Despite pressure from overseas producers and the soft housing market, the moulding and millwork industry keeps moving forward, with many producers seeing moderate growth ahead.
By Matt Warnock and Wade Vonasek
|This cherry library was completed with a variety of custom moulding and millwork. By offering quality, custom components in a timely manner,
moulding and millwork manufacturers can combat overseas imports.
Photo courtesy of Distinctive Woodwork Inc.
The moulding and millwork industry is currently seeing its ups and downs, but overall, the outlook still appears promising. Molding & Trim to 2009 â Demand and Sales Forecasts, Market Share, Market Size, Market Leaders, a 2006 study by international research company The Freedonia Group Inc., predicts the demand for moulding and trim products in the United States to increase 1.7 percent annually to $9.8 billion in 2009, with gains primarily concentrated in the nonresidential market.
Despite a softening in the new housing construction market, the majority of companies Wood & Wood Products spoke with have positive sales expectations for the rest of 2007 and on into 2008. Some of the optimism may be attributed to a sharper focus on the commercial and higher-end markets.
âBecause a large portion of interior trim, mouldings and millwork are used in new housing construction, the current slowdown in the housing industry has caused the U.S. and Canadian moulding and millwork industry to suffer,â says Steve Lawser, executive director of the Wood Component Manufacturers Assn. (WCMA). âAlthough new housing construction is down, the architectural and commercial market for mouldings and millwork is still strong. Also, the remodeling industry has been holding up fairly well, so many companies are focusing on this market.â
âThe housing market slowdown has been more skewed toward the mid- to lower-end segments of the market, with some geographical pockets of the higher end,â says Greg Sheets, senior product manager for HÃ¤fele America Co., based in Archdale, NC. âProducts targeted toward builders have been the hardest hit, and HÃ¤fele primarily markets to the upper end of the market.â
âThe softening of the new housing construction market has had somewhat of a disparate effect on our business, in that while the sales of our lower-priced moulding and millwork have declined to an extent, the sales of our higher-priced moulding and millwork have flourished,â says Joey Shimm, marketing director for Outwater Plastics Inc. in Bogota, NJ.
There have been negative repercussions from the drop in new housing construction as well. Kellie Schroeder, CMP, executive vice president of the Wood Moulding and Millwork Producers Assn. (WMMPA) says the slow market has led to members shutting down shifts and laying off workers, with five well-known large moulding and millwork plants being shut down within the last nine months.
âManufacturers have had no choice but to analyze their operations on a weekly basis to make adjustments to operations, so as to stay healthy during this lax sales cycle,â Schroeder says. âManufacturersâ main focus is on servicing their existing clients, while streamlining their operations to ride out this wave of inactivity.â
The industry presently faces other issues as well. The growing impact of overseas competition on domestic manufacturing has affected a number of companies. Lawser says that low-cost, offshore suppliers have taken away market share from domestic moulding and millwork producers.
âHigher costs of doing business and severe price competition from imports have caused profit margins to shrink,â adds Lawser. âU.S. and Canadian manufacturers are faced with higher structural overhead costs, such as healthcare, worker compensation, corporate taxes, legal, and compliance with government, safety and environmental regulations. Offshore manufacturers in developing countries are not subject to these same costs.â
âPresumably, the only businesses not experiencing the effects of low-priced imports from China and elsewhere are those who have already been put out of business by the mass exodus of overseas manufacturing,â says Shimm. âObjectively speaking, this has had, and will have, both positive and negative long-term consequences for all domestic and overseas manufacturers.â
Lawser says that companies are using a variety methods to deal with this problem. âSome companies have diversified by moving into moulding and millwork products that require more customization and are servicing the needs of small- to medium-sized customers rather than large customers, who are able to purchase large quantities of the same commodity mouldings, which are often imported,â he says.
âMany producers are outsourcing their rough blanks and semi-machined parts from efficient domestic suppliers who can provide them with quick delivery on the quantities they need. Some firms are trying to meet imports head-on and have developed supply contracts with overseas plantation pine lumber suppliers in an effort to lower their material costs and control their supply chain,â Lawser adds.
Peter McKibbin, vice president of Portland, OR-based Contact Industries, says that though his company is mindful of foreign participation in its niche market segments, the influx of imports is more noticeable in high-volume product markets. âAt this juncture, in the segments we participate in, we only see that the imports have oriented themselves to high-volume, single-line item containers of known commodity parts,â he says.
âEven though China doesnât affect us, weâve still got to keep on our toes, continuously improving ourselves to keep us and our customers one step ahead of competitors,â says Steve Wilson, manager of Aurora Custom Mouldings in Aurora, ON. âChina might not be affecting us now, but who knows [what will happen] a year or two down the road. This is why we always have to be changing and be one step ahead, so we do stay on top of them.â
U.S. moulding and millwork manufacturers say they can offer their customers more customization, better quality and quicker turnaround time, which overseas competitors cannot.
Photo courtesy of HÃ¤fele America Co.
One of the best vehicles for change and for staying ahead of the competition â domestic or abroad â is to keep up with the latest trends in technology.
Productivity, quality and consistency are of the utmost importance in woodworking, especially when it comes to decorative components, such as moulding and millwork. Due to the highly visual nature of moulding and millwork, it may be put under higher scrutiny than other wood components. To achieve consistent levels of quality and productivity, and therefore increase profitability, technology is key.
Procuring and implementing the latest technology is also important in remaining competitive. Few companies can afford to stand still while technology is constantly moving forward.
âWood moulding and millwork producers must continue to look for ways to be more competitive in todayâs global marketplace,â says Lawser. âThis includes adding new machinery and adopting new technologies that will lower production costs, while improving worker productivity and product quality.â
Improved productivity and quality go hand-in-hand with higher profits and a better position in the marketplace.
âThere is no doubt that the right machinery, placed in the right spot, can make a company more profitable,â explains G. Matthew Allen, CEO of Milan, NM-based Mt. Taylor Millwork Inc.
âTechnology has, and will continue to play, a crucial role in the maintenance and growth of all sectors of business,â agrees Shimm.
As machinery improves and new technologies emerge, they open the door for moulding and millwork manufacturers to produce and sell new products, as well as improve existing product lines.
âThe new moulders coming out now are more intricate in that you can do a lot more to the mould,â says Wilson. âYou can do better machining with better quality coming out of it.â
Some woodworkers might not realize the wide range of technology options available to the industry. Effective technology in the woodworking manufacturing facility goes beyond CNC and automation to include order tracking, materials management, productivity monitoring, logistics and more.
â[Technology] improves our market and customer knowledge base,â says Sheets. âIt is the backbone of our materials and logistics business, and allows for real-time communication with sales and customers.â
âThe manufacturers are wired in every which way. From obtaining raw materials to shipping finished product, our manufacturers are electronically connected to all companies they do business with,â remarks Schroeder. âThose that have not hopped onto the I.T. bandwagon will do so within the next three to five years.â
This can only help companies improve their bottom line, expand their market share and increase sales.
Sales Grow Slowly
For much of the moulding and millwork industry, sales are on the rise, even if it is a slow climb. The majority of moulding and millwork companies contacted predict sales for 2007 will exceed those of 2006. There are some companies, however, that are predicting a decrease in this yearâs sales compared to last year.
As stated previously, The Freedonia Group projects the demand for moulding and trim products in the United States to increase annually, reaching $9.8 billion in 2009.
âAccording to the 2007 WCMA Market Study, WCMA members are forecasting their component shipments to grow by 3 to 5 percent in 2007,â says Lawser. âAlthough many WCMA members experienced a soft beginning to 2007, they are seeing improvement in the second half that should continue into the 2008 election year.â
âThis year is a lot stronger than last year,â says Wilson. âAs far as 2008, weâve quoted jobs that would pertain to next year, but between now and then, anything can change.â
Outwater Plastics President Chip Kessler agrees and says he anticipates the companyâs moulding and millwork sales will finish up higher at the end of 2007 compared to 2006, with a further anticipated increase for the upcoming year.
However, despite a positive report from many companies in the moulding and millwork industry, there are those firms that project 2007 sales to be less than last yearâs sales totals.
âSales will fall below that of 2006, seeing how the market started falling off last summer,â says Schroeder. âOur manufacturers expect to see another soft year in 2008, and we are all tuned into the housing market.â
âWe envision total sales revenue will be down in 2007 from 2006,â explains McKibben.
Buddy Terry, manufacturing manager of Theodore, AL-based Barnett Millworks Inc. says his company will be down this year. However, he anticipates a stronger 2008, which he says is due to more localized business as opposed to regional business.
Given the current state of the new housing market, some companies have turned to developing and executing new strategies to improve sales.
âSales will be above trend and 2008 will accelerate even more, due to aggressive new programs,â remarks Sheets.
âOur strategic plan, among the many goals we had established, has been developed to lessen our dependence on âvolume,â allowing us to prepare for, and avoid having to participate in, many of the traditional commodity markets that one finds it difficult to make, but easy to lose money in,â explains McKibbin.
As the publicâs opinion and taste evolves, new movements in style emerge. Moulding and millwork manufacturers are noticing a variety of trends, as well as items that are consistently popular.
âWe still see the heaviest demand for maple and cherry woods,â says Sheets. âDemand for oak is way off of what it was several years ago, while demand for alder has grown considerably. There is a trend in Europe for darker woods, such as walnut, even in drawer interiors and organizers, and we are starting to get inquiries for the same here in the U.S.â
Advances in technology open the door for a wide range of possibilities in designing and fabricating unique moulding and millwork.
Photo courtesy of Outwater Plastics Industries Inc.
âAlthough there are quite a few popular style trends right now, one common theme in all of the different offered media is the desire for larger profiled moulding and millwork,â says Shimm. âFrom the technological perspective, manufacturers are now able to cost effectively offer the look of [moulding and millwork] that have been designed to visually and texturally replicate the original building materials from which they have been modeled with exacting realism.â
âLarge, ornate patterns and build-ups in MDF are still the trend,â Schroeder agrees.
âWide casings in primed mouldings and exotic woods that are mahogany look-alikes are popular right now,â says Terry.
âMore and more people are getting into exotic woods,â adds Wilson. âYou can see them starting to break out a little more each year. Large mouldings â like large crown mouldings, moulds that you have to manufacture that go together like a six-piece mould â are also popular in most places.â
Activities in other industries also are influencing the moulding and millwork industry. âWe see other industries driving change into traditional wood products industries, including kitchen and bath product manufacturers, and commercial uses of material that are altering appearances and environments in other venues,â says McKibbin.
Sheets agrees. âWe see demand growing for kitchen and closet organizing products and hardware in styles or finishes that better coordinate or match common themes or color schemes,â he says.
Lawser adds that globalization is also affecting industry trends. âNorth American moulding and millwork producers have been focusing more on products that are lower volume, require more customization and are not subject to such intense import competition,â he says. âGlobalization will continue to push the woodworking industry into custom manufacturing and niche marketing.â
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