Manufacturing Strategy and Improvement Activities of Sri Lankan Furniture Manufacturers

Furniture industry is a significant industry in the manufacturing sector in Sri Lanka based on the number of employees. This paper studies the manufacturing strategy of Sri Lankan furniture industry. A questionnaire survey was carried out among the key players of the industry to investigate the manufacturing strategy and improvement activities. Cluster analysis is used to identify the strategic manufacturing groups based on their competitive priorities and three strategic groups were formed. Top competitive priorities of the Sri Lankan furniture manufacturers were identified as low price, conformance quality and product performance. Performance improvement activities under three major categories namely advanced manufacturing technologies, integrated information systems and advanced management systems were investigated. Manufacturing strategy stages of the furniture manufacturers were studied based on the Hayes and Wheelwright model and it is found out that majority of the companies have the characteristics of stage II of the model.


Introduction
The furniture Industry is a basic industry in most of the industrialized countries, representing in general between 2 and 4% of the production value of the manufacturing sector [1], It was the largest traditional, lowtech sector in the world during 1994-98 period exceeding the value of export trade in the apparel industry and the footwear industry [2]. Traditional furniture making countries take up over 70% of the global market. Meanwhile, developing countries and regions like China, Southeast Asia, Poland and Mexico, with China taking the lead, have built upon their respective competitive advantages and gradually have covered almost 30% of the world market. The furniture industry in such countries is developing strongly and showing great potentials. The European Union furniture industry accounts for about half of the world's furniture production. The production value of this industry in this region is around € 82 billion. Considered to be a labor-intensive industry it provides employment for around 1 million people in Europe. Among the European countries, Germany takes the lead as the largest furniture producing country, accounting for about 27% of total EU production. This is followed by Italy (21.6%), France (13.5%) and the UK (10.4%) [3].
With more than 50,000 furniture manufacturers employing 5 million workers, the Chinese furniture industry has increased exports by 335 percent from 1994 to 2001, replacing Italy as the world's largest furniture exporting country. China's furniture exports to the U.S. have grown at an average annual rate of more than 35 percent [4], According to a recent estimate, the Indian furniture industry is estimated at around Rs. 350 billion. Eighty-five per cent of this falls into the unorganized sector. According to a study by the World Bank, the organized furniture industry is expected to grow by 20 per cent a year and India, Brazil and Russia will witness a boom [3], Even though Sri Lankan furniture industry does not own a significant portion in the world market compare to the above giants, it is a significant industry in the manufacturing sector in Sri Lanka. Based on the number of employees it ranks to third place with 13.62 percent employees in the small industries and ranks fourth place with 4.70 percent employees in the medium and large industries [5]. According to the figures of Department of Census and Statistics, Sri Lanka, total value of output in wood and furniture industry is Rs. 1.719 billion with a value addition of Rs. 984 million in the year 2000.
foreign markets areUK, USA, India, Maldives, Saudi Arabia, France and Germany.
The furniture manufactured in Sri Lanka includes household furniture (bedroom & living room, kitchen furniture, garden furni ture), office furniture (computer tables, office tables, etc.) commercial and institutional furni ture (furniture for hotels and schools, hospitals, etc.) Furniture in knockdown form/built in furniture is also exported according to buyer specifications. Sri Lanka is competent in producing such items to the high end of the market.
Sri Lankan furniture industry is under increas ing pressure due to globalization, changing customer choice and sophisticated markets. The market for the furniture is becoming increasingly international. Cheaper imports increase the competition in local market. The manufacturers have to meet several competi tive priorities simultaneously.
The new competitive priorities are in terms of reduced cost, higher quality, wider range of product, shorter delivery time and better service. Even though Sri Lankan furniture manufactures cater to the international market, most of the firms are still very far from world class manu facturing practices. With the high intensive global competition, it is imperative for Sri Lankan furniture manufacturers to boost their performance through strategically planned improvement programmes. Manufacturing managers should understand the strengths and weaknesses of the present practices of the industry. In this context, it is vital to study the strategic formation of Sri Lankan furniture manufacturers and improvement activities.
The research described here has following objectives: • To identify the strategic groups of key players of Sri Lankan furniture industry. • To identify the improvement activities of various strategic groups. • To analyze the stages of manufacturing strategy.
This paper is organized as the follows: Section 2 deals with the literature on manufacturing strategy. Research methodology for survey is discussed in section 3. Findings are presented in section 4.

Manufacturing Strategy
Importance of the manufacturing strategy for competitiveness was first discussed by Skiner [6]. Since his landmark paper, a number of researchers have pointed out the manufacturing function as the missing link in corporate strategic process and emphasized that manufacturing can be a competitive weapon if managed properly [8,9,10].
Various researchers [6,8,10] identified expecta tion on attributes such as cost, quality, delivery dependability, delivery speed, flexibility and innovation which are popularly termed as competitive priorities or manufacturing perfor mance objectives. Noori and Radford [11] intro duced service as another dimension to competi tive priorities. Skinner [6] indicated that perfor mance objectives could not be achieved simulta neously and there should be trade-offs between them. The interaction between objectives in the form of trade-offs has, however, become a debat able issue. In 1969 Skinner believed that it is impossible for manufacturing companies to make a wide range of high quality and low cost products quickly [6]. Wheelwright [12] challenged this assumption, having noted that many Japanese managers seek to improve qual ity and reduce costs simultaneously. De Meyer et al. [13] pointed out that Japanese managers over come trade-offs by attacking quality, time, cost and flexibility sequentially. Slack [14] included the time dimension into the debate and argued that while no manufacturer can double its prod uct range tomorrow without increasing cost. This may well be possible over a longer period. This connects with the continuous improvement philosophy [15].
Researchers on manufacturing strategy have identified set of companies following similar or generic manufacturing strategies. Following are some important studies.
• Based on 100 case studies Stobaugh and Telesio [16] identified three groups of international manufacturing strategy -cost based, technology based and market driven. • Miller and Roth [9] [18] identified four strategic groups of Indian automobile manufacturers based on the competitive priorities and improvement activities. They named these groups as reactive enterprises, neutral enterprises, active enterprises and proactive enterprises.
Hayes and Wheelwright [7] pointed out that there are different stages in implementing manufacturing strategy and developed "Four-stage model" to evaluate the competi tive role and contribution of manufacturing function of any type of company. Stage I organizations react blindly to the demands placed on them and manufacturing function is considered as a necessary evil. In these organi zations, strategic role of manufacturing is to minimize the negative impact of the manu facturing function. Stage II organizations are in par with their competitors and follow the industry best practices. In the stages III and IV companies, manufacturing strategy is directly linked with the business strategy. In stage IV organizations manufacturing func tion provides source competitive advan tage through its capabilities and drives the business strategy whereas manufacturing strategy of stage III organizations is developed to support business strategy. Stage IV organizations are proactive and they follow the world class practices. Based on the litera ture, Mills et al. [19] have reported that the most common target in the research studies has been stage III. But they pointed out that growing interest in the learning organiza tion, core competences and capabilities compe tition may provoke more interest in stage IV.
Performance improvement programmes are another area which has gained the attention of manufacturing strategy researchers. Ferdows and De Meyer [20] identified set of improvement activities related to performance objectives. Miller

Research Methodology
Since this research is exploratory in nature, the survey methodology is used in this study and focus of the study is cross-sectional. The objective is to understand the present strategy and improvement activities through the survey.

Sample selection
The companies selected for data collection are solely engaged in manufacturing of furniture for local and foreign markets as well as interior decorators supplying custom made furniture. The target firms were selected from the following sources: Directory of ICTAD and Sri Lanka Telecom Business Directory. In these directories, there is large number of small players whose individual contribution is very less for the furniture industry. In order to limit the study to the key players, only the companies which exceed a turnover more than 2.5 million rupees per month were included. Then final population consists of 60 key players of Sri Lankan furniture industry. A randomsample of 40 companies out of these 60 key players was selected to send the questionnaire.

Design of questionnaire and data collection
Astructured questionnaire was developed on five-point Likert scale for data collection. Thequestionnaire contained three sections. Section 1 contained questions to study the com petitive priorities of the companies. Eleven com petitive priorities were identified based on the literature [6,8,9,10]: low price, confor mance quality, product performance, de livery speed, dependable delivery product customization, broad distribution, broad line, after sales service, design flexibility, volume flexibility. Respondent were asked to rate the importance attributed to each of these competitive priorities. These responses were used to identify the different strategic groups in the Sri Lankan furniture industry.
Questions in section 2 were designed to obtain information on the activities of improvements. Based on the literature [9,18,23,24] 22 activities relevant to Sri Lankan furniture manufacturers were identified. These activities were classified into three categories: advanced f manufacturing technologies (AMT), integrated information system (IIS), and advanced management systems (AMS). Table 1 shows the activities of improvement included in the study. Respondents were asked to indicate degree of implementation of these activities in their companies on five point Likert scale (1no implementation, 5 -high degree of implementation) Section 3 of questionnaire devoted to identify the manufacturing strategy stage of the organizations based on Hayes and Wheelwright [7] model. Phrases used in the original text of Hayes and Wheelwright [8] and questionnaire developed by Barnes and Rowbotham [25] were used in developing the carefully screened so that questions would be understood in organizations of all kind. Twenty questions were included in the question naire. Each question was designed to test par ticular stage of the Hayes and Wheel wright model. The questions reflect the charac teristics given in Table 4 in the section 4.
Respondents were asked to indicate their degree of agreement for the attributes present in their companies on five point Likert scale (1strongly disagree, 5 -strongly agree). After refining through a pilot study, the questionnaire was sent to manufacturing managers of forty manufacturing firms. Total of 32 filled questionnaires were received for the analysis which resulted in a response rate of 80%.
questionnaire. Language of questions was

Observation and Results
The discussion of the results is divided into three sections. The first section classifies respondent companies into strategic groups based on the competitive priorities. Importance of improvement activities of each group is identified in the section 2. The section 3 is devoted to study stages of manufacturing strategy according to Hayes and Wheelwright's model.

Strategic groups based on com petitive priorities
Cluster analysis is used to identify the strategic groups of respondent companies based on the competitive priorities. In categorizing the strategic groups this study used eleven competitive priorities. Respondents had indicated degree of importance of these competitive priorities on a five point Likert scale. SPSS quick cluster procedure, K-mean algorithm for non-hierarchical clustering is used to form different strategic groups. In nonhierarchical cluster analysis, number of clusters is known, a priori. To determine the final number of clusters, managerial interpretability of clusters was sought on the defining variable using ANOVA and the Scheffe pair wise comparison tests of mean differences [26]. The three cluster models best satisfied these criteria. Three resultant manufacturing strategic groups are described in Table 2 in terms of their mean scores and their relative ranking in the set of 11 competitive priorities.

Cluster 1
Majority of the respondents falls into cluster 1. This group is similar to the "caretakers" identified by Miller and Roth [9], These manufacturers rank low price as their first emphasis, while conformance quality and product performance come to 2nd and 3rd places respectively. However, price is not significantly different in importance among the groups. According to the results in Table 2, the companies in cluster 1 give more importance to price and product related competitive priorities such as conformance and performance while given less market related factors such as advertising and broad distribution. It can be seen that importance given to most of the competitive priorities (including top priorities) by duster 1 is low compare to the degree of importance given by the other two clusters. However their low relative emphasis on the competitive priorities shows that these companies seek the minimum standards for competition and try to just survive in the market place. Less emphasis given for broader product lines and product customization indicated these companies try to offer standard narrow product line and hence to achieve cost efficiency.

Cluster 2
The competitive priorities of this cluster indicate that this cluster can be named as the "m arketeers" defined by Miller and Roth [9], The companies in cluster 2 differ themselves from other groups on several key market oriented competitive capabilities. They seek to obtain broad line and broad distribution as their 1st and 3rd ranks, while they are significantly conscious about the low price and volume flexibility which are both ranked in 2nd places on the priority list. Relative importance given for many of the competitive priorities by duster 2 is higher than that by cluster 1. This implies that this cluster is keen to be competitive in the market place. The results shows that variety needs of the customers are mainly satisfied through broader product lines and product customization is given less priority.

Cluster 3
The most important competitive priority of this cluster is conformance quality. Both product performance and delivery speed rank to the 2nd place in the importance of competitive priorities. Importance given to price is comparatively low and it ranks to the 8th place. These results show that the companies in this cluster follow more product oriented approach in competing in the market place. Compare to other two clusters, this cluster provides much emphasis on delivery speed and after-sales services. Product customization and design flexibility are given less priority and both rank 6th place. These two are key competitive priorities for the innovators. Even though the clusters 1 and 2 match with taxonomy of Miller and Roth [9], the cluster 3 does not match with this taxonomy where they named 3rd cluster as the "innovators". The key priorities in this cluster are mainly towards product performance and conformance and hence this cluster is in line with the m anufacturing group identified by De Meyer et al. [13] where they named the manufacturing group w ith these key competitive priorities as "h ig h performance product group". This group tries to differentiate their products through high performance and hence this group is named as "D ifferentiators" in this study. Table 2 indicates that industry overall figures rank low price, conformance quality and product performance as the major competitive priorities. Apart from these competitive priorities, industry overall shows low degree of importance for the other priorities. This is a clear sign of the existence of a majority of manufacturers whose main focus being survival in the industry.

Activities of Improvement
Degree of implementation of 22 improvement activities in sample companies was obtained through the questionnaire survey. Respon dents have indicated degree of implementation of these activities in their companies on five point Likert scale (1 -no implementation, 5high degree of implementation). Table 3 shows mean and standard error of improvement activities for each cluster.
There is no much significant difference in activities of improvement for different clusters. Effort for using CAD is reasonably high in all the clusters compare to other types of advanced manufacturing technologies. Apart from CAD, the companies in clusters 2 and 3 have given the emphasis in using high tech machines in their manufacturing process, but industry overall for high tech machines is at a lower level. However there is no significant invest ment for the other advanced manufacturing technologies. It is noticeable that integrated information system implementation is at fairly low level in the Sri Lankan furniture industry. Customer relationship maintenance ranks as the second important activity of improvement and all the groups have given emphasis to improve customer relationship. This implies that the companies in the furniture industry have given much importance due to the huge competition in the industry. In the furniture companies in the clusters 2 and 3, there are some efforts for employee related improve ments such as workforce involvement, employee empowerment and labour/ manage ment relationship.

ENGINEER
l i In terms of advanced management system related programmes, the companies in cluster 1 give very little or no emphasis for improvement activities except benchmarking. The cluster 1 is the weakest group in the furniture industry and probably they are trying to benchmark the best practice companies in the industry. In the cluster 3 practices of TQM and statistical process control are at a higher level compared, to the other two groups. This demonstrates effort made by cluster 3 for conformance quality, which is their number one competitive priority. It is further noted that in the companies of cluster 3, emphasis given for reducing manufacturing lead time is comparatively high and it shows the dedication for meeting their second important competitive priority "delivery speed". The improvement activities such as business process reengineering, recycling and zero defects have not yet grabbed the attention of furniture industry. Attributes of various manufacturing strategy stages I -IV, given by Hayes and Wheelwright [8] and degree of agreement of the respondents for these attributes present in their companies are given in Table 4 (1strongly disagree, 5 -strongly agree). It is observed from the Table 4 that the mean is highest for stage II, which depicts that majority of the companies of Sri Lankan furniture industry follow the industry practices and in par with the competitors. However, mean rating for the stage III is not much different from that of stage II. This is indicates that there are reasonable number of companies which try to link manufacturing strategy with their business strategy.

Conclusion
This research identifies three strategic groups of Sri Lankan furniture manufacturers based on 10 competitive priorities. The taxonomy devel oped in this study has much in common with that of Miller & Roth [10]. Their "caretakers" and "marketeers" match with the clusters 1 and 2 respectively but "innovators" does not match with cluster 3. In the formation of strategic groups it is not possible to identify a group with innovative characteristics. This shows the lack of innovativeness of the Sri Lankan furni ture companies. The majority of the companies consider the low price as the dominant competitive priority. Many competitive priori ties other than price, product performance and conformance are given lower importance even below the moderate level.
The cluster 1, "caretakers" does not give much importance to improvement activities. The clusters 2 and 3 (marketeers and differentia tors) pay much attention for the improvement activities compared to the cluster 1. In both groups CAD and high-tech machines have become the priorities in implementing advanced manufacturing technologies. Apart from CAD and high-tech machines, implemen tation of other advanced manufacturing technologies is at a very low level. Use of integrated information systems is at a very low level in the furniture industry in spite of much popularity of ERP in Sri Lankan manufacturing sector. Lack of interest on advanced manufac turing technologies and integrated information system may be due to the fact that still the furniture industry is considered as a low-tech traditional industry in spite of immense compe tition. Advanced management systems have not gained much attention for improving performance. Except customer relationship maintenance and employee empowerment, other improvement activities show very low importance in the furniture industry.
In implementing manufacturing strategy it reveals that many organizations fall to stage II of Hayes & Wheelwright's model. This indicates that majority of organizations attempt to be in par with the industry practices. How ever, many organizations have certain charac teristics of stage III of Hayes and Wheelwright model. This situation indicates that companies in the Sri Lankan furniture industry should work hard to follow strategies of stage IV in order to achieve leader status and to face global competition.
In formulating manufacturing strategy Sri Lankan furniture manufacturers should follow more proactive approach in order to face global competition. They have to go beyond prelimi nary competitive priorities such as price and conformance and should come up with more market oriented competitive priorities. Manu facturing managers and engineers should plan their improvement activities to meet these priorities through manufacturing and related operations. The furniture manufacturers should understand the importance of advanced manu facturing technologies for improving the performance and should consider the possibili ties in implementing technologies beyond CAD. In searching the avenues for enhancing the competitiveness, the companies in the Sri Lankan furniture industry should not overlook the role of integrated information systems and management oriented improvement programmes.