CAVIRC.net - The Wood Furniture value chain

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THE WOOD &amp; FURNITURE VALUE CHAIN&lt;img hspace="5" src="/files/02607200516.37.31-legno.7dvd" align="right" vspace="5" border="0" />The figure shows the wood furniture value chain, which for the forestry sector involves the provision of seed inputs, chemicals, equipment and water. Cut logs then go to the sawmill, which obtains its primary inputs from the machinery sector. From there, sawn timber moves to furniture manufacturers who, in turn, obtain inputs from the machinery, adhesives and paint industries and also draw on design and branding skills from the service sector. Depending on which market is served, the furniture then passes through various intermediary stages until it reaches the final customer, who after use consigns the furniture for recycling or refuse. Value chain analysis throws light on the way in which producers enter global markets. This affects the price margins at which they can sell and their ability to upgrade. In some sectors, such as footwear, there is evidence that global buyers block producers from moving into more profitable activities such as design and branding but support the growth of their manufacturing capabilities. However, the growing capabilities of independent producers result not only from the promotional efforts of independent buyers, but also from the increasing tendency of multinational companies (MNCs) to outsource manufacturing activities, and to concentrate on areas such as design, technology, branding, logistics, marketing and after-sales service. If upgrading initiatives by buyers are a general global trend, how is it working in the wood furniture sector? The number of market segments, and within these, different market niches (high-volume, price-sensitive, designintensive, brand-intensive and so on) make this a complex issue. Moreover, markets vary from region to region. For example, softwoods are strong in Europe, but in Japan particleboard and hardwood products dominate the market. While retailing in France, Germany and the United Kingdom consists of a concentration of large, multi-store outlets, in Italy most furniture is sold in small independent outlets. Despite this market complexity, three major buying agents, who facilitate the entry of wood furniture producers into final markets, can be identified: <ul><li>Large multi-store retailers, with outlets and suppliers in many countries. IKEA, for example, sources from 2,000 suppliers in 52 countries and has more than 300 outlets in three continents. </li><li>Small-scale retailers, which buy directly from a limited number of suppliers in a limited number of countries. </li><li>Specialized medium-sized buyers, which source from many countries and sell on to retail outlets, usually in a single country or region. These buyers may have over 1,500 suppliers, located in many countries. Even the smaller specialized buyers will typically source from more than 100 suppliers. </li></ul>Source THE GLOBAL WOOD FURNITURE VALUE CHAIN What Prospects for Upgrading by Developing Countries: The case of South Africa - UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION</PRE>