9
INTRODUCTION
The thesis project highlights the topic of visibility along the supply chain and its positive impact
on corporate performance. It is an ever-expanding topic, that requires continuous research and
analysis, in order to provide a clear explanation.
In the last few years, the production model used is proving to be inefficient under several
perspectives: slow data management, high-cost increases and ineffective communication
represent some of the main problems that companies face today. As a result, to solve these issues,
the use of technology, the optimization of the production process and the cooperation with supply
chain partners are recommended.
Moreover, the furniture industry is moving toward this path and is investing in innovative and
cutting-edge machinery, in order to remain competitive in the market.
The purpose of this paper is to analyze and evaluate, through a practical case study, how the
problem of the lack of visibility along the supply chain in the furniture industry is addressed and
solved. For this purpose, an in-depth analysis of the furniture sector and of the manufacturing
process, as well as a broad study of the concept of visibility along the supply chain and the
application of the business problem to a real company, were carried out.
The thesis project is divided as follows: the initial chapter introduces the furniture sector in Italy,
starting from its origins up to the global development, through a qualitative and quantitative
analysis of the sector.
The second chapter develops the visibility concept, in comparison with traceability and
transparency terms, and a broad description of lack of visibility on company performance and on
customer satisfaction, is provided.
Finally, in the third chapter, the practical case is illustrated, focusing on two companies operating
in the furniture industry, Battistella as a manufacturing company and Gugel as a transport
company. Both supply chains are examined to understand the whole furniture process, from the
raw material procurement to the final customer service. In addition, the business problem in the
Gugel firm is analyzed, as well as the company’s ability to promptly respond to this issue.
The thesis concludes with a critical analysis of the analyzed situation, the results obtained and the
potential managerial implications of this research for current and future companies.
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CHAPTER I. THE FURNITURE SECTOR
1.1 Market overview
The furniture sector is part of a manufacturing industry, which makes furniture,
designed and manufactured to support human activities, such as sitting, eating, working
and sleeping. This sector is made up of both the wood and furniture subsectors, which
can be further divided into different segments: the wood sector includes cutting and
treatment of plywood, laminated panels, elements for construction (floors, doors,
windows, stairs), wooden packaging, frames, toys, and other wooden products; the
furniture sector includes living and dining room furniture, bedroom furniture, kitchen
furniture, office furniture and appliances, like lighting, floor covering and other
materials
1
. In general, the leading segment is living room furniture, followed by bedroom
and kitchen furniture, and then home office, lighting and floorings in third place.
Focusing on the production, the process starts from the procurement of raw materials and
their transformation into finished products: nowadays, there are more than 50.000
companies active in the production, more than 40.000 suppliers of raw materials and
about 110.000 distributors worldwide
2
. Totally, the global turnover generated accounts
for over $ 246 billion in 2020, of which $ 79 billion was generated in Europe and the
remaining amount in USA and Asia
3
.
The current trends of this industry are focusing on the recovery from the pandemic period,
which has led to an economic recession in all countries, except China, which remains one
of those countries with a positive final result, albeit lower compared to other years
4
.
Another important driver of the sector relies on sustainability matters, leading firms to
redesign their corporate culture and identity from a sustainable point of view. In this
sense, companies have to reorganize their supply chain, in terms of production and
distribution: on the production side, more integration among players along the supply
chain is essential to operate efficiently and reach competitive advantage together.
1
Federlegno Arredo (2019). “La filiera Legno-Arredo italiana”, 1 – 65.
2
Orbis (2022). Retrieved June 4, 2022 from: https://orbis.bvdinfo.com/version-
202262/orbis/1/Companies/Search.
3
Ibidem.
4
FederMobili (2021). “Il settore del mobile post-Covid: le previsioni fino al 2023”. Retrieved on June 9,
2022 from https://magazine.federmobili.it/settore-mobile-post-covid-previsioni-2023/.
12
Benefits like effective relations management, greater production flexibility, precise cost
and time management represent the result of such integration. Furthermore, the incentives
for technological investments and export supporting actions represent the trends of the
sector in the near future, together with the creation of a unique supply chain, which
combine the strengths of all companies, creating greater value to the end user. On the
distribution side, however, furniture companies rely on both wholesalers and retailers,
according to the different destination of products. In the first case, producers sell products
to wholesalers, like big distributors and department stores, while in the second case,
products are directly sold to retailers and brick-and-mortar stores. In this sense, the use
of sustainable means of transport, as well as the greater proximity among warehouses,
makes the supply chain more sustainable.
Aside from these market trends, the main driver of this sector remains the customer,
whose needs and habits are continuously changing in order to live in a practical and
comfortable house: aspects like quality, functionality, price and materials used are of
primary importance; while, convenience, comfort, breadth of choice and style are of
secondary importance.
Given this initial assumption, these aspects are very important for the decision-making
process of each customer, especially regarding large furniture, like those for kitchens and
living rooms, in which consumers invest the most; while small furniture, lights and
household items are bought later on. In addition, consumers use many tools for rational
shopping, for example Internet, magazines and physical stores. They consult different
websites, like those of big distributors, of specific companies and social networks, in
order to be inspired and make a proper choice about where and what to buy. From here,
it is possible to differentiate many types of customers: on average, they are rational and
concrete, looking for the needed product at a reasonable price; although, impulsive and
inspired customers still exist, looking for the new piece of the collection, sometimes
expensive. Today’s customer is looking for flexible, multifunctional and elegant
furniture, together with quick delivery and easy payment.
This need was highly required during the Covid-19 Pandemic, when many consumers,
forced to stay at home, started to change their living and working space with new furniture
13
and appliances
5
. They had to get used with this new “life” and started to purchase desks,
comfortable chairs and useful tools to create a new environment. The majority of people
started to change their home spaces, creating small corners for work, exercise and relax,
purchasing multifunctional furniture to adapt their small spaces for many uses. Most of
consumers purchased furniture from online websites, moving this sector to e-commerce
and online sales. In general terms, this sector faced many difficulties in order to promote
and sell furniture on online platforms, because several requirements should be respected,
for example: a precise and clear platform to allow an easy navigation both on smartphone
and laptop; high-quality images with a detailed product description; goods division in
macro and micro categories, information about payment terms, with diversified options;
efficient and quick delivery terms and, finally, the constant customer assistance. After
this pandemic period, several furniture companies are currently moving to online sales,
maintaining also physical stores, in order to enlarge their offer to more customers. In this
sense, it is essential to invest in: omnichannel sales as DTC, or distributor to consumer,
social media, like Facebook, Instagram, Whatsapp, and customer service.
In addition, the current customer is more attentive to sustainability matters, regarding
both the procurement of raw materials and the production process
6
. Consumers tend to
purchase products made with natural materials, easy to find and produce, such as linen,
hemp, cork and wood or with sustainable materials, like those obtained from recycling,
recovery, or reuse, where waste turns to be raw materials for new objects. In this case,
FSC certification is generally provided in the product description, to certify the material
origin.
The production process is also of extreme importance: producing any object has always
a certain impact on the planet, and some companies try to reduce their carbon footprint,
promoting the low waste production, the reuse of materials or the use of renewable
energy. Furniture produced very quickly, through fast production, is generally of low
quality, since these companies focus on quantity goals, using poor quality materials,
5
A. P. Barc, M. K. Kuzman, T. Vergot,
P. Grošelj (2021). “Monitoring Consumer Purchasing Behavior
for Wood Furniture before and during the COVID-19 Pandemic”. Research Gate, 1 – 14.
6
Serena Uccello (2022). “I consumatori pretendono dalle aziende filiere green” – Il Sole 24Ore. Retrieved
April 11, 2022 from:
https://mydesk24.ilsole24ore.com/crui#/showdoc/37868471/consumatori%7Cmobili?ref=pullsearch.
14
harmful to humans and the environment. For this reason, environmentally conscious
consumers should purchase durable and easily repairable products, vintage or second
hand items, preferably from local and authentic suppliers
7
.
This brief introduction provided a general overview about both the producer and
consumer perspectives of the furniture market. In the next paragraphs, the furniture
market will be analyzed in detail, divided among Italian, European and World
dimensions.
1.1.1 In Italy
The furniture market is one of those sectors, that has always represented the
importance of Made in Italy worldwide. In the past, this sector was characterized by small
shops of professional craftsman, that, today, has been completely transformed into small
and medium companies expanding internationally, trying to export the taste and
experience of Made in Italy abroad
8
.
Furniture manufacturing only became a specialized craft activity relatively late: during
the Middle Ages, the carpenter used to make the few objects present in living spaces, like
beds, tables, and chairs
9
. This sector was effectively born in the 15
th
century, when the
first figures of artisans started to produce basic furniture components in their small shops
and gradually made their appearance in the cities. From the sixteenth to the eighteenth
century, the demand was still satisfied by carpenters, which started to realize a more
structured system, thanks to the introduction of the first corporate regulations.
Only in the 1870-80s real furniture factories were born, following the strong expansion
of the tourism sector, whose growing demand, combined with the need for rapid supplies
and a wider choice, gave rise to mass production. In addition, with the progress of
industrialization, furniture factories started to specialize in the production of certain
categories of products, for example they only focused on bedroom furniture, offering a
7
Hasan Serin, Yunus Sahin, Muhammet Durgun, Cemre Dabakoglu (2015). “Supplier choice on furniture
industry”, 854 – 870.
8
Statista Research Department (2022). “Furniture market in Italy – statistics and facts”. Retrieved April
20, 2022 from: https://www.statista.com/topics/9103/furniture-market-in-italy/.
9
Fabrizio di Marco (2005). “Arredamento” – Enciclopedia Treccani. Retrieved May 5, 2022 from:
https://www.treccani.it/enciclopedia/arredamento_%28Enciclopedia-dei-ragazzi%29/.
15
full range of items for bedroom: indeed, factories used to produce for wholesalers, who,
then, sold their items to retailers. So, not all companies produced all furniture items, but
each company produced a single piece, and, through cooperation with other companies
of the sector, the final good was created: in this way, the first industrial districts were
born.
In the Italian manufacturing system, industrial districts represent an important peculiarity,
for both the efficiency of the productive process and the competitive capacity. Born as a
merger between economic and productive relations and consolidated as processes of
economic, social and institutional development, today, industrial districts represent the
local productive systems, with a strong geographical reference, essentially made up of
small and medium sized firms. On the following lines, the most important districts are
briefly introduced
10
.
- Between Veneto and Friuli Venezia Giulia, the “Distretto del mobile di Livenza
e del Quartier del Piave” develops: its focal business is the production of home
furnishings aiming at the medium-high market segment. Here, small, medium and
large-sized companies are established, demonstrating that about half of the
furniture supply chain is concentrated.
- In Friuli-Venezia Giulia, the “Distretto della sedia di Manzano” expands in the
area around Udine. Its specialization is the production of wooden chairs of
medium quality, together with chairs, seats and pieces of furniture made of other
materials. It primarily aims at the medium segment of the market.
- In Lombardia, the area between the cities of Como and Milano is the birthplace
of the “Distretto del legno-arredo della Brianza”, the oldest among the Italian
furniture clusters. It is qualified in the production of upholstered furniture, living
rooms, kitchens, and bedrooms of a high quality range. Its strength relies on the
closeness to Milano, where professional designers study and set up their
businesses.
10
Intesa San Paolo (2021). “L’industria e i distretti del mobile: tra tradizione e innovazione”, 1 – 26.
16
- In the Marche region, the area around the city of Pesaro is the “Distretto delle
cucine di Pesaro”. It is specialized in the production of kitchen furniture, but its
overall production ranges from home furnishings to office equipment.
- Between the regions of Puglia and Basilicata, the “Distretto del mobile imbottito
della Murgia” is set. Its core business is upholstered leather furniture of medium-
low cost.
To conclude this brief historical introduction, from 1950-60s there has been an
exponential growth of residential, commercial and public construction, leading to an
increase in both demand for quality handmade furniture and for low-cost, industrially
produced furniture.
Today, Italy is among the world's leading manufacturers of furniture, mainly by 42,898
small and medium-sized family businesses, organized in industrial districts, and by
230,933 workers. It is the first country with a production turnover equal to 49.3 billion
euro, which increased by 25.5% over 2020, and by 14% over 2019
11
. This growth is also
confirmed by the positive trade balance of €8.2 billion: this figure is confirmed by
exports, which represent 37% of the total and have a value of over 18 billion euros (+
20.6% on 2020 and + 7.3% on 2019)
12
.
Italy is one of the major furniture exporters in both European and extra-European
countries: this country represents the European furniture market together with Germany,
Poland, France and Spain, where Italian products are generally exported
13
. Outside the
11
Federlegno Arredo (2022). “Per la filiera del legno-arredo il 2021 è stato un anno da incorniciare”.
Retrieved April 15, 2022 from: https://www.federlegnoarredo.it/it/federazione/presidenza-e-
direzione/news-presidenza-e-direzione/in-primo-piano/per-la-filiera-del-legno-arredo-il-2021-e-stato-un-
anno-da-incorniciare.
12
Federlegno Arredo (2022). “I preconsuntivi 2021 della filiera +14.1% per il fatturato sul 2019. Ma sulla
ripresa arrivano le prime ombre”. Retrieved April 15, 2022 from:
https://www.federlegnoarredo.it/it/federazione/presidenza-e-direzione/news-presidenza-e-direzione/in-
primo-piano/i-preconsuntivi-2021-della-filiera-14-1-per-il-fatturato-sul-2019-ma-sulla-ripresa-arrivano-
le-prime-ombre.
13
Confartigianato (2021). “Nel 2021 +9,4% produzione mobili vs 2019. Made in Italy per 12 province top
al 3° posto in Ue dopo Polonia e Germania”. Retrieved April 26, 2022 from:
https://www.confartigianato.it/2021/06/studi-nel-2021-94-produzione-mobili-vs-2019-made-in-italy-per-
12-province-top-al-3-posto-in-ue-dopo-polonia-e-germania/.
17
European area, United States and Canada represent the major output countries, together
with Cina, Vietnam and India, which are significantly contributing to the world growth.
This positive growth, especially in Italy, is due both to the centrality, that the home has
taken in life of Italian people, and to the effectiveness of tax concessions, such as the
furniture bonus. In addition, these companies have demonstrated their capability of
responding to the crisis of the last two years, through investment and innovation,
interpreting, with a constructive and positive spirit, the health, social and economic
drama, that has affected the whole world.
Despite this, now, a critical and highly uncertain situation prevails, due to the economic
situation of the first months of 2022. Some negative signs are affecting the current supply
chain: the reduction suffered by sales is reflected in a price increase, in order to absorb
the increases in raw materials, energy and logistics
14
. This has led to continuous price
increases, almost always accompanied by a reduction in margins and with the consequent
risk of demand cooling. Now, this long wave is also affecting the rest of the supply chain
and will soon reach the final consumer. The hope is that, through the measures
implemented by the Government, the problem will be solved soon, and thus the sector
could still achieve positive results during the current year.
It is obvious that, given this situation, it becomes difficult to make plans for the current
year and the real risk is that a sharp slowdown in consumption and the climate of
uncertainty will frustrate the recovery from 2021. Nevertheless, the commitment of
companies is always aimed at searching innovative products and materials, new markets
and sustainable development of the sector, which are essential elements for international
competitiveness. Furthermore, it is nowadays essential to become more autonomous by
immediately implementing the necessary actions to achieve the objectives, leveraging on
internal skills, such as quality, elegance, and refinement of “Made in Italy” furniture,
appreciated all over the world.
14
Federlegno Arredo (2021). “Dati Federlegno Arredo 2021. Trend in Crescita per l’arredamento, ma
l’incertezza e il caro materie prime si fa sentire”, 1 – 7.
18
Furniture sector data are continuously monitored and analyzed by Federlegno Arredo
association, that represents a reference point for the market and the Italian furniture
companies
15
. It is an important Federation for wood, cork, furniture and furnishing
industries. It represents the wood-furniture sector in all the components of the supply
chain, from the raw material to the finished product, both in Italy and abroad.
Since 1945, it has been defending the Italian know-how and the ‘Made in Italy’ brand,
throughout the world. It is, now, working on the issue of environmental and social
responsibility, that should be part of the development strategies: the goal is to lead the
sector, by 2025, to become a world leader in terms of green economy. Italy currently
ranks first in Europe, in terms of recycling economy and sustainability and it is moving
toward an eco-friendly and sustainable future
16
. Being sustainable provides clear
economic benefits: an important contribution comes from local supply chains, which
allow a higher environmental protection, direct relationship with local suppliers, and a
“sustainable” division of labor.
This is also confirmed by the use of sustainability certifications, regarding all the supply
chain, from upstream to downstream. The increasing use of sustainable raw materials,
together with the optimization of resources up to real green investments, has led,
increasingly, to reduce pollution and energy waste: this demonstrates how the wood
supply chain addresses the issue of sustainability by looking at the entire life cycle of the
product. This ability to manage the entire production process in a sustainable way makes
the wood industry, in Italy, an increasingly circular economy and also represents a source
of competitive advantage.
Another source of competitive advantage is represented by national and international
events, where Italian furniture companies participate and demonstrate the importance of
“Made in Italy”. For example, every year, Federlegno Arredo creates a famous
international fair in Milan, called “Salone del Mobile”, which hosts companies from all
over the world
17
. This year an important milestone is celebrated: the 60th edition of the
event, which shows how its key values such as quality, innovation, beauty and, today
15
Federlegno Arredo Association. Retrieved on April 27, 2022 from: https://www.federlegnoarredo.it/.
16
Confindustria (2021). “3° Rapporto sull’Economia Circolare in Italia”, 7 – 11.
17
Salone del Mobile. Retrieved May 10, 2022 from: https://www.salonemilano.it/it.
19
more than ever, sustainability, are the basis of the Italian furniture industry. As a
consequence of two difficult years of pandemic, this event was postponed and the whole
sector, initially, suffered from the closed companies. However, the goal, now, is to restart
and grow to pre-pandemic levels: it is important to transform this crisis into an
opportunity, starting with the theme of digital, sustainability and training in companies.
For this reason, returning to this fair to exhibit Made in Italy products means reinforcing
Italian leadership, while also turning our gaze to new emerging markets
18
.
This important goal should be pursued effectively, together with the modernization of the
supply chain: this sector, despite its long tradition, requires a high and precise level of
organization, to work in a fragmented and competitive market. In this context, a digital
approach to the supply chain makes it possible to manage deposits, warehouses and
transport in an extremely precise way, making digitalization one of the last great
competitive advantages of the wood supply chain in Italy. This industry, in fact, has
modernized its production lines with standard and automated processes, thanks to the
introduction of Information Technology. Staff is increasingly qualified and, compared to
the past, is more involved in organizational and administrative tasks, rather than manual
ones. One of the great future challenges will be: revolutionizing the supply chain on
Italian soil, that is historically very fragmented and widespread, through the digitalization
of the planning and production processes and through the integration of software used
throughout the Supply Chain.
These objectives will certainly be pursued, given the considerable importance of high
quality, testified by the worldwide fame of the "Made in Italy" brand, as well as by the
competitive quality/price ratio, its intense specialization and the traditional techniques.
These represent the most important strengths of the sector, while, weaknesses, like the
slowdown of companies to outsource their production or the sale of large amounts of
goods, should be turned into strengths.
18
Stefano Boeri (2021). “Il design torna protagonista: l’industria del mobile ha ripreso a correre” – Il
Sole 24Ore. Retrieved May 12, 2022 from: https://www.ilsole24ore.com/art/il-design-torna-protagonista-
edicola-e-online-rapporto-sole-24-ore-AEVo5Qg.
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1.1.2 In Europe and around the world
The furniture market in Europe has a good reputation all over the world, thanks to
the creative ability of combining technology and innovation with cultural heritage,
tradition and style. It is the second largest furniture manufacturer in the world, accounting
for over a quarter of global production, and it is the world leader in the high-end segment:
almost two out of three furniture products, sold worldwide, are made in the top furniture-
producing nations, such as Italy, Germany, Poland, UK, Switzerland and France
19
.
The European market is mainly characterized by small and medium enterprises,
employing around 1 million people in 130,000 companies, which generate an annual
turnover of around 96 billion euro
20
. Furthermore, the European market is divided into
three main segments: the largest segment is characterized by living and dining room
furniture, including living rooms, lounges, lobbies and dining rooms; the second one
refers to bedroom furniture, which includes beds, wardrobes, bedside tables and dressers;
the third focuses on kitchen furniture, whose growth is mainly driven by household
appliances. Future furniture, developed by this market, will include ecological, modern
and luxury items, mainly for homes, hotels and restaurants, made with sustainable and
low-cost raw materials.
Indeed, one of the challenges that Europe is facing is the enormous competition from low-
cost countries, such as China, which is penetrating the European market and growing
rapidly, so much that, it is now the largest exporter of furniture in the European Union.
To reduce competition from non-EU countries, international protectionist measures have
been adopted, creating distortions and reducing competitiveness in the sector: these
measures are both in terms of duties on import of raw materials, and taxes on export of
finished products. All this leads to higher operating costs in the Union, which force
companies of this continent to impose higher prices on their finished products. An
important and related problem refers to the implementation of European Regulations,
19
European Union. “Internal market, industry, Entrepreneurship and SMEs”. Retrieved May 14, 2022
from: https://ec.europa.eu/growth/sectors/raw-materials/related-industries/forest-based-
industries/furniture-industry_en.
20
Ibidem.
21
which introduce specific norms, concerning sustainability or timber origin. These rules
could lead to a sharp decline in furniture trade, as European manufacturers do not trust
foreign suppliers of raw materials, not actually complying to European standards.
In order to face these challenges, Europe should invest in technology and personnel. In
particular, it is necessary to invest in innovation, creating new products, in line with
changing population lifestyles and trends: this investment can lead to the creation of new
jobs, based on specific knowledge. This would allow the industry to attract employees of
younger generation, and could help to rejuvenate the industry, by keeping it highly
competitive on the global stage. In addition, doing these investments could open doors,
to further expand towards markets, particularly in the high-end segments.
Going globally, the furniture industry accounts for $715.60 billion in 2022, expecting an
annual growth of 4,79% reaching $ 720.20 billion by 2028
21
. Most of the world's furniture
production, therefore, takes place in Asia and the Pacific area, followed by the United
States and Europe, which account for the 3 leading markets in the world. In general, the
main importer countries are United States, Germany, France, United Kingdom and
Canada; while, on the export front, China, Germany, Poland, Italy and Vietnam represent
the big players.
Asian countries are continuously growing in size and importance: from 2008 to 2019,
their production has doubled, covering more than half of world production: the leading
country is China, which dominates the market, thanks to its low cost input factors, the
availability of resources and the continuous improvement in technology.
21
Statista Research Department (2022). “Furniture market worldwide”. Retrieved May 16, 2022 from:
https://www.statista.com/outlook/cmo/furniture/worldwide.
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