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The 13th Annual Report

WOOD 100 Companies Grin and 'Bear' It

Companies focus on a variety of methods to combat a down economy.

By Bernadette Freund and Karen M. Koenig

There's no "bull" about it. Business is looking up for most of this year's WOOD 100 companies.

Despite the social and economic havoc created by Sept. 11 terrorist attacks, which curtailed sales for many woodworking firms, this year's crop of WOOD 100 companies fine-tuned their strategies and skills to ride through the rocky times. Their combined 2001 sales hit the $2.1 billion mark, an increase of 26% over their 2000 total.

Skewing the figures is the fact that this year's top moneymaker -MasterBrand Cabinets - singlehandedly accounts for $1.1 billion in sales. Without MasterBrand in the mix, the combined 2001 sales drop to $960 million, up only 15% from 2000 figures.

In either instance, the numbers are impressive. While many woodworking firms have struggled in a down economy, 35 companies in this year's 13th Annual WOOD 100 Report averaged more than 26% growth, while 61 companies grew more than 15%.

Overcoming the Slow Down
Both large and small companies alike were hit hard in the latter part of 2001, following the events of Sept. 11. Based on the results of this year's poll, many are still reeling from the blow. Approximately half of this year's participants ranked the economy as their number one concern. (See Concerns chart, below.)

"The economy is any company's biggest concern when it comes to its future and stability," says the president of a Texas-based WOOD 100 company. "Ever since Sept. 11, 2001, the economy in our nation as a whole has taken a downturn - but it is improving. Our company will just have to continue to work hard on building quality relationships and products that will keep our clients pleased."

Which factor contributed most to your company's success since Jan. 1, 1999?
Customer Service
34%
New Product Development
17%
Increased Productivity
15%
Marketing Program
15%
Employee Skills
11%
Other
5%
Quality Control
3%

"For the last three years, we have been working to diversify our business," says a component manufacturer from North Carolina. "Hopefully, when one industry slows down, we will still have other product lines to keep us moving forward."

"In an uncertain economy a firm needs to be able to react quickly to changes in demand," agrees one Michigan-based component manufacturer. "Expanding into new products and markets helps to reduce the risk of depending on one or two market segments."

Adds the marketing director from a Midwest company, "While overall economic shifts are outside our immediate control, we have maintained growth by focusing on our relationship with our customers and on internal quality control."

Service Is Key
With the economy in a slump, woodworking firms have found other methods of maintaining and attracting new business. It is no surprise that 34% of the WOOD 100 companies say they believe their customer service policies have been key to their success. Many companies, especially custom woodworkers, say they stress their reputation, total project coordination, on-time delivery and quality to customers. Also ranking high on the list were new marketing strategies and new product developments. (See Contributing Factors chart.)

"Our customer service encompasses total project coordination and service to our customers," says the president of one millwork company. "A result of this is that customers keep coming back to us with new projects."

"The jobs we promise are delivered on time and in top condition," says another millwork owner and president. "Our work can be depended upon and is consistently reliable."

Companies are using the old "tried and true," as well as new, methods for attracting new customers to their base. Cited by many were: highly-visual catalogs, regional and national advertising programs, as well as showroom displays.

One Texas-based caseworks company has even produced a virtual tour of its plant. "This gives prospective clients a comfortable feeling of knowing who they are working with."

Maintaining Profit Margins
As customers shop for the best price, manufacturers are doing "whatever it takes" to maintain a positive profit margin. In a recent survey, 21% of the WOOD 100 participants said that their profit margins are significantly higher compared to three years ago, while another 37% said they were higher. Only 9% said their profit margins have dropped. (See Profit Margins chart.)

Compared to three years ago, how are your company's profit margins?
Significantly Higher
22%
Higher
38%
Same
29%
Lower
9%
Significantly Lower
2%

"Making a profit is tough to do in a competitive marketplace, yet it must be the greatest concern for any business," says the president of a California-based custom shop. "Our solution is to continue to provide a consistently superior end product while addressing our costs carefully and assuring that our pricing is relatively competitive, while still providing us with a tangible profit margin."

"To maintain profit margins we will try not to get caught in a downward spiral," adds the president of an East Coast firm. "We don't want our products to be thought of as a commodity, but rather as a branded top quality offering deserving a healthy but fair price."

"Profit margins have been impacted primarily by pricing issues," agrees the vice president of a New Jersey-based company. "Many customers are uninformed about the product differences between competitors in our industry, creating unsubstantiated price-cutting for all and a long-term deflation in the progress of product innovation, product quality and the addition and retention of higher-paid, higher-skilled employees."

Retaining Good Workers
The problem is nationwide. In a survey of WOOD 100 participants, 65 companies said that employee skills or recruitment are among their top three concerns.

"All an employer can do is continue to look for better qualified employees," says the owner and president of a Texas-based millwork firm. "A company needs to offer a 401k, both monetary and non-monetary benefits as well as encourage job performance to keep employees happy."

One Pennsylvania-based manufacturer says the key is to make a stronger, more informed staff. "By increasing our commitment to open books management and employee empowerment, we can make our staff stronger, which will convert into increased sales and a better product with higher quality."

Another solution cited by some is to automate their shops and/or implement training programs.

"We must become more efficient in the shop. Better scheduling, eliminating mistakes are the keys in 'just-in-time' manufacturing," says the president of southern cabinet company. "We are currently planning new systems to streamline our manufacturing and assembly operations."

"Automate!" adds the president of an East Coast components company. "We now have a very good engineering department that can build or rebuild equipment. If we cannot buy it, we build it."

Top Concerns First Second Third Total
Economy
49
17
8
74
Employee Recruitment
14
13
9
36
Profit Margins
12
8
15
35
Price Cutting
9
20
10
39
Employee Skills
6
16
7
29
Health Benefit Costs
3
7
17
27
Design Copying
2
1
3
6
Lumber/ Composite Costs
2
1
3
6
Wood Quality/ Availability
1
3
8
12
Workers' Compensation
0
7
11
18
Imports
0
5
5
10
Finishing VOCs
0
2
2
4
Other
2
0
2
4
Total Responses: 100 surveys

"By adding more automation in our production, we are eliminating the need for highly skilled employees," says the vice president of another cabinet shop. "We are also going to develop our own in-house training facility for our installation team."

Wrestling the Bear
Despite the slowed economy, WOOD 100 participants predict their service and marketing efforts will continue to boost sales upwards.

Companies are optimistic about 2002 sales, with 27% saying the year will be their "Best Ever" and 56% predicting it will be "Good." Not one single company is predicting a "Poor" or "Terrible" turnout for 2002 sales.

"(We'll need to continue to) explore new market segments and keep up-to-date with technology to maintain the best value for our clients," says a spokesman for a New York-based firm. "We invest in people as well as equipment."

The president of a Minnesota-based components company adds his own twist. His strategy, which will likely be followed by many, is:

"One: I'm going to keep my fingers crossed. Two: We'll develop new markets and products. Three: We'll develop contingency plans for reduced volume. Four: We'll work to keep debt low."

And the number five mantra cited by many including one Missouri company president: "Continue to offer a high-quality product at an affordable price - without pricing ourselves out of business."

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