Homag is about sustainable solutions: Venkat Gorti

Homag is the leading technology and service provider to India’s furniture manufacturing industry. Its range of machines includes panel cutting and sizing; edge banding and glue application; CNC machining, processing, and routing; planning and moulding; drilling and milling; surface technology and label printing; and storage and sorting solutions. Dhananjay Sardeshpande spoke with Homag India’s Managing Director and Country Head Mr. Venkataramana Gorti, to feel the pulse of wood-based furniture manufacturing in the country, and to hear about his company’s diverse solutions for the woodworking industry. Excerpts:

Homag works with its customers to help them retain their competitive edge in the market.

What have been the two or three noticeable changes in the Indian furniture manufacturing industry since you joined Homag India in 2019? To what would you attribute these changes?

With global e-commerce sales expected to reach at least US$ 6.5 trillion by 2023, online stores are no longer an afterthought, or a complement to a physical store – it is one of the key ways to tap the burgeoning market demand and keeping the sales figures up. This makes it important for furniture makers, especially traditional ones, to create a thriving e-commerce platform that showcases their offerings.

Secondly, in the last few years, the demand and percentage of rental properties have increased sharply in metro cities. The Indian furniture rental industry was estimated at US$ 4.1 billion in 2020 and is forecast to grow to US$ 13 billion by 2025, at a CAGR of 26%.

There are several reasons for this change, most of which are related to rapid urbanisation and the rise of Millennials as the larger percentage of the active workforce.

They have a new and different set of challenges compared to their previous generations, which includes – but is not limited to – the rise in home prices, the need for higher education, instant gratification, and getting married at a later age.

More rental spaces mean a rise in demand for a very specific type of furniture – both from landlords and renters. Given the large-scale decline of “one-and-done” type of heavy furniture, manufacturers have evolved and diversified their line of products. They now offer a separate line of furniture that fulfils the burgeoning demands of Millennial renters.

Thirdly, there is the changing demography of the work force. With more and more of the Millennial and Gen-Z population coming to the forefront, it is not just lifestyle and housing choices that are experiencing a shift.

This is especially true when it comes to jobs in the furniture manufacturing industry. Those from the older generation are retiring in large numbers, and Millenials and GenZ employees are taking over the bulk of the manpower used in manufacturing companies.

Given their different lifestyle, they have different sets of skills and priorities and are not particularly wooed by the factors that appealed to the older generation. For instance, the idea of owning their home before they are 30, or having a hefty pension plan appeals less to them, as opposed to having a second master’s degree.

Millennials and Gen-Z workers prioritise their personal development and are not impressed if the furniture manufacturers they work for do not share their viewpoints. Unfortunately, very few companies have realised the gravity of this situation and have, therefore, not invested in automation.

With the demands rising higher and competition getting tougher by the day, relying exclusively on manpower is impossible. At the same time, factories are not in a position to run 100% on automation. Manufacturing units must, therefore, adopt to integrate robots in a way that helps them sustainably improve their production.

In hindsight, what lessons were there for the furniture industry from the business disruptions caused by the Covid-19 pandemic?

The year 2020 saw a decline in the demand for furniture due to the sudden Covid-19 disruptions. However, there was a slight growth recorded in online sales. As people refrained from visiting showrooms, they switched to ordering their furniture online.

We are seeing signs of huge furniture market growth, and a large amount of the population has switched to buying online.

Second, with more individuals working from home than ever before, there has been an increase in demand for home office furniture that is stylish, functional, easy to assemble, and quick to ship.

Those furniture companies that already specialised in home office furniture have seen sales increase dramatically, and the demand is expected to continue into 2023 and beyond as the remote and gig work force is expected to become more than just a temporary event.

Third, social media presence has become a must for direct-to-consumer brands. Big multinational furniture firms now find huge potential in social media marketing. Interior designers and fashion influencers post pictures of their furniture and the designs become popular. Online and offline magazines have also played a vital role in showcasing ideal furniture setups for studio apartments, offices and bungalows.

Another popular trend is direct customer selling. The process of making a product and then launching it and sending the prototypes to the franchised outlets in every city has gone cold these days.

With the help of social media, new business owners of furniture shops are directly posting pictures of the unit they want to sell online and accepting payments directly online.

What is the state of the furniture industry now? What are its prospects in the coming years?

The Indian furniture market by the commercial sector is anticipated to achieve a CAGR of 11.97% during the forecast period (2018-23). The commercial sector is further sub-segmented into non-contracting and contracting.

The demand for furniture has been observed to majorly generate from northern and southern India. India is the fifth-largest furniture producer at a global level, and the fourth-largest consumer of furniture. The Indian furniture market was valued at US$ 17.4 billion in 2021. It is predicted to reach US$ 37.7 billion by 2026, growing at a double-digit CAGR of 13.37%.

The size of the online furniture retail segment grew from US$ 300 million in 2017 to US$ 920 million in 2020, recording a CAGR of 32%.

What is the state of investments in this sector? What is the nature of these investments? What are the profiles of these investors?

The furniture market in India is dominated by small, unorganised, local firms. However, organised players have increased their contribution to the Indian furniture sector during the previous decade. With the advent in India of multinational furniture companies, such as IKEA, the organised players’ market share would expand even more.

The Indian furniture market is highly competitive and fragmented. There are very few organised market players in the furniture industry. The big players include Godrej, Zuari, Durian, Nilkamal and Featherlite. Together they have a good market presence in India. Fortunately, several new players are expected to enter this market due to low entry barriers.

The furniture-making business in India is defined by its supply chain management, cost minimisation, customisation and brand management. With the growing need for improved infrastructure, improved standard of living, and rise in the tourism and hospitality industry, the need for furniture of different types, styles, designed for different spaces (commercial offices, homes, hotels, resorts, etc.) has also been growing.

The changing consumer demographics in terms of westernisation, the constant need for establishing social status, and the boom in the real estate business are all the reasons entrepreneurs should set foot in the furniture manufacturing business.

Will ‘Make in India’ and China’s recent temporary isolation help boost manufacturing in India? What is additionally required to give the furniture sector a leg-up?

Yes, absolutely! The market potential for this furniture-making business is huge because it makes up 0.5% of India’s GDP and the major contribution to it is by the 85% unorganised sector of this industry.

Reducing GST on the real estate and construction industry would boost domestic demand for furniture manufacturing. If the Central government includes furniture manufacturing under the performance-linked incentive (PLI) scheme, India will become the furniture hub for the world.

Homag India has moved to its new, bigger and better-organised premises near Bengaluru. Can you tell us something about the new facilities? How they have benefitted your customers?

Homag India is in a new phase of expansion, whether it is in terms of the product range that we provide, in-house training programmes for customers as well as staff, or the services for machinery and digital products.  Our manufacturing facility supports both domestic and international markets in Asia, Japan, Australia and Europe.

Our new state-of-the-art factory contains a shop floor, training rooms, an experience centre, and several conference and discussion rooms for varying capacities. Located in Rajdhani Industrial Park, Dobbespet industrial area, about 40 km from Bengaluru city centre, it is testimony to our increasing commitment to serving the industry.

In keeping with the motto ‘We set the trends’, the Homag India Experience Centre allows our customers to get demonstrations of sustainable solutions for their businesses, thanks to its woodworking machinery and digital assistants.

You have spoken about ‘Voice of Customers’ and ‘RoI on Technology’. Could you explain?

Most organisations are profit- or product-centric, and follow the push method to sell their products in the market. Most sellers prefer to push their chosen products to customers without understanding their customers’ needs. At Homag India, we follow a three-pronged pull strategy:

•        Resonate and be coherent to the voice of our customers, their needs and ambitions;

•        Work with them to ensure their growth projections are met and help them retain their competitive edge;

•        Realign from product-centric selling to providing viable, relevant and sustainable solutions.

Trust and transparency are the buzzwords in our organisation, from the shop floor to the top floor. We are enhancing our business processes through Homag Group Production Systems 2.0, and putting in place more robust and scalable systems. These will contribute to the growth of the industry and keep pace with market expectations.

When it comes to setting up and running furniture production, Indian entrepreneurs always think about ROI on their capital investment and the payback period. They never think about the total cost of ownership at least for 10 years of operations, losses arising due to production downtime, operational expenses and material wastage.

Though the initial value of our products may be higher, compared to our competitors, the solutions offered by Homag India cost a lot less in the long run. Among other things, we achieve high machine availability through high product quality and service and spare parts availability.

We urge our customers to treat the solution offered by Homag India as an investment, not as a business expense. 

How can technology providers, such as Homag, nurture workshops into full-fledged, organised and scaled-up businesses?

We are a customer-centric organisation. We provide tailor-made solutions to each customer segment in the woodworking industry. Thanks to our extensive range of services, we can train customers who have their wood workshops and support them with consulting.

We have permanently expanded the product portfolio in recent years, especially digital solutions for organisational optimisation. Most software products do not require installation and can be used as an App on a monthly subscription. These products are suitable for interior designers, freelancing architects and furniture manufacturing companies of any size. 

Homag has entered the solid wood processing and timber construction sectors as well. What is in it for the Indian market?

With the perfectly interlocking range of services offered by System TM, Kallesoe and Weinmann, Homag offers tailor-made solutions for the entire process chain in solid wood processing.

In terms of efficient and sustainable production, we offer our customers precisely coordinated solutions from the individual machine to the complete production line, including the corresponding control software.

In Asia, we are seeing an increasing interest in the industrial production of housing, but it is currently difficult to estimate the extent and speed at which the demand in India will pick up. We can also support interested parties and investors in product development and house construction, to enable newcomers to successfully enter the market.

System TM is a leading global supplier of customised solutions to the solid wood industry with more than 40 years of experience and more than 300 running lines worldwide. Being the world market leader, Weinmann offers the entire range of machine technology for timber construction, both for carpentry companies and module manufacturers and the prefabricated house industry.

Kallesoe contributes 50 years of know-how and experience in the development of high-tech machines and solutions for the manufacture of laminated timber products.

So far as automation and digitisation of production go, Homag has a bouquet of solutions. Could you expand on the ‘Digital Twin’ and ‘Industry 4.0’ concepts?

Whether our customers need machines, systems, or software solutions, our goal is to provide integrated solutions for production in the woodworking industry and woodworking shops. It is one of Homag’s unique selling propositions.

Digitalisation and networking of furniture production beyond the factory premises and national boundaries is the core of the ‘Industry 4.0’ vision. Diverse units within a manufacturing facility can communicate with each other and even organise themselves. The benefits of ‘Industry 4.0’ solutions are:

•        Efficiency increases in the manufacturing process;

•        Improvement of material flow in production;

•        Increase in machine utilisation times;

•        Reduction in administrative expenditure on IT;

•        Prevention of redundant, fault-prone data maintenance.

The ‘Digital Twin’ technology is the process of using data streams to create a digital representation of real-world assets, machines, systems and factory operations to improve collaboration, information access, and decision-making.

In other words, through a combination of simulation technology and data – gathered from sensors, historical records, etc. – engineers use software that builds a virtual twin of a woodworking factory or physical object or process.

Homag Group AG has achieved its goal of simulating a factory in its overall process, thereby significantly reducing the amount of work and the time required for commissioning on the construction site.

That said, no Homag system is like any other – they are all unique and individually designed to meet the respective customer’s needs. For this reason, each system must undergo extensive testing before the operator can run it at full capacity.

Can you also elaborate on your portfolio of design and production software?

Homag is staying one step ahead of the market to provide optimal support to companies that operate in the woodworking trade as they move into the future. Whether you need woodworking design software to deliver personalised kitchen cabinets, or plan your production to reduce material wastage, or monitor your machine performance remotely, our digital products such as Homag iX, Production Manager, IntelliDivide Cutting, CutRite, MMR Mobile, materialManager, intelliDivide Nesting, and ServiceAssist can save up to 70% of the time to get the things done, from customer idea to production.

How big is the need in India for formal education and training in the furniture industry? What is the way forward for up-skilling our carpenter community?

One of the biggest challenges that the furniture manufacturing industry faces is a looming skills gap. While the technology and machinery involved in manufacturing furniture have advanced by leaps and bounds, the work force to control and monitor them hasn’t quite gotten up to speed.

Older workers usually lack the technical training and know-how of sophisticated manufacturing equipment such as 3D printers, CNC machines and robotic systems. Most of them, close to retirement already, choose to retire rather than “take risks” with complications.

Younger workers from architecture backgrounds do have the digital skills and the ability to understand such equipment, but tend to lack a solid STEM (science, technology, engineering and mathematics) background that could help them fully realise their potential in the industry.

This skills gap will soon create a scenario where manufacturing units will be in a severe dearth of skilled and able workers. Almost 97% of the work force in the furniture sector is school dropouts. Out of these, almost 88% have an educational qualification of secondary schooling or less.

Labour is abundantly available in Uttar Pradesh, Madhya Pradesh, Bihar, West Bengal, Odisha, Rajasthan and Maharashtra. As the labourers in these states are minimally skilled, they find the furniture and furnishing sector attractive.

To plug this gap, I have joined the Governing Council of the Furniture and Fittings Skill Council (FFSC). To begin with, we have trained the FFSC teaching faculty on Homag machinery and digital solutions, free of cost.

FFSC aims to skill, reskill and up-skill 5,00,000 aspirants for internships, apprenticeships, jobs, and entrepreneurship opportunities by 2025-26.

Homag India also offers training and certification on woodworking solutions to interested candidates. We have introduced a new furniture design software called SmartWOP. Any internet-savvy person can design furniture using this software. And this is just the beginning. As the proverb goes, “A journey of a thousand miles begins with a single step”!

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