It probably is not surprising to anyone reading this that the major objective of a cabinet shop, flooring mill, or even your own operation is not to produce sanding dust from organic rectangular parallelepipeds from truncated cones, but rather is to make money.
So, how are we going to make more money in the future? Putting more wood products into the market, that is, increasing production, is not the solution for increasing profits for the future.
Remember the statement I have made before that you can make cabinets or furniture all day, but you do not make any profit until they are sold. So, rather, we need more demand, a demand that exceeds the market size we had ten years ago.
Exports and housing
My crystal ball says that the cheap sources of wood that offshore operations have been using is or has come to an end. As the manufacturing cost of cabinets, furniture and related products is maybe 75 percent wood, when the wood cost rises, so does the wood product cost. So, I see exports decreasing.
Before checking my crystal ball, it is important to note that remodeling expenditures are now equal to new home expenditures. Also, note that the new house construction starts are finally over 1 million units again. But here is the key:
Ask yourself, “Will increased remodeling and new home construction help my sales?” Ten years ago, the answer was “Yes !” But is that the correct answer today?
Cabinets. Why should you buy “Made in U.S.A.” cabinets instead of foreign made? If you cannot answer this, how can we expect the consumer to answer it and then buy American-made cabinets?
Flooring. There is big competition from offshore with different colors, species and designs. There is huge competition from grass; that is, bamboo. Bamboo is touted as being a “green” product, but maybe our red oak floors are also. Do we promote that fact? There is big growth in ipe (from Brazil) flooring for exterior use.
Again, ask yourself “Why should the consumer buy U.S.A.-made flooring?” Can we make our “Made in U.S.A.” flooring better?
Millwork. Is there money to be made here? Can the Eastern hardwood region compete with western softwoods and offshore? One new competitor is acetylized wood that is coming out of Europe. It is decay resistant, stable with moisture change, strong and easy to work (one brand is Accoya). Or what about the thermally treated wood that is gaining in popularity?
Furniture. Do we have furniture plants in the United States that need more wood? Will the U.S. furniture industry grow in the next few years or will we continue to get 80 percent of the furniture sold in the U.S. from offshore? Does furniture made with American woods or “Made in the U.S.A.” have any benefits--perceived or real benefits?
Transportation and tie demand
Crossties for the railroads mean large energy savings and cost savings for long-haul transportation. Also there is a large increase in using railroads to move oil safely without using a pipeline. There are now 20,000 crude oil trains a year (2012) in the Midwest going to New Orleans, with 118 tankers hauling about $700,000 per train. We will be needing more railroad ties. Also, the Fiscal Cliff bill passed in January includes a 50 percent tax credit for small railroad lines to improve their tracks. Tie demand will be growing and you can bet that they will pay whatever it takes to keep the tracks in good repair and the trains rolling. Why should you be concerned about railroad ties? As these prices rise, we will see the prices of lumber rise as well.
The new marketplace
My crystal ball also says there are now, and we will see many more, medium and small secondary wood manufacturers. We will see more small, customized orders within our industry. At the least, we will have to adopt new methods of market development and distribution. Overall, these customers will be more demanding on quality. This change is going to favor the smaller producer; medium and larger producers may have to change to efficiently accommodate these changes, if they want to get on the bandwagon.
Also, there will be less emphasis on oak lumber. This means that two-thirds of our potential sales will be a species other than oak.
Add to the list of future activities the idea that high quality, good service for small customers is going to be very important.
Excuses and reasons to buy
Did you suffer losses in sales during the past four to six years? Why can’t you sell 120 percent of what you produced last year and let your competitor or neighbor suffer poor sales?
Ask yourself, “Why would someone buy from my competitors and not from me?” Hopefully you have a good answer as to why your product is indeed better. In fact, ask yourself every day, “What can I do to make my product more valuable--more valuable to the consumer?”
Some ideas include
--Have a guarantee.
--Make customer satisfaction goal. If not totally satisfied, why not?
--Use your own grades...customer orientation
--Be as proficient in marketing as in manufacturing
--Maybe the manufacturing association that you belong to should trade mark so special names for the wood--names like prairie oak, arctic white hard maple, badger red oak, Kickapoo ash, everlasting northern cedar, just like “denim pine” a trademark that is--Guarantee your lumber 100 percent
--Increase your customer orientation
--Make everything we do for a company to appear more personal
--Answer the phone with a real person rather than a machine
--Show quality in everything you do -- ads, internet, phone, outside sign, lumber markings.
--Be able to provide whatever the customer wants--even If you Have to buy it on the outside.
Indeed, here we have the road map for success for the immediate future in our industry.
Have something to say? Share your thoughts with us in the comments below.