Truong Thanh Furniture Corp is one of Vietnam’s largest furniture manufacturers. The company has seven factories supplied with wood from their own plantations. With a total capacity of 3,000 containers annually, the company produces both indoor and outdoor furniture. Truong Thanh, Managing Director of Truong Thanh Furniture Corp, discusses his strategies for the continued success of the company.
By Ong Hong Tat
Of the seven factories that Truong Thanh Furniture Corp owns, two produces indoor furniture; the remaining four manufactures outdoor furniture while the last is a particleboard factory supplying medium density fibreboard (MDF). From these seven facilities, Truong Thanh Furniture’s total yearly productions of 3,000 containers are distributed between indoor (40 percent) and outdoor (60 percent) furniture. The majority of its exports head for Europe. “About 65 percent of our exports go to European countries; 15 percent to Japan; 10 percent to the US and 10 percent to other regions like the Middle East,” said Truong Thanh, Managing Director of the self-titled company.
In 2008, Truong Thanh Furniture opened a new indoor furniture facility. Not resting on its laurels as a well-known outdoor furniture maker, this addition brings its production mix to an even 50-50 split. Nonetheless, Truong Thanh Furniture plans to increase its outdoor furniture output soon. In the next three years, Truong Thanh Furniture will its increase its total outdoor furniture output to 70 percent of total production,” said Truong.
Committed To Value
Truong Thanh Furniture set up the company in 1993 with five objectives: good quality, competitive prices, on-time delivery, innovation and service. These five objectives are practiced daily, according to him. For example, to deliver on their competitive price promise, Truong Thanh Furniture operates two plantations in Vietnam. This allows them to have better control over material supply. “We use the small trees for make particleboards and the large logs to produce furniture. We also stagger the trees growth so we always have a ready supply of raw materials,” Truong explained.
In line with their objective of providing on-time delivery, Truong Thanh Furniture goes against the grain, holding a significant amount of stock so that their international customers will not have to incur costly warehousing expenditure. The company is deliberately keeping inventory in a time when most companies try to clear stock to reduce warehousing costs. Truong chose to do the opposite as this arrangement allows his production schedule to be on time regardless of contingencies. In addition, some customers like Carrefour demand large volumes that take time to produce. Having the 500-container capacity warehouse gives Truong Thanh Furniture a buffer to work on larger orders.
“The cost of building and maintaining warehousing facilities is much lower in Vietnam as compared to many of our customers in Europe and the US. We take advantage of this and pass on the savings to our customers. Since we have ready stocks, our customers do not need to maintain their own warehouses, which can be quite costly in the western countries,” said Truong.
With this ready stock, Truong Thanh Furniture can deliver orders with lesser lead-time. “Our first shipment will take 45 days to reach our customers because of the need to arrange logistics and train our workers. After this initial phase, we can turnaround in a week, delivering to customers’ requirements once every week,” said Truong.
This commitment to timeliness has benefitted the business. “Our warehousing arrangement in Vietnam has been appreciated by our customers and it has become a selling-point for us. It helps our clients save on expensive storage costs in their own countries,” said Truong.
Weathering The Storm
Despite Truong’s carefully thought-out strategies and principles, outlook for the new year is not going to be as rosy. Given the current economic climate, even the more established players in the market are feeling the pressure. “Our loyal customers have dropped their orders to half of what they were requesting in the previous year,” said Truong.
Anticipating the trickle effect from the financial crisis, Truong Thanh Furniture started to exhibit at more trade fairs. “For this year , we joined a lot of international fairs. We were at the Las Vegas Market, Spoga in Germany and of course, Vietnam’s HCMC Expo,” said Truong.
The increased exposure seems to work. “We got some customers at Spoga and Las Vegas Market. In fact, our production has rose 20 percent and we are now operating at 70 percent of capacity,” said Truong. “We are also exploring other ways to grow the business. Direct sales and e-commerce are all ways that we are using to reach out to those who might be interested in our products.
”While exploring new opportunities, Truong Thanh Furniture is also keen on retaining their loyal customers. “For our regular clientele, we try to offer better terms if they can stick with us for a longer period of time,” said Truong. These will be designed based on an understanding of buyers’ mindsets. “There are two types of customers: those that demand high-quality and are willing to pay slightly higher prices. Then there are those that more price sensitive but quality is not as important,” Truong elaborated. To meet the distinctly different requirements, Truong Thanh Furniture has two lines of production: one to make very high-quality furniture pieces and the other for mass production to enjoy economies of scale.
All in all, although manufacturers are further away in the supply chain of furniture from consumers, Truong believes that suppliers have to help retailers, who are their customers, to sell: “We manufacture for the benefit of our customers. That is our key value: we strive to bring benefits to our clients”.
Source: Furniture & Furnishing