Riding the wave of an overall strong North American economy, most wood-based product producers are cautiously bullish about the future, according to the annual FDMC/Cabinet Makers Association survey of North American manufacturers.
But that doesn’t mean there aren’t some bumps in the road, some new, some recurring, according to the 300 woodworkers (92 percent who are owners or senior company officials) who took part in the online survey.
A comment from one respondent in the open-ended part of the survey reflects this perspective: “The last two years have been difficult as a result of the recession. Our business's financial health has suffered. However the situation is improving and we are optimistic about the remainder of this year and into next year.”
Last year’s survey had 59 percent saying they expected a better 2016 than the previous year, compared to significantly more (70 percent) than that number this year as they looked forward to 2018, according to this year’s survey. Overall, most of the respondents said they had a better 2016 business-wise than 2015.
Hiring, pricing challenges
Still, there are ongoing challenges that have lingered for years in the wood industry, chief of which is finding qualified, motivated employees and remaining competitive in an increasingly narrow-margin market. Seventy percent of those answering the survey said employee issues were at the top of their problem/challenge list.
“Our business seems to be rather successful, however we have a hard time finding qualified employees to train who want to work and put in their best effort,” one woodworker said. “We find a lot of employees are looking for a paycheck and the quality of the work in return is not of importance to them.”
Ironically only 20 percent of those answering the survey said they use technical schools to recruit new employees.
Even though finding/training new employees ranked high, the number one (80 percent) business headache are competitors who “low-ball” bids.
Small- to medium-size shops
For the most part, those responding to the survey were businesses with annual sales ranging from $100,000-$250,000 (16 percent) to $250,000-$1 million (26 percent) and $1 million-$5 million (31 percent). Seventy-five percent were producers of kitchen, bathroom and related cabinetry, followed by closets (51 percent). The remaining product focuses were related to interior millwork, built-ins and related products. More than 50 percent said their companies have been in business more than 20 years.
Nearly 60 percent of responders were in the Midwest, Northeast and Southeast United States. About 18 percent were based in Canada. Seventy percent sold to residential customers, while nearly that many marketed to homebuilders and general contractors, too. Architects and interior designers were the third largest sales target at 40 percent.
More than 60 percent installed the cabinets they built, primarily in residential settings. Nearly 70 percent described their market as less than a 50-mile radius to less than 100 miles from their shops of which 67 percent of their primary facilities were owned or rented back to them.
Of cabinet manufacturers, face frame and frameless were equal at about 26 percent with inset cabinets at about 20 percent of the product mix. Pocket screw and blind dado were the preferred construction methods totaling about 50 percent. Plywood (87 percent) and melamine (51 percent) were the primary raw materials used in cabinets. Over 90 percent of manufacturers purchased their panels domestically. The most common outsourced components were countertops, doors and drawer boxes, followed by specialty components and millwork items.
The Internet and other social media were major marketing strategies with more than 90 percent saying they had a website or used other online media to get their messages to customers and potential customers. Last year, 83 percent of responders were using Internet and other social medial to help market their products. Still, face-to-face interaction and word of mouth contacts were strong components in the marketing and sales process.
Growth of CNC
Integration of CNC technology has grown significantly over the years. Last year’s survey reported 55 percent using CNC in the shop with links to in-house design stations. This year, more than 64 percent of manufacturers say they are using CNC and related design software to generate designs and production codes in the shop.
Nearly two thirds said the addition of computer-based manufacturing has “added significant manufacturing capacity.” Almost 85 percent said they are much more or a little more profitable because of the technology. Less than one percent said they are less profitable since adding CNC.
Shop rates, wages
Hourly shop rates ranged widely. The largest proportion of shops in the survey (31 percent) reported shop rates from $51-$75 per hour. That compares to 20 percent who reported rates $76-$100 per hour, 18 percent who listed rates of $26-$50, and just 17 percent who posted rates of $25 per hour or less.
Average employee compensation was a mixed bag, depending on years of employment, job title and other factors. In general, sales managers and general managers drew the highest hourly paycheck with $26-$40 (38 percent) and $41-plus (35 percent). In the shop and in the office, estimators and designers with 10 years experience garnered the top hourly rate of $41-plus, with rates declining depending on length of employment
Finishers, installers, general shop specialists and cabinetmakers with five-plus years on the job were the top in-shop employees, paid at an average hourly rate of $26-$50. (As a caveat, these rates varied with product sector and geography.)
More than 70 percent of owners/senior management said they receive a fixed or variable salary, followed by owners draw (39 percent) and dividends/profit sharing distribution (29 percent). Average monthly salary for owners/senior company officials was $3,500-$4,000. Some 24 percent reported monthly pay of $4,000-$6,000. More than 8 percent pulled in $15,000 or more per month. All these pay rates are consistent with last year’s survey.
For more information about the survey results, contact the Cabinet Makers Association at www.cabinetmakers.org. The CMA has been helping cabinetmakers and professional woodworkers for nearly 20 years with networking opportunities and other resources.
Open-ended comments paint picture of the business
Responders to the FDMC/CMA Benchmark Survey offered personal insights on where their businesses are heading and what the future looks like for the industry in general. Here is just a sampling:
“Cabinetmakers are cutting their own throats by participating in online bidding. Letting GC's control your destiny is foolhardy.”
“Overall our business is good, but finding workers who actually care about the job they do is extremely challenging. Our local economy is not that great, so I'm surprised by this.”
“I'm actually pretty frustrated, having been in the trade for 38 years, 33 with my own business. I have created a somewhat successful business, but with not much profit yearly. It's tough in our area, there's a Home Depot, Lowes, Ikea, or China-made store popping up in every city. 10-15 years ago if you wanted cabinets you'd call a cabinet shop, now you can get plans made up for free, or walk into a store or huge warehouse and pull off the shelf for 20 cents on the dollar. We are a high-end shop and have no desire to drop my quality to be competitive with the lower levels.”
“Business is very strong right now. The DFW forecast is to stay strong through 2018 or 2019.”
“Our business has updated equipment and facility, with low overhead cost of repairs, and financially stable. Local economy is above the national average, with the outlook for the next few years being fairly positive.”
“The overall health of our company is good. Local economy has been stagnant but picking up. Skilled reliable employees will affect woodworking industry.”
”Business is booming and we should be busy through the end of the year and into 2018. The industry in general is humming along.”
“Business is great! Costs constantly increasing so margin narrows. Housing market in GTA has slowed and renovations have increased dramatically. Currently we are as busy as ever. High-end custom designers seem to be a challenge to find, especially those who that can integrate into our shop. As long as we continue to provide high quality cabinets, design etc., our company should continue to prosper.”
“Our industry battles with the struggle of operational efficiency. We have great equipment, however, the software required to utilize this always comes with stumbling blocks. A simple, order input/product output software-to-machine doesn't exist. We are striving to bridge this gap, however it seems our North American software, and German machines don't play well together.”
“We're a small shop. Business is exceeding the prior year since we began in 2008. I worry that I'm leaving time on the table by hand producing my plans, but I have no idea where to find reasonable design software that does what a drawing can do and that offers training. Our market seems healthy right now.”
“We need smart customers, not ignorant. We need help to find tomorrow's customers today.”
“Our business has more than doubled in the past 4 years.”
“The industry is still plagued by ever more demanding deadlines and difficulties collecting receivables. The good news is there is still plenty of work to be had and enough quality customers that appreciate good service to make it all worthwhile.”
“This would be a lot more fun if clients were more realistic about their deadlines and the need to pay for the work they receive!”
“We have steadily grown over the last 8 years and the biggest challenge is managing the rapid growth. It has been a great journey and the industry will be strong for a few more years yet before leveling off. “