BUSINESS EXPANSION

Business Expansion

Executive Summary

Malaysia is rapidly emerging as a new center of economic growth in South-east Asia. Foreign investors seek business opportunities in both the domestic market of over 80 million potential consumers, and in low cost production sites. North American and European investors are in particular eyeing the domestic markets while investors from neighboring countries such as Taiwan are developing Malaysia as an export platform. Malaysia's young population - 95% are younger than 65 - is eager to explore Western consumer goods, and present a huge potential market for foreign investors. The rapid economic growth of the 1990's, on average 7.3% annually, is expected to continue, suggesting an even larger market in the future (Statistics Publishing House, 2004). International integration, notably the membership in the ASEAN Free Trade Area (AFTA), and the anticipated membership in the WTO facilitate access to this attractive market. At the same time, Malaysia is emerging as a major export platform. The country is gaining competitive advantages for labor-intensive production processes on the basis of low general wage levels. Productivity of the workforce is high as Malaysians employees have a reputation for being hard working and ambitious. On this basis, Malaysia has build major export-oriented operations based on labor-intensive manufacturing, notably in the garment, footwear and furniture industries.

The relationship between supply chain/operations practice and operational/financial performance has been of interest to academics and practitioners for many years. We propose and develop a model exploring these connections, utilising data from a survey of manufacturers located throughout Malaysia.

Table of Contents

Executive Summary2

Introduction6

Structure of Malaysian Furniture Industry6

The Furniture Industry in Malaysia8

Furniture Manufacturing in Malaysia11

Production And Trade12

Plant Size And Location14

Supplier Relationships14

Distribution And Sales15

Relationship Between Practice And Performance In Operations And Supply Chain Management15

Furniture Supply Chain16

Business Units Of The Furniture Supply Chain19

Product Range21

Tactical Planning Problem22

Sawing Process24

Drying Process25

Transportation26

Advanced Manufacturing Systems (AMS)26

Factors which Effect the Operations27

The Supply and Demand Situation of Rubberwood28

Importation of Timber29

Imposition of Export Levy and Quota Rules30

Import Price Indexes31

Conclusion32

References and Bibliography34

Introduction

Trade in forest products has become increasingly global in recent years, with the number of countries exporting and importing various forest products growing. In addition the ownership of forests and processing plants, concession rights, and management contracts for such things as harvesting, are increasingly held by foreign companies. As a result the rules and conditions of forest management and trade are being set or influenced by foreign interests. Clear examples of this are the current efforts on criteria and indicators of sustainable forest management, global conventions on bio-diversity, and proposals for some type of global forest instrument, such as a forest convention. With this increasing globalisation has come a resurgence in interest in questions of market access and trade protectionism.

Structure of Malaysian Furniture Industry

In 1995, there were about 2,965 furniture plants III Malaysia, with 2,630 in Peninsular Malaysia, 120 in Sabah and 215 in Sarawak, as listed in Table 4. It is estimated that 70% were small scale plants such as workshops and backyard factories using low level production technology and catering to domestic markets (MTIB, ...