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Component Manufacturing dverti$er
Don’t Forget! You Saw it in the
Adverti$er
December 2018 #10233 Page #38
Independent CMs Still Have an Edge Over Multi-Location Companies
Todd Drummond
S
ince the home building crash of ‘08, there has been a huge spike in mergers and acquisitions of wood truss and wall panel component manufacturers. With all the big players in the market, independents naturally have concerns about staying competitive. Believe it or not, independents still have more than a few advantages that the big guys have yet to figure out how to resolve. I have performed multiple consultations with large multi-location companies, and it is still surprising to me how they all share so many behaviors. The larger your group, the harder it is to keep it nimble and focused on doing what is right for net profits instead of trying work within the corporate bureaucracy or please the next person in charge. Let’s list some problems that are so common among the big guys that independents will beat them every time. Focusing too much on red herring numbers, such as board footage, instead of gross margin dollars. Oh my goodness, this is a big one. Everyone I speak to about board footage knows how inaccurate it is in gauging daily or job-by-job efficiencies for wood truss manufacturing, but they do it anyway. For example, at a multi-location company, one GM would always make sure their floor truss manufacturing was at maximum production no matter the current scheduled demand. They would have a yard filled with floor truss orders that were not due to be shipped for months. Why did this happen? Well, his corporate boss was always asking him about their monthly board foot productivity. Needless to say, there was a lot of money tied up in unnecessary work-in-progress that could and should have been focused elsewhere. Most independents always have their eye on gross margin per time period as the priority, and large companies can be too focused on other fictitious units, thinking they always translate into better profits. For wood trusses, proper time units derived from motion and time studies are the most effective means to gauge production efficiencies, create schedules, and develop better pricing models—not board footage. Focus your attention on gross margin dollars per time period and the effort it took to achieve them, not fictitious units that have very few benefits.
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