On 29 of May 2020, a strategic session on the creation of a furniture cluster in Rivne region was held in Rivne. The day before, at the 179th meeting of the Board of the Ukrainian Furniture Association, it was decided to hold meetings with government officials and donor organizations to cluster the regions of Ukraine to increase the competitiveness of the industry in a favourable synergy environment.
Initiators and participants of the strategic session
Representatives of the furniture and woodworking industry of Ukraine, as well as representatives of the Rivne Regional State Administration, gathered in the premises of the Rivne House of Scientists to discuss common tasks and prospects for the development of the industrial sector cluster. The participants of the meeting were the owners and business managers of Rivne region and adjacent regions, in particular: Kronospan Ukraine, Swisspan, Ескада-М, Топ-Арт, Родинне дерево, МебельОК, 100% Інтер’єр, Радо, Гарант-Експорт, Модерн-Експо, Adler, Blum, Smart-People and others.
“The furniture cluster is one of the segments of the technological hub that we are creating in Rivne region, ” said Vitaliy Koval, Head of the Rivne Regional State Administration.
The moderator of the meeting was Vitaliy Ivakhov – Member of the Board of the Ukrainian Association of Furniture Manufacturers, owner of furniture production “100% Interior”, teacher of the School of Furniture Business Management.
Development of a furniture cluster roadmap
Using the method of design thinking, at the first stage of strategy development, the participants of the meeting voiced a list of obstacles and challenges that hinder the development of the industry and brand Furniture of Ukraine. Among the most important were the following issues, which can be divided into blocks.
And the policy:
- lack of marketing research;
- opacity, the uncertainty of the future, lack of strategy;
- Lack of a single platform with transparent and clear information about market participants and products.
- low competence of market participants in promoting their own products;
- lack of an export agency;
- lack of furniture logistics with affordable tariffs and quality service;
- lack of loyalty to the Ukrainian product;
- lack of large system furniture retailers in the domestic market;
- use of dumping as the main tool in the fight against a competitor.
- lack of narrow specialization of producers;
- uncertainty of the product matrix.
Procurement and supply:
- state regulation of the timber market;
- lack of independent wood examination;
- inaccessibility of Ukrainian wood to small and medium enterprises;
- grey import of fabrics;
- low productivity of furniture makers;
- lack of quality outsourcing;
- low financial literacy and inability to keep track of production costs.
Finance and taxes:
- high local land tax;
- lack of available credit funds;
- bad investment climate.
- the unpopularity of the furniture profession among young people;
- inconsistency of training programs of specialized educational institutions with the needs and requirements of the market;
- lack of short-term courses for operational training.
- the long and expensive process of connection to electricity and gas networks;
- the complex system of obtaining permits;
- low quality of roads;
- lack of infrastructure for the utilization of industrial waste of furniture production.
Each point of the obstacle map requires a joint effort of business and government.
Expected results of cluster startup
Clustering is an effective and proven tool for decades in Italy, Poland, China and other countries. The Ukrainian Association of Furniture Manufacturers plans that the launch of the furniture cluster will provide the following results:
1) reduction of logistics and production costs;
2) reducing the cost of production and increasing the competitiveness of Furniture of Ukraine at the international level;
3) increase in exports;
4) efficient use of production capacity;
5) concentration of furniture production in one region;
6) increasing the attractiveness of the furniture industry of Ukraine for traders and foreign investors;
7) growth in the number of jobs;
8) increasing the efficiency of sectoral education;
9) development of the subject design of Ukraine.
“The cluster is a self-regulating system where participants spend energy on cooperation, not on fighting with each other, ” – once again stressed the President of the Ukrainian Association of Furniture Manufacturers Volodymyr Patis.