Part III: Current and future trends.

Trends to Consider

There are many trends in the world marketplaces today that deserve your thoughtful analysis when plotting a course for your future. A few of them are:

• The aging population in the United States
• Requirements today for shorter lead times
• Fracturing of companies (outsourcing)
• Continuing immigration
• Green branding
• Emerging markets

During the past two months I have briefly looked at the current state of the wood products industry in light of the current economy and, more importantly, a rapidly changing and complex world. I reviewed the necessity of targeting customers that want products and services that we can provide. I reminded you that meeting the requirements of your target customers is the key to your success, and that of our industry.

I also accused our industry of having had a snail mentality over the past five decades, wherein we have largely shunned innovative thinking and new technology while the rest of the world left us behind. This month I want to complete this series by challenging every company to look at the domestic and export markets and think outside the box while considering the current and future trends of the “New World.” If your company will shake off the snail mentality, and genuinely think creatively, then it can confidently forge ahead with a vibrant business plan.

Analyze the Trends

The way for your company, and our industry, to move forward is to become proactive in making positive change in light of the current and future trends. The further out your company can see, the more long-term viability it will have. This basic truth — coupled with the fact that you must meet your customers’ unique requirements — is a trait of successful companies. The leaders are those that try to stay one step ahead of trends and competition. Those who do not, will perish.

Using just these two pages, I cannot analyze the way the “New World” will affect your business, but you can. Listed below are some issues that deserve serious deliberation as you think of how your company should be structured to go to market, now and in the future. There are hundreds more issues and trends unique to your specific market that should be analyzed. The best strategies are not going to be obvious, but something beyond that. Here are a few categories to stimulate your thinking.

Aging U.S. Market

The U.S. market is aging, with baby boomers retiring as each day passes. That means more trips for health care. What kind of opportunities for wood products does this open up? Think outside the box. Are there products used in the health care industry that can be substituted with wood?

With a volatile financial market, what will seniors want to do about their homes? Will they downsize as soon as they can and buy condos? Will they continue to live at home instead of a nursing home, and will that demand different furniture or cabinetry because of their age and agility? What cabinetry innovations would help meet the needs of this target market?

Is there a need for smaller scale, softer-sitting furniture for those in their “golden years?” What products could you offer a remodeler that would allow him to transform a kitchen or bathroom into a more senior friendly one?

Shorter Lead Times

My wife and daughter went looking for a fully upholstered glider last week to use in the nursery of the baby my daughter and her husband are expecting in early February. I asked Meg, “Why are you doing this so early — the baby is not due for six months?” “Lead times are 12 weeks, Dad,” was the answer.

This retailer and its supplier are living in the snail world for sure. Buyers of nursery furniture for birth or adopted children do not want to wait that long. Here is another opportunity to meet customers’ needs instead of dictating to them how they will have to buy your products.

With container transport costs from China now near $9,000 and lead times for all sorts of furniture products stretched out due to lengthy shipping lanes, it is time to re-think the entire furniture value chain. Someone asked me the other day what was an acceptable lead time. My answer: Shorter. Those with the best definition of shorter for their customer base will get the lion’s share of the business. It is time to think days and not weeks.

Anita Shaw reported in Kitchen and Bath Design News that a design/build company in California developed the “One Week Bath” to satisfy customers who did not want the bathroom remodeling job to stretch over weeks. This illustrates how one company has defined shorter to meet customer requirements. Give this company a gold medal!

Fracturing of Companies

When the computer age began, most companies were fully integrated, much like the early years of the automobile industry. Whatever they needed, they manufactured.

Today, Hewlett Packard buys cabinets from one company, software from another, memory chips elsewhere, hard drives and chips from highly specialized factories, and so on. HP and others have fractured and outsourced to those who specialize and produce with shorter lead times and lower costs — and this does not always mean going overseas.

Using this model, I have seen the re-birth of clusters from Vermont to Bangladesh, because they were willing to work together for a common cause — greater market share. They demand better education and training for their employees and are going through the exercises I have been talking about for these past three months. They look to partner with companies, here and abroad, that can help them cut costs and better serve customers. The dying wood products manufacturing clusters in this country need to work together to regain lost market share, with innovative ways to address the market today.

The U.S. furniture and cabinet industries are fracturing and becoming more competitive because of this. However, many companies still opt to be all things to all people — resulting in high costs and long lead times.

Green Branding

As I mentioned last month, “green” is no longer a fad, but an established consumer preference. Anyone who chooses to ignore this will be left behind. Make your products “green” with certified wood, reclaimed wood, by using less energy, generating less pollution, etc., so you can tag that to your brand and get recognition from this huge emerging market. I again remind you of the Dollars & Sense of Going Green Seminar in Indianapolis on Oct. 28-29. For information, visit www.greenwoodseminar.com.

New Workforce

Here in the United States, we are producing about 2.0 children per family. Our population growth is coming from immigrants and the larger families they produce. The wood products industry must realize that this new workforce is necessary for our own factories and also that these workers will serve as an additional emerging market opportunity. We must, however, be willing to help integrate them into our society and help educators find effective ways of doing this.

 Emerging Markets

Speaking of emerging markets, they are popping up all around us. I have already mentioned this, but it deserves repeating: Stop thinking of third world countries as competitors and start looking at them as potential customers. Find ways to create a demand for your products by targeting the emerging middle classes in these countries. An aging population and an increasing number of immigrants also represent additional emerging markets, with unique opportunities for those willing use their creativity.

Summary

I hope these columns have spurred you to research and discover new markets for your company and learn how to satisfy the requirements of the customers within. There is no simple way to develop a plan to grab and maintain market share in these groups. It is going to take dedication by the management of your company and the fortitude to do what it takes to follow through.

The world really is changing fast if you had not yet realized it. Begin to catch up now.

Tom Dossenbach is the president of Dossenbach Associates Inc., a Sanford, NC-based international consulting and research firm. Contact him at (919) 775-5017
or e-mail tfd@dossenbach.com. Visit his Web site at www.dossenbach.com. Past Management Matters columns are archived here.

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