Business Briefing

Swimming against the Tide, by Art Raymond, araymond@raymondnet.com

While the pace of furniture plant closures continues in the U.S., world number one furniture retailer Ikea has opened its first American manufacturing operation in Danville, VA. Operated by its Swedwood subsidiary, the 910,000-square-feet facility is employing leading-edge technology to supply Ikea’s 35 U.S. and 11 Canadian stores.

Ikea is a cult brand among its primary demographic, young furniture buyers. Last year over 583 million shoppers visited Ikea stores in 37 countries to choose from over 7,000 items. The company distributed 191 million copies of its catalogs. As Business Week put it, Ikea provides “a one-stop sanctuary for coolness.”

Ikea’s growth and profitability are driven by relentless attention to cost cutting. Unlike many furniture makers, Ikea invests heavily in product engineering to find ways to cut both material and labor cost from its products. Its goal is to lower prices across its product line by two to three percentage points every year. One of its best selling sofas, introduced in 1999 at $354, is now priced at $202.

This cost obsession is paired with a culture for design. The idea is to design beautiful products that are inexpensive and functional. The result of this combination is high volumes. And remember that nothing trumps unit volume in the quest for production efficiency and low manufacturing cost.

With high volume as a basis, Swedwood can invest in mass production equipment rather than focus on the one-at-a-time, custom manufacturing philosophy followed by many U.S. woodworking companies. The new Danville plant’s products are based on lightweight panels made on a specially-designed press line supplied by Bürkle. These panels are then cut to required component sizes, edge banded, and drilled on lines provided by Homag. Two finishing alternatives will be available when the plant is fully equipped: (1) a wet finishing line with grain printing and UV-cured topcoat capabilities and (2) a foil laminating line.

Swedwood operates 38 factories in Sweden, Germany, Poland, Hungary, Latvia, Romania, Slovakia, Russia, and now the U.S. Its key to success is focusing each of these factories on one production technique, one base raw material and a limited product range.

Consuming such a huge volume of composite wood panels in the manufacture of its products, Ikea recently announced the formation of a new subsidiary to produce particleboard and HDF.

Bottom Line: Ikea proves what Henry Ford first espoused about price and cost nearly 100 years ago, “One of the ways of discovering what the cost of a product ought to be is to name a price that forces everybody to the highest point of efficiency. A low price makes everybody dig for profits.” Such focus on great product engineering and manufacturing execution can work even in the furniture business.

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Economic Quote

“Economists set themselves too easy, too useless a task if, in tempestuous seasons, they can only tell us that when the storm is long past the ocean is flat again.”

- John Maynard Keynes
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Sector Report

Kitchen Cabinets

Resale Value of Kitchen Remodels Drops
According to The Wall Street Journal, the resale value of big-ticket renovations like a new kitchen or bath is dropping. In the past up to 90 cents on the dollar of an investment in a new kitchen or bath was recouped at resale. A recent survey by Remodeling magazine found that an average kitchen remodel recovers only 83 percent of its $21,100 cost. With kitchen remodeling being critical to cabinetmakers, this news adds to the overall pessimism in this sector. Today the best payback comes from projects that add curb appeal like new windows and siding, fresh paint and well-manicured landscaping.

Is this news the beginning of a trend or just an aberration caused by the drop in home prices? Stay tuned.

According to the KCMA’s Trend of Business Survey, April cabinet sales fell by 9.5 percent versus the same month last year. Year-to-date cabinet sales have dropped 10.3 percent vs. 2007 with stock cabinet sales down a whopping 20.2 percent. Remember too that April 2007 sales were down nearly 10 percent.

At the company level …

• Masco, the largest cabinetmaker in the U.S., reported a 13.7 percent drop in its 1Q2008 cabinet sales to $596 million, down from $691 million in the same quarter last year. Operating profit came in at 4.7 percent, down from 10.4 percent year-over-year. Its KraftMaid Cabinetry division announced a lay-off of hourly and salaried personnel at its new West Jordan, UT, plant. No details on the number of jobs being cut were released. In January the company idled 400 workers at its Middlefield, OH, plants.

• Canac Kitchens announced the closing of its Thornhill, Ontario, Canada, operation. Built in 1967, the 300,000-square-feet plant shipped much of its production to the U.S. market and hence has been adversely impacted by the strength of the Canadian dollar. Since 2002, the Canadian dollar has risen from US$0.63 to parity. In addition, increasing residential development of the area surrounding the plant led to complaints about noise, traffic and air pollution. Responding to the Ontario government’s demand to eliminate emissions, Canac relocated its finishing operations to its Statesville, NC, plant in January 2007. Finished components were shipped to the Thornhill plant for final assembly. The resulting increases in transport costs combined with the currency issue and the drop in the U.S. housing market ultimately led to the closure. After reducing its staff by 600 since last September, the final 400 jobs will be eliminated this June. Canac is owned by U.S. bathroom fixture giant Kohler Co. which also owns Baker Furniture and McGuire Furniture.

Home Furniture

Foreign Furniture Makers Report Sales Declines
The weakness in U.S. furniture retailing has hit foreign suppliers directly in their pocketbooks. No matter where furniture is made, it is simply not selling through at retail here. A look at the results of publicly-traded foreign furniture makers reveals the impact of our furniture economy around the globe…

• Singapore-based upholsterer HTL reported a 4.4 percent drop in revenue in the fourth quarter of 2007 and a 90 percent decline in profits. For the full year its sales fell 1.3 percent, and profits decreased by 81 percent. Sales to North America dropped by nearly 9 percent.

• China-based Kasen International said its 2007 sales fell by 15.5 percent led by a 27.8 percent drop in shipments to the U.S., its largest market. The company closed three plants.

• Samson Holdings, parent of U.S. brands Universal, Legacy Classics, and Craftmaster, saw its 2007 sales fall by 10.5 percent with profit falling 46 percent.

Credit Woes Hit Furniture Industry
Over the past three years many furniture retailers have closed their doors, and industry experts predict continuing bankruptcies. As a result many factors and lenders to the furniture industry have significantly tightened credit availability citing increasing risk. Many furniture makers and importers rely heavily on factoring their accounts receivable and borrowing against their inventories.

GE Capital Solutions announced recently a cutback in unsecured inventory financing for furniture companies. CIT Group, the biggest name in furniture factoring, has tapped its credit line and sold stock to raise capital to offset recent losses experienced in furniture.

As credit standards tighten, those companies with poor cash flow and excessive inventory investment will suffer and perhaps close. The loss of these marginal players will strengthen the market positions of those companies who effectively manage their operations.

Latest on Formaldehyde
Recently the California Air Resources Board (CARB) approved strict guidelines that will take effect on January 1, 2009, on the amount of formaldehyde released by composite wood products like plywood, MDF, and particleboard. These regulations require paperwork from every step in the supply chain – the board producers, distributors, end product manufacturers and resellers.

The new rules apply to any board sold in California regardless of origin. Since manufacturing separate products for sale only in that state will prove onerous, the CARB rules will become the de facto standard for the world.

Compliance will depend on third party certification firms approved by CARB and, of course, the honesty of panel producers and the rest of the supply chain. Today CARB has approved only two U.S. certifiers and none in Asia where vast amounts of furniture is sourced for U.S. consumption.

A petition urging the Environmental Protection Agency to adopt the CARB limits nationwide is currently circulating. Such action by the EPA would effectively level the playing field for all users of composite board. However some producers indicate that compliant board will cost 10 to 20 percent more and drive end product prices higher.

Stay tuned for news on this petition.

Wood Certification Gaining Importance
With being green as the strategy du jour, certifying the source of wood in furniture is gaining value in the quest for the consumers’ dollars. More furniture makers are now using wood certified by the Forest Stewardship Council and the Sustainable Forestry Initiative as being harvested from sustainably managed forests.

Promoting responsible wood purchasing is a primary aim of the Sustainable Furniture Council, an industry group focusing on eco-friendly business practices. Harden Furniture, a producer of fine solid wood case goods, was awarded the SFC’s Silver status for documenting that 15 percent of its wood comes from certified forests.

A significant piece of green news comes from the recent consumer survey conducted by chemical giant DuPont and flooring producer Mohawk Industries. U.S. homeowners indicated a willingness to pay $8.30 more per $100 purchase for products that use renewable resources. The argument that no one is willing to pay more to be green seems to be losing steam. We may be reaching the tipping point where selling green actually pays.

Furniture Makers in Singapore Aim for Higher Exports
Singapore’s furniture industry plans to double its share of world furniture exports by 2015. Producers there currently ship $2.4 billion of furniture to consumers around the globe. Over the past five years the industry there has grown annually by 10 percent driven by demand in the U.S., India, China, the Middle East and Europe.

To meet this target Singaporean furniture makers must expand capacity and increase efficiency. Those needs translate into higher demand for new machinery thus making Singapore an attractive market for export-oriented WMMA members.

At the company level …

• Despite a 14.3 percent decline in 1Q2008 sales, Furniture Brands reported $10.6 million in operating income, a 32 percent gain.

• Producer/retailer Ethan Allen announced that its 3Q2008 sales fell 4.3 percent. Operating income fell to $15.6 million, down 44.5 percent vs. the same quarter last year.

• Bassett Furniture Industries announced an 11.1 percent increase in its 1Q2008 revenues due to a large new product introduction in its 131 retail stores. The higher sales along with internal cost reductions resulted in a small profit vs. the $4.2 million loss in the same quarter last year.

• Stanley Furniture reported 2Q2008 sales of $62.5 million, down 16.7 percent from a year ago. Gross margin for the quarter came in at 17.7 percent; operating margin, at 3.6 percent.

• Chromcraft Revington posted an 18.9 percent decline in its 1Q2008 sales and an operating loss of $2.2 million.

• Carolina Accents has acquired a 230,000-square-feet plant in Ripley, MS, that was previously part of Berkline/BenchCraft. The operation will initially employ 125.

• Case goods producer Vermont Precision announced the closure of its Morrisville, VT, plant and its exit from domestic production. The company will continue to sell its imported Bolton Furniture line. Founded in 1989 as a youth furniture specialist, the company’s domestic volume had fallen for the last seven years. The closure will idle about 20 plant employees.

• Upholstery maker Berne Furniture has ceased operations at its Berne, IN, plant. Management indicated that the firm is studying reorganization. The company was founded in 1925, and its work force had fallen from 125 two years ago to 20.

• Canadian producer/importer Shermag, following a failed bid to take the company private, has sought protection from its creditors under Canada’s equivalent of Chapter 11 bankruptcy. Battling a strong Canadian dollar that hurt its competitiveness in the vital U.S. market, the company has closed six of its eight plants and laid off 75 percent of its work force since 2004.

• Another Canadian producer, Dorel Industries, reported a one percent drop in its 1Q2008 home furnishings sales. Its RTA producer, Ameriwood, posted its fourth consecutive profitable quarter.

• Universal Furniture, owned by Chinese-based Lacquer Craft (a division of Samson Holdings), is merging its imported upholstery line into its sister company, Craftmaster Furniture, of Taylorsville, NC.

• Promotional wood bedroom maker Higdon Furniture of Quincy, FL, filed for Chapter 11 bankruptcy protection.

Office Furniture

BIFMA, the sector trade association, reported a one percent gain in April orders and a two percent jump in shipments.

More importantly, the association is now forecasting a worsening outlook for the office furniture sector over the next two years. On May 16, BIFMA and its research advisor Global Insight lowered their forecast for the fifth consecutive time. During 2008 the deterioration in new office construction, corporate profits and capital spending, and white-collar job growth will result in a 6.8 percent decline in consumption vs. last year. The outlook is predicting a further 6.3 percent drop for 2009. The previous, more optimistic forecast released in February called for a 0.6 percent decline in 2008 followed by a 2.6 percent decline in 2009.

2007 marked the fourth straight year of growth as this sector shipped $11.4 billion, up 5.5 percent from the previous year. Unfortunately 2008 will most probably bring the end of this run.

At the company level …

• Steelcase, the world’s largest manufacturer of office systems and business furniture, announced plans to cut its work force and close plants to rebalance capacity with the economic uncertainty the company sees for the next 12 months. Up to 250 white-collar jobs will be eliminated from salaried personnel at the company’s Grand Rapids, MI, facilities. The plant closures will affect facilities in City of Industry and Corunna, CA. In addition some production at its Ontario, CA, plant will be shifted to other facilities.

• Knoll reported an 8 percent increase in its 1Q2008 revenues. According to industry analysts the company appears to be outperforming its peers in top line growth. However both gross and operating margin declined slightly from the previous year. Given the headwinds predicted for this sector, management is calling for only one to four percent growth in its 2Q.

• HNI Corporation announced a 7.5 percent decline in its 1Q2008 sales. Office furniture sales fell 6.4 percent.

Wood Flooring

At the company level …

• Armstrong World Industries reported wood flooring sales of $160.3 million in its 1Q2008, a decline of 20 percent from the prior year. The company attributed the drop to the severe slump in residential construction and remodeling. Operating income also fell to $2.5 million from $8.4 million in the same quarter of 2007.

• Mohawk Industries, in its 1Q2008 report, announced that sales of its Unilin flooring products fell 6.2 percent year-over-year. The operating margin of this product line dropped to 12.4 percent vs. 17.2 percent in the same quarter last year.

Non-Residential Construction

The American Institute of Architects’ Architecture Billings Index rose to 45.5 in April from its all-time low of 39.7 in March. Scores below 50 indicate weakness in the pipeline for new projects that will be constructed nine to 12 months in the future. The Index fell below 50 this past February. Design firms in all regions of the U.S. reported weaker business conditions. Those specializing in institutional projects are, however, seeing steady business conditions vs. commercial/industrial architects. Many firms are concerned about existing projects being put on hold or slowed down.

Public Policy

As has been the case time and time again in this Congress, the debate is whether Congress will raise someone else’s taxes to offset the lost tax revenue. As you know, this Congress has been operating under “pay-go” rules that require Congress to offset tax relief with either spending decreases (which never happens) or tax increases elsewhere. The fiscally-conservative Democrats in the House, known as the “Blue Dog” coalition, have forced the House to offset the R&D extension. The House has passed H.R. 6049 that extends the R&D credit and a host of other expiring credits and deductions and includes revenue offsets.

I’ve as yet to see the empowered Blue Dogs propose spending cuts for deficit reduction. All I’ve seen is higher taxes. Like their liberal brethren, Blue Dog Democrats only look to the American taxpayer to fund new spending. We’re seeing it, once again, on the war supplemental bill. Why couldn’t they find a spending cut to pay for the popular vets' benefits package? Why always go to tax increases?

Flow through tax entities, such as sole proprietorships, partnerships, and S Corporations, pass on their business income to their owners, and their owners pay income tax on the business income at the individual tax rates. While we do not have many sole proprietorships and partnerships among the WMMA membership, we do have S Corporations. Within the small business community at large, all three types make up the vast majority of small business taxpayers. So anytime there is a discussion about the top individual tax rate, we worry. Our belief is that it will be a major topic of discussion in the next Congress.

The other big tax policy matter to be resolved in this Congress is whether to extend the temporary increases in the income thresholds at which the Alternative Minimum Tax kicks in. These increases also expired at the end of 2007. The debate again is whether to offset the revenue lost from their extension. The House has proposed that the lost revenue be offset but the Senate does not want to do so.

America is a leading-market economy. American prosperity and economic strength in our [Republican caucus] view is derived from a vigorous private sector that affords all Americans the opportunity to work hard, save, and invest more of their money. A growing economy is the best policy objective. It makes fiscal sense as well. Fiscal history shows that, despite criticisms to the contrary, the bipartisan tax relief plans [of 2001 and 2003] drove revenue back up after the economic shocks we suffered in the early part of this decade.

International Business Development

To use a TIB, importers are required to secure the TIB from a customhouse broker at the time of entry into the foreign country. The purchase of a TIB is required for each country visited on every trip. Conditions and fees for TIBs vary widely and members should consult with their freight forwarder to determine costs.

ATA Carnets allow temporary exporters to use a single document for all customs transactions, make arrangements in advance, and at a predetermined cost. Carnets facilitate reentry into the U.S. by eliminating the need to register goods with U.S. Customs at the time of departure.

ATA Carnets are “Merchandise Passports” provided by the U.S. Council for International Business (www.uscib.org). They are international customs documents that simplify customs procedures for the temporary importation of various types of goods. They ease the temporary importation of commercial samples, professional equipment and goods for exhibitions and fairs.

ATA Carnets were developed by the World Customs Organization to encourage world trade by reducing the obstacles caused by varying national customs regulations. Carnets are issued and guaranteed by national groups, which administer the ATA Carnet System under a set of conditions established by the International Bureau of Chambers of Commerce (IBCC). The IBCC is sponsored by the International Chamber of Commerce (ICC) in Paris. The U.S. Council has managed the ATA Carnet System in the United States since its appointment by the U.S. Customs Service in 1968. The U.S. issues approximately 13,000 Carnets per year, covering goods valued at over $1.5 billion dollars.

Benefits of Carnets

• May be used for unlimited exits from and entries into the U.S. and foreign countries (Carnets are valid for one year);
• Accepted in over 75 countries and territories;
• Eliminate value-added taxes (VAT), duties, and the posting of security normally required at the time of importation;
• Simplify customs procedures. Carnets allow a temporary exporter to use a single document for all customs transactions, make arrangements in advance, and at a predetermined cost;
• Facilitate reentry into the U.S. by eliminating the need to register the goods with U.S. Customs at the time of departure.
• Cover virtually all goods, including commercial samples, professional equipment and items for trade shows, including display booths BUT, excluding giveaways, consumables (like promotional literature) and disposables.

Drawbacks to Using an ATA Carnet

• Fees. Basic processing fees for ATA Carnets issued by the USCIB are determined by the value of a shipment. Fees range from $200 to $330 and the normal processing time is two working days, if the application and security deposit are received by 4:00 p.m. ET. Applications received after 4:00 p.m. will be processed the following business day or will incur an expedited service fee.
• Security. In addition to fees, Carnets are subject to a security deposit. As the National Guaranteeing Association, the USCIB is required to take security, usually 40 percent of shipment value, to cover any customs claim that might result from a misused Carnet. Acceptable forms of security are certified check or surety bond. Cash deposits are returned in full and surety bonds are terminated upon Carnet cancellation. Bond payments are typically one percent of the bond amount.
• Non Acceptance. While BAX and DHL accept Carnet shipments, FedEx and UPS (small package division) generally do not.
• Carnets should be used for goods NOT intended for sale. It is possible to sell off a Carnet. However, in addition to normal customs duties, taxes and VAT, goods sold off Carnet are subject to a penalty equal to 10 percent of the amount of duties and taxes. A USCIB Claims Handling Fee, up to three percent of the amount paid by USCIB, may also apply. For goods sold off Carnet, it is recommended that you contact a local customs office to determine the procedure best suited to your circumstance. Some countries, e.g., U.K. and Australia, tightly control the sale of goods off Carnet. Generally, local customs will request that the goods and Carnet be brought to the local office prior to Carnet expiration so that the Carnet may be properly discharged and duties, taxes and penalty paid.

While Carnets were always thought to be the best option, they really only apply to goods which you are sure will not be coming back to the U.S. Penalties and additional fees are a big disincentive and members should carefully consider their options with their freight forwarder, overseas dealer and potential overseas buyers before opting for a Carnet.

For more information on the US ATA Carnet and the USCIB, visit their Web site, www.uscib.org. For more information on foreign country Carnets, visit the Web site of the International Chamber of Commerce (ICC), www.iccwbo.org.

Business Development

Sales Forecasting Tools

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U.S. Leading Indicator May 2008
The May number is out and the result was a lot like lukewarm water on a hot summer day. It was better than nothing but not exactly satisfying.

Purchasing Managers Index May 2008
The May Purchasing Managers Index stands at 49.6, which is an improvement from April. In fact, the Purchasing Managers Index has moved higher in two of the late three runs. The overall increase since February is milder than normal and as such is consistent with our forecast for the second half of 2008, which calls for the U.S. economy to hang onto the positive designation through the late 2008/early 2009.

Housing Starts March 2008
Housing Starts makes the news on al almost daily basis and is certainly an important part of many businesses. The doom and gloom is prevalent and well known. We thought you would like to hear some good news for a change.

Manufacturing and Trade Inventories and Sales March 2008
Business inventories in March 2008 rose 0.1 percent from February and increased 5.2 percent from March 2007, to $1,465.1 billion. Sales rose 1.0 percent from the prior month and increased 6.3 percent from the prior year, to $1,154.3 billion.

IWF News

An Update U.S. Technology & Demonstration Center – A WMMACommunity Project

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The pace of activity is brisk, and accelerating, for the installation of the U.S. Technology & Demonstration Center – 3,600 square feet of U.S. wood machinery manufacturing know-how at IWF 2008. WMMA members will showcase and demonstrate a cell approach in assembling a complete production line of kitchen cabinets.

Participating WMMA members are providing each of the components to this integrated method, from dovetailer and edgebander to CNC machining center, from gang rip saw to dust collection. Companies are also providing additional support such as saw blades and abrasives. The Association extends its appreciation. To date, members include:

• Air Handling Systems by Manufacturer's Service Company
• Alexander Dodds Company
• American Fabric Filter Company
• CTD Machines, Inc.
• Denray Machine, Inc .
• JLT Clamps
• Komo Machine, Inc.
• Kreg Tool Company, CAS Enterprises, Inc.
• Mereen-Johnson Machine Company
• The Original Saw Company
• Rees-Memphis, Inc.
• Safety Speed Cut Manufacturing Company, Inc.
• Super Thin Saws, Inc.
• TigerStop, LLC
• Timesavers, Inc.
• 3M Company
• J.C. Uhling Products Company
• Unique Machine & Tool Company
• Vecoplan, LLC

During the show, demonstrations will be held August 20 - 23, three times a day at 9:40 a.m., 12:40 p.m. and 3:40 p.m. in Booth 5752 of Hall B. Staff of the participating companies will operate their machinery and work together to complete the product. In addition, all WMMA member companies who are exhibiting at IWF ’08 are being recognized in the booth. WMMA highly recommends that members and visitors stop by and watch a demonstration – this is sure to be a highlight of the show.

Click here for more information on the U.S. Technology & Demonstration Center, the member product guide and member video demonstrations.

The beneficiaries of this collaboration will be Atlanta Habitat for Humanity, which plans to use the kitchen cabinets in its 1,000th and 1,001th homes, whose construction will be completed in the fall. The surplus will be donated to The ReStore, Atlanta Habitat's discount outlet store whose proceeds benefit the charity.

 

Buyers’ Outlook – Optimism Ahead

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Eighty-one percent of people in a recent independent survey of IWF 2006 attendees either have already or are planning to purchase one or more of the more than 30 types of machinery/equipment. Over 60 percent of respondents are expecting 2008 to be an excellent or good business year. Further, 82 percent expect their companies will be sending either about the same or more people to IWF 2008.

The WMMA-commissioned survey, Online Quantitative Research Study IWF 2008: Planned Attendance, Preferences and Overall Purchasing Intentions, was conducted in April by Quail Run Business Solutions. The study concludes that while economic conditions are challenging, those surveyed are fairly optimistic about the current year. They are interested in increased productivity and the exploration of new market niches. Therefore, potential buyers will be predisposed to machinery/equipment decisions framed in that context.

Click here to view the research findings.

WMMA Members among Finalists for IWF 2008 Challengers Distinguished Achievement Awards®

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Nine WMMA members are among the 20 finalists in the Challengers Award program of IWF 2008. This year set a record for participation – 126 entries from 93 companies. Known worldwide as the woodworking industry’s highest honor, the competition challenges the industry to develop revolutionary, creative, ingenious, forward-thinking-technology, materials, services or safety devices that advance the industry. Of the 20 finalists, seven will receive the Challengers Award during a special awards ceremony on Wednesday, August 20th at 1:30 p.m.

In alphabetical order, WMMA member-finalists, their products and exhibit booth numbers:

• Accu-Systems, Inc. – Mortise Tenon Haunch Machining Center (Booth number 9852)
• Carter Products Company, Inc. – Sand Trac Totalizer SD -1000 (Booth number 5400)
• FS Tool Corporation/FS Curing – Aerotech (Booth number 8252)
• NAP GLADU – Next G Series Diamond & Carbide Inserts Cutting Tool (Booth number 5973)
• Onsrud Cutter – Tuff Core® (Booth number 8206)
• ShopBot Tools, Inc. – ShopBot Buddy with Power Stick (Booth number 8436)
• Super Thin Saws, Inc. – UltraCem-coated blades (Booth number 9000)
• Timesavers, Inc. – Timesavers Random Air Motion Blow-off (Booth number 5713)
• Vortex Tool Company, Inc. – The Venturi System (Booth number 8952)

The Association salutes all WMMA entries into the program which was especially competitive this year.  

Significant Savings for Booth Marketing Packages

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WMMA has partnered with BD Metrics to develop a SmartBooth program for WMMA members who are exhibiting at IWF 2008. Through this program, WMMA members have the opportunity to identify qualified leads and direct them to their booth. Further, the program is offered to members at a more than 60 percent discount off the list price.

An online brand awareness, lead development and reporting system, the IWF SmartBooth gives your company access to the three most important marketing tools available:

• Real-time registered attendee database – automatically identifying registered attendees who need to know about your company
• Online IWF 2008 Search and Recommendation engine, my IWF Event Planner, that registered attendees use before and during the show to plan their event
• Onsite kiosks used by attendees to find the products, services and companies of interest while on the show floor

You can potentially reach 12 times more of your targeted attendee audience. You can also purchase EventKeywords that your buyers use to find your company online. Your company will be displayed on the first page on the official myIWF Event Planner Web site search engine, allowing your buyers to click and connect directly to you.

WMMA Member Program

	List Price	WMMA Member Price	Savings
SmartBooth	$1,295	$500	$795
Event Keywords	$500	$200 (each keyword)	$300 (each keyword)

The WMMA member discount is valid until June 30, 2008; now extended to July 31st. Contact Steve Raymond of BD Metrics, (410) 402-1061, directly for more information.

Preview Day

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At the request of WMMA, IWF 2008 has replaced Dealer Day with Preview Day on August 19. The intent is for exhibitors to select up to three key prospective or current individuals, not companies, for quality face-to-face time on the show floor the day before the show officially opens. Any exhibiting company can request up to three ribbons for distribution, which will allow admittance between 8:30 a.m. and 3:00 p.m.

Special note: Preview Day guests must be pre-registered for the show by July 19, 2009.

Requests can be made by logging onto the show’s Exhibitor Secure Area.

 

Manufacturing Strategies

 “Problem-Solving Through the Lean Lens,” by Jamie Flinchbaugh, Lean Learning Center
Editor’s note: the following article appeared in Industry Week.

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Lean manufacturing has been surrounded by many misconceptions and myths over the past 10 years. While there are enough erroneous ideas on lean to fill many articles, we are going to focus on just one misnomer – that lean is only about speed and not about problem-solving. The truth is that lean is, in fact, all about problem-solving. It is this never-ending process of problem solving that prevents us from getting to an ideal state – the state in which every customer's needs are met on time and with zero waste.

Most problem-solving efforts tend to focus on the output of the process. We measure the output, we analyze the data, we find the gaps, and then we go to work on them. This approach has worked and will continue to work as long as the problems reflect specific trends or consistent gaps.

However, when we need a process capable of not just identifying and solving a major failure, but able to also eliminate the millions of individual opportunities for mistake or error, a different lens and approach is needed.

The Lean Lens on Problems

I hail from York, Pa., just down the Susquehanna River from Three Mile Island, the nuclear power plant that experienced a too-close-to-catastrophic accident in 1979. Through extensive analysis and study, the attempts to pin down the problem to one or two vital things failed, because the process broke down at many steps. For example, a maintenance repair tag from a switch was hanging in front of an indicator light, which led to the wrong information and, ultimately, the wrong decision. No amount of inspection, data collection, sampling or large-scale problem-solving was going to help. What was needed, instead, was a process, system and organization capable of surfacing deviations of any kind at every step of the process as well as a procedure to respond effectively to these deviations. This is one of the central tenets upon which all of lean is based.

Systems must be designed, employees skilled and cultures attuned to the ability to identify deviations wherever they may lie and without the interference of a manager who will deem the problem as insignificant. This cannot be done only in the problem-solving phase. It must be designed into the process, far in advance of the problem occurring. The work process should be such that when the problem does occur, we know about it immediately.

Let's look at the phases of problem solving – identifying the problem, surfacing/engaging the problem, and sustaining the solution – and how the lean lens can add value in these phases.

Identify the Problem

Far too often, the method of choice for identifying problems is letting them find us. This basic element of the general problem-solving progression is underappreciated and often neglected altogether. There are so many problems that find us, because the customer was impacted or our monthly result was affected, that we accept this process as normal or satisfactory. It plainly is not. We greatly underestimate the impact of solving problems at the micro level, as the problem is occurring. Additionally, this reactive method does not allow us to be at all strategic in solving the problems, which prevents us from getting to our stated goal. The problems that find us often end up occupying so much of our time that we never get to address the core issues and more important problems.

For example, take a tool as plain as painting lines on the factory floor, referred to as cycle timing marks in an assembly process. These marks help the operator know where they are in the cycle, which is often broken down in 10% increments. In most organizations, a tool such as this is underutilized because it is viewed through a traditional lens, which says that its purpose is to help the operator keep pace and to speed up if he is behind. However, when viewed through a lean lens, this is not the purpose. The work should keep its own pace. The true purpose of the lines is to help spot problems as they occur. If something is wrong with a task – from parts that don't quite fit to a sluggish air motor – the lag in cycle time will be immediately identifiable, providing opportunity for quick intervention.

Another example of missing the point in problem identification often happens through the use of the 5S tool (sift, sweep, sort, sanitize, sustain) – often misused as the lean implementation starting point. When I ask organizations utilizing 5S the simple question "What is the purpose of 5S?" I get a plethora of answers ranging from cleanliness and morale to discipline and structure. The answers are almost always wrong. The proper purpose of 5S is to create an environment where problems can be quickly identified. Imagine the setup operator who needs a critical tool, but when it comes time to execute the changeover the tool cannot be found – the 30-minute changeover increases to 60 minutes. Or the inventory numbers at the end of the month rise because more and more material has been stuffed into each workstation. Or the customer has a failure because the operator grabbed the wrong, uncalibrated torque wrench that was lying nearby. All of these problems are examples of conditions that can be spotted and corrected much earlier, much faster, much cheaper and without negatively impacting performance through a tool such as 5S.

It is not the tool itself that is important, but rather the question, "Will the work itself tell me that a problem is occurring before it impacts us?" The lean lens allows us to design work so that problems become visible and rise to the surface. What's needed in addition to this is a culture that supports this notion and a means to deal with the problem once it is identified.

Problem Engagement

There exists an assumption in managers today that if a problem is found it will be dealt with. In actuality, most systems and cultures function in a way that allows the problem to select us rather than us selecting the problem. Most problems are dismissed as either insignificant or as "typical, so it's not really a problem." And, in general our capacity to acknowledge and solve multiple problems is limited to a handful of key people. We need an organization with the capability and capacity to solve 100 times more problems than we do today. And, we need a process that connects the right people to the problems. This is a major gap for most organizations.

Andon systems are an example of a solution. However, most people focus on the physical element – the andon cord – rather than focusing on the process. Whether the problem is spotted by a person or a machine, the andon process essentially raises its hand, drawing attention to itself, asking for help. The andon process accomplishes two goals. First, it gets resources to each problem as it occurs, not after it is inspected or found through data. Second, and this is just as important but seldom highly valued, is that by connecting resources together, an explicit structure and highly repetitive process for learning is created. By engaging in each problem in a structured way, every individual learns and is coached. Over time, this builds up a massive capacity to solve problems. This capability then enables the solving of millions of small problems BEFORE they become the big problems.

Sustainability

Problem-solving is often effective through the root cause phase, but fails at the point of selecting the appropriate solution. Many solutions fall into two categories of ineffectiveness. The first is the "force fit" solution, where extra work, burden, complexity and review are thrown into the process in order to force an effective result. All of this adds waste to the process, hindering speed and efficiency and thus will end up eventually being eliminated. The other approach is the "try harder" solution, which involves more training, coaching or incentives. This also has the potential to complicate the situation. When looking through the lean lens and striving for sustainable solutions, one simple rule applies – make the new way easier (or easiest) or make the old way impossible.

In Conclusion

Problem solving is employed in every organization on the face to the earth and is the primary tool by which we create stable and capable processes. Traditional tools and thinking will work to a point, but lean thinking can take organizations to another level of success. However, the key to solving more problems more efficiently is to not wait for the problem to present itself, but instead design our processes, organizations and culture around finding and solving problems where they occur, surfacing and isolating the problem at its point of origin.

Jamie Flinchbaugh is a founder and partner of the Lean Learning Center in Novi, Mich., and the co-author of The Hitchhiker's Guide to Lean: Lessons from the Road.

 

Association News

Updated Education & Scholarship Program Brochures Available

One of the strengths of WMMA membership is a scholarship program that can be tailored to a member company’s unique situation. Member companies identify their training and staffing needs in various areas and then can take direct action such as sending a current employee back to school, recruiting a student from a local college or technical school or benefiting a specific student. WMMA’s Scholarship & Education Committee and staff will help guide you through setting up a program.

For students interested in the U.S. wood machinery industry, the WMMA scholarship program provides the financial means to pursue their education while learning onsite at member company locations.

Remember, the WMMA Scholarship pays $3,000 a year for two years ($6,000 total) of the student’s tuition!

Members – look for the brochure to arrive shortly and consider participating in a great program to train your next employee and a new generation of U.S. wood machinery industry workers.

WMMA Appoints Administrative Director

The WMMA warmly welcomes Gina Marinilli as administrative director. She joins the team of Ken Hutton, Stella Sytnik and Laura Mahone at association headquarters in Philadelphia. Gina has experience in nonprofit fundraising and management as well as in marketing and public relations communications in a variety of fields. These include telecommunications, high-tech consulting, insurance, and specialized areas of health, disability and workers’ compensation management services.

Gina is overseeing various projects to manage the office and various communications, including editing Cutting Edge. She also serves as the staff liaison to the ASC 01.1 Committee, which writes the standards for the wood machinery industry.

Member News

In Memoriam: A Salute to a Fallen Hero

Part of Larry Hilchie's legacy is how freely and purposefully he gave back to the industry he loved. Larry served on not one but two industry association boards, as a director for the Association of Woodworking and Furniture Suppliers (AWFS) and for the Woodworking Machinery Industry Association (WMIA). Larry blossomed into a true industry pioneer and leader as director then president of WoodLINKS USA. Sadly, Larry lost his courageous fight with leukemia. What follows is a tribute to Larry from one who went from a business colleague to a friend, Wilf Torunski:

"It's not often that one has the privilege of meeting someone as dedicated and committed to the right things in life as Larry. Larry always had time for me and was an 'ultra - giver' rather than a 'taker.' He was, and will continue to be, a key inspiration to my own recovery. He was kind. He worked tirelessly for WoodLINKS and other education projects, and I trust that the wood industry will not let him down in the continuation and strong support of the projects for which he lived and worked tirelessly. Our prayers are with Mimy, Sarah and Mark during these difficult times. Good bye, Larry. We will think of you often, and I'm certain that I will often ask myself the question 'What would Larry have done?