Component manufacturers look to new products for sales growth opportunities
August 15, 2011 | 11:10 am CDT

The decline in 2009 of both the commercial and residential markets hit the components industry hard, says Steve Lawser, executive director of the Wood Component Manufacturers Assn. But, he adds, the forecast for 2010 appears to be better.
“According to the latest WCMA Dimension & Component Market Study, WCMA members are forecasting their dimension and component sales to increase by an average of 12.5 percent in 2010,” Lawser says, adding that several companies noted a pick-up in demand right after the holidays. “They also gave positive projections for net income, plant capacity utilization and capital expenditures.”

Members of the Wood Products Manufacturers Assn. also are showing cautious optimism following a year of double-digit sales declines. “For the upcoming year companies that are producing architectural millwork or supplying companies that are involved with commercial projects the prediction is business will be flat at best for the first half of the year, with slight improvement for the third and fourth quarters,” notes Michelle Arsenault, financial manager of the WPMA. “Companies that are offering new and innovative products or niche items are predicting a slight increase over 2009 sales.” She adds that
members are also seeing a return of product volume that had moved overseas.

Challenges & Opportunities
Still, price-cutting by overseas and domestic competitors is just one of the concerns facing the industry. Others include: profit margins, employee retention, lumber supply, and the lack of available credit. “Bankers and credit sources have reduced credit lines or eliminated them altogether,” Arsenault says. “Unless lending restrictions are relaxed there will be a severe shortage of new projects started, which equates to less and less new work being put out to bid.”

Lawser and Arsenault say members instead see growth coming from other areas, including the development of new products and applications. “[Component manufacturers] can’t depend on any one customer or end-use market anymore,” Lawser says. “They are also focusing on producing more ‘green’ products and many are becoming chain-of-custody certified. The green issue could turn into a real wild card for domestic wood product producers.”

Another “wild card” in which domestic manufacturers have an advantage is in the custom and specialty products markets. “[These] normally require shorter lead times and are smaller orders, which give domestic producers the advantage over offshore producers,” Lawser adds.

According to information from the WCMA, the
furniture industry was the dominant end-use market in
1984, accounting for nearly two-thirds of component
sales, before imports had their impact. The building
products industry grew from 10% of component sales
in 1984 to an all-time high of 46% during peak housing
construction, and accounts for one-third of component
sales today. The cabinet industry is the second largest
end-use market, with 27% of sales.

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