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The main challenge of furniture manufacturing companies is to provide innovative products in shorter time cycles, at reduced cost, and with improved quality. The furniture industry is driven by demands for products that are affordable and better than the ones they replace. In order to meet market requirements, industry has been moving to Asia, which is now the primary source of furniture.
All countries in EU find themselves facing rapidly rising incomes and living standards that are pushing up labour costs and taxes. To maintain competitiveness, companies are rapidly transferring labour-intensive operations into countries like India, Malaysia, China, the Philippines, Thailand, Indonesia and Pakistan. As the benchmark for low-cost manufacturing, Malaysia is encouraging all the countries to move into higher value-added products and to invest in capital-intensive businesses. Malaysia consistently ranks highly on global and regional rankings for its attractive corporate tax rates, ease of hiring and well developed infrastructure. Malaysia was rated at eighteen for most attractive environment for highly-skilled foreigners according to the IMD World Competitiveness Year book.
Malaysia has become the leader in the Asian furniture manufacturing industry. Malaysia consists of three federal territories and thirteen states in Southeast Asia. Bordering nations include Thailand, Singapore, Indonesia, Brunei and the Philippines. The population of Malaysia is more than 27 million and covers an area of more than 127,000 square miles.
KHAN Furniture’s prides on the dedication and commitment to supply the high quality furniture with affordable price and for your total customer satisfaction. We have been growing to become one of the leading providers of desks and tables to schools, universities, and offices in U.K and the business development has been hard work but enjoyable one and has given us a solid reputation for efficiency of service, product knowledge and quality.
Our company currently does its business in UK with the name ‘KHAN FURNITURE’ intends to set up a manufacturing unit in Johor (Malaysia) as part of the mission and vision to be the leading provider of Dining table in the EU and has named the new manufacturing site as a “KHAN MANUFACTURING UNIT”. The main competitive advantages in locating the factory in Johor is the availability of the main raw material i.e., Mahogany hardwood, close proximity of suppler, low labour costs.
Now the main task for the Company is to find a supplier who can supply good quality Mahogany hardwood, Staff Recruitment, staffing costs and approval of required licenses to set up the company. Our products are made by talented furniture craftsmen who lovingly pay great attention to each detail. High attention and consideration go into choosing the finest hardwoods; preparation of the wood; and hand-shaping, sanding, staining and rubbing.
The finished products are then exported to Rotterdam (Europe) through shipping for sale. A Warehouse is leased at Rotterdam for the storage of Dining Table and sends to all the distribution networks when required.
The company has chosen four distribution channels to sell the products to gain maximum market share.
This project will not only enhance our current business but also will be increase the profit in future.
1. 0 INTRODUCTION
The main concept of setting up KHAN Manufacturing Unit in Malaysia is based on offering a wide range of well designed and good quality mahogany dining tables at low prices so that as many people as possible will be able to afford them. The KHAN furniture makes it possible to serve the many by providing affordable products that contribute to helping more people live a better life at home. The project is about to setting up factory in Malaysia to produce mahogany dining tables for sale in Europe. The report begins with the main objectives concerned in setting up the factory in Malaysia. In doing so number of relevant issues is being considered this includes production process, customer issues and supply issues. Additionally it looks at the aspects relating to location, staffing and other supporting functions like the purchase, finance and information technology and also looks at the environmental issues, health and safety issues and further dimensions concerned with the competitive advantage.
1.1 VISION AND MISSION
The vision and mission is to be the leading provider of dining tables to the public in the EU within the next ten years at a profit.
- To setup a factory in Malaysia to produce a range of Mahogany dining tables
- To offer our customers superior quality and unique designs furniture at affordable prices.
- Expand our product lines to meet customer demand and produce the best quality mahogany tables
- The new factory will enable us to cost effectively expand our product lines to meet European Union customer demand.
The following are the three key goals that the KHAN Company aims at fulfilling by opening the new manufacturing unit at Malaysia can be summarised as:
- enhancing the international profile of the company
- controlling the quality of products (dining table)
- managing growth in order to ensure that it strengthens the financial position.
2.0 LOCATION OF MACTURING UINT
Selection of the location is the main task of our project.
2.1 GEOGRAPHICAL VIEW OF MALAYSIA
Malaysia is one of the largest countries in the Asia-Pacific group which has the predominantly forested areas of Sabah and Sarawak, across the South China Sea on the northern coast of Borneo. Its climate is tropical and often humid. Malaysia currently has 32.8 million hectares of land area, of which 24.8 million hectares – 75.5 per cent of total land – are classified as forest and tree cover. Of these, 19.5 million hectares are forest cover and 5.3 million hectares are tree cover. Of the total forest cover, 9.2 million hectares (47.4 per cent) are found in Sarawak, 5.9 million hectares (30.1 per cent) are found in Peninsular Malaysia and 4.4 million hectares (22.5 per cent) in Sabah.
Malaysia exports furniture to more than 160 countries worldwide. Today, Malaysia is ranked as the 10th largest furniture exporter in the world; 3rd in Asia and 2nd in the ASEAN region.
2.2 SELECTION OF MANUFACTURING SITE
Our manufacturing unit will be located in Johor which is in the southern portion of peninsular Malaysia. It is one of the most well developed states in Malaysia and has got all the facilitating conditions for the company to operate like the close proximity to port, airport and hotels. The location of the plant at Johor results in reduced overhead and supply costs. For example, lease rates, labour costs are low if compared to other places in Malaysia. There are many suppliers in this place who supply different types of mahogany hardwood for us to manufacture mahogany tables. This close proximity of our suppliers means lower transportation and shipping costs.
3.0 COMPETITIVE ADVANTAGE
Our competitive advantages include our unique furniture design and quality, a competitive pricing strategy, a strategic location close to suppliers and already existence of the company in the UK.
- TIME FACTOR
The time is most important factor in any business nowadays because of our main U.K Office whom reaches the customer first for product marketing and getting the order and Our Malaysia Manufacture unit whom meets the customer orders most quickly.
- HIGH QUALITY
We are using the Mahogany wood only for providing the quality dining table for long-term success of our business. The close proximity of our wood suppliers also gives us better control on getting the best quality of Mahogany.
- COST BENEFIT
The mass production of dining tables gives us high economies of scale which makes us more cost efficient and low labour cost.
Our flexible manufacturing system to offering customized greater variety of products besides standardised products which enables us to cost effectively and the increased productivity which result to generate high revenue.
- PRODUCT AND MARKET KNOWLEDGE
We have been in furniture business since many years and we know better about the style and demand of EU Customers and other processes of furniture manufacturing. Now to move in Malaysia Furniture market is another forward step and edge.
4.0 RECRUITMENT AND STAFFING
We will recruit both internally and externally for the Malaysia manufacturing unit. . We have decided to select top management from the existing staff so as to maintain the strong element of the company’s culture. We will first send internal emails to all members of staff with details of available positions and number of spaces available, highlighting the benefits of working in Malaysia such as lower tax deductions from pay, less expensive cost of living compared to UK and a stable political economy. The whole management team at manufacturing unit is approved by the UK Office and rest of the staff like Line Managers, supervisors & other labour staff will be recruited locally.
High skilled staff is essential for quality assurance at offshore manufacturing unit. With regard to product quality in manufacturing process, onshore managers as well as local staff will be employed at merit. This method of staffing is beneficial in the sense that local staff has an understanding of the local place, people and how the system works well. Primarily, most production workers like craftsman, operators/ manipulators will be recruited locally to save cost while those from the home company staff define the company standards and those working closely the work can be done more efficiently. Furthermore, main U.K company staff can support the development of local staff so that the reliance on parent staff can be gradually reduced. This can in turn help the company in cutting down costs in the long run. However upon enhancing their abilities and passing the quality audit, local staff will be delegated greater responsibilities and the scope of their work expanded.
4.1 MANAGEMENT STAFF
It includes the Production manager, operations manager, Marketing Managers, Finance Manager, engineers etc. They will control their departments and give updates to main U.K office.
4.2 LOCAL STAFF
The production force can be classified as forestry engineers and qualified for work in furniture production. The qualified labour force includes:
- wood converters ( mainly carpenters and tuners )
- Manipulators/operators of the machine
4.3 EDUCATIONAL REQUIREMENTS
The following is educational requirement for our selection and recruitment:
- We prefer to hire production workers who have a minimum high school / vocational school education.
- For managerial position a minimum college education and some specific knowledge about furniture is needed.
4.4 EXPERIENCE CRITERIA
We prefer our plant workers to be highly skilled craftsman with extensive experience in wooden furniture manufacturing.
We will ensure our staffs undergo regular trainings in their fields to make sure we deliver best quality products and to increase the potential of the staff and raise the human capital of the company.
4.6 WORKING ENVIRONMENT
We believe that we all are one family. We offer a flexible benefits programme, training and development programmes, discounts on products and services and participation in Company share scheme offers. The company has a proposal of implementing a procedure (“whistle blowing policy”) for employees to report any concerns confidentially.Workers need both manual dexterity and mechanical ability for many jobs .working conditions vary from job to job. Usually numbers of working hours in a week is forty but this may vary and there may be layoffs during slack periods. In addition to providing core remuneration benefits (including annual incentive schemes), holidays, sick pay, life assurance and pension provision.
5.0 MANUFACTURING PROCESS/CORE PROCESS
We are only going to Malaysia for cost efficient and better production process and our product quality and customer satisfaction depends on our manufacturing ability.
5.1 BASIC EQUIPMENTS
Basic and main Equipments in the plant includes a spindle shaper, table saw, wide belt, Sander, dust collection system, sprayer for finishing, hand tools and work benches.
5.2 DINING TABLE MANUFACTURING STEPS
The following is the manufacturing steps to make the dining table from Mahogany wood:
- STRUCTURING AND DESIGNING MAHOGANY WOOD TABLE
First Special computer programmes to optimize the layouts for each dining table. This provides the maximum yield of the material which lowers the cost of the dining table. Our furniture designers create specific designs of furniture. The designers make sketches and diagrams of their ideas. Drafters prepare blueprints of the designers’ plans. Highly skilled model makers build a piece of the furniture by working on the blueprints.
Managers and engineers check the design and quality and then approve it for the mass production of that piece of furniture.
- SIZING THE PARTS
Individual parts are cut from the mahogany wood using a panel saw, crosscut saw, planers and carefully labelled.
- MOULDING AND SHAPING THE PARTS WITH MACHINE
We machine properly each part and use only the highest standard for machining the wood.
- SURFACE FINISHING – FOR PERFORM FLAT WITH LAND SANDING
The surfaces of the table are sanded before assembling the parts.
- ASSEMBLING / JOINING PARTS
The components of the dining table are assembled. The face frame and mouldings are applied eventually.
- PERFORM FINISH SANDING
The final finish sanding will be done for shining and better quality.
- CHECK DINING TABLE AND COMPONENTS FOR QUALITY
The integrity of the dining table is verified and the finish sanding is also carefully inspected.
- FINAL ASSEMBLING OF THE TABLE
All other accessories are installed e.g. Metal legs, Locks
- RUB OUT THE TABLE
Finished piece is rubbed out to bring the piece to its final showcase condition before being delivered.
- (PACKING) WRAP AND DELIVER
The dining table is carefully wrapped in preparation for delivery. Careful wrapping delivers the product without any damage to the destination point.
We know the importance of customization because it gives more help to capture the market and generate the profit than as usual.
The products which are manufactured at our unit are available in a variety of resilient finishes and colours so that customers have the flexibility to customize the furniture to their individual tastes and order through any of our distribution channels. This added facility in long-term will give us a better customer retention rate.
5.3 COMPREHENSIVE SUMMARY OF CORE PROCESS
We will receive the mahogany wood (after warping & drying) from suppliers, the machine operators using their machinery like crosscut saws, planers, ripsaws etc cut the mahogany into different sizes and shapes as advised by the designers/engineers and the cut pieces are sent to the next department by conveyer belts or mill trucks. Machine operators then shape the wood into legs and top part of the dining table. Drill holes are used to make grooves in the wood. Stock handlers take the shaped wood pieces to the sanding department, where the workers smooth the surfaces. The sanded wood pieces are put together by workers in assembly and sub assembly departments. The surface is later smoothed down by hand sanders. Finally the furniture is send to the finishing department where finishers apply various finishing coats to color and seal it.
Sometimes when there is a customized order the finishing is done by using special techniques such as distressing, which means processing furniture to make it look old and worn. The finished tables are then wrapped and send to the export target market to the distribution channels via shipping for sale.
6.0 QUALITY AND PERFORMANCE MANAGEMENT
The main objective of our company is to give guarantee to our consumers of a perfect product and level of quality, which fulfils with strict requirements for material and workmanship.
We will measure quality at every step including staff recruitment, marketing, purchasing, inventory management and site location. It is crucial to identify the typical quality issues related to quality of mahogany hardwood etc. Six Sigma Improvement model is a comprehensive and flexible system for achieving and maximizing business success by minimizing defects and variability in processes. We will define the characteristics of process’s output that are critical, getting picture of the current process by documenting it using flow charts and process charts and identify data sources and preparing data collection plan. Using data on measures to perform process analysis, applying tools such as Pareto charts, scatter diagrams, cause and effect diagrams and the statistical process control (SPC) tools. Improving existing methods to meet the new performance objectives and implementing changes. Controlling and monitoring the process to make sure that high performance levels are maintained.
All the products manufactured go through the above process and any defects identified are rectified and are dealt immediately to deliver the best mahogany tables. We ensure that the requirements for materials and workmanship are observed partly by unannounced visits to factory and partly by testing of randomly choose furniture.
Quality control label of KHAN furniture will be a guarantee for the consumer and an assurance that the furniture will be able to live up to all reasonable expectations.
We will obtain a certificate from the standards and industrial research institute of Malaysia- SIRIM which is the body accredited by the Malaysian Administration for the development of the activities of standardisation and certification.
7.0 SUPPLY CHAIN MANAGEMENT
My teacher Alan Parkinson always said supply chain is very important for your Manufacturing Unit Project so I make the given below picture only for his satisfaction.
RAW MATERIAL (MAHOGANY)
Mahogany is a very large canopy tree, sometimes reaching over 150 feet in height, with trunks sometimes more than 6 feet in diameter above a large basal buttress. Mahogany is a generally open-crowned tree, with gray to brownish-red fissured bark.
Mahogany is perhaps the most valuable timber tree varies from yellowish, reddish, pinkish, or salmon coloured when freshly cut, to a deep rich red, to reddish brown as the wood matures with age. It is fine to medium texture, with uniform to interlocking grain, ranging straight to wavy or curly.
Fair and effective Working with suppliers adds significant value to the products of the firm. We will buy the Mahogany from one Supplier so we get good quality wood but we also consider some other suppliers to avoid any shortage of supply.
- INBOUND LOGISTIC
Malaysia has about 64,328 km road network which consist of main roads and highways. 90% of the goods and passengers traffic use this mode of transport in Malaysia and Malaysia has also good rail net work of more than 2,000 km and urban train project is under development with full speed. We will try to make arrangement with supplier to deliver the raw materials at the manufacturing unit.
- WAREHOUSE FOR RAWMATERIAL
To avoid any shortages or to meet any last minute orders we need a massive warehouse which is located within the manufacturing unit.
- PRODUCTION PROCESS
Production process has been explained above in detail.
- WAREHOUSE FOR FINISHED DINING TABLE
It is important to keep the finished dining tables in stock carefully and send them when required by the distribution networks. To save the transport cost we have to careful about the weight of shipping container so we keep the stock till the required container weight.
- OUTBOUND LOGISTIC
The strong growth in exports implied the increase of the harbour capacities. The main ports of Malaysia are Kelang, Penang and Johor. Our furniture is moved from Malaysia to Europe in containers by Shipping from Johor Port because it is the most cheap transport system for the furniture export and also environmental friendly.
- TOTAL DELIVERY TIME
We are going to provide the furniture to whole Europe Union so the company has chosen Rotterdam port (the largest port in Europe) which is in Netherlands as the delivery point for finished goods in Europe. Rotterdam being the largest harbour in Europe and which is very near to our target markets gives us synergy and reduces transportation costs.
The processing time for 20 ft container order is 6 weeks and 40 ft container is 8 weeks. For 20 ft container the space available is 30 Cubic Meter/ CBM, 40ft is 60 CBM and 40ft HC is 75 CBM. The total items that can fill into the container depend on the size of Dining table.
The Finished goods are then delivered to the distribution networks through roadways, airways and railways throughout Europe.
7.1 INVENTORY MANAGEMENT ISSUES
Excessive inventory or lack of inventory control can lead to wasted materials, either by using more than needed or purchasing materials deteriorate before use
- Our Purchase Manager will work closely with suppliers to provide just in time material delivery so that optimum raw material can be ordered.
- We will use a multipurpose solvent which can reduce our costs of managing wasted and facilitate recycling.
- We try to make arrangements with supplier to return unused materials.
8.0 CUSTOMER ISSUES
For improvement of our quality and the success of our company depends on the satisfaction of our customer.
8.1 CUSTOMER RELATIONSHIP AND FEEDBACK
We undertake regular consumer surveys, which include questions about ethics and respond to the results of these surveys when developing our products. We also obtain feedback from staff serving customers in our stores of their perception of issues that mainly affect customer satisfaction and build this feedback into our plans.
8.2 AFTER SALES SERVICE
The complaints of the customer are handled centrally and we are proud of the process we have established. All the complaint investigations will be started within 24 hours of receipt and we attempt to resolve each one to the satisfaction of our customers. Our policy is to communicate with our customers in most of the languages spoken in Europe. All complaints are recorded to undertake a detailed analysis, monitor trends and identify key issues to improve our performance. We repair or replace any item if there is a justified compliant.
9.0 MARKETING STRATEGY
Our target market is EU which consists of 27 countries :France, Germany, Greece, Ireland, Italy, Romania, Bulgaria, Luxembourg, Malta, Netherlands, Portugal, Belgium, Cyprus, Finland, United Kingdom, Czech Republic, Estonia, Hungary, Spain, Sweden, Austria, Denmark, Latvia, Lithuania, Poland, Slovenia and Slovak Republic.
European Union is big market for furniture and demand of Malaysia furniture is increasing with time so market strategy is main point of our success. Last year, according to Malaysian furniture export statistics report, it exported 12.6% to Europe of its total exports.
The company’s marketing strategy is based mainly on making the right information available to the right target customer. The marketing conveys the sense of quality in every picture, every publication, and every promotion. We can’t afford to appear in second-rate catalogues with poor illustrations that make the product look less attractive than it is actually. We also need to leverage our products using specialty distributors and high-quality catalogues. This catalogue will be developed on each product line that will be distributed to interested consumers through all our distribution channels. The wood finish samples show customers the actual finishes and stains available with our product lines. Our dining tables are priced competitively and take into account production costs, competitive pricing strategies and consumer price sensitivity.
9.1 CHANNELS OF DISTRIBUTION
Published research indicates that 51% of the total sales volume in the market goes through the retail channel, most of those major national chains. Another 23% goes through the direct sales channel, although in this case direct sales include sales by distributors who are buying from multiple manufacturers. Most of the remainder, 18%, is sold directly to buyers by catalogues. KHAN furniture has chosen four channels for selling its products in Europe to gain maximum market and be the leading provider of the dining tables in the next ten years:
These are our distribution channels which will help us to sale our dining table in EU at every level:
- Retail Outlets
- Direct sales
- Corporate sales
10.0 SUPPORTING FUNCTIONS
The following three functions are the supporting functions of our manufacturing unit:
10.1 PURCHASING THE RAW MATERIAL
All the purchases made by the company are done fairly which means we treat our suppliers fairly by paying a reasonable price for their products. The purchase manager employed at the manufacturing unit has a wide experience in purchasing and also a good negotiator. The purchase manager is also trained in other areas such as supplier support that give him a powerful insight into the cost drivers in the price equation. However his brief is not to focus exclusively on price but on the future potential of supply relationships and generation of capacity. If price is a problem he will work to reduce the cost rather than looking for a different supplier.
The projected cash flow statement and other financial statements shows that the company has sound liquidity which means that the company has got enough available funds to invest in the new manufacturing unit in Malaysia. It appears that company had a very successful year.
10.3 INFORMATION SYSTEMS
The company’s sophisticated information technology (IT) software enables collaborative planning and scheduling. The technology allows synchronized supply chain execution and design collaboration, which enables our company to respond better and faster to changing market needs and tastes. A update IT system will help helps us to sale the dining table directly on website and keep in touch with customer.
11.0 ENVIRONMENTAL ISSUE MANAGEMENT
We will follow standards according to the ISO 14001 which is about implementing, maintaining and improving the environmental management system.
Our company will demonstrate its commitment to sustainability through initiatives focused around resource conservation and responsibility. We will optimally take advantage of the triple-bottom line approach of sustainability which incorporates economic, social and environmental components of responsibility. We ensure ethical, social and environmental standards are maintained throughout the supply chain by auditing and visiting of our suppliers on a regular basis. Our main concern is manufacturing of furniture (dining table) but our audits also review ethics, health and safety, employee pay, employment conditions, use of child labour and environmental policies and practices. The main impact on the environment is waste management and energy use and our priorities lie in improving our environmental performance in these areas. Our usage of wood, electricity and cardboard is regularly monitored, as is our waste recycling and landfill performance. Sub meters for all utilities are installed throughout our manufacturing unit which will further improve our monitoring and aid us to target specific areas for improvements. Cardboard generated in our Retail outlets is returned to our warehouse site at Rotterdam in the returning empty lorries. We encourage staff to recycle general office consumables including paper and printer toners. Currently ocean transport has a growing demand because it is considered as the most environment-friendly way of moving goods around the world .As a company we are dedicated to reduce the impact on environment caused by our business so we choose ocean transport to export our goods to Europe (target export market).
12.0 CORPORATE SOCIAL RESPONSIBILITY
KHAN Furniture Company is committed to the welfare of our colleagues, customers, suppliers and the communities in which we operate. The company has a firm commitment to social policies, not just for the company employees but also the supplier have to conform IWAY and they are audits to ensure that they comply with IWAY. IWAY provisions include commitments to high standards of health and safety, employee working condition such as access to rest areas and toilets, working hours and a minimum wage or basic salary. Employees and their families have access to confidential counselling and legal assistance helpline which operates 24 hours, 7days a week.
This Malaysia Manufacturing Unit Project is very suitable and important to achieve the company vision of leading provider of quality dining tables with aim of profitability.
All these factors and innovative operational strategies such as the JIT paradigm and the Total Quality Management (TQM) view of design and production, Production efficiency, well-planned cost structures, manageable size, attention to underserved markets, lower overall labour costs prove that the project is viable and the long term vision of the company can be achieved.
- Scholes , k ., 2008. Exploring corporate strategy .8th ed. ch 5.pp 177-212.FT prentice hall.
- Bryde, D.J., 2003. Modelling project management performance. Internatio
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