Proceed with Caution
Donít Be in a Rush to Buy or Rehire
by Michael Collins
As the recovery begins to come into sharper focus, it is
more important than ever for door and window manufacturers to ensure they
are doing everything possible to remain competitive.
Know Everything about the Competition
In surveying the competitive landscape, which should be a constant discipline
for all companies, it is important to note the plant closures of companies
with which your company competes. If a competing company has closed a
location, will it be able to serve the market in which you compete with
them as effectively? Keep in touch with mutual or contested customers
to see if lead times and customer service levels hold. Cases where they
do not will represent prime opportunities to win business. When a competitor
goes out of business altogether, 100 percent of its customers are up for
grabs. Every manufacturer should know its competitors well enough to make
a compelling case to customers seeking a new supplier that they are the
best replacement for that business.
Know Your Own Business
Another aspect of profiting during the recovery is by becoming more of
a student of your own business. Important data to calculate include customer
longevity statistics, profitability by geographic region or by customer
and precise product capabilities versus competitors. Also, we are surprised
consistently by the number of manufacturers that cannot accurately estimate
the percentage of their business that is used in repair and remodeling
versus new construction applications. We realize that this information
is most readily known at the dealer or retailer level. However, in most
cases, a check box could be added to order forms or bid requests to let
a manufacturer know where its products will be used. Where products are
being manufactured as part of a dealerís stock inventory, companies should
categorize products by whether they have a nail fin in order to differentiate
end markets. If these end markets into which a companyís products are
being sold arenít readily known, there is a great deal of valuable planning
that a company cannot undertake. For instance, if a customer of yours
only orders doors and windows for repair and remodeling projects, could
you win additional business by showing them how to present your products
to builders or contractors as well?
"Overtime is a far
less expensive option than paying the full salary and benefits of recalled
workers who may be underutilized the following month."
Know When to Rehire
As the recovery gains momentum, certain large manufacturers have begun
to call back laid-off workers. This is certainly positive and is another
confirmation of the recovery itself. We would caution smaller and medium-sized
companies, though, to exercise caution in making the decision to rehire
workers. This recovery will not be smooth and it doesnít take many months
during a given year where a company is overstaffed to destroy the profitability
of the entire year. Overtime is a far less expensive option than paying
the full salary and benefits of recalled workers who may be underutilized
the following month.
Know How to Save Money on Equipment
Buying inexpensive equipment available on the secondary market is another
way to profit in the current environment. As a result of the closing of
numerous companies and plants during the last several years, the market
is awash in excess door and window manufacturing equipment. Manufacturers
of such equipment have always faced stiff competition from foreign products,
many of which are of lower quality but are compellingly inexpensive. Now,
though, they face additional competition from the ready availability of
their own products on the secondary market. In many cases, the value of
even slightly used equipment has dropped to five to ten cents on the dollar.
Buyers at equipment auctions are often buying ahead of anticipated future
demand and there is little to motivate them to make strong bids at a given
auction. Instead, they will simply wait for the next auction.
Michael Collins is vice president of the building products group
at Jordan, Knauff & Company, an investment banking firm that specializes
in the door and window industry. He may be reached at firstname.lastname@example.org.
Mr. Collinsí opinions are solely his own and do not necessarily reflect
the views of this magazine.
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No reproduction of any type without expressed written permission.