Hardwood Industry Should Take Cues from Cabinet Makers, Says Consultant
Industry Conference Focuses on Issues of Competition in Global Marketplace
By Chuck Ray
Date Posted: 9/1/2004
Art Raymond, president of A.G. Raymond & Co., discussed the loss of jobs in the
He was one of several speakers at WoodPro 2004: The Penn State Hardwood Industries Leadership Conference. The conference focused on issues that currently impact the ability of
The conference, sponsored by the Pennsylvania Hardwoods Development Council, the Pennsylvania Forest Products Association, the Empire State Forest Products Association and
The conference was opened with welcoming remarks by Dr. Bruce McPheron, director of the Pennsylvania Agricultural Experiment Station and associate dean for research and graduate education for the
He was followed by the host of the conference, Dr. Charles Strauss, director of the
The keynote speaker of the first session of the conference was Clarence Kwan, deputy managing partner of the Deloitte-Touche China Services Group. He provided a close insider’s view of how business is done in
In illustrating the significance of Chinese-American business relations, Clarence noted that Motorola Company was by far the largest investor in Chinese industry and that the giant retailer Wal-Mart was by far the largest exporter from
As for opportunities for the forest products industry in
Clarence also identified a second, less obvious, opportunity for
While opportunities in
Paul recommended the following policy changes to reduce U.S manufacturing overhead costs: tax cuts, pension reform, regulatory reform, and broader development of energy resources. These public policy initiatives would help ‘level the playing field’ for
John Bassett, president and CEO of Vaughn-Bassett Furniture Company, addressed the trade dispute between Chinese and
The dispute is a matter of fair application of international trade laws, he said. “We simply want the trade laws enforced,” said John. So far,
John illustrated the complex issue with a simple but effective story from his childhood. “When I was growing up in
While the American petitioners have one law firm working on their behalf to file and support their claim, the Chinese producers have 21 law firms working in
The concept that a country’s official government policies can have significant impact on other countries’ economies was supported by Mark Conolly, president of Bradford Lumber. He noted that about 60% of American log exports go to Canada, and that about 40% of logs harvested from New England and New York are shipped into Canada for value-added processing in that country.
The reason that
Greg Lottes, president of Interforest, Inc., and Michael Buckley of World Hardwoods in
Greg shared with the audience some of Interforest’s export success. “The sooner low-cost producing nations can develop a viable middle class, the more internal foreign demand for North American products will occur as Western style products become more popular and in fashion,” he said. As an example, he mentioned that Interforest had received significant business from the small Arab country of
Michael predicted a similar phenomenon in
Four university professors took the spotlight for the marketing and management session: Drs. Judd Michael, Terry Harrison and Steve Jablonsky of
In opening the session with an audience participation exercise, Judd demonstrated the importance of the concept of ‘scanning’ the business horizon for potential influencing factors that are beyond one’s current field of vision, and how management over-confidence based on past experience can lead to mistakes in strategic decision making.
Terry and Steve explored management opportunities that world-class companies exploit that are usually overlooked by most other companies. Terry demonstrated a software program developed at
Steve, a specialist in taxation and international finance, predicted that the furniture anti-dumping tariffs will only remain in effect for 18-24 months. He made an interesting observation on the corporate culture at Wal-Mart with respect to inventory management: Wal-Mart started up its business in 1970 with two weeks worth of inventory, and it has maintained that maximum two weeks worth of inventory ever since.
“Wal-Mart isn’t a merchandiser,” said Terry. “It’s a supply chain management company.” The implication for wood producers: it is not what they make, but how they manage production and distribution that ultimately determines profitability.
However, new markets do not come cheaply,
The final session of the conference highlighted current technological challenges to the hardwood industry and how to deal with them.
Dr. Paul Blankenhorn of
The interest in Paul’s remarks was apparent in a survey of the conference participants that was evaluated later. His was the highest rated presentation of the conference, a clear indication that technology issues that are impacted by government policies and regulations are at the top of the list when it comes to industry concerns.
A pair of faculty members from Virginia Tech provided insight into industry progress and support in issues of technological competitiveness. Dr. Paul Winistorfer, professor and chairman of the department of wood science and forest products, led a group-think session on how education fits into the ‘supply chain’ of technological competitiveness. The high level of fragmentation in the hardwood industry has prevented it from establishing a focused educational agenda for global competitiveness, he suggested.
Phil Araman of the U.S. Forest Service and Virginia Tech discussed ‘next generation’ wood processing technologies that will enable companies to remain competitive. These technologies include:
· hardwood tree-length log bucking scanning systems
· internal log scanning
· sawmill edging and trimming optimization systems
· automated rough lumber grading
· curve sawing for hardwood logs
· automated pallet cant evaluation
· automated pallet part scanning and grading
· automated lumber to parts processing
Phil cited a study that estimated at least 20% of the potential value of all Southern Appalachian hardwood was lost through improper and inefficient processing. His presentation of these technologies demonstrated how this loss can be greatly reduced through proper technological development and investment.
Dr. Gene Bryan of Best Possible Solutions Inc., of
He explained the concept of using a computerized optimization tool called linear programming to ensure a company’s best allocation of resources to achieve profit objectives. Typically, wood products companies can realize a profit improvement equal to 3%-7% of total
Jim Kohlhaas of Lockheed-Martin Corporation spoke on the topic of the future of information technology. Leading companies capitalize on technology advances to enable growth, he said. The challenge for most companies, as it is in the hardwood industry, is how to direct the integration of company data sources without needlessly wasting significant sources of capital and without negatively impacting company operations. He led the conference through a fascinating look at how computer technology increases the utilization of resources on the battlefield. Jim related his comments to the hardwood industry in conclusion by demonstrating the dynamic relationship between a company’s investment in developing technological capabilities and its ability to capitalize on growth opportunities.
Art Raymond reviewed what has happened to the
By his company’s best estimates, about one-third of the
However, cabinet companies, buoyed by the new model of marketing their products through home centers, adopted different tactics aimed at keeping their product in the
The lessons that hardwood companies must learn from these two different stories, he said:
· “You need a process that delivers your product quickly.”
· “Consumers like a lot of choice – the Chinese cannot give them much customization.”
· “Process focus – do what you do well and buy the rest.”
· “Don’t waste time fighting change…companies that understand change are better able to take advantage of it. Remember that change means opportunity for profit.”
Dr. Harry Wiant of Penn State reminisced about the ‘good old days’ of harvesting redwoods (half a log to a truck!) while stating a well-considered case for a return to common sense in national forest policy making.
“I think this was the best conference I have ever gone to in my professional career,” said Ira Lauer of Catawissa Lumber & Specialty.
Keith Atherholt of Lewis Lumber Products concurred: “Great Conference! I took 11 pages of notes. So it was definitely a learning experience for me.”
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