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Deadlines drive today’s component market

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A look at the wood component industry shows trends of producing smaller batches with shorter lead times at the best possible price, which means it continues to be a buyer’s market.

“The comment that I’ve made for years on the outsourcing component business is that when times are good, they’re very, very good. Everybody is kind of caught in a capacity crisis. But when times are bad, they’re really bad because at that point [customers] are pulling everything in house and trying to keep their own employees engaged and leverage their fixed costs,” says Chris Watson, COO of Conestoga Wood Specialties in East Earl, Pa.

“So the swings you see on the component side are very dramatic right now. They would easily be two to three times the general trends. If the market’s down 10 percent, the component guys are going to be down 20 to 30 percent because everybody’s pulling everything in house. When the market heats up just a little bit, say 7 percent, we’ll be up 15 percent.”

Cabinetry, both residential and commercial, makes up 32 percent of the market, followed by furniture at 21 percent, according to the Wood Components Manufacturers Association. The most often outsourced items are moldings and millwork; cabinet doors and drawer boxes, and cut-to-size blanks.

Competition from foreign manufacturers continues to be a threat, along with a trade imbalance.

“The U.S. is the major exporter of hardwood lumber and logs. But we are the major importer of finished hardwood products like furniture, flooring, staircases, moldings and components,” WCMA executive director Steve Lawser said in a webinar earlier this year. “This needs to change if our secondary wood processing industry is to survive.”

The good news is that total component sales are expected to increase 10 percent in 2012. Strategies for growth include producing smaller batches for a broader customer mix. But pricing remains the biggest hurdle.

“Cost is critical to every decision,” Watson says. “[Customers] are trying to overcome the pricing variables and issues with their customers by selecting more simplistic designs, maybe more traditional and species of material that are more readily available. It’s not that everybody’s just beating you to death on price, but they’re willing to accept a different collection of products to help bring the cost down.

“Once you get past that, it’s really about lead times. We’ve seen a dramatic increase in the lead time requirements of our customer base. In many cases we’ve been forced to cut lead times by as much as 50 percent. They were never really long. We were working off a nine to 10-day complete cycle — and that’s for full custom parts. They’ve dropped to seven-day lead times and now we probably have seven different shipping cycles which range from eight working days down to 24 hours. That’s what it takes right now in order to be competitive.”

Max Hunter, president of Western Dovetail in Vallejo, Calif., says customers are also expecting complete service.

“For example, they want to be able to order all of their drawers from us. That means if it is curved, we have to make it. If it is a drawer insert with lots of dividers, we have to do it. If it is a recycle pullout with compost bins and storage compartments, we need to do that, too. We can’t just make the basic drawers and expect to satisfy our customers.”

“The way it used to be described is cherry picking and that’s what’s happening,” says Watson. “In the past, companies like ours would say we don’t want to deal with the cherry pickers. Now you embrace them. If somebody wants something that you manufacture and you have it, why not, even though it might be a one-time transaction.”

Other trends mentioned by component manufacturers include more demand for prefinished products since fewer shops are doing their own finishing, a higher percentage of orders with solid color finishes and increased activity from the renovation market.

The bottom line is component manufacturers have never been more eager to please their customers. Call it a matter of survival.

“Unlike in the past when everyone was doing well or when everyone was taking a beating, presently there are definitely winners and losers. Now you’re see who are really making good business decisions. They’re picking up market share at the expense of their competitors,” adds Watson.

“If you make a commitment to a customer in terms of a product specification or a delivery date, you better not miss it.”

This article originally appeared in the June 2012 issue.

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