed in the future such as: What levels of customisation are valued by end users? How should the end user customise furniture? What are the necessary conditions for retailers to support MC? Further research on those (and other) MC related topics may help the North American furniture industry to develop and retain a competitive advantage and to gain market shares in the context of globalisation.

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