Attitudes and investment challenges trouble Romanian furniture manufacturers - EU-funded programs might remedy both?
The furniture industry is by excellence a traditional industry. The largest part of the Romanian furniture sector is made up of small and medium-sized enterprises (SMEs) and Mid-Caps that process solid wood to produce furniture. Although it has a lower degree of specialization in product manufacturing, Romanian furniture sector faces similar challenges as the EU furniture industry in general.
It is no secret that the furniture industry across Europe has faced big challenges for the last 20 years, mainly due to skilled ageing workforce and the lack of attractiveness of this sector amongst younger population.
Financial challenges hinder new investments
The large imports of cheap furniture from other markets is also heavily challenging the EU furniture industry. Together with the constant pressure of high prices of utilities and raw materials, these constantly erodes the (relative) competitiveness of the furniture manufacturing industry across Europe. In essence, the challenges of the Romanian furniture industry are mainly structural and financial in nature, too.
In 2018 there was a profit margin shrinkage among furniture companies in Romania which resulted in an average profit margin of 5% as a result of increased wood price and a higher minimum wage (national economy-wide level, which is legally established).
Another impediment to investment for the furniture sector is the price of loans. The real interest – and by this I mean the numerous and consequentially burdensome bank charges, fees and commissions (apparent or hidden) – could reach to as much as 8-9%. Percentage most Romanian furniture SMEs consider too high.
Next generation of furniture workers?
On the other hand, the biggest challenge is the ageing workforce and low relative competitiveness in terms of salaries compared to e.g. automotive or technology sectors. Attitudes play a big part in attracting next generation of workers to the furniture sector, which is considered too traditional and “uncool” place to work for among young people at the moment.
In Romania, the EU-funded acceleration programs are still relatively new concepts for companies. The need for investments, business mentorship and other services exists and these EU-funded programs are the way to assimilate the rapid development of technologies and help to improve competitiveness. SMEs would be able to optimize and update their traditional processes with new technologies. A transition APMR’s member companies know they need to take, but cannot afford.
The furniture industry has not yet caught up with the potential of digitalisation. To do so, innovation is needed and here is where the immense potential for all traditional industries resides. Accelerator programs like L4MS not only provide technological expertise but also funding that makes the investment less risky for manufacturing SMEs.
Acceleration programs are also a way to attract young people, because of the transfer of new advanced manufacturing technologies and process optimisation. This will also help create new, high-tech and knowledge-intensive jobs that are attractive for the next generation of professionals. What better way for traditional industries to take the ‘digital leap’?