STATIES

FRED CARUSO executive secretary

A TATISTICS intrigue most busi9 nessmen! They can be used to prove just about any point. But on a more practical side, they serve to open eyes to new ideas. Perhaps most importantly in today's tough economy, statistics can help us open our own old eyes to seeing very old ideas a little differently.

Here are a few national averages for the retail lumber industry based on 20 operating ratio surveys involving over 3,000 separate companies nationwide: .15.54(% 26.221\t 24.55"1,

Average Mark Up. (iross Margin Operating Expenses... Operating Profit on Sales..... 1.68(h Otherlncome. ......1.19"1' Net Before-lncome-Tax Profit 2.8701, Average Inventory Turns. -5..11

Of those figures, mark up and margin seem to be the most tightly contained by the market place. The deviation from the lowest to the highest average gross margins, according to the surveys, is only from 24.5 to 29.0. Bottom-line profits vary considerably, however. What management does in between makes the difference.

What are some of the lactors that make a diflerence to the bottom line? And how much difference? Is a l0(lr increase in sales more "powerful" than a l%r reduction in costs (as a percent ol sales)? What about increasing inventory turns?

What if you could eke out just one more percentage point in gross margin (based on sales)? (iranted, you probably can't get an extra percent on your loss-leaders, but where can you get it? We are talking averages. What would one point do to the bottom line?

I)o you know that a l%r increase in gross margin (as a percent of sales) is equal in profits to an incredible 60%, increase in sales with all other lactors fixed!

Just think about that for a minute. lt would take 60%r more sales volume to equal a l%, increase in margin (or l(),i, reduction of costs as a percent of sales) if all factors were fixed!

Losses due to unproductive inventory have about the same effect on the bottom line as reckless discounting.

A few suggestions aimed at curbing losses that have to be made uo with higher sales volume: o Tighten all security measures to reduce shrinkage. o (iet rid of obsolete and non-moving stock. o Train all yard employees to properly handle stock materials. a Know your customers preferences lor merchandise and stock accordingly. o Tighten credit, reduce days outstanding and collect what is owed, and. o Think twice before you discount!

E.very dollar you "write off' requires a fortune in new business to break even ! I)amaged merchandise, shoplilting, pilferage, or shrinkage due to weather and excess inventory (or thoughtless or unnecessary discounting) all translate to the same losses.

It takes one heck of a lot of sales to make up lor a loss! It takes $33,000 in sales to cover a $2,000 write off, assuming a profit of 6t1,.

If you are anywhere near average, that $2,000 write off will require a whole lot more in sales to cover the loss - more like $119,760 if you are working with the average operating profit of | .6701t. Teach your employees the true cost of write offs. The cause doesn't matter. The effect is the same.

WAYN E GARDNER executive vice

to 190/o of the population in Southern California.

Add to this situation the tendency on the part of local lawmakers to legislate against lumber. The shake and shingle issue has been big in Los Angeles for years. Now someone at the state level is attempting similar legislation.

tA

OMEWHERE some lamous philos9 opher said, "Poor is the man who has no yesterday." Oh, don't we alt think about yesterday and a lot ofyesterdays. How wonderful it is to be with friends and lamily and reminisce about wonderful times we have shared or heard about from other members of the family. Yes, it's great to have yesterdays and memories.

Stop and think for a moment about your past. Think about the lumber industry and the wonderful people who are in it. have been in it and will continue to be in it.

Now think about tomorrow and the day alter that, a lot of tomorrows. Will it be the same, better or worse, or will it be at all? A number of lactors seem to be working all the time to preclude our being around as an industry tomorrow.

F'irst, we have the "Tree Huggers" who chain themselves to the tree so it can't be removed from the forest. Next we have the group who drives spikes into trees, so that cutting and milling a tree into lumber becomes extremely hazardous due to the presence of the spike. A saw hitting the spike becomes shrapnel and lethal.

We have the legislators who introduce proposed laws banning clear cutting, in spite of the fact that it's a recognized tool for managing certain species. We have a group that says this bird or that mammal lives in those trees and if you cut the tree down, you disrupt their habitat and, since there are so lew of the species, they are endangered. Then a court orders that logging be stopped.

While plans are readied for logging, five years already have elapsed before we get to the actual cutting of the timber. Then along comes a preservationist group to put the accepted plan under a temporary restraining order. The result is less timber available at higher prices, which translates into higher lumber prices for the consumer. Not what they want to see when housing prices make the average house available to only 1301,

At the local level we also find jurisdictions that wanl to ban wood fences. They don't look good, they don't last, etc, etc. Maybe these are not big markets, but they do represent markets. And that's what this is all about. lf we lose a market segment here, a market segment there or some raw material availability, some say, "Oh, so what." But these actions will keep adding together until one day there won't be any markets, unless we do something.

Letter writing from Southern California to Washington on the spotted owl issue was heavier than from any other lumber using area. So we know it can be done. Watch the local issues in your community and see that wood isn't legislated out of the fence market, the shake and shingle market, and whatever other market they can think of. Take an active part in your community political arena. Take a position for the lumber industry. None of us are poor because we had no yesterday, but we could be poor if we are insidiously legislated out of tomorrow. And today was tomorrow only yesterday.