DEFINITION
OF THE INDUSTRY
 Hailed
as the furniture capital of the Philippines, Cebu lives up to its
reputation as it steadily enjoys a substantial percentage share
of the country's furniture export sales, which is over 60 percent
of the total annual figures, yet Cebu manufacturers comprise only
20 percent of the entire Philippine furniture industry. Manifestations
of considerable strength amidst soaring prices was evident, when
despite the plummet of the peso, the Cebu furniture industry still
registered a positive growth.
Most
of the significant achievements in the industry were done in the
last ten years. From a fledging start in rattan pole trading, the
furniture industry has grown into one of the major contributors
to Philippine economy, with furniture classified among the top five
export commodities in the country.
Moreover,
Cebu's furniture industry is now the forerunner of the province's
thrust toward global competitiveness. Due to its rich tradition
in furniture-making as well as its impressive track record both
as a major export earner and net exporter, the Cebu furniture industry
has long been considered as having one of the greatest potentials
in the world market. True enough it has been included in the list
of 15 export winners under the Medium Term Development Plan.
Already
noted for very good designs and excellent craftsmanship, the industry
gears towards the direction of product development to further keep
its edge over its Asian neighbors. The scarcity of raw materials
has anything but discouraged nor limited the very talented Cebuano
furniture designers into creating beautiful furniture made from
combinations of traditional and indigenous materials such as sea
grass, abaca (Manila hemp), arorog, and butay (coconut twig) mixed
with wood, bamboo, rattan, stone and wrought iron. These designs
are expertly handcrafted by the finest craftsmen in the area, giving
attention to the tiniest detail that make up the essence of each
piece.
Cebu
has all the potentials of becoming a major player in the international
scene. At present it already serves the European, North American,
the Middle East, and Asian markets, thus making it a furniture resource
of great promise.
HS Codes, PSSC Codes and Descriptions for Export Products
Table
1
International
Classification Codes
Furniture Industry
|
PSCC
CODES
|
HS
CODES
|
DESCRIPTION
|
|
821.13
|
9401.50
|
Seats
of cane, osier, bamboo or similar materials
|
|
821.16
|
9401.60
9401.69
|
Seats,
n.e.s., with wooden frames
|
|
821.17
|
9401.71
9401.79
|
Seats,
n.e.s., with metal frames
|
|
821.31
|
9403.10
|
Furniture,
n.e.s., of metal, of a kind used in offices
|
|
821.39
|
9403.20
|
Furniture,
n.e.s., other metal furniture
|
|
821.51
|
9403.30
|
Furniture,
n.e.s., of wood, of a kind used in offices
|
|
821.53
|
9403.40
|
Furniture,
n.e.s., of wood, of a kind used in a kitchen
|
|
821.55
|
9403.50
|
Furniture,
n.e.s., of wood, of a kind used in the bedroom
|
|
821.59
|
9403.60
|
Furniture,
n.e.s., other wooden furniture
|
|
821.79
|
9403.80
|
Furniture
of other materials (including bamboo)
|
PSCC
= Philippine Standard Commodity
Clearance Code
HS Code = Harmonized System Code
MAJOR COMPONENTS OF THE INDUSTRY
CLUSTER
The
key players of the said industry are the manufacturers, subcontractors,
and traders whether direct or indirect exporters, or a combination
of these natures of businesses.
Table
II
Furniture
Industry Key Players
|
Cluster
|
Percentage
|
|
Manufacturer(direct
exporters )
|
37%
|
|
Manufacturer
engage in the ff:
-sub-contracting,
manufacturing, direct & indirect export trading
|
24%
|
|
Manufacturer
engage in the ff:
-sub-contracting
& direct exporting only
|
13%
|
|
Manufacturing
with direct & indirect Exporting w\out sub-contracting
|
8%
|
|
Manufacturers
dealing solely in direct exports
|
5%
|
|
Sub-contractors
of traders (direct or indirect) & domestic markets
|
2.6%
/ grp.
|
|
Exporters
engaging in trading only
|
2.6%
|
|
Others
|
7.8%
|
|
Total
|
100%
|
Some
of its support industries are the wood and lumber industry, hardware’s
and the metal industry. Its allied industry is the Cebu Gift, Toys
and Housewares (GTH) which produces some of their furniture accessories.
FLOW
/ PROCESS CHART OF THE FURNITURE INDUSTRY
Figure
I
Furniture
Industry Flow Chart
|
IRON
& STEEL Industry
|
|
WOOD
Industry
=Industrial
tree plantation
=Lumber
Imports
=Plywood & blockboard MDF |
|
STONE
CUTTING Industry
|
|
CHEMICAL
Industry
=Paints &
Laquers
=Adhesives
& glue
=Wood
treatment |
|
ACCESSO-
RIES /
HARD-
WARES
|
|
UPHOLS-
TERY
Industry
|
|
|
FURNITURE
INDUSTRY
= Wooden Furniture
= Wrought Iron Furniture
= Metal Furniture
= Stone in-laid Furniture
= Other materials |
|
|
|
|
|
|
DOMESTIC
MARKET
|
|
EXPORT
MARKET
|
|
INDUSTRY
SIZE, LOCATION AND GROWTH
Number
of Firms
There
are 162 furniture establishments in Cebu, 123 (76%) of which are
members of the Cebu Furniture Industries Foundation, Inc.(CFIF),
the industry association. The other 24% are non-members of CFIF
but listed with the DTI.
Size,
Assets and Distribution of Firms
Majority
of the firms (50%) are in the small-scale category. What used to
be about 77% (micro, 24% and cottage, 53%) is now reduced to only
23% (8% micro and 15% cottage). At the same time, the medium and
the large firms have grown in number from only 5% to at least 20%
(10%, medium and 10% large).
Most
companies have obviously prospered through the years. In this regard,
the effect of experience cannot be disregarded, in view of the maturity
of the industry.
Presently,
majority of the firms in the Cebu furniture industry are still at
the small-scale category. But the encouraging note is that most
of them started only at the cottage and micro levels.
Value
- added
Possessing
the globally acclaimed strength in design, mixed media and other
product innovation they were able to price it higher compared to
other Asian Furniture producing countries; catering the medium and
high end buyers and still remain to be highly competitive.
The
value added chain was completed when companies started their own
product development and design, manufacturing, assembly, and final
furnishing.
The
secret lies in the hands of their multi-skilled workers which readily
adopts to the changing needs of the customers, offering incomparable
variety in designs, function, color, texture, material and most
of all excellent workmanship handcrafted by the finest craftsmen,
giving attention to the tiniest detail that make up the essence
of each piece.
Employment
This
survey adopts the Table of the National Statistics Office (NSO),
on the number of workers by classification of firms, in the following
manner:
Table
III
Number
of Workers by Classification of Firms
National Statistics Office
|
Classification
|
No.
of workers
|
|
Micro
|
1
- 9
|
|
Cottage
|
1
- 9
|
|
Small
|
10
- 99
|
|
Medium
|
100
- 199
|
|
Large
|
200
and above
|
Most
establishments (53%) are clustered in the Small Enterprise classification
(10-99) when the NSO table is used.
Seventy-six
percent of the businesses have 9 or less managers, consisting of
both genders in about equal numbers.
More than 50 percent of the businesses have 9 or less supervisors
while 29% employ anywhere from 10-99. There are more male supervisors
in the furniture industry, not because the male gender is favored,
but because most supervisors are promoted from the ranks of multi-skilled
and skilled labor. These classes have been traditionally male-dominated
in the furniture industry.
Thirty-nine
percent employ 9 or less specialist/support staff while 18% employ
10-99. In both cases, males and females are employed in more or
less the same numbers.
Where
multiple skills are required, establishments have up to the present
been employing more men, mainly because there are not enough women
with multiple skills. The same is true with skilled labor. This
appears to be a carry-over of the old, hand-tool (as opposed to
mechanized) operations of the furniture industry, which required
men, more than women.
The requirements for jobs performed by semi-skilled and unskilled
personnel are about equally served by the employment of either gender.
Location
Figure
II
Location of the Cebu
Furniture Industry
Exporters & Manufacturers
Majority of the Furniture
industry companies are located in Mandaue City. Others are found
in the city proper and very few are found in the nearby provinces
of Cebu.
ECONOMIC
IMPORTANCE OF INDUSTRY
To
date, the furniture industry is one of the major source of livelihood
for over a thousand workers of Cebu-based furniture manufacturers
and exporters. Thousands of these workers employed directly and
indirectly are benefited from these said exporters and manufacturers.
There are also other indirect beneficiaries of this industry like
shipping, storage, insurance, trade and banking.
Taking
into consideration the contribution of the furniture industry to
the socio-economic condition of Cebu, it has been able to improve
the quality of life of Cebuanos particularly their workers who are
at the same time breadwinners of their respective families.
INDUSTRY
GROWTH ( 1993 - 1997 )
Table
IV
Growth
Rate of Cebu's Furniture Exports
By Commodity
Value
in U$ Dollars
Cebu Port & MEPZ
[
see table from other page ]
Markets
of the Industry
Domestic
vs. Export
A
great majority (82%) of the establishments export their products
(53% solely exporting and another 29% exporting and another 29%
exporting 90% of their products). Thirteen percent have anywhere
from 10-90% of their outputs bound for abroad, while only 5% produce
solely for the local market.
 |
This
trend may be taken as an indication that the products of the
Cebu furniture industry are, to a confident level, globally
competitive. This can be a valid conclusion because there
are much more firms that cater to the more competitive foreign
market than to the domestic buyers.
|
The
fact that this is achieved by an industry with firms dominantly
wholly owned by Filipinos should be taken as a positive signal by
other industries in the Philippines.
Countries
of Destination
Most
of the products go to the Americas (44%), with 40% to the USA. Europe
is a far second (21%), followed by the Asian market (12%). Other
market including the local market is 23% of all outputs.
Figure
III
Geographic Dispersion of Cebu's Furniture Export
1998
The
trend on countries of destination may not really serve as a clear
indication for marketing, except that the distribution of sales
figures may reflect the traditional market shares of imports from
the Philippines by these countries. Other than the usual demand
proportions of these regions, the other possibility is that the
US market has the best profit potential.
Business
of Major Foreign Customers
The
biggest customers of the industry abroad are Distributor-Wholesalers
(63%) with Retailers a far second (16%). Some 13% are Manufacturer
or Assemblers, meaning that their suppliers here are subcontractors.
The
trend in this item confirms the notion that the easiest segment
of the market to sell to are the distributors. This sector, in
a sense, are composed of the equivalent of middle-men or brokers
who make the link between producers and retailers for a profit.
It
may then be implied that, if our manufacturers are able to go
directly to retailers, they would generate more profits through
by-passing of the distributors. Much more if our exporters become
the retailers of their products in the country of destination.
INFRASTRUCTURE
With
the creation of the second Mactan Bridge; a lot of Cebuanos will
be benefited in terms of accessibility especially the exporters
and manufacturers who are now located in Lapu-Lapu City, they need
this in the transportation of their goods to the pier, and for companies
located at Mandaue and in other parts of the City who like to load
their shipments to Mactan International Airport and to its other
Mactan destination.
Communication
wise, there has also been an improvement in this area. Islacom (Island
Communication) for one, a new telephone company offered new telephone
lines to Cebuanos. If before getting a telephone line entails a
very long process, now it is made faster and easier by this telephone
company. So this really helped our exporters and manufacturers who
found it very difficult to transact their businesses because of
the absence of a telephone which is one very important means of
communication.
BUSINESS
CLIMATE
Relevant Policies/Laws/ Procedures reviewed to identify roadblocks
to industry growth and potentials for advocacy
Being
branded as one of the "export winners", the furniture industry
exports have been identified as one with a strong potential for
growth, therefore whatever relevant laws and policies that would
hinder this industrys' growth and development should be reviewed
accordingly.
One
of this is the opposed rate increase of the Transpacific Stabilization
Agreement (TSA) for all cargoes bound from Asia to the US. The
move to raise the freight rates poses a big problem for the survival
of the industry, which is still reeling from the blow of the Asian
economic crisis. Besides, the TSA has not given any justification
for its implementation and also no reason why they are putting
a surcharge during peak season.
Furthermore,
the increase will greatly affect the Cebu furniture industry,
specifically lessening its competitiveness. The repercussions
is not limited to this as this creates a possible imbalance in
the country's economy, furniture being one of the thriving industries,
ranking third among the Philippines' export commodities and consequently
second in Cebu.
Technology
One
of the key strategies to cope with increased competition is an increased
penetration of the market. This is possible through mass production.
Introduction to new technology to speed up production and quality
enhancement as well as meet demands of the buyers is a necessary
factor to survive in a competitive world market. Products that are
produced from mass production are prices lower than those from manual
production.
The Cebu furniture industry is slowly updating and upgrading its
technology know-how either by exposing themselves to foreign technology
transfer or by attending seminars and technology upgrading programs
conducted by expert trainors. Some companies are also beginning
to mechanize other parts of their production process to speed up
its production.
Economies of scale then, is reached through this form of mechanism.
Others which are somewhat "expensive" still remain to be competitive
for they possess the art of creativity as manifested in the intricacy
of its design and craftmanship.
Education
and Training
Some
of the companies believe that basic skills (e.g. woodworking,
carpentry, etc.) training is "not necessary". This group may be
implying that, either they do not need new skilled workers, or
there are workers easily available in the employment market who
possess basic skills.
What
may be unfortunate is when they will just hire helpers (unskilled)
who will be left on their own to learn the basic skills on their
own, observing work procedures, asking questions from skilled
workers, or undergoing unsupervised OJT.
Companies
in this case will need to look at such things as shortage of manpower
in certain specific skills, assess the trainability of certain
workers along specific trade skills-probably, even with the possibility
of the worker leaving for another company after training.
Companies
in the furniture industry are more inclined to spend for skills
upgrading than basic skills training. Generally, they intent to
keep their present pool of skilled workers and are willing to
use their cash resources to upgrade their existing employees.
Furniture
companies are almost as eager to multi-skill their employees as
they are in making them upgrade their existing skills. For workers
with multiple-skills are likely candidates for higher vacancies.
Management normally requires this for shop-floor supervisory positions,
and workers are aware of this. If the companies would successfully
multi-skill their workers/employees, especially across functional
boundaries, it will be one of the key factors in making the Cebu
furniture industry more competitive.
Companies
are "attempting" to properly dispose of all their waste, but the
result can still be improved if all the workers are educated to
waste disposal. It may mean that they have the waste management
structures, but practices are not yet in accordance with the structures.
Another
very important factor of waste management is the control of dust,
a very important concern because of its effects not only on employees
but also on the environment. Dust comes from a variety of sources
in a furniture manufacturing facility. Sanding and polishing operations
generate a lot of dust especially in the manufacture of wood and
stone furniture. Wet sanding technology used in grinding stone
significantly minimizes dust but produces another waste-slurry.
The
problem of dust pollution is not addressed to all furniture manufacturers
because some of them belong to the category of trading only and
those in iron/steel who generate minimal quantities of dust.
With
some companies, they isolate dust-producing operations in semi-enclosed
areas where workers are provided with dust masks. Others have
an aspiration system installed in dust producing areas.
On
this basis, majority of the furniture companies have addressed
the dust pollution effects to the environment, and probably to
a certain extent protect their workers.
Generally,
the furniture industry appears to be responsibly disposing their
waste materials properly; may it be domestic waste, chemical waste,
scrap waste and wastewater. Some of these waste when not disposed
are then recycled. However, there still others who don't know
how to get rid of these waste.
Labor
Most
firms pay their male and female managers over P10,000 while others
pay between P6,001 and P10,000. This makes that majority of their
managers higher than P6,000 per month.
 The
pay rates supervisors, the ranges somewhat gives an indication
of the gap with managers' pay. Majority of the employers pay their
supervisors between P6,001 and P10,000 while others pay between
P4,001 and P6,000. Very few employers pay their supervisors over
P10,000.
Specialist
and support staff, multi-skilled labor, skilled labor and a few
semi-skilled labor are paid between P4,001 to P6,000. Some specialists/support
staff and multi-skilled labor get salaries between P6,001 and
P10,000 with very few getting less than P4,000.
Skilled
laborers are in the same pay range as most multi-skilled labor.
A higher percentage of skilled labor compared with multi-skilled
labor get less than P4,000. A few skilled laborers get anywhere
between P6,002 and P10,000.
Most
of the semi-skilled workers are in the range of P4,001 to P6,000,
the others receive less than P4,000. Majority of the unskilled
laborers are in the less than P4,000 pay range. Very few get upwards
of P4,001.
It
is to be noted that these monthly pay rates do not include the
benefits and bonuses which some employers provide.
Some
trends that may be deduced from these data are:
- The
typical basic pay for managers is around P10,000 per month.
- Supervisors
are generally getting between P6,000 to P10,000 per month.
- Skilled
specialists and support staff are generally clustered within the
P4,000 to P6,000 range, although many of the former get higher
than P6,000.
- Multi-skilled
workers are usually given higher pay than skilled specialists;
not discounting the possibility that most of the multi-skilled
are the first ones promoted to supervisory level.
- There
is little distinction between the pay of semi-skilled and skilled
workers. This may stem from the fact that, in the first place,
it is difficult to distinguish these categories from one another.
- Unskilled
laborers usually get a monthly take home pay of around P4,000.
- There
are no distinctions between the pay rates of men and women
Mode
of Payment
One
mode of payment is on a daily basis and piece-work. There are
those which have a combination of both daily and monthly, although
it is presumed that the former is for rank-and-file, while the
latter pay mode is for supervisors and above and the clerical
staff.
Some
use piece-work and daily modes, presumably for rank-and-file.
Subcontracting
arrangements however, are highly predominant in the export sector.
Particularly in industries where much labor is required, exporters
are utilizing subcontractors' resources to produce either a product
component or the whole product, as it has been proven to be an
effective cost-saving arrangement. Cebu's thriving export sector,
the backbone of Cebu's economy, is considered "semi-formal" because
it is mixture of formal and informal transactions. The chief agents
of Cebu's semi-formal export sector are the exporter (contractor)
and the informal (subcontractor).
Informal
subcontracting is popularly practiced in Cebu, as manifested by
the average ratio of contractors. Depending on industry demand,
a typical contractor can have 5 - 30 subcontractors. This situation
may be due to the following reasons:
- subcontracting
spreads the risk of the contractor
- transfer
of technology offers the subcontractor a chance to be a contractor
himself
- subcontractors
are the fast learners, flexible producers and offer low-cost labor
- subcontracting
cuts down on government bureaucracy (e.g. minimum wage)
Most
of the surveyed firms are at subcontracting, others act as domestic
supplier or a combination of both. To date there are about 74 subcontractors
documented by DTI, there could be more however.
Financing
Owners'
Cash Resources
The
dominant sources of working capital are the owners' cash resources.
Some of the companies "always" use the owner's money for capital.
Another "often" use the owner's cash resources', others "seldom"
do so; and a few "never" do. This shows that most companies in
the furniture industry are liquid enough to sustain their operating
capital requirements without aid from others.
Financing
from Banks
Some
companies use bank financing facilities to finance capital; others
"often" and a few "seldom" do. This seems to mean that bank facilities
are usually the second option of financing when the owners' resources
are insufficient.
Financing
through Private Lending Institutions
Some
of the companies "always" depend on this form of financing to
finance working capital; others "often" avail of bank facilities,
some "seldom" do; and a very few "never". This seems to mean that
bank facilities are the usually second option of financing when
the owners' resources are insufficient.
Financing
through Private Lending Institutions
Some
companies "always" depend on this form of financing; a very few
"often" resort to it and others "occasionally (seldom)" do so,
and others "never". This seems to mean that bank facilities are
the usually second option of financing when the owners' resources
are insufficient.
Loan
Sharks
Only
a few of the companies are depending on loan sharks; others "seldom"
but majority of them "never" get their working capital from loan
sharks. Again, this reflects the overall liquidity of most of
the firms in the industry.
Advance
Payment of Customers
Companies
although not all are asking advance payment from their customers.
Because not only does it give them capital for the production
of their orders but also gives them a sense of "commitment"(to
finish their production) from their buyers and also vice versa.
Borrowing
against Letter of Credit
A
very small percentage, less than 3%, borrows against the Letter
of Credit. This used to be a straight-forward transaction, but
due to a weak peso, vis-a-vis the dollar collateral is required
by lenders as well.
Terms
from Hardware Suppliers
A
very small percentage, also less than 3%, use credit line form
hardware suppliers to extend their cash resources for other purposes.
Fiscal
Incentives
The
grant of much needed fiscal incentives to exporters, most of which
were patterned after, but not as extensive as those in the fast-exporting
Asian Tigers and the ASEAN newly industrializing economies are as
follows:
-
six (6) years to pioneer firms
- four
(4) years to non-pioneer firms
- Duty
of 3% on imported capital equipment and its accompanying spare
parts
- Tax
credit on domestic capital equipment
- Tax
and duty-free importation of breeding stocks of genetic
- Additional
deductions for labor expenses
- Tax
credit for taxes & duties on raw materials
- Exemption
from wharfage duties and any export tax, duty import fees
- Exemption
from contractor's tax
- Tax
duty exemption on imported spare parts
Non-fiscal
Incentives
Non-fiscal
incentives are also provided as follows:
- Simplification
of customs procedures for the importation of equipment, spare
parts, raw materials and supplies and exports of processed products.
- Employment
of foreign nationals. This may be allowed in supervisory, technical
or advisory positions for five (5) years from registration. The
president, general manager and treasurer of foreign-owned registered
enterprises or their equivalent shall not be subject to the foregoing
limitations.
- Access
to bonded manufacturing/trading warehouse system. Registered export-oriented
enterprises may have access to bonded warehousing systems.
Non-Government
Services
Cebu
Furniture Industries Foundation, Inc. (CFIF)
Marketing
and Promotions
- Organizes
and promotes the annual Furniture Fair in Cebu.
- Publishes
and distributes annual marketing and promotional materials - locally
and internationally
- Organizes
the participation of CFIF member companies in local and international
trade fairs and missions.
Training
- Commissions
technical and market development seminars/workshops
- Provides
technical and management consultancy services
Information
- Disseminates
information to its members and corresponds with government and
non-government agencies, institutions and organizations through
its quarterly newsletters, bimonthly communications and internet
homepage
- Acts
as the industry's information center by providing library services
Policy
Advocate & Industry Representation
- Lobbies
on major issues affecting the furniture industry
- Design
and Product Development
- Coordinates
design and product development programs and activities with its
Cebu Furniture Designer Guild
Ethics
- Espouses
the maintenance of ethical practices within the furniture industry
through its Ethics Committee.
Wood
Producers Association of Cebu (WOPAC)
Training
and Service Center
Vision
Statement
Envisions
itself to become a world class training and service center committed
to serve the micro cottage, small and medium enterprises (MC-SME)
and wooden furniture industry to become efficient and competitive
partners for domestic and foreign customers.
Mission
Statement
Training
and Service Center is being established with the following
mission:
To
develop human resources to be efficient and productive in the
field of wood abased products manufacturing especially on furniture
and cabinet making;
To
provide seminars to the member companies like sharpening of
tools and furniture part production in order to raise the quality
standard of their products; and
To
support the wood base MC-SME wooden furniture industry by providing
management and technical consultancy, those increasing the productivity
of the company.
Goal
In
line with its vision and mission WOPAC Training and Service Center
has the following goals:
To
train wood industry workers to become competent and socially
responsible craftsmen in the production of wood based products
especially in the field of furniture and cabinet making;
To
equipped the craftsmen with knowledge of SEQEMS (Safety, Environmental
Friendly, Quality, Economy, Methods and Safety) and the skills
required to be capable wood workers of the MC-MSE and wooden
furniture industries;
To
continually develop the WOPAC staff with technical and management
skills to be effective in delivering services to MC-MSE and
the wooden Furniture Industry.
INTERNATIONAL
TRADE AND INVESTMENTS
Exports
 Furniture
exports are divided into the following sub-groups: rattan, wood,
bamboo, buri, stone, metal, parts of furniture and other materials
and furnishings.
Rattan
although has been dominating the industry for the past years is
now overtaken by wood. Cebu's furniture industry has shifted from
rattan-based to wood due to the high demand of global market although
the sector is known as the leading exporter of rattan-made furniture.
Statistics show that for the period of 1998, overall sales were
down by 33 percent for the 1st half but picked up towards
the end of the 2nd half of the semester, the Cebu Furniture
Industries Foundation, Inc. (CFIF) statement revealed.
In a comparative study of Cebu furniture export sales for the 1st
quarter 1996 to 1998, sales for wooden furniture increased by 459.88
percent in 1997 and 36.70 percent in 1998.
Still other materials such as metal and mixed materials furniture
posted an increase in demand. Metal furniture posted growth at 316.31
percent in 1997 and 183.67 percent in 1998; mixed furniture grew
by 35.04 percent in 1998 while its 1997 performance registered a
negative 46.51 percent.
Inspite of this "Cebu still prides itself as the furniture capital
of the Philippines where we contribute over 60 percent of the total
annual figures for the industry as a whole".
See
attached (Annex 1,2 & 3)
Imports
Table
IV
Importation
of Furnitures
January - September 1999
|
Codes
|
Description
|
Volume
(in kilos)
|
FOB
Value
(In US $)
|
|
821.71
|
Furniture
of Plastics
|
380
|
$
1,562.00
|
|
821.79
|
Furniture
of stone/marble
|
22,648
|
41,896.00
|
|
821.80
|
Parts
of furniture
|
182,888
|
15,250.00
|
|
699.17
|
Of
moldings and fittings
|
47,008
|
84,020.00
|
|
893.95
|
Fittings
for furniture’s
|
131
|
716.00
|
|
821.55
|
Beds,
of wood
|
37,194
|
41,400.00
|
|
821.29
|
Cushions
& pillows
|
1,929
|
12,811.00
|
Export
Performance Targets (1999 to 2001)
The
furniture export target for the year 1999 to 2001 is a 10% increase
in every year of the current years' export sales.
OPPORTUNITIES
DRIVING THE INDUSTRY
External
Drivers
Due
to the political instability of Indonesia which is one of our great
competitor; our market share in the furniture market has therefore
increased. As seen in the recent Philippine International Furniture
Show held at Cebu Waterfront Hotel attended by different buyers
all over the world, which earned around twenty one (U$21,000,000)
dollars. This would also imply that there is still a very huge demand
for Philippine made products, especially Cebuano crafted furnitures
in the world market.
Access
to the world market is made easy through the participation of International
shows like this.
Technology
wise, the Cebu furniture industry is slowly updating and upgrading
its technology know-how either by exposing themselves to foreign
technology transfer or by attending seminars and technology upgrading
programs conducted by expert trainors. Some companies are also beginning
to mechanize other parts of their production process to speed up
its production.
The
continued economic stability of the United States is a also a great
opportunity for the furniture industry to grow since this is their
biggest market.
Internal
Drivers
Because
of the implementation of 5S (a Japanese legacy on productivity)
of some companies (introduced and taught by the DTI 5S Team) their
management system has greatly improved. Thus, there has been cost
control reductions, eliminating unnecessary costs found in the production
as well as in the management process thereby improving the productivity
of the company.
Moreover,
the furniture industry still posses the globally acclaimed strength
in design, using mixed media and other product innovations. Maintaining
its craftmanship, acquiring flexibility in terms of using diverse
materials and being able to adopt the needs of the customers is
a major strategy used by the people in the industry to have an edge
over their competitors.
REQUIREMENTS
FOR GROWTH
The
furniture subcontractors which, being mostly micro-cottage enterprises
and considered to be an informal enterprise must be the area of
focus since they are actually dealing with first-hand production.
Problems that can be identified in this area are: Unavailability
of raw materials, failure of workers to meet production deadline,
quality control problems and mixed up production scheduling.
Unavailability
of raw material
Unavailability
of raw materials is a problem being shared by the subcontractors
with the contractors. Relatively scarce materials like wood, rattan
and stones are constantly hampering the production of furniture.
Quality
control
Quality
control Is also another big problem for this sector. With the contractors'
strict material and workmanship specifications, furniture makers
find it hard to meet them. In fact, most of the subcontractors say
that quality control is present in their operations usually at the
finished product inspection stage. With the presence of quality
control during this last stage is a disadvantage for them since
some furnitures have to be redone again and others are redone from
the start if rejected by the exporters. Which costs a lot of money
and time on the part of the subcontractors.
Inability
to meet deadlines
This
is a big disadvantage on the part of the subcontractors as well
as with the exporters, because this problem causes a chain of effects.
If the subcontractor cannot deliver on the specified date by the
exporter, the finishing which is usually done on the exporters premises
can also be affected, thus delivery to the buyer will also be delayed.
Especially if the order is covered by a letter of credit wherein
it has to abide by its conditions and that includes the deadline
of shipment. The worst scenario in this is the cancellation of order
by the buyer.
Limited
capital
Subcontractors
are paid either on a Cash on Delivery (COD) basis or by terms by
the exporters; depending upon the value of the amount involve. With
this situation when they are paid in terms some subcontractors are
having a hard time managing their finances. Especially in the procurement
of raw materials when they have to pay their suppliers in cash.
Access
to credit also is difficult. The subcontractors can only depend
on their earnings and cash advances from contractors for their working
capital requirements. Due to informality and smallness of the enterprise,
they have no option but to borrow from informal lenders at usurious
rates. Banks or other formal sources of credit only lend to registered
firms and some require collateral and/or rigid application requirements
for unsecured loans to subcontractors (if any) which is impossible
for the informal firm to comply.
Being
an informal enterprise brings with it costs which limits the firm
to do business transactions in a professional and oftentimes, legal
way. The lack of a legal personality deprives furniture subcontractors
of the benefits and protection of the contract system. For instance,
these firms cannot make long-term commitments, enjoy price or delivery
protection, or have flexibility in transferring assets. Much less
can they have access to the courts when their agreement with other
parties are violated.
Inorder
for the industry to grow subcontractors must be given the necessary
training in production and financial matters. They must be able
to attend seminars and workshops for them to increase their knowledge
and skills as well adopt new technology know-how to increase and
improve the quality and quantity of production.
Adequate
administration and control is also considered a vital need of the
industry. Management skills have been determined to be lacking which
leaves the business in an always precarious situation. If only the
subcontractors will learn how to develop basic skills in financial
management, problems in cash management, cost estimating procedures,
and sourcing of funds, administration and control problems will
be solved by the subcontractors themselves.
Exporters
must also assist the subcontractors especially in financial matters
for this serves as a "fuel" in the production process, without it
nothing can ever move.
RECOMMENDATIONS/COURSES
OF ACTION
Having
known the current problems faced by the furniture industry, active
efforts are required to establish a common agenda for the subsector's
development. Thus, cooperation among government line agencies, non-government
organizations, and the business sector as a whole is absolutely
a pre-requisite to address such problems. Indeed, throughout the
process of development, it is necessary for the entire industry
to collaborate on the improvement from the grassroots of the industry
to the upper hierarchy.
To
achieve the unity in the industry which will be required for such
activities, it is essential to organize a governing body that will
oversee the situation of the subcontractors. This governing body
should also act as a coordinative body between and among contractors,
subcontractors' associations, government line agencies, and business
sector.
There
is also a need to organize into cooperatives or associations the
subcontractors for better representation.
And
for proper evaluation of the program should be put in place. Constant
monitoring such as in-plant visits and review of programs should
be done. Plans and strategies for the improvement of the sector
must be done like:
Assurance
of quality raw materials at globally competitive prices, linkage
with other government agencies, e.g. DENR, DA, etc. should be pursued
to avoid detrimental government policies like the recent plan to
export lumber but which was withdrawn by the president after protests
from the public.
Improvement
of product quality through improved productivity and production
methods, and availability of a world class workforce at all levels
of employment. 5S implementation at firm level should be continued.
Development
and implementation of a strategic marketing and promotions plan
to expand markets (participation in international fairs, studying/venturing
into newly emerging markets)
Continue
support to the association. Provide pro-active assistance to the
subcontractors so that they can eventually graduate into exporting
and they will have more negotiating power with buyers.
Continue efforts on policy advocacy beneficial to the sector.
And
lastly, the government must see through the problems of the industry
and work hand-in-hand with the key players in order for them to
come up with appropriate solutions for the industry to grow thus,
reaching their targeted goals for the years to come.
References:
World
Class: Made in the Philippines. Furniture Industry ProfileCIDA-ESP-MCBLP
Survey Report on the Cebu Furniture Industries Foundation, Inc.
A
Benchmark Survey on the Micro-Cottage & Small Enterprises in
Cebu
National
Statistics Office
Cebu
Furniture Industries Foundation, Inc.
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