After a strong IWF show and despite an uncertain political climate most industry leaders are optimistic about the outlook for woodworking companies in 2017. We talked to a number of experienced woodworking executives from several segments of the industry who are known for their thoughtful take on where business is going. Here are their responses.
General predictions for 2017
Taking a broad brush, most of the executives we spoke with painted a rosy picture for 2017. They were buoyed by a strong year in 2016 capped with the very successful IWF trade show.
Stephan Waltman, vice president – communication, Stiles Machinery Inc., said, “My prediction for 2017 is very positive. I believe that all segments of our business are enthusiastic about their future and they are active with adding staff and capabilities. Experts are reporting strong economics and whoever might be president is not an issue. There are many great programs in place to energize the labor force and so I am very optimistic.”
Jamison Scott, EVP/Corporate officer, Air Handling Systems, and a past president of the Wood Machinery Manufacturers of America described himself as “cautiously optimistic.” He pointed to IWF as a barometer. “Best show we had in 12 years,” he said. “Very good attendance and quality leads which has led to increased sales. Those investing in woodworking machinery lead me to believe the industry itself is preparing for future growth. While housing numbers are still soft, baby boomers are downsizing, the millennial generation is entering the housing market and population continues to grow, all needing housing options, many of which lack in availability.”
Todd Vogelsinger, director of marketing, Columbia Forest Products, says that uncertainties are a fact of life in today’s business climate, but that won’t hold back growth. “It’s clear that there is tremendous uncertainty in the business community around interest rates, regulation, healthcare costs, and many of the same issues we’ve been struggling with for years,” he said. But he added, “We do see signs that the consumer is actually positioned to open their wallets and start circulating cash toward cabinets and furniture. One of our largest customers told us this week that they see the consumer as a real tailwind in 2017, pointing to the first wave of millennials starting to form households and buy their first home. We believe that cabinet and furniture manufacturing in North America is still in a growth cycle for the next few years.”
Taking a look at the new year from the perspective of small to medium-size custom shops, Matt Krig, owner, Northland Woodworks, and president of the Cabinet Makers Association, says there is “a lot of optimism.” He said, “IWF was a frenzy of new ideas and methods as well as robotic lines and add-ons coming into reach for medium-size custom shop. My hope is the automation and software component will reshape the image and opportunities in our industry to be prestigious again. A couple of years ago there would be a great divide between the shops with ‘big iron’ and shops less likely to adopt CNC routers. I was completely blind at the time to the up and coming small frame CNC phenomenon that has leveled the playing field again, however. the cost to entry in this industry has increased many fold.”
Change brought on by a rising economy is how Ken Frye, executive project manager, KCD Software, sees 2017: “With new growth in the marketplace, it reflects in the demand for more woodworking products.”
Demands for new technology will drive business, according to Peter Tuenker, managing director, IMA Schelling America. “We are expecting another strong year for our business because these days our customers invest because they know they have to streamline and automate processes to gain productivity or they introduce new products that require different technology,” he said. “These days there is a lot of commonality between the way we do business in North America and Europe. This wasn’t the case until a few years ago. The situation has changed recently, and a big group of our customers have stopped worrying about China and are now focusing on their North American competitors again. A great example is the office furniture industry. Their business model demands great flexibility in product offerings and quickness to market. The only companies who can offer similar services to customers are other North American companies. Again, this is very similar to what we are seeing in Europe.”
Looking at some specific market segments, these same experts pointed to how they expect 2017 to perform for different areas of interest and specialization.
“The machinery business had the best year ever in 2016, and I don’t see any reason for this to not continue in 2017,” said Waltman of Stiles. “The marketplace is energized with new ideas and challenges to be met. This bodes well for those of us whose business is ideally suited to help meet these issues head on with effective and relevant equipment and services. 2017 will be a great year for machinery suppliers who are ready to serve and not just sell.”
Scott, whose company specializes in dust collection, expects to benefit from renewed investment in machinery. “Every time a new woodworking machine is purchased, the need for dust collection must be ensured,” he said. “Additionally, woodworkers are continually understanding the importance of properly designed and installed dust collection.”
Pointing to a strong housing and remodeling market, Tuenker of IMA-Schelling chimed in with a positive response. “Most of our customers are industrial panel processing companies in the kitchen, office or residential furniture segments. We also do a lot of work with architectural woodworking companies. We have seen substantial gains for all of these companies over the past four years and we don’t see any changes for 2017,” he said.
On the materials side of the equation, Vogelsinger of Columbia Forest Products points to regulation and import issues. “Domestic hardwood plywood production continues to be challenged by lower-cost imports, whether from Asia or, with today’s strong dollar, Europe and South America,” he said. “With the new EPA formaldehyde rule coming into play, those of us who are equipped to provide a highly-qualified formaldehyde-free panel product – and the rigorous testing and paperwork credentials that will be part of the compliance regimen - will be distinguished as true ‘safe harbors’ in a field that’s about to go through some interesting challenges. The early word we’re hearing is that the EPA rule will make CARB look like a cakewalk in terms of the exacting documentation that will be required for composite wood product manufacturers and users.”
Residential cabinetry and closets
In the residential cabinetry and closets markets, experts point to a number of issues that will affect the coming year, but they remained positive.
“Labor shortages will continue to plague our industry, driving wages higher, in turn skyrocketing costs for custom goods as we have entered a wage and benefit race to find and retain woodworkers,” said Krig, who runs a custom shop in Wisconsin. “Our primary focus is the residential market, which is going very strong. There is a flurry of activity as we see first-time home buyers entering the market and quickly scooping so-called starter homes. Baby Boomer and empty nester downsizing have created a strong remodeling component to our business, as well,” he said. “Remodels are taking place a room at a time rather than as the old style of moving out and tearing an entire house apart from the inside out and doing the kitchens and all of the baths.”
Still Krig expresses some caution. “There is a bit of a nagging feeling of uncertainty and fear that the bottom could fall out at any time,” he said. “Some fellow CMA members are also sharing our reluctance to borrow any money to fund rapid growth for fear of getting caught in another period of hard times. For the moment, the good times are here again for our market segment. The projects are smaller in scale, but the details are greater, and the costs are greater than before.”
Frye of KCD Software also pointed the power of the housing market to boost the industry. “The custom cabinet and closet segment of the marketplace will continue to be extremely busy,” he said. “The key to the cabinet and closet makers’ success is to streamline their custom process, without compromising their quality.”
Trends to watch in 2017
Anticipating trends can boost success dramatically, so we asked our forecasters to spotlight particular trends they see for the coming year.
Waltman or Stiles said, “The one significant trend of 2017 will be material handling solutions. IWF 2016 was a perfect example of this focus; with many of the top suppliers showing material handling solutions from simple pick-and-place devices to the extremely effective storage-and-retrieval systems like the one shown in the Stiles booth.”
Technology is the top trend for Scott at Air Handling. “Improvements in technology while a cliché, is still valid in 2017,” he said. “Again IWF brings the newest technology to the industry and in many cases with the lead times coming out of the show, many will just be seeing the full benefits of their investments in early 2017 helping them be more efficient in the future.”
Design and quality are the important watch words for Vogelsinger at Columbia Forest Products. “A lot is happening on the design side to stoke demand through color and texture. And it’s a great time for the consumer, because they’ll be benefitting from the focus on style and faster availability,” he said. “Quality is the real differentiator, and we believe there will be a gap forming between the stylish but flimsy imported products and domestically-produced finished goods. On the individual sale, wood finished goods will have to compete on true and lasting value.”
Euro style and diverse design themes are the big trends seen by Krig of the CMA. “The days of homes with the same door styles, species and finish throughout a home are gone,” he said. “Each room seems to have its own theme.” He also noted a key business trend that will affect the makeup of custom shops. “We are seeing an unprecedented wave of successful shop owners who are reaching retirement age and will be faced with the choice of exit strategy,” he said. “It will be interesting to see what happens to a lot of companies over the next 24 months.”
Technology is the trend on the mind of Frye at KCD. “In 2017, custom cabinet and closet makers will gravitate toward technology to help them with their processes,” he said. “They will look for easy to use custom design software with more built-in ready-to-go production options. They will look to upgrade to new state-of-the-art CNC equipment, to using new fastener systems, to outsourcing doors, drawers, and pre-cut cabinet parts.”
Frye also pointed to the introduction of new innovative fastener systems, which he thinks will affect more than just how cabinets are put together. “We will see added strength and the speed-up of the production process of cabinets and closets,” he said. He also sees continuing growth in outsourcing.
“Productivity gains, labor shortage and product diversification are driving the need of our customers for more and more automation and the need to optimize manufacturing processes,” Tuenker of IMA-Schelling. “We heard so much talk lately about Industry 4.0, Internet of Things, Smart Factory, etc. that all describe one thing: the need for manufacturers to gain control over their manufacturing processes by having the data available to show them what they are making and how well they are doing while they are making it. This data readily available to them allows them to make smart decisions in a very short period of time.” He said achieving that knowledge and level of technology will be “the number one area that our customers will be looking at us for in 2017.”