Survey Says Good Help is Hard to Find

Representatives of top architectural woodworkers and store fixture companies

remain optimistic about 1998 despite several areas of concern.

BY SAM GAZDZIAK

Top 25 chart

Store fixture manufacturers and architectural woodworkers should have a banner year in 1998, provided they can find enough good employees to work in their facilities, according to Wood and Wood Products' 11th annual Top 25 survey. Employee skills have become the number one worry among the companies surveyed this year. Seventy-five percent of the company executives are either very or extremely concerned about the current level of workforce skills, and 31 percent say they are more concerned than they were compared to one year ago.

But despite their fret over finding and keeping enough productive employees, 61 percent of the companies who participated in the survey said 1997 was either a very good year or their best year ever. Not one company gave 1997 a "poor" or "terrible" mark. Most companies seem enthusiastic about 1998, too. Only 5 percent of the companies have lower expectations for this year, while three-quarters of the manufacturers believe it will be greater.

Help Wanted

It's gotten more difficult to find available skilled workers because of the U.S. economy, according to John Schlegel, president & CEO of Hamilton Fixtures of Hamilton, OH. "We are in a virtual full-employment economy," he explained. "In the areas where we operate, just about everyone who wants a job has one." There is also competition among companies operating in a given area to hire the best workers, he said.

Terrell, TX-based Madix Store Fixtures also has experienced the staffing problem. The company is opening a factory in Alabama and faces the task of hiring hundreds of qualified workers to fill it. "The economy is extremely strong right now," said John Clontz, assistant marketing manager at Madix, "and it's a challenge to find and maintain employees."

Some of the executives in the survey said their companies have taken it upon themselves to develop their own work force. E & E Group of Lawrence, KS, for example, is establishing its own training university. The National Association of Store Fixture Manufacturers also may be able to provide some relief. Schlegel, who is the president of NASFM, said the association is working with trade and vocational schools to train people for the industry. This would lead to an influx of prospective employees.

Given the difficulties in finding new workers, many companies are concerned with keeping the employees they already have. "We have committed ourselves to training and paying people an incentive to encourage them to learn different skills," Schlegel said. Hamilton Fixtures also has a gain-sharing program, wherein employees can make up to an additional 10 percent if the company achieves certain goals or levels. Businesses have developed many other incentives in order to retain their skilled workers. For example, every Thanksgiving Madix has a car giveaway among employees without any absences or safety mishaps.

Competing Against Price Cutting

Another concern facing the industry is price cutting by competition. David Schemery, president of Sun Prairie, WI-based Famous Fixtures before it was purchased last month by L.A. Darling Co., mentioned that his company's gravest challenge was "the rise and proliferation of small manufacturers who undercut us with their 'survival pricing.'" Elvin Schmidt, president of MII Inc. of Lincoln, IL, said, "It's an attitude going through the American industries. It (price cutting) is an attempt to differentiate yourself."

Among the companies surveyed, 70 percent expressed a high level of concern about price cutting. It is also the fastest growing concern in the store fixture/architectural woodworking industry, with almost half saying that they are more worried about it in 1998 than they had been in 1997.

In the wake of price-cutting trends, companies have had to reevaluate the way they do business and make themselves more cost-effective. Streamlining was one of the most common events of 1997, according to the survey.

"It's forcing us to be more economical," said Vic Romano, president of Vira Manufacturing of Rahway, NJ. To that effect, Vira is consolidating four locations into one facility, a move which "lets us achieve lower pricing," Romano said.

"We have worked hard to lower overhead and increase efficiency so we can be more competitive," said Hamilton Fixture's Schlegel, whose company has also consolidated manufacturing recently. "We have exited some market categories where we didn't feel we could be more competitive." Schlegel said Hamilton has used value engineering rather than bidding to save customers money. By recommending more cost-effective substitute materials or processes to the customer, Hamilton is able to produce similar-quality products at lower costs.

More Causes for Concern

Schlegel said he is also concerned about government regulations, including air quality, wood dust and other environmental standards. "The regulations are getting increasingly complex, and that causes us to have to be really careful about making sure we're doing everything we have to do," he explained. "Our goal is to be 100 percent compliant, but that's getting harder to do."

"We have programs in place, and we're conforming to every regulation," said James Vecchione, vice president of Monarch Industries of Providence, RI, "but it's a strain on us."

Many companies are dealing with the diverse standards required by various state governments. Madix Store Fixtures has factories in several states, including Texas and Alabama, so it has several sets of regulations with which to deal.

The varying degrees of government regulation also benefit the competition, according to Schlegel. "While we're spending money to be more compliant, people who aren't have an unfair cost advantage," he said. "Either the laws aren't as stringent or regulators aren't enforcing them at the same levels."

Keeping the government satisfied can be an expensive and challenging task. Schlegel said that finishing compliance often involves having to convert to different materials and processes. Madix, for example, has changed from a high-solids paint to a powder coating with its products. "Environmental regulations are certainly for the good of all," said Clontz, "but it requires us to come up with more inventive techniques."

Some businesses have a hard time keeping up with the laws that are passed. "More and more government regulations with government agencies are running out of control. Small to medium-size businesses are at risk of being simply forced out of business because we lack the resources needed to fight back and win," said David Berryman, president of Moore's Displays in Houston, TX.

Schmidt of MII also holds the government responsible for the rising cost of some woods. "We've had problems since Bill Clinton went to the West Coast about five years ago (for his historic timber summit)," he said. "He's created a situation on the West Coast and we haven't been able to remedy it."

Schmidt said the problems began when Clinton said he would go straighten out some wood problems, including the controversial policy to protect the Northern spotted owl. As a result of Clinton's policy to curtail logging, Schmidt estimated that the price of pine has increased 25 percent.

The availability of certain wood species is also a concern. Romano said, for example, mahogany has been available in large quantities at one point and then all of a sudden becomes scarce. "Many times we're commissioned to a six-month or a year-long program, and it affects our profitability on the selling price, which we're locked into," he said.

Battle at the Border

Along with domestic competition, foreign competition has also become a problem with some companies, especially those located close to the U.S.-Canadian border. Of those companies that are either extremely or very concerned about foreign competition, half are based on the East Coast.

"It's affected the whole New England market," said Monarch Industries' Vecchione. "With a lot of the architectural woodworking I do, I've noticed there's added Canadian competition." He said that the Canadian millwork companies have several advantages, including a national health care plan and the exchange rate difference, which works in their favor.

Romano said he's also concerned about foreign competition, although he's noticed it more in metal products than wood. "Our quality is much higher, so retailers who want quality stick with us. But there are imports in increasing volume," he said.

As with many other companies, Monarch Industries has altered its production in order to reduce cost. "We're looking towards automation more and more," Vecchione said. "We've installed more CNC equipment. We're looking for simplification."

Despite the causes for concern, most companies surveyed have high hopes for this year's sales.

"Retailers have had a successful 1997," said Schmidt. "They seem to have good cash flows and a willingness to spend money." Vecchione said he's also seen a trend towards more construction this year.

Streamlining is a reason many companies are so optimistic. "We've learned how to very quickly go from the concept to the prototype," said Madix's Clontz. "We've invested in some very expensive software and hardware to automate systems."

Schlegel has also seen how major changes within the company can benefit in the long run. "We've done a lot within the last two years to raise productivity, encourage efficiency and become more competitive in production," he said.

The top companies have also found how valuable versatility can be. "We do design and engineering, so we offer a lot of products," said Romano of Vira Mfg. "It keeps the cost down for the customer, because they don't need to go elsewhere." He added that because Vira makes both wood and metal products customers don't need to worry that the wood parts they got from one manufacturer won't be compatible with the metal parts they got from another.

More often than not, though, it's a company's past work that dictates its success (or lack thereof) in the future.

Clontz said that Madix has more new prospects and bidding opportunities than it has ever had in the past. "A lot of it is because our company has a reputation for doing good jobs and is well-known in the retail business," he said.

Romano said, "We're finding some retailers we work with are awarding us bigger programs because we did well last year." He said the retailers who work with multiple companies tend to drop the unsatisfactory manufacturers and give the slack to the ones that did well.

Top 25 chart

Have something to say? Share your thoughts with us in the comments below.