Volume 47, Issue 4 - May 2008
Mouldings Per Gallon
Beating Fuel Costs and a Competitive Market
by Drew Vass, assistant editor of Shelter magazine.
Add up the modern green movement, rising fuel costs and an ultra-competitive market and what do you get? A major headache for those of us who simply contemplate the implications, but a mountain of difficulties for those producing and shipping material. So how does a moulding manufacturer and wholesaler deal with these issues? In mouldings per gallon.
Achieving maximum mouldings per gallon means every time Moulding & Millwork’s plant fires up a truck for shipping, it is loaded to capacity with all of what its customers want and none of what they don’t need. It means shipping in the right materials for the job from the closest possible sources. It means adding storage in order to stock sufficiently and avoid every day shipments. It means training a sales staff to fill orders to perfection, thereby avoiding return shipping and emergency reshipping costs. The equation goes on for this Doswell, Va.-based producer of oak and maple millwork products.
“Years ago, these things didn’t make a difference, because energy was cheap,” says Derek Daly, general manager for the Doswell plant. Daly says the first part of his plant’s equation begins with sourcing, all of which he handles himself. When he arrived as the plant’s general manager 11 years ago, it was located in Bowling Green, Va., and sourcing was from all over the place. That, he says, had to change.
“We are strategically located to take advantage of the available raw materials,” he says. “It’s all indigenous to this area. I would say that 80 percent of our material comes from within 200 miles of our plant—from within Virginia.”
Daly says Virginia is loaded with hardwood sources and he personally visits and signs each supplier. Aside from sourcing locally, he also ensures his plant is getting raw materials that match his customers’ needs as closely as possible. If the forecast calls for a large number of 8-foot mouldings, Daly arranges for a close match in raw material length. The company also has added plenty of storage in order to stock adequate materials and avoid constant and under-maximized shipping efforts. But adequate means adequate, Daly assures. He believes the burden of stocking material ultimately should fall on the manufacturer, not distributors or dealers, but no one part of the supply chain should stock any more than necessary.
Trim the Fat
“We discourage our customers from stocking too much inventory,” he says. “Why should they? Wouldn’t you like your money in the bank, rather than on the floor?”
Daly says his company’s buffer is well calculated. “We carry probably five weeks of raw material inventory,” he says. “That’s what ‘Just-In-Time’ (JIT) production is all about. It doesn’t stand for ‘just too late’ or ‘way too soon and way too much.’ Those don’t sound too successful to me.”
The JIT philosophy he refers to is part of Lean Manufacturing, a system that Toyota has mass popularized in recent years. Daly, who has been trained and indoctrinated in Toyota’s concepts and methods, says every action counts toward total efficiency. And total efficiency, not just shipping efficiency, is what helps his operation achieve maximum mouldings-per-gallon. Daly attended a three-week Lean course in December 2007 to gain his personal certification, and he began implementation immediately upon his return.
But Daly says in order to implement the Lean philosophy, you have to step back from day-to-day operations.
“To be successful in Lean, you have to be able to separate yourself from the business a bit,” he says. “You have to be able to step back and take a crow’s nest view to see what can be improved.”
He also says everyone has to be onboard. Daly formed a Lean team at his operation, incorporating key personnel from each area. He also implemented routine and mandatory meetings in order to keep the group focused on its goals.
The Doswell plant currently employs approximately 70 employees working two shifts. It is one of eight Moulding & Millwork manufacturing facilities that service its 35 distribution centers. The current capacity for Daly’s location is 1.2 million lineal feet per week.
Things Aren’t What They Used to Be
Daly’s Lean philosophy is aimed at more than just mouldings-per-gallon. It’s also a matter of staying competitive. He says in today’s business environment you either set your sights high or risk falling by the wayside.
“In the past, the market wasn’t as competitive,” he says. “Today, the market is ultra-competitive. We’re in a global market. We’re not just competing against the guy down the street—we’re competing against low labor costs in other countries.” He says the only preservation method is staying on top. “Hopefully we’re number-one or number-two,” he says. “If not, we’re out. We’re done.”
When you think of mouldings per gallon, you likely envision big rigs hauling material over American roadways. But Daly says the equation also applies to foreign labor and overseas shipment. Significantly cheaper labor rates in some foreign countries often offset the cost of moving material across the globe and back again. Daly says Mouldings & Millwork attempted to capitalize on the foreign equation by purchasing less expensive raw materials from South American providers, then processing it into finished material here in the United States.
“We were importing pine and processing it domestically, with the hopes of being able to service people with quick shipment,” he explains. “But it didn’t work out as well as we expected, so we pulled the plug.” Daly’s facility sticks to a locally sourced, homegrown philosophy. Not only does this cut down on transportation expenses, but it also builds local relationships. “I want to support the local area, because we’re going to be able to support one another,” he says.
An Eye for Efficiency
Once the appropriate size and type of raw material has been trucked in from local sources, every part of the manufacturing process influences the mouldings-per-gallon equation.
When rough-cut lumber enters the facility, it is fed immediately through a high-tech system that employs cameras to scan and evaluate every inch of every board. This system determines how each unique piece of material should be handled in order to minimize waste and maximize value.
“Instead of ripping to yield, we rip to value by determining the maximum value we can get out of each piece of wood,” explains Wade Hickson, sales manager for the Doswell plant.
Though the company relies on its equipment, Hickson says one of its workers makes the final decision and can override the system’s determination easily. A photo image of each board is produced, complete with defects and imperfections. Software analyzes how to properly utilize every inch of the material, and then an operator has the opportunity to revise or approve its plan quickly. Once approved, each board passes directly to a computer-controlled saw that produces the initial cuts accordingly. At this phase, it already is known what type of moulding each board will produce. Each piece of wood is labeled accordingly and passed to the next phase of production. And each phase of production has its own methods for analysis to help minimize waste.
Daly points out that while many think of waste material as a byproduct at the end of the manufacturing chain, they may be overlooking its presence in the beginning and middle phases. And it’s not always in the form of leftover shavings or product.
“Excess shipping is also waste,” he explains. “For many of our competitors, north of here, raw material comes from the middle of the country and further south. Those who bring in raw materials from far away are shipping all of that waste in and then trucking it all around,” he says. In this way, Daly says fuel is wasted—moving waste. By sourcing wood that’s as close in length to the final product as possible, less drop-off is generated. Fuel isn’t expended moving what inevitably will end up in the scrap pile and Daly’s plant doesn’t move material any further than necessary—increasing its total mouldings-per-gallon (not raw-material-per-gallon).
Get It Right the First Time
Another area that can decrease mouldings-per-gallon is sales. Improperly specified orders often convert into returns. Returns require shipment. In the event that a salesperson fails to order up and deliver the right materials, fuel is expended in shipping the wrong product out, then further expended bringing it back again and resending the corrected order. Daly’s company has an answer for this.
“We’ve got a salesperson starting this week and they have to go through a full eight-week training program involving each station in the plant before they even go into the office,” Hickson explains. That new salesperson is Joshua Wright.
“If I didn’t go through this type of program, I wouldn’t have any idea how to answer people’s questions,” Wright explains. “This way, I have answers to provide upfront.” Hickson, Wright’s manager, says the key isn’t just in knowing the right answers, but in getting the right answers in order to understand the customer’s exact needs. This, Hickson says, requires asking the right questions. When it comes to mouldings-per-gallon, when you fuel up the shipping vehicle it helps to ensure it’s loaded to capacity with the right product.
In light of recent fuel prices, Daly says his company’s philosophy never has been more welcome.
“One of our biggest markets is Alberta, Canada,” he says. “When I got here, we were at $3,800 per shipment. Now, we’re at $7,000.” Daly says a weakened dollar also has taken its toll. “We have to compete not only with fuel, but now we have to compete with the conversion rates,” he explains. “They’re no longer as happy with the greenback as they once were.”
Daly says his company will continue to find ways to beat the odds and remain competitive. “I’m not saying that we weren’t any good at it before; but we’re really good at it now,” he says. He believes there may not be room for everyone in the future.
“I think there will be more consolidation in the millwork industry,” he says. In the end, he who is left standing may do so partly through mouldings-per-gallon.
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