Focusing on the future - Anybody's guess

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Focusing on the future
Small shops are big business
Drawers, legs and more
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Anybody's guess
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Sherwood works primarily with architects and interior designers, and on rare occasions directly with clients. Some homeowners are insistent that everything be made in Sherwood’s shop, regardless of the price.

“We do 5,000- to 6,000-sq.-ft. houses. And we find a lot of [our customers] are interested in having craftsmen doing the work. They don’t want a manufactured product. We often hear from customers asking that we build everything here, don’t you? And I like to say yes.

“I know how much it costs me, exactly, to produce a dovetail drawer. We use a Porter-Cable jig and a router. I have one guy that can produce three drawers an hour and another guy, two doors an hour. My shop rate is $60 an hour. The drawers are ready when I want them ready. I don’t have to have them sitting on the floor here for two weeks. We make them a couple days before we need them.”

Recently, Sherwood has found that his customers love the stainless-steel drawers from Blum. The shop needs are minimal: cut the bottom and back of the boxes; the sides of the drawer are stainless steel, and the bottom is a stainless-steel contact paper Sherwood buys from Outwater Plastics. The drawer front is the design of the kitchen and it takes about 10 minutes of labor to assemble each drawer.

Anybody’s guess
The future of the wood components industry has even the prognosticators unable to predict what is likely to happen in the next few years. The uncertainties are too numerous to shed any reliable light on where the industry is headed. Energy costs, labor costs, technological advancements, a horrible housing market, a fair remodeling market, the credit crunch, an increased awareness of green products, the potential of new markets, and even the upcoming presidential election, are all factors that will help determine the industry’s course.

The commercial market is presently more profitable than the residential market, but once again, how long that will last is unknown.

“The non-residential construction and remodeling markets have been reasonably good for office buildings, public buildings, hotels, and recreational and healthcare facilities,” Lawser says. “According to Economy.com, non-

residential/commercial construction markets are projected to increase around 14 percent in 2008. However, a 17 percent decline in residential construction is expected in 2008, according to the National Association of Home Builders. So the residential and non-residential markets are moving in opposite directions.”

The remodeling market has been adversely affected by the decline in housing prices which has resulted in lower home equities, while rising energy and food prices have resulted in less disposable income for consumers, adds Lawser.

“However, people still value their homes as their best investment and are willing to use their available resources to remodel and upgrade their current homes. According to the latest Harvard Joint Center for Housing Studies, remodeling is projected to grow much faster and will equal new housing construction spending by 2015.”

“We’ve been blessed to be in the markets [residential and commercial] that we are in,” says Atherholt. “We didn’t do this on purpose. It wasn’t like we said if the residential markets really decline, we need to be on the commercial side. It just happened to be that that’s what we were better at. We’re very good at the custom-molding business; we grind our own tooling, we make a high-quality molding, we produce it to the customer specifications, and we produce it very quickly.”

Lawser says the industry won’t begin to see any real recovery until the financial and credit markets get back to normal and housing inventories work their way down. The good news is demographics, immigration, and the replacement and remodeling of older homes will bring the housing market back, as soon as late 2009. Until then, woodworkers are going to have to innovate and automate to lower costs and become better marketers by focusing on their strengths of shorter lead times, quicker deliveries, providing smaller orders, more customized products, and better service and attention to their customer’s ever-changing needs.

Not everyone in the components business is as optimistic.

“All of our planning would suggest that we don’t anticipate any form of rebound in the marketplace until at least 2010, and we think that when the rebound begins it is going to be very slow. It’s not going to be anything dramatic,” says Watson. “We think it will bottom out in 2009 and then stay flat for a period of time, and maybe in the spring of 2010 we’ll see a little bit of an up-kick.

“With the economy being in the state that it is, what we always say is when the times are good, [for] outsource companies like Conestoga and our competitors, times are very, very good. And when times are bad, times are very, very bad. There’s very little margin for error right now in the business.