FURNITURE/CABINET MAKING/JOINERY INDUSTRY FORUM 9 th APRIL, 2014

1. FURNITURE/CABINET MAKING/JOINERYINDUSTRY FORUM 9th APRIL, 2014 FCJ IndustryTHE WAY FORWARD Presented by: Ron Scott

2. FCJ Industry Alliance TODAY’S NEWS Slow growth Pressure on anti-dumping policies Poor skills in manufacturing Trade deals - CHALLENGE – big picture v small businesses

3. FCJ Industry Alliance Moving Forward, Not reacting in an uncertain world

4. FCJ Industry Understanding the past, But planning for the future with a knowledge of the future Understanding how people will live, Demographic trends and housing styles

5. FCJ Industry Before looking at the future, let’s look at how FCJ started. Set up by a group of like minded and visionary associations, all recognised the importance of collaboration and speaking with “one voice”

6. FCJ Industry The following is an abbreviated presentation delivered at the inaugral meeting of interested associations and other interested bodies in February 2011

7. FCJ Industry Although the statistics primarily reflect on the furniture industry, this is only due to the fact of the initial founding bodies being the FIAA and AWISA. As other major bodies such as AWA, CMDA and ASOFIA became major participants, the overall numbers became even greater.

8. FURNITURE/CABINET MAKING/JOINERYINDUSTRY CONFERENCE 2011 FCJ IndustryTHE WAY FORWARD Presented by: Ron Scott

9. Industry Value by Sector (In final prices to end users) NOTE: Value estimates inclusive of domestic manufacturing costs and margins, imports, distribution costs, government taxes and duties and profit margins at all distribution chain levels. KEY POINT: The combined industry is immense and a vital component of the Australian economy.

10. The Australian Furniture & Related Industries The furniture, cabinet making and joinery industries are closely linked. Closely related industries - such as window and door manufacturing - face identical issues and challenges At present no forum exists representative of the common interest

11. Furniture Industry Employment Estimate by Trade Basis: ABS 2006 Census of population & housing KEY POINTS: The furniture manufacturing industry is a major manufacturing employer. Direct manufacturing alone accounts for an estimated 100,000 jobs. Thousands of other jobs in upstream and downstream industries are directly or indirectly dependent on furniture manufacturing .

12. Industry Manufacturing Revenue & Employment Comparisons Source: IBISWorld 2009/10 industry reports Note: ‘TCF’ is comprised of 10 different industries. In speaking with ‘one voice’ considerable government support has successfully been secured

13. The Australian Furniture Industry KEY POINT: Combined sector manufacturing revenue has weakened considerably since the GFC. Imports - the overriding impediment to future growth.

14. Australian production share of domestic free standing furniture retail turnover since the reduction of tariff rates KEY POINT: The sharp decline of Australian production share of the retail furniture market has fallen below 50% since the reduction of import tariffs and the rise of China as a manufacturing powerhouse.

15. China’s imports share of core industry classes KEY POINT:China’s imports share of core industry classes grows exponentially regardless of market and economic conditions.

16. Asian imports - the dominant current and future industry threat Imports from China loom as the overwhelming threat to survival of remaining local manufacturing base most at risk

17. Why China imports continue to grow Enormous advantages of scale Improving product quality and design Improving IT based supply management systems Low cost of labour Low taxes/high level government subsidies and support Purchasing power of popular Australian hardwoods limiting domestic manufacturers supply Appreciating $AUD = cheaper imports Artificially undervalued Chinese Yuan

18. Why Australian manufacturers struggle to compete Disadvantages of scale High labour costs High taxes/ low tariffs/ minimal government support Inefficient supply chain management Low profile brands Concentration of retailers squeezing manufacturers margins Appreciating $AUD = cheaper imports/less competitive exports Lack of uniform labelling legislation blurs distinction between imports & local products at point of purchase

19. The way forward A.D.A.P.T Accept that Chinese imports are here to stay Accept that direct price competition with imports will not succeed Accept that lateral strategies and smarter business practices are urgent and essential!

20. The way forward A.D.A.P.T Develop a prestige, premium quality image for Australian furniture Develop clear consumer preferences for Australian made furniture based on style, design, choice, innovation, service and reliability .

21. The way forward A.D.A.P.T ADOPT a business model based on voluntary manufacturing consolidation and rationalisation. ADOPT a more pragmatic pro-active approach in the selective use of imported components in manufacturing when ‘best practice’ own manufacture costs are uncompetitive.

22. The way forward A.D.A.P.T PROMOTE the benefits to consumers of buying Australian made furniture PROMOTE the benefits to retailers of supporting local suppliers PROMOTE the benefits to government of a viable manufacturing industry for the preservation and creation of Australian jobs

23. The way forward A.D.A.P.T TRAIN manufacturers in acquiring skills in manufacturing, supply chain management, design and marketing (with government support). TRAIN manufacturers in the benefits of a business model based on voluntary manufacturing rationalisation and pooling of assets with an end goal of fewer but more efficiently managed and more specialised enterprises

24. The way forward THE FIRST STEP The need to ADAPT is clear and time is of the essence To merely begin the process - the ‘industry’ must first engage with Government This will not occur until all parts of the ‘Furniture/Cabinet Making/Joinery’ industry can speak with ONE VOICE Achieving this aim is by definition the first, most urgent and overriding priority

25. Australian Furniture Industry KEY WORDS ADAPT COLLABORATION COMMUNITY CONNECTION

26. Australian Furniture Industry CHANGES TO INDUSTRY – ADAPT ALL PARTICIPANTS NEED TO CHANGE, TO ADAPT TO EMBRACE DESIGN, PROJECT MANAGERS and LOGISTIC EXPERTS, NOT MERELY MANUFACTURERS

27. FCJ Industry Alliance Formed February, 2011 Achived first goal with major collaborative parties FIAA, AWISA, AFA, AWA CMDA and ASOFIA

28. FCJ Industry Alliance 4 INDUSTRY REFERENCE GROUPS Design and Innovation Skills and Training Regulations and compliance Supply Chain

29. FCJ Industry Alliance Collaborative but shared responsibilities Some need government involvement Others are needing industry leadership

30. FCJ Industry Alliance Holistic Approach Needs commitment and action on all fronts, not picking areas of comfort or interest

31. FCJ Industry Alliance Changing economic environment GFC – effect still with us Internet age – buying habits change No foreseeable growth in economy

32. FCJ Industry Alliance Changing economic environment Baby boomers still dominate spending BUT spend less on “things” Bigger spend on services

33. FCJ Industry Alliance Changing economic environment Ageing population – more $ spent on health and aged care Younger generation staying at home longer Baby boomers look to downsizing

34. FCJ Industry Alliance STRATEGIC OVERVIEW