C I N T R A F O R
Working Paper Abstract
Results of a 1990 Survey of US Millwork Industry Characteristics and Attitudes
Lee Bialozynski, David Briggs. 1995. (120 pp) WP49 $15.00
A national survey of U.S. millwork producers was conducted during late 1991. Exactly 500 respondents, an 18.2% response rate, provided data on 1990 characteristics of their establishments. The survey differs from the US Department of Commerce Census of Manufacturers by including all producers of millwork, not just those for which millwork is the principal activity.
Establishments are relatively small
19.9% had 1990 sales of less than $250,000, 51.0% had sales less than $1 million, and only 6.6% had sales exceeding $15 million. 60:5% had less than 20 employees, only 7.9% had 100 or more employees.
The typical respondent
Total Sales
$4.5 million = millwork plus non-millwork products $3.7 million = millwork only (82.2% of total)
Ownership
Private corporation (68.7%) and sole proprietorships (24.3%) predominate. Private corporations accounted for at least 70% of respondents in each size class except the smalles (<$250,000), which were 62.6% sole proprietorships.
Employment
36.2 total, of which 76.5% were direct labor; 3.3 direct employees per administrative employee
Utilization of Capacity
68.8%
Replacement Cost
$1.5 million; $41,000 per employee; $2.99 sales per dollar of replacement cost
Costs
36.7% raw materials;
11.1% other materials;
31.7% labor;
17.1% administrative overhead;
4.3% research and administrative
Market Geography
92.2% participate in local markets
64.6% participate in regional markets
25.8% participate in national markets
10.8% participate in international markets
Projections from responses to estimates of national totals fro all millwork producers
Product Mix
55.8% of respondents were involved in manufacturing a non-millwork products, either as the prinicpal or as a secondary products. Cabinets were the most common non-millwork products.
17.5% of respondents who produce millwork indicated that a non-millwork products was the main or principal business.
Non-millwork products represent about 17.8% of total sales of all respondents.
Of the millwork products,
Mouldings: Mouldings were dominant in terms of frequency of being listed as a product, frequency of being listed as the principal product line of a respondent, and as a percent of total sales. This contracts witht the U.S. Department of Commerce Census, which lists mouldings as only 11.8% of millwork industry sales. Part of this difference may be that many moulding producers reached by the survey may be classified as sawmills and planing mills by the Census.
Doors: Doors ranked second in product frequency, principal product line, and share of sales.
Windows and Stairs: Windows and stairs were essentially tied for third place in share of sales, but stairs wer much less frequently listed as the principal product line.
Product Attributes
97.1% of respondents produce custom products, 84.6% produce specialty products, and 41.6% produce commmodity products.
Large establishments are more likely to produce commodity products.
When asked to rank the importance of 25 factors that could influence product success, the 11 factors rated very to extremely important. Several of these can be summarized as the ability and willingness to work with the customer and produce and deliver what is needed when it is needed. Other important factors involve various aspects of product quality (accurate dimensions, attractiveness, etc.). All of these combine to affect the company reputation, which received the top ranking. Factors such as gathering market information, adverstising, brand name, etc., were in the bottom half of the 25 factors.
Investment
Product development is typically done on an occasional basis (45% of respondents); 32% have continuous product development (most commonly among larger establishments); and 23% do not engage in product development.
Compared to 1990 levels of spending, 26% plan to increase spending on plant capacity during the next five years, 30% plan to increase spending on used equipment, and 36% plan to increase on new equipment.
Exports
10.8% of respondents exported in 1990; exports averaged 5.2% of total sales of these exporters.
In terms of total sales of all respondents, exports were 1.2%
Extrapolation suggests 1990 total millwork exports were about $120 million. This is in reasonable agreement with U.S. Department of Commerce trade statistics, which indicate $143 million exports of millwork products in 1990.
Mouldings and doors are the most commonly exported products. This agrees with U.S. Department of Commerce trade statistics: 51.3% of 1990 export sales were moulding and 19.5% were doors.
Larger establishments are much more involved in exporting.
Both exporters and non-exporters were asked to rank a list of factors that affect export success. Those who do no export cite their domestic marketing focus, small size, and inability to contact foreign customers as leading factors for not exporting. In contrast, the exporters rated competition in foreign markets, financing terms, and inability to contact foreign customers as the top factors affecting success.
When respondents were asked how export sales contacts originate, the leading methods cited were reactive (foreign customer or agent contacted the establishment). Pro-active methods, such as traveling to foreign countries to seek customers or participating in international trade shows, are not commonly used.
Factors affecting business operations
Of 17 factors rated by respondents, labor skill and education, environmental regulations (pollution), labor costs, availabiltiy of capital, and cost of capital were the top five overall.
Distance from the source of raw material was of higher concern than distance to product markets. This seems consistent with the tendency of millwork producers to locate near population centers and focus on local/regional markets.
Supply of raw material ranked eighth overall. However, concern with this factor increased with size of establishment and it was the top concern of the largest.
When asked to respond to statements regarding the effect of reduced harvesting on federal lands, respondents indicated that it will be more difficult to obtain wood of quality needed and that they would shift to substitute species. They were less inclined to agree that they would increase use of non-wood materials or change manufacutring methods.
Respondents agreed that competition from non-wood materials will greatly increase. Interestingly, responses to other questions suggest that they are not inclined to adopt use of these materials, hence they may lose market share to outside competitiors.
Respondents disagreed witht he suggestion that reduced demand for tropical hardwoods (boycotts, etc.) will improve demand for their products. This may reflect the very low incidence of use of tropical hardwoods by respondents.
Raw material consumption
The realtive proportions of these volumes are in reasonable agreement with expenditure data in U.S. Department of Commerce Census of Manufacturers reports.
When asked to indicate anticipated use of wood raw materials over the next five years, all materials received average scores, suggesting some increase. However, five western softwoods and one western hardwood (alder), all affected by reduced federal harvests, received the lowest average growth ratings.