Methodological Centre for Vocational Education …

1 Methodological Centre for Vocational Education and training STUDY OF WOOD SECTOR Research report on skill needs 2008, Vilnius 2 STUDY OF WOOD SECTOR Experts: Aleksandras Abi ala, Giedr Beleckien , Ar nas B k ta, Antanas Vidimantas Bumelis, Gintautas Bu inskas, Vaidas Daujotas, Vincentas Dienys, John McGrath, Bronislava Kaminskien , R ta Karvelyt , Vitalija Motiekaitien , Loreta Ra elien , Albertas lekys, Lina Vaitkut We are sincerely grateful to the Wood sector companies, personnel search and selection companies, Vocational Education and training establishments and everyone who has contributed to this activity. We hope that the information presented will be helpful in the staff training planning process as well as in other areas. 3 SUMMARY The wood sector is defined with regard to the international classification of Economic activities in the European Community (NACE). It consists of two subsectors: Manufacture of wood and wood products ( , , , and activities) and Furniture manufacture ( activity).

2 International development trends in the wood sector The international wood industry has become more complex due to globalisation, production assortment and the development of technologies. Environmental protection also plays a major role to the development of this sector (processed materials, nature preservation, etc). European, Australian and USA manufacturers compete with the imported Asian products that are cheaper. The industry has responded to these threats by enhancing productivity, targeting niche markets and improving quality, design and marketing. In many companies, the production process consists of the assembly and gluing of particleboard which is coated with a decorative covering such as a veneer. The level of skills involved is not as sophisticated as in craft work. Nevertheless, the skills are important particularly in respect of the operation and maintenance of computer numerically controlled machines, finishing techniques and in the case of soft furniture, the sewing, cutting and pattern making.

3 The method of working, however, is as important as the actual skills of the operatives. Specifically, working in cells has been shown to be more efficient in reducing lead times and in optimising machine utilisation. These working arrangements, however, require a high degree of multi1skilling on the part of the production operatives. The development of craft skills is essential for the survival of the European furniture industry. Craft skills are necessary to produce high quality, intricate furniture items based on solid wood. The market for such products is less sensitive to price than the market for mass produced furniture constructed from wood composites and it is a market therefore which can be successfully exploited by the European companies. The increasing complexity of the industry means that it requires a cadre of university qualified professionals to provide many of the technical, supervisory and management functions. Design and marketing have become the twin pillars on which any successful development strategy for this industry must be based.

4 Wood sector development trends in Lithuania Companies. There are 2162 companies in the wood sector, 65% of those specialise in the field of Manufacture of wood and wood products. Small companies prevail in the sector (the number of staff does not exceed 49 people). The process of enlargement in the companies is ongoing in both subsectors. At the moment the start1up of new companies is more intense in Furniture manufacture sector than in the Manufacture of wood and wood products subsector. Lithuanian owned capital companies dominate in the sector. The biggest concentration of wood and furniture manufacturers is in Vilnius and Kaunas counties. Staff. Wood sector employs the biggest number of people in the field of processing industry in Lithuania. It employs about 53000 people; the majority of them work in Manufacture of wood and wood products companies (about 58% of all people). During five years (200312007) the number of people employed in the sector was continuously growing, especially in Furniture manufacture subsector.

5 The employees who work shorter hours amount to 6% of all the employees in the sector, women amount to 40%. With regard to the occupational groups the most popular are highly1skilled and low1skilled worker jobs. Employees of 30150 year of age are prevailing in the sector; 60 years of age and older amount to 3% of all the employed in the 4 sector. In 2007 licenses for working in Wood and wood products companies were issued to 177 foreign nationals, which is 3 times more than in 2005. Highly skilled workers were dominant among them. Main development features. Wood sector is the strongest and the fastest growing cluster in Lithuania. Even though the manufacturing of wood high added value products is developing fast in Lithuania, the wood consumption level is still quite low. The major experience is accumulated in the sectors of furniture, sawn timber, chipboards, sanitary paper and carton manufacturing. These sectors were continuously modernised and the demand for such products has not been decreasing.

6 The experience is good in the manufacturing of wooden houses and their parts. The number of furniture manufacturers is growing. They successfully cooperate with retail chains; they are fast in reacting to the demand of different markets. Furniture manufacture competitiveness was very much influenced by a newly implemented business model when the chipboard production is in its final form construction materials and furniture parts and furniture companies focus on the production of chipboards. Such a business model promotes capital concentration and reduces logistics costs. Performance indicators. Wood industry foreign trade balance is positive and continuously growing. The majority of the companies export their products to other countries. This demonstrates sufficient competitiveness of the sector on the international level. Even though this industry is increasing turnover and added value, the productivity (added value for one factual working hour) is lagging behind from many other activities.

7 The average monthly gross1 salary in the wood industry still remains one of the lowest among the activities of processing manufacturing. In the last two years the majority of wood sector companies introduced new products or services. The main purchasers of the wood products are construction companies, furniture retailers and individual customers. The competition on the Lithuanian and foreign markets remains quite big. Technologies. More than 50% of the companies in the manufacturing use modern technologies. Out of those in Wood and wood products subsector the most popular are efficient waste usage technologies, Furniture manufacturing modern technological equipment. Among the Wood sector companies modern technologies e1banking and accounting systems are the most popular. In Furniture manufacture subsector software design, such as AutoCAD, etc, programmes are quite popular. Development trends. The development of wood industry companies are related to modern technological equipment and the automation of the manufacturing process.

8 In the coming two years the plans are to implement software manufacturing planning and management programmes, technological process automation technologies and modern technological equipment. The turnover of the companies in the sector will continue to grow and it is likely that the growth pace will slow down. One of the reasons is insufficient labour recourses. Therefore, one needs to look for other sources to ensure manufacturing development, such as increase in labour productivity, which is at the moment quite low. Since labour productivity is related to the modernisation of the manufacturing process, this will inevitably increase the demand for employee training . The average monthly salary before tax should also grow and this would create more attractive conditions for work in the wood industry. The increase in prices of raw materials and energy recourses could 1 Salary before tax 5 negatively influence the scope of turnover and export.

9 More efficient use of local wood recourses, clusterisation and the development of new business model as well as efficient logistics system would reduce the negative effect. The company clusterisation process will continue as well as the manufacture of high1added value products. According to the company survey the threat to the successful growth of the business is posed by the tax system , shortage of labour and lack of employee competencies . The main factors that will influence Wood sector in the future will be the following: Increase in demand of environment friendly products; Fast change in consumer demands; Increase of import (from the countries where the prices of materials, energy and labour force are lower); Increase of international competition; Reduction of employee supply (in terms of number and qualification level). Staff demand. Staff annual turnover in the sector amounts to 39%. It is determined by the following reasons: work conditions (low salaries, working hours and location, seasonality of work), personal qualities (alcoholism, absence, non1compliance with the internal rules of the company) and emigration.

10 The highest turnover is observed among the low1skilled and highly1skilled worker groups, the lowest among the administration specialists. From 2003 till 2006 the number of people registered in the Labour exchange office has reduced. The supply of vacant positions also decreased slightly. Even though the level of tension (ratio of vacant positions and the number of employees) in the Wood sector is lower than the country average, some occupational groups are quite problematic. For example, in the worker group, the highest demand is for the machinists and furniture manufacturers . Also, technologists and constructors are on high demand, so are Sales and marketing specialists, where suppliers are of the highest demand. In the coming five years the number of employees in the Wood sector will continue to grow. This will influence all occupational groups. The demand for the new entrants into the market will amount to people annually.