How to Keep Your Lumber Cost Low

By Rick Hill | Posted: 03/06/2013 8:13PM

 

Woodworking an lumber Sales Expert Rick Hill The most expensive raw material in most wood manufacturing plants is the lumber. Keeping a handle on the recently rising market and a steady supply are essential to staying profitable.

Decades ago, I was a Falconer, hunting the woods and fields of South Dakota with a Red-tail hawk on my thickly gloved fist. Being a poor student, I drove around the fields in a 68 Buick LeSabre, 4 door with the back seat ripped out. The hawk sat on a T-perch screwed to the floor and crapped in the car. I had no room (or money) for a the essential falconer’s companion, a birddog. No birddog, meant that I would push through every bramble, thorn or weed patch trying to kick out game for the Red-tail. The smarter falconers walked in the grass while their birddogs pointed or flushed game out for them. They took great joy in calling me “Birddog”.

Timberland Lumber
When buying lumber from mills remember to require 8 ft tarps on any open trucks. The tarps keep the lumber dry while shipping from the mill to your plant. The truckers often don’t like to tarp loads when the weather looks good, but they really hate to tarp them in the rain. It is better to require the tarps from the onset instead of chancing a whole load of soggy lumber.
The lumber industry has a similar problem. There are hundreds of small sawmills, kilns and rough mills spread throughout the country. Each is cutting local timber, or drying and producing in their own particular way. They are the game hiding in the weeds and the best chance to control your lumber costs.

As I call on woodworkers nationwide, I often hear that they are buying or selling lumber at “mid-market”. Many use the Hardwood Market Report and Directory to verify their costs and establish their buy/sell price. Though the reports are good guides, they miss a lot of details that help keep your costs low. When demand is low, buying at mid-market is an excellent way to pay too much for your lumber. When the market is hot finding someone who sells at mid-market is hard. It takes a lot of time to really stay on top of when to buy lumber and when to hold back.

Lumber pricing is really based on supply and demand. The guides cannot tell you if the mill has been sitting on 5 loads of hickory they really need to move now. The guides miss whether the cash flow of the kiln is tied up in slow drying red oak and that they would be willing to sell green lumber this week to pay the bills. The guides never know what the real price is to volume users of lumber that buy on programs.

The key to keeping your lumber costs low is to use a birddog. While you walk through the grass, you need someone who is in the thickets full time, breaking through the brambles and flushing up the deals directly from the mills. A good lumber birddog knows what species are hot, who has too much stock and the financial situation on mills all across the country.

There are several kinds of lumber birddogs in the industry, so here are a few guidelines to finding the right one who can work for you. These guidelines will help you establish their ability to save you money. The first rule is volume. Make sure your lumber rep buys enough volume to get a good price from the mills. The second rule is to find an independent rep. Independents are not employed by one mill and are not forced to sell that mills inventory first. This does not mean that factory employed reps should be ignored, it just means that you also want an independent on your side to help verify costs.

Lastly, purchase an insurance policy by spreading the orders. When you purchase from one source consistently, they get to know what you are willing to pay. When the market dives down they will often not pass all the savings on to you. Using other types of sources keeps your purchasing current with the market price.

If the lumber market seems too specialized and volatile for your company, or if you find you are devoting more time to sourcing lumber than makes sense, look at using an independent lumber buying service. Buying services are specialists that work as your dedicated buyer for all lumber purchases. A dedicated buyer gets a small commission from you that is based on each purchase of your lumber. They spend their time coordinating freight, qualifying mills and establishing programs of stock for you. They use their current volume with other customers to keep your pricing low. Many companies have found that using a buying service frees up their internal people to work on other projects, and costs less than hiring an experienced lumber professional. Much like an insurance or financial expert, they make a living on small commissions from handling several customers instead of one large paycheck as an employee.

Remember, the lumber market is an ever-changing, fluid entity that is never one price. Costs are based on hidden factors like timing, stock, and cash flow. It takes a devotion of time, expertise and serious work to find your best value. Check out your options by keeping a specialist on your list of sources.

Good Hunting,

Rick “Birddog” Hill


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About the Author

Rick Hill

Rick Hill is a Contract Buyer Specialist with Timberland Wood Products, Sheboygan, WI. Timberland contracts with woodworking companies to help them lower their total lumber costs at timberlandwood.com. Rick comes from a 20 year history in the cabinet and furniture supply industry. On fall weekends Rick can be found banding hawks and falcons at the Cedar Grove Ornithological Park. You can reach Rick at rick@timberlandwood.com.

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