Note: This is the second of a two-part series on the state of the furniture and woodworking industries in Australia. Tom spent a month “down under” as part of an Australian government visiting specialist program on lean manufacturing in the furniture industry. He held workshops in six states and visited 28 companies — conducting lean manufacturing audits.

Last month I looked at the state of the furniture and woodworking industry in Australia. I noted that the industry was one comprised of several thousand manufacturers with less than 50 employees and many with an average of less than 20. Several large manufacturers have disappeared during the past 10 years. As a final reminder, a full 40 percent of furniture sold in Australia today is imported.

This month, I want to present an idea of where the industry is heading and how it plans to fight the ominous flood of imports. What must a manufacturer do to become a survivor? What can be done in the industry to slow or stop the decline underway? How can the industry combat imports and the price pressures from retailers?

The Freedom plant in Sydney is one of the more than 45 Steinhoff plants in the world. The Freedom retail store is one of 95 in the country.

Getting Lean
The furniture and woodworking industry in Australia is similar to that in the United States in the fact that most manufacturers are plagued with excessive waste and high costs. Many manufacturers are unfocused and scramble to produce a myriad of products in an effort to capture market share.

Some manufacturers offer 300 to 400 SKUs, with only 50 employees. This has resulted in unacceptable cycle times which will continue until a specific item is produced again. It also has produced a great burden on employees to handle such a wide variety of products.

It is common to find factories with little or no continuous flow of materials through the plant — instead most are clogged with work-in-progress. Many factories have CNC equipment that is underutilized and usually isolated in a “CNC Department,” where work cells are all but non-existent. Many manufacturers will let parts sit in a queue awaiting processing on the CNC when they could be machined in less time on older, simpler machines. All of this results in waste and longer lead times.

Most factories can offer no better than six to eight weeks delivery. The exceptions are those companies that are pulling parts from inventory and assembling to order. A few companies, such as those, will be described below. Extended lead times and excessive costs are the greatest detriments to competitiveness in today’s climate of globalization.

Readers of this column will recall the many times I have called for continuous improvement and lean manufacturing initiatives to help bring wood products’ manufacturers to a better competitive position. It does not matter whether the company is located in the United States, Australia or China — the requirements for competitiveness are the same.

Fortunately, industry associations and state economic development agencies in Australia have recognized this and have made a commitment to do something about it. They are joining together with others such as the state of Vermont and the Province of Nova Scotia which have decided to become proactive and help save their woodworking industries.

Education and Training
The Furnishings Industry Association of Australia (FIAA) has recognized the threats to the industry and has sponsored a program to educate manufacturers across the country on subjects regarding the state-of-the-art software available in the industry and how it is being used in supply chain management and in the principles of lean manufacturing. The association has gone into each of the six states that have furniture, cabinet and millwork manufacturers and held workshops to educate them in what it means to become lean and how to accomplish it.

The result is renewed optimism within the industry and a realization that a company does not have to surrender to imports, but can implement a strategy of its own to compete with better quality, lower costs and much shorter lead times. Many are now willing to look at their product offerings, begin reducing them, standardize product parts and embrace lean manufacturing concepts.

	The New South Wales Furniture Education and Training Centre on the Southern Sydney Institute campus provides 65 percent of the furniture worker training in Australia.

The state of South Australia stands out with its impressive program of assistance to existing industry, including the furniture and woodworking sectors. The state has an exemplary program within the Centre for Innovation, Business and Manufacturing (CIBM — www.cibm.com.au) for assisting industry in becoming more competitive. The CIBM is traveling throughout the state offering analysis and technical assistance to companies interested in becoming more globally competitive. It is unfortunate that more states in the United States do not have such a proactive program.

Similar to some locations in the states, the Southern Sydney Institute, located in New South Wales, has an excellent education facility for the furniture industry. The NSW State Furniture Education & Training Centre within the Institute is the largest such facility in Australia and provides 95 percent of the furniture training in the state and 65 percent of the training throughout Australia. It also has become an international training center with overseas students from Vanuatu, Papua, New Guinea, Solomon Islands, Vietnam, Germany, Korea, Indonesia and Malaysia.

It is well equipped and is beginning to turn its attention to important manufacturing management issues, such as “lean,” in addition to its traditional role of trades training — cabinetmaking, cutting and sewing, wood machining, upholstery, furniture finishing, CAD, etc.

Success Story
One of the success stories in Australia is that of the Steinhoff group of companies and its Freedom manufacturing and distribution facility near Sydney. This is one of the more than 45 Steinhoff plants located around the world.

The factory consists of approximately 100,000 square feet, and the attached warehouse and distribution center about twice that. The distribution center receives products from around the globe and inventories them for shipment on demand to 95 Freedom stores throughout Australia.

The just-in-time production flow on the frame and upholstery lines at the Freedom plant moves from left to right.

This factory produces upholstered furniture for its own retail stores and franchises, as well as for nearby exports. It provides lead times of four days or less for custom products delivered to their stores (plus transit time to Perth on the west coast). How they accomplish this is not unique but is out of the ordinary in Australia, and in much of the industry worldwide, because they do not accomplish it with huge inventories.

The key to the success of this plant is the fact that it embraces the principles mentioned above of continuous flow and lean manufacturing. It is an upholstery plant but the principles employed are applicable to any reader of this column. This plant comes closer to the theory of “one piece flow” than most other furniture plants in Australia. Frame parts are cut from board stock as needed. Scheduling is done in four lots per day and configured to typically complete customer orders within a day.

As parts are manufactured, they go directly to frame assembly (located adjacent to the cutting machines) where the frames are built. As soon as the frames are completed, they are placed on a non-powered conveyor line and proceed through the manufacturing process. There are only about 20 frames off the line at any one time as a buffer. Frames flow in a continuous manner to upholsterers and eventually to the distribution center.

The company has opted to cut and fabricate its own foam and cushion components in a just-in-time manner — delivering them to the line as needed to match with the frame. Cutting and sewing is handled in much the same way, with the scheduling system pulling items to meet with the foam materials. There is a conscious effort to eliminate non-value-added activities and keep products flowing through the plant with minimal delay. This is why the company is able to produce between 300 and 400 pieces of upholstery (including motion) per day with a relatively small workforce.

Freedom retail stores — unlike many others in the country — can provide very short delivery times to homeowners who want a new sofa and recliner to match their color scheme for use when their guests arrive over the weekend.

The Freedom plant operates on a “one piece flow.” The worker, above, is assembling a sofa frame for this step in the process.

Other companies (even very small ones) in Australia are beginning to realize that lower costs and shorter lead times are essential for survival and are embracing lean manufacturing and continuous improvement as a means to that end. For example, a kitchen cabinet manufacturer, a store fixture company and an OEM panel supplier have decided that small lots of one are possible and therefore cut and process one SKU at a time. In addition, their CNC equipment becomes the center of a complete manufacturing cell, with sanding and assembly taking place during the machining cycle.

The key to competing in a given market today is to have good value for your products and to provide superior service throughout the distribution channel. This means high quality products that are priced with good value and available from the factory in extraordinarily short lead times.

Woodworking companies of all kinds are quite capable of adopting these principles. In fact, any company or economic development entity in the United States would do well to learn from some of our friends down under.

Part one of the series is available here.