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Mississippi furniture manufacturers becoming more competitive through e-commerce

Point, click, couch

TUPELO — While most people might not think of buying a couch or kitchen table by shopping through the Internet, e-commerce buying is increasing steadily. Mississippi furniture manufacturers are getting a boost, becoming more competitive through electronic commerce with a program sponsored by Tennessee Valley Authority (TVA).

“Even with all the growth and success of the furniture industry in Mississippi, it remains an industry that has the potential to be substantially more competitive, and e-commerce may just provide that competitive edge,” said Mike Carter, an employee of Taratec Corp. who is project manager for the Mississippi e-commerce initiative for furniture manufacturers. Taratec Corp. is a marketing consulting company that helps bring new technology to the marketplace.

Seven regional furniture manufacturing companies have formed a Center Advisory Council to outline the goals and strategy of the e-commerce initiative. The first meeting of the Center Advisory Council was held in Tupelo March 8. Carter said the meeting defined the services to launch small- to medium-sized furniture manufacturers in Mississippi into developing new business strategies based on the explosive growth and influence of electronic commerce.

“We defined what the services of the center would be, and how that would meet their needs and solve some of their problems,” Carter said.

Services include core services technology assessment evaluating all the offerings for e-commerce that are available, determining if they work, and if they are appropriate for the small- and medium-sized businesses that are primarily targeted by the program.

The second service need identified is education and training. Carter said one thing that came out of the meeting is that people in the furniture manufacturing business all know each other, but haven’t had the opportunity in the past to get together to work on common issues. An organization like the American Furniture Manufacturers Association (AFMA) might provide those kinds of opportunities through workshops and conventions, but only 3% to 6% of Mississippi furniture manufacturers — primarily the largest manufacturers — belong to that organization.

The third service needed is technology demonstration to show industry the technology that is in use to decrease the risk of getting involved in e-commerce. Showing how other businesses have overcome problems can be helpful to companies just starting an e-commerce program.

The fourth service is technology consulting, helping individual companies on a proprietary level, meeting their needs in a specific way.

This initiative, known as the TVA Center for International Furniture Industry Competitiveness, plans to address the following opportunities in the Mississippi furniture industry:

• How to raise the productivity and value of the Mississippi furniture industry so it can support higher wage jobs. Average production worker hourly wages for Mississippi furniture workers are 30% lower than that for workers manufacturing motor vehicles and parts. Productivity in furniture manufacturing is the lowest of all manufacturing segments in Mississippi.

• Enrich and expand the supplier network within Mississippi. There are not enough suppliers in Mississippi to adequately support the large dollar amounts of spending for raw materials by upholstered furniture manufacturers (fabric and fillings).

• Expand the Mississippi export market for furniture. The furniture industry in Mississippi could improve exports. Only 4.5% of total exports come from the furniture industry which employs over 15% of manufacturing workers.

• Increase the business volume and associated growth in employment and income of the Mississippi furniture industry. The Bureau of Labor Statistics forecast to 2006 of growth in upholstered furniture jobs is only slightly more than the average of all job growth in Mississippi. Job growth in casegoods and metalworking in Mississippi is forecast to be from two to three times the average job growth.

A key aspect of e-commerce is extranets: private electronic environments that use the public Internet to interact with customers and suppliers. Online retailing and extranets are open 24 hours a day, seven days a week for 365 days per year. The growth in purchasing products and raw materials online has been explosive.

Roughly 20% of Americans age 14 and older have experienced online buying and that figure is forecast to increase to 30% in two years. In the US, business-to-consumer (B2C) online shopping revenues will rise from $8 billion for the year-end 1998 to $80.5 billion by 2003.

Business-to-business (B2B) e-commerce revenues are many times larger than B2C revenues. The percentage of corporate buyers using the Internet to do their job increased from 45% in 1997 to 73% in 1998 according to a survey by Purchasing magazine. One-third of corporate buyers are now making purchases online. In the first half of 1999, more than $250 million were committed by venture capital firms to home furnishings e-commerce retailers. Online home furnishings sales topped $319 million in 1999 and may go as high as $3.5 billion by 2003, according to Forrester Research. In September 1999, 772,000 unique visitors stopped by furniture.com, one of the larger furniture sites online. The Mississippi furniture industry can achieve dramatic productivity improvements through traditional applications of technology (bar coding, robotics, etc.) when a driving force for change is in place.

E-commerce may lead to changes in the manufacturing of furniture such as shortened lead times, changes in product standards and supply chain management and design for manufacturability and shipping (frameless and knock-down design). E-commerce may act as a “technology pull” to raise the competitive level of manufacturers networked with their suppliers, traditional customers or e-commerce retail sales engines. Furniture manufacturers that are able to supply the e-commerce future may also be positioning themselves to competitively conduct export business and to enter new markets such as upholstered seating for motor vehicles, trains and airplanes.

Contact MBJ staff writer Becky Gillette at mullein@datasync.com or (228) 872-3457.

About Becky Gillette

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