state of north american hardwood industry – how …...industry capex/ trade shipments balance wood...
TRANSCRIPT
NHLA meeting Atlanta 030918
Urs Buehlmann Jan WiedenbeckNC State University USDA Forest ServiceRaleigh, NC Princeton, WV
Al SchulerUSDA Forest Service Princeton, WV
National Hardwood Lumber Association (NHLA)Atlanta, GASeptember 18, 2003
State of North American Hardwood Industry – How to Compete Globally
NHLA meeting Atlanta 030918
OverviewWhat is going on with the US wood products industries – furniture as an exampleSupply chains - importanceHardwood log and lumber markets -globallyPotential for manufacturing improvementStrategies for the future…
Questions/Discussion
NHLA meeting Atlanta 030918
U.S. FURNITURE MARKET OUTLOOK
Home building and remodelingPurchasing power and preferencesDemographicsHome sizeCustomized economy
NHLA meeting Atlanta 030918
Residential constructionremains healthy
1
2
3
4
5
6
7
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 20020.5
0.7
0.9
1.1
1.3
1.5
1.7
1.9
Re Sales Starts SF starts
Million Re Sales Starts (million)
Source: NAR, NAHB
NHLA meeting Atlanta 030918
Consumer Expenditures by Age
0%
20%
40%
60%
80%
100%
20 24 28 32 36 40 44 48 52 56 60 64 68Age
Spending $ Peak overall Spending - 46.5 yearsTrade up/custom homes - 44
Starter homes - 33
Vacation homes - 52
Retirement homes - 65
Source: H. Dent, The Roaring 2000s
Remodeling and – 40Furniture spending
NHLA meeting Atlanta 030918
U.S. Population Distribution by Age
0
5000
10000
15000
20000
25000
'0-4'
'5-9'
'10-14
''15
-19'
'20-24
''25
-29'
'30-34
''35
-39'
'40-44
''45
'49'
'50-54
''55
-59'
'60-64
''65
-69'
'70-74
''75
-79'
'80 plus'
Population (thousands)
Source: U.S. Census
Trade up/custom homes,Remodeling, and furniture peak spending
Peak consumer spending
AgeYear 2000
NHLA meeting Atlanta 030918
U.S. Housing Demand
0
500
1000
1500
2000
2500
1971-1980 1981-1990 1991-2000 *2001-2010forecast
Households Vacancies Removals
Thousand units,average per year
The real challenge to builders willbe supplying 2 million units annually
Source: NAHB
NHLA meeting Atlanta 030918
Custom Homes - Increasing House Size
1400
1600
1800
2000
2200
2400
1980 1985 1990 1995 2000 2005 2010
Floor Area(SF)
Source: RISI
Average single family home size doubled between 1950And 1999 - to increase another 10% by 2010
USCanada
NHLA meeting Atlanta 030918
U.S. Customized Economy - Scenario
0%
20%
40%
60%
80%
100%
1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
Standardized Customized
Market share of two economies (add to 100%)
Standardized economy
Customized economy
NHLA meeting Atlanta 030918
Customized Economy andfurniture demand?
Baby boomers are still the largest and mostinfluential group in the U.S. economy
- 75 million strong- many are in their peak earning years- know and demand quality/value – always have, but now they can afford it.
- unique, different, quality products- Americans migrate toward the high end
Figure out how to reach these customers!
NHLA meeting Atlanta 030918
U.S. FURNITURE IMPORTS
Household furnitureUpholstered and office furniture and cabinetsReasons for increasing imports
NHLA meeting Atlanta 030918
Wood HH Furniture* Imports - Sources
Buehlmann & Wiedenbeck presentation given at 2003 NHLA meeting in Atlanta
ClusteringClustering
Buehlmann & Wiedenbeck presentation given at 2003 NHLA meeting in Atlanta
ClusteringClusteringBuild new plants in China to make high end furniture (Henredon/Drexel Heritage)
NHLA meeting Atlanta 030918
Imports Gaining Market Share
0%
10%
20%
30%
40%
50%
60%
70%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Kit Cabinets Upholstered Office HH Furniture
Ratio (%): Imports / Domestic shipments
Source: U.S. Commerce, Bur. Census, Intl. Trade Div., Wash., DC
NHLA meeting Atlanta 030918
Furniture Imports - Drivers1. Globalization - economic integration2. China’s entrance into WTO - China needs to create
17 million new jobs annually!3. Strong U.S. Dollar - making imports cheap4. Strong U.S. economy - mainstay for world
economy5. Containerized shipment - lowering transportation
costs6. U.S. economy investing capital in higher profit
businesses than furniture making7. Increasing costs for skilled labor8. Etc. etc. …
NHLA meeting Atlanta 030918
Canadian Wood HH Furniture Exportsto US Soar as C$ Falls
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
$0.50
$0.55
$0.60
$0.65
$0.70
$0.75
$0.80
$0.85
$0.90Million, US$ US$/C$
US$/C$
Exports to U.S.
Source: U.S. Dept Commerce, Bur. Census
NHLA meeting Atlanta 030918
High U.S. Manufacturing Labor* Costs
$0
$4
$8
$12
$16
$20
$24
1980 1985 1990 1994 1995 1996 1997 1998 1999 2000
U.S. Canada Mexico HK Taiwan Italy
U.S.$/hr. (production workers in manufacturing)
* Includes direct pay plus labor taxesSource: BLS
Buehlmann & Wiedenbeck presentation given at 2003 NHLA meeting in Atlanta
The history of Taiwan will not be repeated in the P.R. of China in the near future
NHLA meeting Atlanta 030918
U.S. Labor Force Demographics
30%
40%
50%
60%
70%
1948
1952
1956
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
16-34 year old
35-64 year old
Share of employedcivilian labor force
Source: www.economagic.com/em-cgi/data.exe
NHLA meeting Atlanta 030918
U.S. FURNITURE IMPORTS AFFECT THE FURNITURE
SUPPLY CHAINLumber sold domesticallyHardwood log exportsHardwood lumber importsImplications for supply chain
NHLA meeting Atlanta 030918
Lumber purchased (%) by North American furniture producers
NHLA meeting Atlanta 030918
Hardwood Log Exports
0
500
1000
1500
2000
2500
1995 1996 1997 1998 1999 2000 2001
Canada W. Europe China Total
Thousand cubic meters
Source: USDA FS
NHLA meeting Atlanta 030918
Global Hardwood Lumber Imports
0
2000
4000
6000
8000
10000
1992 1994 1996 1998 2000
China Italy USA Spain Canada
China now imports 12% of world hardwood total1000 cubic meters
Source: R. Taylor WMM, February 2002
Buehlmann & Wiedenbeck presentation given at 2003 NHLA meeting in Atlanta
ClusteringClustering
Buehlmann & Wiedenbeck presentation given at 2003 NHLA meeting in Atlanta
ClusteringClustering
Buehlmann & Wiedenbeck presentation given at 2003 NHLA meeting in Atlanta
ClusteringClustering
Wood Based Panels International, June/July 2003
NHLA meeting Atlanta 030918
U.S. FURNITURE INDUSTRY
Industry statisticsLabor demographicsCapital investmentRetail chain
NHLA meeting Atlanta 030918
Value of Shipments -Furniture & Cabinets
$13
$12
$10
$4
$0
$2
$4
$6
$8
$10
$12
$14
2000Wood HH Furniture Kitchen Cabinets HH Upholstored Wood Office
Billions of US$
Source: Bureau of Census
NHLA meeting Atlanta 030918
U.S. Capital* Investment Comparisons
1%
2%
3%
4%
5%
6%
1992 1993 1994 1995 1996 1997 1998 1999 2000
Wood HH Furn Kitchen Cabinets Wood Office
Capex divided by shipments
* Capital expenditures for machinery, equipment and buildings Source: U.S. Census
NHLA meeting Atlanta 030918
Trade Balance and Capital Improvements
Industry CAPEX/ Trade shipments Balance
Wood HH Furniture 2.1% - 7.0 billion $
Synthetic Rubber 6.5% +0.3 billion$Plastics & Resins 6.5% +6.2 billion$Automotive Parts 5.0% + 1 billion$Commercial Printing 4.4% + 0.4 billion$Agric. Chemicals 4.6% + 2.8 billion$Industrial Chemicals 8.4% + 1 billion$Tel. Eqpt. 3.3% + 3 billion$Aircraft Parts 5.2% +10 billion$
* Total capital expenditures divided by value of shipments for latest year available
NHLA meeting Atlanta 030918
Plants often outdated
NHLA meeting Atlanta 030918
Too many places…
source: Bamberger and Davidson. 1998. The Closing.
NHLA meeting Atlanta 030918
Outdated - not only furniture
NHLA meeting Atlanta 030918
How to compete?
NHLA meeting Atlanta 030918
Capital* Investment Comparisons
0%
1%
2%
3%
4%
1992 1993 1994 1995 1996 1997 1998 1999 2000
CAPEX/Shipments for Wood HH furniture industries
U.S.
Canada
* Capital expenditures for new machinery, equipment and buildings
Source: U.S. Census and Statistics Canada
Buehlmann & Wiedenbeck presentation given at 2003 NHLA meeting in Atlanta
Porter’s Centers of Excellence/Clustering – synergies between Manufacturers and their raw material and component suppliers,Equipment manufacturers, customers, and supporting institutions to fosterDevelopment of a value added wood products culture
Source:Michael Porter,On Competition
Buehlmann & Wiedenbeck presentation given at 2003 NHLA meeting in Atlanta
Clustering
Current “Mega-Site”(> 700,000 m3)
Future “Mega-Site”
Other Major Panel Capacity Concentration (> 500,000 m3)
Furniture Clusters
DRIVERS
• Capital Efficiency in Establishment
• Site Scale
• Efficient Wood Procurement and Supply Control
• Logistics Synergies
KronospanSanem (MDF,
OSB, PB)
Unilin Wielsbeke-Ooigem (PB)
SpanoOostrozebeke (PB)
M Kaindl Wals(PB, MDF)
PfleidererRheda (PB)
KronospanSandebeck(PB, MDF)
Polspan, Szczecinek(PB, MDF)
KronopolZary (PB, MDF, OSB)
Frati Pomponesco-Borgoforte (PB)Mauro Saviola Sustinate-Viadana (PB)
PfleidererNeumarkt (PB)
Hornitex Horn (PB, MDF)
CSC/Nexfor, Cowie (PB, MDF)
Kronospan, Chirk(PB, MDF)
ClusteringWOOD-BASED PANEL “MEGA-SITES” IN EUROPE LINKING WITH FURNITURE CLUSTERS
Source: Jaakko Poyry Consulting
Advantage Europe!!
Buehlmann & Wiedenbeck presentation given at 2003 NHLA meeting in Atlanta
Cluster Advantage – Self Enforcing!Hyundai plans $1B factory in
AlabamaBy David Kiley,
USA TODAY(4/2/02)DETROIT — South Korean automaker Hyundai is joining a growing list of
foreign car companies to invest in large factories in the USA.Hyundai said Tuesday that it would spend $1 billion constructing a plant on the
south edge of Montgomery, Ala., that's to open in 2005, capable of building 300,000 cars and sport-utility vehicles a year.
Hyundai chose Alabama mainly because Mercedes-Benz and Honda have plants in the
state, which means a network of suppliers there used to meeting high standards.
Mercedes parent DaimlerChrysler owns 10% of Hyundai. Alabama kicked in $150 million in incentives to beat Kentucky.
The move makes Hyundai:•The sixth Asian automaker to build a U.S. factory.
•The third foreign maker to pick Alabama. •The sixth to locate in the Southeast in the past 12 years.
"The U.S. is clearly our fastest-growing market, and we need a manufacturing base to build more vehicles for the U.S. market first, and to get more products to
our dealers faster," says Hyundai Motor America chief Finbarr O'Neill.
Buehlmann & Wiedenbeck presentation given at 2003 NHLA meeting in Atlanta
NC Furniture Cluster will be lost
Source: A. G. Raymond & Company, Inc.
Buehlmann & Wiedenbeck presentation given at 2003 NHLA meeting in Atlanta
Clustering
North Carolina’s Forest Products Industry in Peril
Clustering
NHLA meeting Atlanta 030918
Retail Chain is Broken -Bankruptcies 2000 - 2001
Company Peak volume No. of ($ millions) Stores
Roberd’s $342 24This End Up $152 152Heilig Meyers $1,729 1,253Wards $506 252Krauses $155 101Homelife $680 133Bedroom Superstore $60 19TOTAL $3,624 1,934
source: A. G. Raymond & Company
NHLA meeting Atlanta 030918
U.S. Furniture Distribution Channels
Conventional Retailers
48%
Manufacturer-Owned
8%
Decorator/ Designer
4%
Specialty Retailers
7%Mass
Merchants12%
Rental/Rent-to-Own
3%Department
Stores5%
Mail Order3%
Mobile Homes
1%
Export7%
Other2%
source: A. G. Raymond & Company - 1998 data
NHLA meeting Atlanta 030918
FUTURE OUTLOOK & STRATEGIES
FactsSustainable competitive advantagesParadigm shiftThe increasing importance of dimension manufacturers
NHLA meeting Atlanta 030918
FactsDomestic industry no longer competitive on price Furniture is a pure commodity productRetail chain is broken - new distribution channels evolveThere is and continues to be a huge market for furniture in the US
NHLA meeting Atlanta 030918
“Foreign competitors enter our markets not because their wages are low, but because opportunity exists: the absence of differentiation.”
Don Schultz, Wood Digest, 2002
NHLA meeting Atlanta 030918
What is the onlySUSTAINABLE
COMPETITIVE ADVANTAGEthat a US/CA manufacturer has?
CLOSENESS TO MARKET!
ShippingMarket knowledgeServiceCustomer consulting/service
NHLA meeting Atlanta 030918
And what will alwaysLEAD to a
COMPETITIVE ADVANTAGEno matter where you are located?
INNOVATIONProduct innovationService innovationManufacturing innovationTotal product concept
NHLA meeting Atlanta 030918
It all comes down to the need for a…
PARADIGMPARADIGM
SHIFT!SHIFT!
NHLA meeting Atlanta 030918
Paradigm Shift
„Dissolution“ of furniture factoryStrategic supply chain alliances (global®ional)Mass customization - moving away from the commodity businessNew sales channels - internet among themInnovation
NHLA meeting Atlanta 030918
FURNITURE
Aux. Materials
PACKAGING
COMPOSITES
SAWMILL
PLYWOOD
LUMBER
LOGG I NG
TRADITIONAL WOOD
PRODUCTS
NHLA meeting Atlanta 030918
FURNITUREHARDWARE
ADHESIVES
PLASTICS
STEELDRAWERSCHIPS
FABRICS
PACKAGINGCOMPOSITES
SAWMILL
WOOD COMPONENTS
LUMBER
LOGG I NG
Finished Panels
TRADITIONAL WOOD
PRODUCTS
Squares
Sub-Assemblies
pre-sized veneer
NHLA meeting Atlanta 030918
A changing industry (cont.)Furniture Business Model of the 60's
TYPICAL U.S.SUPPLIERS FURNITURE COMPANY RETAILERS
Lumber Yard & Kilns
Panels Rough Mill
Veneer Panel cut-up
Coatings Machining Conv. Retailer
Aux. Materials Assembly
Finishing
Warehouse
FOR
EST
AN
D A
UXI
LIA
RY
MA
TER
IALS
CU
STO
MER
S
NHLA meeting Atlanta 030918
A changing industry (cont.)Furniture Business Model of the 90's
TYPICAL U.S.SUPPLIERS FURNITURE COMPANY RETAILERS
Lumber Yard & Kilns
Panels Rough Mill
Veneer Panel cut-up Specialty Retailer
Components Machining Conv. Retailer
Coatings Assembly Mass Merchants
Aux. Materials Finishing
OEMs Warehouse
CU
STO
MER
S
FOR
EST
AN
D A
UXI
LIA
RY
MA
TER
IALS
NHLA meeting Atlanta 030918
A changing industry (cont.)Anticipated Furniture Business Model of the Future
TYPICAL U.S.SUPPLIERS FURNITURE COMPANY RETAILERS
Fin. Components Assembly Specialty Retailer
Finished Panels Finishing Conv. Retailer
Sub-Assemblies Offshore Products Mass Merchant
Equipment Warehouse B2C Retailer
Services Outsourcing Captive Retailer
Aux. Materials IT
Logistics Sales
CU
STO
MER
S
FOR
EST
AN
D A
UXI
LIA
RY
MA
TER
IALS
Direct B2C Sales
NHLA meeting Atlanta 030918
Furniture Company Structure -Supply Chain more critical!
Information/Material Flows
Supply Base
Supply Base
CustomerRequirements
CustomerSatisfaction
NEW PRODUCT INTRODUCTION
ORDER FULFILLMENT
Design/Develop Market
Procure Produce Deliver
courtesy of Dr. R. Handfield – Dept. of Business Mgt
NHLA meeting Atlanta 030918
Furniture Company Structure -state-of-the-art in industry?
IV- Fully Integrated Supply Chains
II - Moderate Development
I - Basic Beginnings
III - Limited Integration
IV- Fully Integrated Supply Chains
II - Moderate Development
I - Basic Beginnings
III - Limited Integration
Quality/cost teamsLonger -term contractsVolume leveragingSupply baseconsolidationSupplier quality focus
Ad hoc supplier alliancesCross-functional sourcing teamsSupply base optimizationInternational sourcingCross-location sourcing teams
Global sourcing Strategic supplier alliancesSupplier TQM developmentTotal cost of ownershipNon-traditional purchase focusParts/service standardizationEarly supplier involvementDock to stock pull systems
Global supply chains with external customer focusCross-enterprise decision makingFull service suppliersEarly sourcingInsourcing/ outsourcing to maximize core competencies of firms throughout the supply chain
courtesy of Dr. R. Handfield – Dept. of Business Mgt
Buehlmann & Wiedenbeck presentation given at 2003 NHLA meeting in Atlanta
THE EUROPEAN EXPERIENCE
Buehlmann & Wiedenbeck presentation given at 2003 NHLA meeting in Atlanta
Not without problems:Abundance of „cheap labor“ in the East and borders openingRegulations and labor benefits ever increasingHousing construction and size of housing not in favor for furniture„Furniture for life“YET...
Buehlmann & Wiedenbeck presentation given at 2003 NHLA meeting in Atlanta
Yet,• Export rates of some countries with
comparable or higher production costs:
• Germany 17 percent• Italy 45 percent• Denmark 70 percent
(1999 data)
• To compare:• USA imports today:
half of domestic consumption
Buehlmann & Wiedenbeck presentation given at 2003 NHLA meeting in Atlanta
How?Do they have more trade barriers?Supply chains well developpedUse of technology - automationJIT - almost no inventoriesCLUSTERSDifferentiated furniture - furniture is less of a commodityMass customization a reality
NHLA meeting Atlanta 030918
FP Major Edge-Glued Panel Producer
Major Furniture ProducerConcentration of Furniture Producers
Major Port
Main Roads Freeway
DANISH FURNITURE AND WOODWORKING CLUSTER
ViborgHolstebro
Horsens
ÅrhusSilkeborg
Vejle
Randers
Kolding
Skive
Aalborg
Odense
Åbenrå
FredericiaEsbjerg
Thisted
PP
FF
F
F
F
F
FF
FP
PF
P
F
HerningF
P
P
F
F FF
P
FF
PP
P
F
FP
F F
Frederikshavn
GERMANY
Ringköbing
Clustering
• Jylland – contains 90% of Danish woodworking industries (including component manufacturing), also centre for textile industry
• 60-70% of Danish furniture manufacturing located in 50 km radius from Viborg
• DTI furniture & woodworking related research & development in Aarhus
• Strong concentration of transport and forwarding companies specialised in furniture
• Over 75% of output exported
The Danish furniture cluster ischaracterised by:
• Market and export orientation
• Owner-entrepreneurs drive the business (“Fabrikant”)
• Pragmatic networking –outsource what is not core
• Small and medium-size companies with very light organisations
• Ready to use outside expertise when needed
• Flexible labour structures
• Good gateway position between Nordic countries and Central Europe; strong logistical expertise
Source: Jaakko Pöyry Consulting
NHLA meeting Atlanta 030918
Mass Customization
Buehlmann & Wiedenbeck presentation given at 2003 NHLA meeting in Atlanta
ClusteringClustering
Less encompassing solutions are emerging in North America
NHLA meeting Atlanta 030918
Summary U.S. Furniture Industry
U.S. Furniture industry is loosing market share to importsMost large U.S. producers have “thrown in the towel”No signs of change are visible, a record setting expansion of the Chinese furniture industry is underwayDecreasing production of furniture in U.S. affects entire wood products value chainYET, THE MARKET FOR FURNITURE IN THE U.S. IS, DRIVEN BY HOUSING, HUGE AND SHOULD REMAIN STRONG
NHLA meeting Atlanta 030918
Some Comments
Creation of U.S. Furniture Caucus by furniture manufacturers in March 2003Drive to impose quotas or tariffs of China-made furniture (bedroom) in Congress - allegations of dumping towards Chinese manufacturers
Pressure on Chinese government to revalue (upwards) of the yuan from current fixed rate of 8.28 yuan to the dollar
NHLA meeting Atlanta 030918
Hardwood Log and Lumber Markets and Distribution
Systems that Foster Competitiveness
Jan WiedenbeckUSDA Forest Service
Princeton, WV
NHLA meeting Atlanta 030918
Hardwood Log Markets
0
500
1000
1500
2000
2500
1995 1996 1997 1998 1999 2000 2001
Canada W. Europe China Total
Thou
sand
cub
ic m
eter
s
NHLA meeting Atlanta 030918
Value of U.S. Exports to Asia
050
100150200250300350400450
91 92 93 94 95 96 97 98 99 00 01 02
Mill
ion
$
lumber veneer logs
A Closer Look at the Numbers
NHLA meeting Atlanta 030918
Value of All U.S. Wood Products Exports, 2002
2002 vs. 1998•Hardwood lumber: 26% -•Softwood logs: 13% -•Hardwood logs: 9% -•Softwood lumber: 9% -•Hardwood veneer: 6% -
21%16%5%12%6%
NHLA meeting Atlanta 030918
Hardwood Log ExportsIncreases in log exports to Canada and China over the last 5 years account for 80% of growth in value of log exports
Log exports to China increased from $9 mil. in 1998 to $80 mil. in 2002!
Greatest increase was in exports of walnut, yellow-poplar, cherry, and red oak logs
NHLA meeting Atlanta 030918
Log Market Breakdown by Species, 2002
#1 export log species is mapleTop 5 destinations:
CanadaKoreaGermanyJapanFrance
In 1998, Hong Kong and Taiwan were in top 5, Japan and France were not.
#2 export log species is red oakTop 5 destinations:
CanadaIndonesiaChinaHong KongMexico
In 1998, Taiwan and the U.K. were in the top 5, China and Mexico were not.
NHLA meeting Atlanta 030918
Lumber Market Breakdown by Species, 2002
#1 export lumber species is red oakTop 5 destinations:
CanadaMexicoChinaHong KongTaiwan
In 1998, Benelux was in top 5, China was not.
#2 export lumber species is white oakTop 5 destinations:
SpainCanadaU.K.PortugalJapan
In 1998, Benelux and Germany were in the top 5, Portugal and Japan were not.
NHLA meeting Atlanta 030918
Log Market Breakdown by Species for 2002
#3 export log species is birchTop 5 destinations:
CANADA IS ONLY SIGNIFICANT BUYER OF BIRCH (94%)
#4 export log species is cherryTop 5 destinations:
CanadaGermanyItalyChinaKorea
In 1998, Portugal and France were in top 5, China and Korea were not.
#4
NHLA meeting Atlanta 030918
Lumber Market Breakdown by Species for 2002
#3 export lumber species is mapleTop 5 destinations:
CanadaMexicoHong KongChinaU.K.
In 1998, Japan and Taiwan were in top 5, China and U.K. were not.
#4 export lumber species is yellow-poplarTop 5 destinations:
ItalyHong KongMexicoChinaJapan
In 1998, U.K. and Thailand were in top 5, China and Japan were not.
NHLA meeting Atlanta 030918
Log Market Breakdown by Species for 2002
#5 export log species is white oakTop 5 destinations:
CanadaJapanSpainChinaGermany
In 1998, Indonesia was in top 5, China was not.
#6 export log species is yellow-poplarTop 5 destinations:
Hong KongItalyChinaJapanTaiwan
In 1998, Portugal, Spain, and Mexico were in top 5, Hong Kong, China, and Taiwan were not.
NHLA meeting Atlanta 030918
Lumber Market Breakdown by Species for 2002
#5 export lumber species is red alderTop 5 destinations:
ChinaMexicoItalyHong KongTaiwan
In 1998, Germany and Japan were in top 5, China and Hong Kong were not.
#6 export lumber species is cherryTop 5 destinations:
CanadaHong KongU.K.ItalyChina
In 1998, Benelux was in top 5, China was not.
NHLA meeting Atlanta 030918
Shifts in European Species Preferences (lumber imports)
0% 10% 20% 30% 40% 50% 60%
White oak
Red alder
Cherry
Red oak
Maple
Ash/hickory
Others
1989 1998
Sassafras? Tulipwood? Willow? Sycamore?
Hackberry? Red gum?Red maple?
NHLA meeting Atlanta 030918
EU Wooden Furniture Market
Potential market niche is in bedroom furniture (11% growth over 5 years)Another niche is furniture designed for affluent older EuropeansKitchen furniture trade is intra-European70% of wooden furniture imports are rubberwood-basedRubberwood sustainability will be watched closely
NHLA meeting Atlanta 030918
The Chinese Market
World’s largest log importer in 2002Reduced tariffsLogging banFurniture industry growth
25% of lumber imports in 1999 made up of EU beechIn 2002, Indonesia, U.S., and Malaysia were top hardwood lumber importersDomestic use of lumber expected to double in 3 years due to government housing initiatives
NHLA meeting Atlanta 030918
020406080
100120140160180200
81 83 85 87 89 91 93 95 97 99 01
MM
BF
Japan Taiwan China/HK
Growth in U.S. Lumber Exports to China
Source: U.S.D.C. and Bumgardner
NHLA meeting Atlanta 030918
Ave. Price of U.S. Lumber Exports to Europe & Asia
Source: U.S.D.C. and Bumgardner
800.00900.00
1000.001100.001200.001300.001400.001500.001600.00
94 95 96 97 98 99 00 01 02
$ / M
BF
Europe Asia
NHLA meeting Atlanta 030918
Ave. Price of U.S. Lumber Exports to Asian Markets
800900
1000110012001300140015001600
94 95 96 97 98 99 00 01 02
$ / M
BF
Korea
Japan
Hong Kong
China
Taiwan
Source: U.S.D.C. and Bumgardner
NHLA meeting Atlanta 030918
Russian HardwoodsHardwoods make up 20% of forest resourceApproximately 22% of world’s forest resource and 25% of growing stock Birch is most abundant hardwood (silver and flame)Poplar, basswood, and aspen – other low density hardwoodsOak (3 species) and beech
NHLA meeting Atlanta 030918
Dominant Forest Species in Russia
birch
aspen
other
NHLA meeting Atlanta 030918
Russian Resource into China
In 2000, 44% of logs imported by China (but only 2% of hardwood imports)By 2002, hardwood log imports from Russia had increased to more than 10% market share (source: R. Flynn)
From 1995 to 2000, volume increased 15xMain hardwoods exchanged are oak, birch (classified as beech in China), and ash
NHLA meeting Atlanta 030918
Temperate Hardwood Log Imports by China, 2000
From Malaysia: 27%From EU: 19% (beech)From Russia: 9%From Liberia: 7%From U.S.: 1%
NHLA meeting Atlanta 030918
Log Bucking QualityLog Bucking Quality
NHLA meeting Atlanta 030918
Bucker Value Recovery vs Optimal Value Recovery by Species
0
5000
10000
15000
20000
SUGA
RMA
PLE
RED
MAPL
E
RED
OAK
YL. B
IRCH
BASS
WOO
D
INDU
STRY
Species Price Group
Dol
lars
BuckerOptimal
From: Pickens 2003
NHLA meeting Atlanta 030918
Log Bucking QualityLog Bucking Quality
25252424YellowYellow--poplarpoplar
2121145145All logsAll logs
22222121Sugar mapleSugar maple26264242Red oakRed oak17173030Black cherryBlack cherry
Ave. Value Ave. Value Loss (%)Loss (%)
No. of logsNo. of logsSpeciesSpecies
From: Haynes and From: Haynes and VisserVisser
NHLA meeting Atlanta 030918
After Bucker TrainingAfter Bucker Training
On average 20% more of the optimal value was recovered after training
(from 62% to 82%).
This equates to a 32% average increase in the value of the products
generated!From: Pickens, 2003From: Pickens, 2003
NHLA meeting Atlanta 030918
NHLA meeting Atlanta 030918
NHLA meeting Atlanta 030918
NHLA meeting Atlanta 030918
••Defect recognitionDefect recognition••Sweep eliminationSweep elimination••ClearClear--area optimizationarea optimization••Cull elimination to improve gradeCull elimination to improve grade••BestBest--log preservationlog preservation
NHLA meeting Atlanta 030918
Impact on the Supply ChainLogger receives training and financial incentive for improved buckingThe logs received by the sawmill will produce more volume and higher grade lumber (net reduction in raw material cost)Processing in the sawmill becomes more efficient
Straighter, higher quality logs run more smoothly through millTrim length can be reduced
NHLA meeting Atlanta 030918
Know Your StrengthsWhat are you doing that you aren’t particularly good at?Know your profitable raw material inputs and don’t buy OR buy and then resell your losersGlobalization species preference and grade volatility market intelligence flexibility
NHLA meeting Atlanta 030918
Merchandising Revisited
If one knows the specific logs which are processed at a loss…
and that loss level was defined… Would it not be most advantageous to
sell (merchandise) those logs AT A LOSS… but a lesser loss than if those same logs were processed in the mill?
NHLA meeting Atlanta 030918
Log and lumber wholesale operations
should increase
To get the right material to the industrial
consumer so they may optimize operations
NHLA meeting Atlanta 030918
Final CommentsFinal Comments
Crisis points in wood products Crisis points in wood products manufacturing lead to improvements manufacturing lead to improvements in processing efficiencyin processing efficiency
Many furniture companies are Many furniture companies are exploring raw material options exploring raw material options ––alternative species, lower gradesalternative species, lower grades
This may lead sawmills to show This may lead sawmills to show increased interest in lower grade trees increased interest in lower grade trees and logs including smaller diametersand logs including smaller diameters
NHLA meeting Atlanta 030918
Final Comments (2)Final Comments (2)
““Hardwood markets” becoming a Hardwood markets” becoming a misleading misleading notionnotion
Sustainable forestry practiced in Sustainable forestry practiced in the U.S. should be promoted… the U.S. should be promoted… potentially a very proactive means potentially a very proactive means of leveraging the North American, of leveraging the North American, European, and Japanese valueEuropean, and Japanese value--added marketsadded markets
NHLA meeting Atlanta 030918
What then canYOU do…?
“Never, never give up!”Winston Churchill
NHLA meeting Atlanta 030918
Possible actions to takeShort term – little that can be done what you do not do anywayMedium term – one of the solutions from the moulding industry may be appropriateLong term – the wood industry willevolve in a high tech, highly competitive industry
NHLA meeting Atlanta 030918
Short term„Survival“ modePursue business aggressivelyBe careful with credit you giveAre there markets worth exploring?Do you have any specialty product that could be sold in a larger market including exports?
NHLA meeting Atlanta 030918
Medium termDevelop clear, realistic strategyDiversify markets and products where appropriateStreamline production, invest in people and plant/equipmentAlign yourself with customersCheck moulding industry example
NHLA meeting Atlanta 030918
Lessons frommoulding industry (1/2)
10 Options:• Join offshore competitor• Buy offshore competitor• Get bought by offshore competitor• Buy offshore raw material• Buy offshore products and sell
courtesy of Russ Taylor and Al Schuler
NHLA meeting Atlanta 030918
Lessons frommoulding industry (2/2)
Establish joint ventureSell offshore productsSupply domestic niche marketsSupply specialty export marketsDo nothing and disappear
courtesy of Russ Taylor and Al Schuler
NHLA meeting Atlanta 030918
Long termRemember business models common today in other industries:
OutsourcingSupplier-Buyer relationshipCompete on total product and not on price aloneSUPPLY CHAIN MANAGEMENT
NHLA meeting Atlanta 030918
ACKNOWLEDGEMENTSSpecial thanks to our co-author Al Schuler
USDA Forest Service - Northeastern Station, Princeton, WVNC Department of CommerceMatt Bumgardner, USDA Forest ServiceUche Nwagbara, NC Dept. of CommerceMembers of the Furniture Steering Committee
NHLA meeting Atlanta 030918
THANK YOU!
“The significant problems we face
cannot be solved by the same level of thinking
that created them”
Albert Einstein
Questions-Discussion
NHLA meeting Atlanta 030918
Hardwood Quality for Hardwood Quality for Solid Wood ProductsSolid Wood Products
Publications on veneer quality, Publications on veneer quality, managing for hardwood quality, managing for hardwood quality, lumber recovery in lumber recovery in sawmillingsawmilling, , rough mill yield, manufacturing rough mill yield, manufacturing
cost analysis…cost analysis…Jan WiedenbeckJan Wiedenbeck
304304--431431--2708 or 27202708 or 2720Email: Email: [email protected]@fs.fed.us
NHLA meeting Atlanta 030918
Further InformationA copy (pdf-file or hardcopy) of the presentation:
[email protected] [email protected]
Wood Products and Furniture Steering Committee:[email protected] or 919.515.5580
Proceedings of the FPS-CC wood fiber – supply, demand, quality and potential meeting posted by next week on the web at:
www.ncsu.woodrecycling