WESTERN LUMBER COMPANY

DO YOU WORK TOO HARD, TAKE HOftTE TOO LITTLE fiIONEY? A PLAN THAT IS DESIGNED TO HEIP IUMBER, YAR,DS:

. meel competition

. set profif gools

. give low prices . increqse profits

Thele is hardly a man in any business today who hasn't log\ed at the greener grass in some otle else's pasture.

T-he other guy's business always looks easier, more profitable and less troublesome.

But when it comes to the lumber business, we have found that there is a genuine cause for complaint on the part of some dealers. A thoughtful study of^the industry uncovers the sad fact that there are a good many dealers who are earning from 5/o to 38/o less th-=an they s-hould be.

No lumber man that we know would be happy at the thought of tossing a potential 5/o proflt out the window. But the idea of making a whoppir-rg 38/o less than you should is pretty frightening.

So we decided to talk it over with a management consultant firm with specialized experience in the wood and wood products industry. Our man was Harold F. Birnberg, executive consultant of Wolf Nlanagement Engineering Company, Chicago. Wolf serves a great many individual yards of all sizes as well as local and regional associations. We asked Birnberg for his opinion of the causes and possible solutions to the problems facing many of our readers today.

Our first question was: What facing lumber dealers today?

ANSWER: The lower profit industry as a whole compared to

O Conlrol Invenlories

. end profit-leoks

. know costs, mqrk-ups

. sef qccurofe pricing

cases this has declined to a danger point where the ability of the yard to stay in business is threatened.

2-What is the cause of this situation ?

ANSWER: The narrowing margin between buying costs and selling prices. But this is like saying the patient died because his heart stopped beating. What has-really hap- pened in too many cases is that yard managers have failed to analyze the cost of doing business under today's conditions. Too many men are ltill operating under methods that were successful in the sellel's maiket during and righ-t after- World War II. The failure to develop new methods of cost analysis is the foremost cause of a i'profit bind" that is making yard operation less profitable--and sometimes even UNprofitable.

3-How does a lumber dealer determine his true costs of doing business ?

ANSWER: Both the obvious and the hidden cost elements must be found. It is very easy to assume that if a board foot of lumber costs you -X doilars, you are making 100/o markup if you sell it for 2X. But you certainly arE not making 100/o profit on this round-figure formula. And this fictitious two-time markup could very possibly result in an actual dollar loss if you are not analyzing: the major margins enjoyed other industries. problem by the fn some

1. cost of materials

2. overhead, including labor

3. services

Most dealers do not analyze precisely the internal costs