State of North American Hardwood Industry – How …...Industry CAPEX/ Trade shipments Balance Wood HH Furniture 2.1% - 7.0 billion $ Synthetic Rubber 6.5% +0.3 billion$ Plastics

NHLA meeting Atlanta 030918

Urs Buehlmann Jan WiedenbeckNC State University USDA Forest ServiceRaleigh, NC Princeton, WV

Al SchulerUSDA Forest Service Princeton, WV

National Hardwood Lumber Association (NHLA)Atlanta, GASeptember 18, 2003

State of North American Hardwood Industry – How to Compete Globally


OverviewWhat is going on with the US wood products industries – furniture as an exampleSupply chains - importanceHardwood log and lumber markets -globallyPotential for manufacturing improvementStrategies for the future…

Questions/Discussion


U.S. FURNITURE MARKET OUTLOOK

Home building and remodelingPurchasing power and preferencesDemographicsHome sizeCustomized economy


Residential constructionremains healthy

1

2

3

4

5

6

7

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 20020.5

0.7

0.9

1.1

1.3

1.5

1.7

1.9

Re Sales Starts SF starts

Million Re Sales Starts (million)

Source: NAR, NAHB


Consumer Expenditures by Age

0%

20%

40%

60%

80%

100%

20 24 28 32 36 40 44 48 52 56 60 64 68Age

Spending $ Peak overall Spending - 46.5 yearsTrade up/custom homes - 44

Starter homes - 33

Vacation homes - 52

Retirement homes - 65

Source: H. Dent, The Roaring 2000s

Remodeling and – 40Furniture spending


U.S. Population Distribution by Age

0

5000

10000

15000

20000

25000

'0-4'

'5-9'

'10-14

''15

-19'

'20-24

''25

-29'

'30-34

''35

-39'

'40-44

''45

'49'

'50-54

''55

-59'

'60-64

''65

-69'

'70-74

''75

-79'

'80 plus'

Population (thousands)

Source: U.S. Census

Trade up/custom homes,Remodeling, and furniture peak spending

Peak consumer spending

AgeYear 2000


U.S. Housing Demand

0

500

1000

1500

2000

2500

1971-1980 1981-1990 1991-2000 *2001-2010forecast

Households Vacancies Removals

Thousand units,average per year

The real challenge to builders willbe supplying 2 million units annually

Source: NAHB


Custom Homes - Increasing House Size

1400

1600

1800

2000

2200

2400

1980 1985 1990 1995 2000 2005 2010

Floor Area(SF)

Source: RISI

Average single family home size doubled between 1950And 1999 - to increase another 10% by 2010

USCanada


U.S. Customized Economy - Scenario

0%

20%

40%

60%

80%

100%

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Standardized Customized

Market share of two economies (add to 100%)

Standardized economy

Customized economy


Customized Economy andfurniture demand?

Baby boomers are still the largest and mostinfluential group in the U.S. economy

- 75 million strong- many are in their peak earning years- know and demand quality/value – always have, but now they can afford it.

- unique, different, quality products- Americans migrate toward the high end

Figure out how to reach these customers!


U.S. FURNITURE IMPORTS

Household furnitureUpholstered and office furniture and cabinetsReasons for increasing imports


Wood HH Furniture* Imports - Sources

Buehlmann & Wiedenbeck presentation given at 2003 NHLA meeting in Atlanta

ClusteringClustering


ClusteringClusteringBuild new plants in China to make high end furniture (Henredon/Drexel Heritage)


Imports Gaining Market Share

0%

10%

20%

30%

40%

50%

60%

70%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Kit Cabinets Upholstered Office HH Furniture

Ratio (%): Imports / Domestic shipments

Source: U.S. Commerce, Bur. Census, Intl. Trade Div., Wash., DC


Furniture Imports - Drivers1. Globalization - economic integration2. China’s entrance into WTO - China needs to create

17 million new jobs annually!3. Strong U.S. Dollar - making imports cheap4. Strong U.S. economy - mainstay for world

economy5. Containerized shipment - lowering transportation

costs6. U.S. economy investing capital in higher profit

businesses than furniture making7. Increasing costs for skilled labor8. Etc. etc. …


Canadian Wood HH Furniture Exportsto US Soar as C$ Falls

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

$0.50

$0.55

$0.60

$0.65

$0.70

$0.75

$0.80

$0.85

$0.90Million, US$ US$/C$

US$/C$

Exports to U.S.

Source: U.S. Dept Commerce, Bur. Census


High U.S. Manufacturing Labor* Costs

$0

$4

$8

$12

$16

$20

$24

1980 1985 1990 1994 1995 1996 1997 1998 1999 2000

U.S. Canada Mexico HK Taiwan Italy

U.S.$/hr. (production workers in manufacturing)

* Includes direct pay plus labor taxesSource: BLS


The history of Taiwan will not be repeated in the P.R. of China in the near future


U.S. Labor Force Demographics

30%

40%

50%

60%

70%

1948

1952

1956

1960

1964

1968

1972

1976

1980

1984

1988

1992

1996

2000

16-34 year old

35-64 year old

Share of employedcivilian labor force

Source: www.economagic.com/em-cgi/data.exe


U.S. FURNITURE IMPORTS AFFECT THE FURNITURE

SUPPLY CHAINLumber sold domesticallyHardwood log exportsHardwood lumber importsImplications for supply chain


Lumber purchased (%) by North American furniture producers


Hardwood Log Exports

0

500

1000

1500

2000

2500

1995 1996 1997 1998 1999 2000 2001

Canada W. Europe China Total

Thousand cubic meters

Source: USDA FS


Global Hardwood Lumber Imports

0

2000

4000

6000

8000

10000

1992 1994 1996 1998 2000

China Italy USA Spain Canada

China now imports 12% of world hardwood total1000 cubic meters

Source: R. Taylor WMM, February 2002







Wood Based Panels International, June/July 2003


U.S. FURNITURE INDUSTRY

Industry statisticsLabor demographicsCapital investmentRetail chain


Value of Shipments -Furniture & Cabinets

$13

$12

$10

$4

$0

$2

$4

$6

$8

$10

$12

$14

2000Wood HH Furniture Kitchen Cabinets HH Upholstored Wood Office

Billions of US$

Source: Bureau of Census


U.S. Capital* Investment Comparisons

1%

2%

3%

4%

5%

6%

1992 1993 1994 1995 1996 1997 1998 1999 2000

Wood HH Furn Kitchen Cabinets Wood Office

Capex divided by shipments

* Capital expenditures for machinery, equipment and buildings Source: U.S. Census


Trade Balance and Capital Improvements

Industry CAPEX/ Trade shipments Balance

Wood HH Furniture 2.1% - 7.0 billion $

Synthetic Rubber 6.5% +0.3 billion$Plastics & Resins 6.5% +6.2 billion$Automotive Parts 5.0% + 1 billion$Commercial Printing 4.4% + 0.4 billion$Agric. Chemicals 4.6% + 2.8 billion$Industrial Chemicals 8.4% + 1 billion$Tel. Eqpt. 3.3% + 3 billion$Aircraft Parts 5.2% +10 billion$

* Total capital expenditures divided by value of shipments for latest year available


Plants often outdated


Too many places…

source: Bamberger and Davidson. 1998. The Closing.


Outdated - not only furniture


How to compete?


Capital* Investment Comparisons

0%

1%

2%

3%

4%

1992 1993 1994 1995 1996 1997 1998 1999 2000

CAPEX/Shipments for Wood HH furniture industries

U.S.

Canada

* Capital expenditures for new machinery, equipment and buildings

Source: U.S. Census and Statistics Canada


Porter’s Centers of Excellence/Clustering – synergies between Manufacturers and their raw material and component suppliers,Equipment manufacturers, customers, and supporting institutions to fosterDevelopment of a value added wood products culture

Source:Michael Porter,On Competition


Clustering

Current “Mega-Site”(> 700,000 m3)

Future “Mega-Site”

Other Major Panel Capacity Concentration (> 500,000 m3)

Furniture Clusters

DRIVERS

• Capital Efficiency in Establishment

• Site Scale

• Efficient Wood Procurement and Supply Control

• Logistics Synergies

KronospanSanem (MDF,

OSB, PB)

Unilin Wielsbeke-Ooigem (PB)

SpanoOostrozebeke (PB)

M Kaindl Wals(PB, MDF)

PfleidererRheda (PB)

KronospanSandebeck(PB, MDF)

Polspan, Szczecinek(PB, MDF)

KronopolZary (PB, MDF, OSB)

Frati Pomponesco-Borgoforte (PB)Mauro Saviola Sustinate-Viadana (PB)

PfleidererNeumarkt (PB)

Hornitex Horn (PB, MDF)

CSC/Nexfor, Cowie (PB, MDF)

Kronospan, Chirk(PB, MDF)

ClusteringWOOD-BASED PANEL “MEGA-SITES” IN EUROPE LINKING WITH FURNITURE CLUSTERS

Source: Jaakko Poyry Consulting

Advantage Europe!!


Cluster Advantage – Self Enforcing!Hyundai plans $1B factory in

AlabamaBy David Kiley,

USA TODAY(4/2/02)DETROIT — South Korean automaker Hyundai is joining a growing list of

foreign car companies to invest in large factories in the USA.Hyundai said Tuesday that it would spend $1 billion constructing a plant on the

south edge of Montgomery, Ala., that's to open in 2005, capable of building 300,000 cars and sport-utility vehicles a year.

Hyundai chose Alabama mainly because Mercedes-Benz and Honda have plants in the

state, which means a network of suppliers there used to meeting high standards.

Mercedes parent DaimlerChrysler owns 10% of Hyundai. Alabama kicked in $150 million in incentives to beat Kentucky.

The move makes Hyundai:•The sixth Asian automaker to build a U.S. factory.

•The third foreign maker to pick Alabama. •The sixth to locate in the Southeast in the past 12 years.

"The U.S. is clearly our fastest-growing market, and we need a manufacturing base to build more vehicles for the U.S. market first, and to get more products to

our dealers faster," says Hyundai Motor America chief Finbarr O'Neill.


NC Furniture Cluster will be lost

Source: A. G. Raymond & Company, Inc.


Clustering

North Carolina’s Forest Products Industry in Peril

Clustering


Retail Chain is Broken -Bankruptcies 2000 - 2001

Company Peak volume No. of ($ millions) Stores

Roberd’s $342 24This End Up $152 152Heilig Meyers $1,729 1,253Wards $506 252Krauses $155 101Homelife $680 133Bedroom Superstore $60 19TOTAL $3,624 1,934

source: A. G. Raymond & Company


U.S. Furniture Distribution Channels

Conventional Retailers

48%

Manufacturer-Owned

8%

Decorator/ Designer

4%

Specialty Retailers

7%Mass

Merchants12%

Rental/Rent-to-Own

3%Department

Stores5%

Mail Order3%

Mobile Homes

1%

Export7%

Other2%

source: A. G. Raymond & Company - 1998 data


FUTURE OUTLOOK & STRATEGIES

FactsSustainable competitive advantagesParadigm shiftThe increasing importance of dimension manufacturers


FactsDomestic industry no longer competitive on price Furniture is a pure commodity productRetail chain is broken - new distribution channels evolveThere is and continues to be a huge market for furniture in the US


“Foreign competitors enter our markets not because their wages are low, but because opportunity exists: the absence of differentiation.”

Don Schultz, Wood Digest, 2002


What is the onlySUSTAINABLE

COMPETITIVE ADVANTAGEthat a US/CA manufacturer has?

CLOSENESS TO MARKET!

ShippingMarket knowledgeServiceCustomer consulting/service


And what will alwaysLEAD to a

COMPETITIVE ADVANTAGEno matter where you are located?

INNOVATIONProduct innovationService innovationManufacturing innovationTotal product concept


It all comes down to the need for a…

PARADIGMPARADIGM

SHIFT!SHIFT!


Paradigm Shift

„Dissolution“ of furniture factoryStrategic supply chain alliances (global&regional)Mass customization - moving away from the commodity businessNew sales channels - internet among themInnovation


FURNITURE

Aux. Materials

PACKAGING

COMPOSITES

SAWMILL

PLYWOOD

LUMBER

LOGG I NG

TRADITIONAL WOOD

PRODUCTS


FURNITUREHARDWARE

ADHESIVES

PLASTICS

STEELDRAWERSCHIPS

FABRICS

PACKAGINGCOMPOSITES

SAWMILL

WOOD COMPONENTS

LUMBER

LOGG I NG

Finished Panels

TRADITIONAL WOOD

PRODUCTS

Squares

Sub-Assemblies

pre-sized veneer


A changing industry (cont.)Furniture Business Model of the 60's

TYPICAL U.S.SUPPLIERS FURNITURE COMPANY RETAILERS

Lumber Yard & Kilns

Panels Rough Mill

Veneer Panel cut-up

Coatings Machining Conv. Retailer

Aux. Materials Assembly

Finishing

Warehouse

FOR

EST

AN

D A

UXI

LIA

RY

MA

TER

IALS

CU

STO

MER

S


A changing industry (cont.)Furniture Business Model of the 90's


Lumber Yard & Kilns

Panels Rough Mill

Veneer Panel cut-up Specialty Retailer

Components Machining Conv. Retailer

Coatings Assembly Mass Merchants

Aux. Materials Finishing

OEMs Warehouse

CU

STO

MER

S

FOR

EST

AN

D A

UXI

LIA

RY

MA

TER

IALS


A changing industry (cont.)Anticipated Furniture Business Model of the Future


Fin. Components Assembly Specialty Retailer

Finished Panels Finishing Conv. Retailer

Sub-Assemblies Offshore Products Mass Merchant

Equipment Warehouse B2C Retailer

Services Outsourcing Captive Retailer

Aux. Materials IT

Logistics Sales

CU

STO

MER

S

FOR

EST

AN

D A

UXI

LIA

RY

MA

TER

IALS

Direct B2C Sales


Furniture Company Structure -Supply Chain more critical!

Information/Material Flows

Supply Base

Supply Base

CustomerRequirements

CustomerSatisfaction

NEW PRODUCT INTRODUCTION

ORDER FULFILLMENT

Design/Develop Market

Procure Produce Deliver

courtesy of Dr. R. Handfield – Dept. of Business Mgt


Furniture Company Structure -state-of-the-art in industry?

IV- Fully Integrated Supply Chains

II - Moderate Development

I - Basic Beginnings

III - Limited Integration

IV- Fully Integrated Supply Chains

II - Moderate Development

I - Basic Beginnings

III - Limited Integration

Quality/cost teamsLonger -term contractsVolume leveragingSupply baseconsolidationSupplier quality focus

Ad hoc supplier alliancesCross-functional sourcing teamsSupply base optimizationInternational sourcingCross-location sourcing teams

Global sourcing Strategic supplier alliancesSupplier TQM developmentTotal cost of ownershipNon-traditional purchase focusParts/service standardizationEarly supplier involvementDock to stock pull systems

Global supply chains with external customer focusCross-enterprise decision makingFull service suppliersEarly sourcingInsourcing/ outsourcing to maximize core competencies of firms throughout the supply chain

courtesy of Dr. R. Handfield – Dept. of Business Mgt


THE EUROPEAN EXPERIENCE


Not without problems:Abundance of „cheap labor“ in the East and borders openingRegulations and labor benefits ever increasingHousing construction and size of housing not in favor for furniture„Furniture for life“YET...


Yet,• Export rates of some countries with

comparable or higher production costs:

• Germany 17 percent• Italy 45 percent• Denmark 70 percent

(1999 data)

• To compare:• USA imports today:

half of domestic consumption


How?Do they have more trade barriers?Supply chains well developpedUse of technology - automationJIT - almost no inventoriesCLUSTERSDifferentiated furniture - furniture is less of a commodityMass customization a reality


FP Major Edge-Glued Panel Producer

Major Furniture ProducerConcentration of Furniture Producers

Major Port

Main Roads Freeway

DANISH FURNITURE AND WOODWORKING CLUSTER

ViborgHolstebro

Horsens

ÅrhusSilkeborg

Vejle

Randers

Kolding

Skive

Aalborg

Odense

Åbenrå

FredericiaEsbjerg

Thisted

PP

FF

F

F

F

F

FF

FP

PF

P

F

HerningF

P

P

F

F FF

P

FF

PP

P

F

FP

F F

Frederikshavn

GERMANY

Ringköbing

Clustering

• Jylland – contains 90% of Danish woodworking industries (including component manufacturing), also centre for textile industry

• 60-70% of Danish furniture manufacturing located in 50 km radius from Viborg

• DTI furniture & woodworking related research & development in Aarhus

• Strong concentration of transport and forwarding companies specialised in furniture

• Over 75% of output exported

The Danish furniture cluster ischaracterised by:

• Market and export orientation

• Owner-entrepreneurs drive the business (“Fabrikant”)

• Pragmatic networking –outsource what is not core

• Small and medium-size companies with very light organisations

• Ready to use outside expertise when needed

• Flexible labour structures

• Good gateway position between Nordic countries and Central Europe; strong logistical expertise

Source: Jaakko Pöyry Consulting


Mass Customization



Less encompassing solutions are emerging in North America


Summary U.S. Furniture Industry

U.S. Furniture industry is loosing market share to importsMost large U.S. producers have “thrown in the towel”No signs of change are visible, a record setting expansion of the Chinese furniture industry is underwayDecreasing production of furniture in U.S. affects entire wood products value chainYET, THE MARKET FOR FURNITURE IN THE U.S. IS, DRIVEN BY HOUSING, HUGE AND SHOULD REMAIN STRONG


Some Comments

Creation of U.S. Furniture Caucus by furniture manufacturers in March 2003Drive to impose quotas or tariffs of China-made furniture (bedroom) in Congress - allegations of dumping towards Chinese manufacturers

Pressure on Chinese government to revalue (upwards) of the yuan from current fixed rate of 8.28 yuan to the dollar


Hardwood Log and Lumber Markets and Distribution

Systems that Foster Competitiveness

Jan WiedenbeckUSDA Forest Service

Princeton, WV


Hardwood Log Markets

0

500

1000

1500

2000

2500

1995 1996 1997 1998 1999 2000 2001

Canada W. Europe China Total

Thou

sand

cub

ic m

eter

s


Value of U.S. Exports to Asia

050

100150200250300350400450

91 92 93 94 95 96 97 98 99 00 01 02

Mill

ion

$

lumber veneer logs

A Closer Look at the Numbers


Value of All U.S. Wood Products Exports, 2002

2002 vs. 1998•Hardwood lumber: 26% -•Softwood logs: 13% -•Hardwood logs: 9% -•Softwood lumber: 9% -•Hardwood veneer: 6% -

21%16%5%12%6%


Hardwood Log ExportsIncreases in log exports to Canada and China over the last 5 years account for 80% of growth in value of log exports

Log exports to China increased from $9 mil. in 1998 to $80 mil. in 2002!

Greatest increase was in exports of walnut, yellow-poplar, cherry, and red oak logs


Log Market Breakdown by Species, 2002

#1 export log species is mapleTop 5 destinations:

CanadaKoreaGermanyJapanFrance

In 1998, Hong Kong and Taiwan were in top 5, Japan and France were not.

#2 export log species is red oakTop 5 destinations:

CanadaIndonesiaChinaHong KongMexico

In 1998, Taiwan and the U.K. were in the top 5, China and Mexico were not.


Lumber Market Breakdown by Species, 2002

#1 export lumber species is red oakTop 5 destinations:

CanadaMexicoChinaHong KongTaiwan

In 1998, Benelux was in top 5, China was not.

#2 export lumber species is white oakTop 5 destinations:

SpainCanadaU.K.PortugalJapan

In 1998, Benelux and Germany were in the top 5, Portugal and Japan were not.


Log Market Breakdown by Species for 2002

#3 export log species is birchTop 5 destinations:

CANADA IS ONLY SIGNIFICANT BUYER OF BIRCH (94%)

#4 export log species is cherryTop 5 destinations:

CanadaGermanyItalyChinaKorea

In 1998, Portugal and France were in top 5, China and Korea were not.

#4


Lumber Market Breakdown by Species for 2002

#3 export lumber species is mapleTop 5 destinations:

CanadaMexicoHong KongChinaU.K.

In 1998, Japan and Taiwan were in top 5, China and U.K. were not.

#4 export lumber species is yellow-poplarTop 5 destinations:

ItalyHong KongMexicoChinaJapan

In 1998, U.K. and Thailand were in top 5, China and Japan were not.


Log Market Breakdown by Species for 2002

#5 export log species is white oakTop 5 destinations:

CanadaJapanSpainChinaGermany

In 1998, Indonesia was in top 5, China was not.

#6 export log species is yellow-poplarTop 5 destinations:

Hong KongItalyChinaJapanTaiwan

In 1998, Portugal, Spain, and Mexico were in top 5, Hong Kong, China, and Taiwan were not.


Lumber Market Breakdown by Species for 2002

#5 export lumber species is red alderTop 5 destinations:

ChinaMexicoItalyHong KongTaiwan

In 1998, Germany and Japan were in top 5, China and Hong Kong were not.

#6 export lumber species is cherryTop 5 destinations:

CanadaHong KongU.K.ItalyChina

In 1998, Benelux was in top 5, China was not.


Shifts in European Species Preferences (lumber imports)

0% 10% 20% 30% 40% 50% 60%

White oak

Red alder

Cherry

Red oak

Maple

Ash/hickory

Others

1989 1998

Sassafras? Tulipwood? Willow? Sycamore?

Hackberry? Red gum?Red maple?


EU Wooden Furniture Market

Potential market niche is in bedroom furniture (11% growth over 5 years)Another niche is furniture designed for affluent older EuropeansKitchen furniture trade is intra-European70% of wooden furniture imports are rubberwood-basedRubberwood sustainability will be watched closely


The Chinese Market

World’s largest log importer in 2002Reduced tariffsLogging banFurniture industry growth

25% of lumber imports in 1999 made up of EU beechIn 2002, Indonesia, U.S., and Malaysia were top hardwood lumber importersDomestic use of lumber expected to double in 3 years due to government housing initiatives


020406080

100120140160180200

81 83 85 87 89 91 93 95 97 99 01

MM

BF

Japan Taiwan China/HK

Growth in U.S. Lumber Exports to China

Source: U.S.D.C. and Bumgardner


Ave. Price of U.S. Lumber Exports to Europe & Asia


800.00900.00

1000.001100.001200.001300.001400.001500.001600.00

94 95 96 97 98 99 00 01 02

$ / M

BF

Europe Asia


Ave. Price of U.S. Lumber Exports to Asian Markets

800900

1000110012001300140015001600

94 95 96 97 98 99 00 01 02

$ / M

BF

Korea

Japan

Hong Kong

China

Taiwan



Russian HardwoodsHardwoods make up 20% of forest resourceApproximately 22% of world’s forest resource and 25% of growing stock Birch is most abundant hardwood (silver and flame)Poplar, basswood, and aspen – other low density hardwoodsOak (3 species) and beech


Dominant Forest Species in Russia

birch

aspen

other


Russian Resource into China

In 2000, 44% of logs imported by China (but only 2% of hardwood imports)By 2002, hardwood log imports from Russia had increased to more than 10% market share (source: R. Flynn)

From 1995 to 2000, volume increased 15xMain hardwoods exchanged are oak, birch (classified as beech in China), and ash


Temperate Hardwood Log Imports by China, 2000

From Malaysia: 27%From EU: 19% (beech)From Russia: 9%From Liberia: 7%From U.S.: 1%


Log Bucking QualityLog Bucking Quality


Bucker Value Recovery vs Optimal Value Recovery by Species

0

5000

10000

15000

20000

SUGA

RMA

PLE

RED

MAPL

E

RED

OAK

YL. B

IRCH

BASS

WOO

D

INDU

STRY

Species Price Group

Dol

lars

BuckerOptimal

From: Pickens 2003


Log Bucking QualityLog Bucking Quality

25252424YellowYellow--poplarpoplar

2121145145All logsAll logs

22222121Sugar mapleSugar maple26264242Red oakRed oak17173030Black cherryBlack cherry

Ave. Value Ave. Value Loss (%)Loss (%)

No. of logsNo. of logsSpeciesSpecies

From: Haynes and From: Haynes and VisserVisser


After Bucker TrainingAfter Bucker Training

On average 20% more of the optimal value was recovered after training

(from 62% to 82%).

This equates to a 32% average increase in the value of the products

generated!From: Pickens, 2003From: Pickens, 2003





••Defect recognitionDefect recognition••Sweep eliminationSweep elimination••ClearClear--area optimizationarea optimization••Cull elimination to improve gradeCull elimination to improve grade••BestBest--log preservationlog preservation


Impact on the Supply ChainLogger receives training and financial incentive for improved buckingThe logs received by the sawmill will produce more volume and higher grade lumber (net reduction in raw material cost)Processing in the sawmill becomes more efficient

Straighter, higher quality logs run more smoothly through millTrim length can be reduced


Know Your StrengthsWhat are you doing that you aren’t particularly good at?Know your profitable raw material inputs and don’t buy OR buy and then resell your losersGlobalization species preference and grade volatility market intelligence flexibility


Merchandising Revisited

If one knows the specific logs which are processed at a loss…

and that loss level was defined… Would it not be most advantageous to

sell (merchandise) those logs AT A LOSS… but a lesser loss than if those same logs were processed in the mill?


Log and lumber wholesale operations

should increase

To get the right material to the industrial

consumer so they may optimize operations


Final CommentsFinal Comments

Crisis points in wood products Crisis points in wood products manufacturing lead to improvements manufacturing lead to improvements in processing efficiencyin processing efficiency

Many furniture companies are Many furniture companies are exploring raw material options exploring raw material options ––alternative species, lower gradesalternative species, lower grades

This may lead sawmills to show This may lead sawmills to show increased interest in lower grade trees increased interest in lower grade trees and logs including smaller diametersand logs including smaller diameters


Final Comments (2)Final Comments (2)

““Hardwood markets” becoming a Hardwood markets” becoming a misleading misleading notionnotion

Sustainable forestry practiced in Sustainable forestry practiced in the U.S. should be promoted… the U.S. should be promoted… potentially a very proactive means potentially a very proactive means of leveraging the North American, of leveraging the North American, European, and Japanese valueEuropean, and Japanese value--added marketsadded markets


What then canYOU do…?

“Never, never give up!”Winston Churchill


Possible actions to takeShort term – little that can be done what you do not do anywayMedium term – one of the solutions from the moulding industry may be appropriateLong term – the wood industry willevolve in a high tech, highly competitive industry


Short term„Survival“ modePursue business aggressivelyBe careful with credit you giveAre there markets worth exploring?Do you have any specialty product that could be sold in a larger market including exports?


Medium termDevelop clear, realistic strategyDiversify markets and products where appropriateStreamline production, invest in people and plant/equipmentAlign yourself with customersCheck moulding industry example


Lessons frommoulding industry (1/2)

10 Options:• Join offshore competitor• Buy offshore competitor• Get bought by offshore competitor• Buy offshore raw material• Buy offshore products and sell

courtesy of Russ Taylor and Al Schuler


Lessons frommoulding industry (2/2)

Establish joint ventureSell offshore productsSupply domestic niche marketsSupply specialty export marketsDo nothing and disappear

courtesy of Russ Taylor and Al Schuler


Long termRemember business models common today in other industries:

OutsourcingSupplier-Buyer relationshipCompete on total product and not on price aloneSUPPLY CHAIN MANAGEMENT


ACKNOWLEDGEMENTSSpecial thanks to our co-author Al Schuler

USDA Forest Service - Northeastern Station, Princeton, WVNC Department of CommerceMatt Bumgardner, USDA Forest ServiceUche Nwagbara, NC Dept. of CommerceMembers of the Furniture Steering Committee


THANK YOU!

“The significant problems we face

cannot be solved by the same level of thinking

that created them”

Albert Einstein

Questions-Discussion


Hardwood Quality for Hardwood Quality for Solid Wood ProductsSolid Wood Products

Publications on veneer quality, Publications on veneer quality, managing for hardwood quality, managing for hardwood quality, lumber recovery in lumber recovery in sawmillingsawmilling, , rough mill yield, manufacturing rough mill yield, manufacturing

cost analysis…cost analysis…Jan WiedenbeckJan Wiedenbeck

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Further InformationA copy (pdf-file or hardcopy) of the presentation:

[email protected] [email protected]

Wood Products and Furniture Steering Committee:[email protected] or 919.515.5580

Proceedings of the FPS-CC wood fiber – supply, demand, quality and potential meeting posted by next week on the web at:

www.ncsu.woodrecycling

State of North American Hardwood Industry – How …...Industry CAPEX/ Trade shipments Balance Wood HH Furniture 2.1% - 7.0 billion $ Synthetic Rubber 6.5% +0.3 billion$ Plastics

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