Located in Binh Duong Province outside Saigon, Interwood employs 2,000 people and has invested more than US$20 million in three plants, exporting its entire production.
INTERWOOD, Vietnam: 10 Years Old, And Still Growing
By Michael Buckley
Saigon, Vietnam–Interwood, now one of the largest furniture makers in Vietnam, was unusual when it started and remains innovative as it plans and invests its way towards its 10th anniversary next year. Located in Binh Duong Province outside Saigon, Interwood was one of a few non-Taiwanese companies set up at a time when European investors in Vietnam were relatively rare. Today the company employs 2,000 and has invested more than US$20 million in three plants, exporting its entire production.
When British-born Imi Lelani first came to Vietnam in 2000 to establish a wood furniture company, Taiwanese dominated the furniture industry in which they are still very much around today. They were strong investors with effective management skills and knew the overseas market, largely in the U.S. Then along came an entrepreneur with British investors who not only aimed to supply the United Kingdom and European markets, but took little account of traditional furniture mass production methods and disciplines in Southeast Asia. Lelani had decided to switch from furniture production in Thailand to a green-field site in Vietnam, which enabled him to start afresh with production concepts that have served the company well in its early development. With Vietnamese labor costs low then and still so, it has in fact been the machine flow process, led by process and product engineers coupled with a constant striving for efficiency, which has been the central pillar of Interwood’s management. Even with gross labor costs still at only US$200 per month (less than $7/day) for the average shop-floor worker, Lelani is determined to ensure that all the company’s production systems are constantly measured for productivity and that workers, through constant training, understand his management ethos, which is geared to protect the security of the company’s future.
Imported North American hardwood used by Interwood in its products include White Oak, Ash, Maple, Cherry and Walnut.
Production management is based upon a product flow, rather than batch system, and minimizes “Work in Progress” with components drawn, as needed, from a central material pre-prepared stock. The plants have surprisingly little WIP stock, which habitually clutters the production areas of most mass production furniture plants. Shop-floor workers are to remain at their work station on the production flow lines and are allowed to “remain idle” when deprived of material or semi-finished product, allowing roving production engineers quickly to spot and rectify hold-ups or production problems.
Quality control is so integrated into the furniture making process, that plant rejects are minor and customer returns negligible. With no current license to sell furniture in the local market, this is of major importance. All furniture is assembled and dismantled several times before final packing, whether shipped assembled or in KD form. All staining, oiling and top-coating is applied only to components before assembly on automatic lines so that all surfaces are treated. Unusually, therefore, there are no finishing lines for assembled product. Finished furniture is hand sprayed only in a small spray station, when minor touch-up repairs are required.
With the majority of its contemporary style furniture made in solid and real wood, imported American hardwood is the main material amounting to about 300m3 per month, mainly in White Oak, Walnut and some Ash, Maple, and Cherry. The company admits to having difficulty in promoting Red Oak to its European customers. The only local hardwood used is Southeast Asia Rubberwood, but finger jointing is not popular with Interwood so that such species as American Sap Gum has been found a more viable and cost effective alternative. Lenga from Chile is also being trialed. Currently Interwood is also looking at design innovations in such species as Sappy Walnut and a possible return to Cherry.
Currently Interwood is looking at design innovations in such species as Sappy Walnut.
All hardwood supplies are re-graded to assess suppliers; and such careful monitoring of material data and recovery of waste is maintained that the company is confident in its claim that yield of rough sawn lumber to finished product runs at 60 percent - high by any standard.
Environmental issues are of central importance to Interwood, especially given its relative dependence on European markets. The company maintains standards of dust extraction, pollutant and effluent control and working conditions to European standards that will pass muster in any external audit by its customers under their responsible purchasing policies. A visit to the plants demonstrates the success of the clear air standards to a level rarely seen in Asian furniture plants. Paints are mainly sourced from Sweden to high environmental standards and the plants are fully specified with UV systems and equipped to convert totally to water-based finishes.
About 60 percent of sales are in the U.K., with France also important. Some progress has been made in the U.S. market, “which is of growing importance to Interwood, even in this market,” says Lelani. That’s because new customers are supplied only after careful assessment of their long term intentions rather than any attention to spot business. In the British market for example, a handful of buyers who have formed relationships with Interwood, account for all deliveries.
Interwood ensures that all its production systems are constantly measured for productivity.
Current production can achieve about 450 cabinets and 400-600 tables and beds per day, and recent investments have pushed chair capacity to 2,000 per day. As controlled growth is introduced the company plans to diversify its markets by improving its in-house design capability for one thing and by continued understanding of market needs. Easy words one might think, but Imi Lelani has a very clear view of Interwood’s market position in an industry that he considers is suffering from global overcapacity and needs slimming. One of the key issues he believes will shape the future is responsible purchasing by importers and distributors, who are increasingly forced to greater transparency with their customers.
Design is a cooperation by which Interwood responds to customer needs with its own designers employed inhouse accounting for 90 percent, and herein lies a philosophy with regards to wood. “I believe in emphasizing the substrate of wood, however we treat it. It doesn’t matter whether we stain or brush it,” says this blatant wood enthusiast. “I want to show the grain of Oak or the beauty of Walnut,” he insists. The company buys hardwood veneer only from approved suppliers and standards are high, and that applies equally to rustic grades which can account for as much as 40-50 percent of the product range. This requires less color matching, more use of No. 2 Common lumber grades and high recovery.
Craig Ewers, Managing Director of Interwood Vietnam reflects on this view. “Our products are very wood oriented with simple finishing. Rather than elaborate on handicrafts, it is very much left to the material to speak for itself,” he says. Ewers further adds that a product is designed by matching the available materials to the concept in mind. “We try to make use of materials that are not necessarily in high demand. We enjoy the challenge of using the combination of natural wood characteristics to show its value.”
Production management is based upon a product flow, rather than a batch system, and minimizes “Work In Progress” with components drawn, as needed, from a central material pre-prepared stock.
Defects, as opposed to characteristics, are displayed and labeled in the company’s main meeting room and around the plant. All staff are clear, through constant training, as to target standards of material input just as much as the furniture output standards. But there also lies a problem of working in Vietnam. Its rapid industrial development has resulted nationally in high turnover of industrial labor, so that staff retention and training costs are high. “We have to educate our workforce as to the benefits of efficient and safe working as a primary objective. Even then we can suffer 5 to 6 percent staff turnover per month,” he admits. Last year saw many labor strikes in Vietnam that have subsided in the current crisis, but having developed Interwood to its current position, Imi Lelani and his management team look set to stay the distance in this increasingly difficult industry.
For more information about this company, visit its website at www.interwoodlimited.com or email, info@interwoodlimited.com.
