KUALA LUMPUR: As competition in the international timber industry intensifies, it is crucial for Malaysia’s timber players to focus on high value-added offerings as they look into diversifying products and services, which would enable them to tap into new opportunities for growth, said Malaysian Furniture Council (MFC) secretary-general Matthew Law.
While recognising the challenges that the industry has faced as a result of the Covid-19 pandemic, Law said that timber and timber-related companies can begin recouping market share lost during the total lockdown of movement control order 3.0.
Local timber players must look to continuous improvement in various aspects, said Law.
“Furniture is one of the largest contributors to the export for the timber industry. We will not be phased out as it’s an industry that will always remain [in the market],” he said, pointing to the RM12bil in timber exports for the first half of the year, in which furniture was the top contributor at RM5.54bil, despite the country embroiled in the pandemic.
Law also attributes the demand for furniture to differing consumer behaviour in different markets including the US or the United Kingdom, where it is the norm for households and businesses alike to change furniture every three to five years.
Notably with the continued trade tensions between the United States and China, alongside the supply chain disruption at the height of the pandemic, countries are increasingly realising the risks in potential gaps caused by the crisis and are taking steps to diversify their supply chain for business continuity.
He added, “China is one of the world’s major suppliers, but customers won’t put everything in crisis and local companies can leverage on the gaps in the global supply chain.
“With our stable base of trustworthy and reliable manufacturers and the skills that we have, Malaysia is definitely one of the countries ready to take on that aspect.”
On the other hand, there is also rising competition from Eastern European countries such as Poland, which is geographically closer to those markets and has relatively lower wages compared to Malaysia.
Tackling challenges
For Law, who also has his own company, plans for the short term are to implement suitable standard operating procedures with extra measures to minimise business disruptions – such as those relating to enclosed areas, physical contact and safety precautions – as well as to encourage healthier lifestyles among staff members to ensure they are ready to tackle opportunities in the market.
That said, he admits that there are challenges lying ahead, with varying economic activity recovery levels in different states meaning that supply chains are still not back to normal, as companies adhere to regulations to operate at capacity in tandem with full vaccination rates.
“The second challenge is for export. Although freight rates have increased to a range of 250% to 300%, there’s no container space for us. So, we have to check with customers beforehand whether they’re able to secure containers, which affects production as well,” he said.
Another major issue lies with market volatility due to the ongoing pandemic, which directly impacts credit terms and cash flow management issues.
Despite the looming obstacles, Law believes that industry players have to continue staying positive and swiftly implement strategies and processes for continuous improvement, in order to remain competitive on the global stage.
He opines, “Our industry players must look beyond mass production to focus on high value-added products. The sector also must be ready to ramp up capacity to the next level and embrace the implementation of the Fourth Industrial Revolution to future-proof their businesses, instead of solely relying on foreign workers.
“It’s about digitising and automating where possible to be prepared to tap into new opportunities, be it engineering, software, or machinery.
“Although the more labour-intensive aspects such as stitching and upholstery still require manual work, when it comes to panelling and solid woods, it’s possible.”
At the same time, he cautions industry players to learn from their experience during Covid-19 to not only diversify products with an eye on adding value, but also exploring more markets for growth.
Stressing that sustainability practices are the future for the industry, Law said that Malaysia’s timber industry is ready to meet such requirements.
This is in order to cater to growing demand, due to the rising trend of customers in well-developed countries outside of the US, UK and Europe – like Singapore and Japan, for instance – becoming more aware and discerning when it comes to choosing environmentally friendly products.
