How to make it in the cabinetry: Part 2 - Outsourcing

See Part 1 here.

 

About 10 years ago I realized that, for a small to medium cabinet shop, outsourcing cabinet doors was the only reasonable way to go.

 

Beyond the normal problems of quality control, training, turnover, and capacity was the enormous amount of equipment needed to build doors.

 

So, I decided to source my doors…and I didn’t look back.

 

The inner struggle with outsourcing is mostly one of pride and emotion, not logic and numbers. As a cabinet maker, I understand that once a craftsman, always a craftsman. The problem though, is at some point you are going to want to grow beyond just your own, personal capabilities.  

 

So, it boils down to two options:

 

• do it myself
• hire a specialized company to do it for me.  

 

APPLYING THE PROS OF OUTSOURCING

 

To start, first identify the areas of your business that are capacity constraints or bottlenecks and analyze how the following pros of outsourcing apply to that particular need.  

 

A few areas that come to mind are cabinet doors, drawers, and cabinet boxes.

 

Economies of Scale

 

As an outsource cabinet component provider, I know that we can mill parts for cheaper than most operations because our whole operation is set up for just that.  

 

From the conveyors, layout, automation, and software, our whole business is geared for cranking out large amounts of components in a short amount of time. On the flip side, a normal cabinet shop may only mill a couple days a week and cannot benefit as much from these economies than from utilizing our operation.

 

Fixed Costs

 

This is a biggie.

 

Knowing exactly what your costs are before you ever cut a board is like seeing the future. By eliminating the majority of the variables that can fluctuate, your chances of making a great profit go up exponentially. Outsourcing allows you to do just that.

 

Shorter Delivery Times

 

Generally, outsource component providers can reduce your overall time by several days. For example, with our goal of producing parts in a week or under, you are left with plenty of time to focus on selling more jobs than you ever had time to before.

 

Maintain Low Debt

 

If you don't use it, you don't lose it.

 

Cash that is.  

 

If you purchase all of your components from an outside supplier, you only pay for the service when you order something. However, when you take a capital lease out on a $150k CNC router or edgebander, that payment rolls in every single month like clockwork.  

 

Not to mention, payroll for the operator that you have to keep around to run the equipment for when the work picks up.

 

This point may be the most important aspect of consideration, as it allows you to follow the first rule of making it in the cabinet industry : Maintain low debt, while increasing your capacity and profitability.

 

THE EFFECTS OF OUTSOURCING 

 

What can outsourcing really mean for your business?

 

By freeing up your labor to only assemble cabinets and install, you are in turn doubling your capacity and reducing your overhead.

 

When you move the bottleneck to sales instead of somewhere in the production process, new doors begin to open that you had never thought of before.  

 

Imagine, how many jobs could you sell if you actually had the time to do nothing but that, just sell?

 

DOUBLE CAPACITY WITH OUTSOURCING

 

In our experience, a shop can double capacity without adding any capital to their business or hiring more labor.

 

One of our earliest customers was a local cabinet maker that added frameless components as a supplement to her current offering. Before she knew it, she was selling more frameless because it just went through her shop so much faster and easier.  

 

Not long after that, practically everything she did was coming from an outsource supplier. Working with only 3 shop hands and a 3000sf shop, they were producing close to $1 million in annual revenues.

 

Still not convinced? If any of these 10 statements apply to you...then it’s time to consider outsourcing.

 

STEP OUT AND OUTSOURCE

 

Now that you’ve seen the pros of outsourcing, give it a try.

 

Grab one of those small projects that are hard to get through the shop and source the cabinet boxes or doors and just get a feel for the process. Test drive the turnaround and then try it again.  

 

Remember, the first time you switch from what you normally do, it can be a little rough to get accustomed to.

 

Overall, pay attention to the points from above and give it a fair go.

 

Also, make sure to choose an outsource partner that is right for you.

 

Read Part 1 to this article here.

from https://www.woodworkingnetwork.com/management/how-make-it-cabinetry-part-2-outsourcing

The huddle: How it works and why you should consider it

He felt guilty saying it….I want to work less and earn more.

We were sitting in the corner at Starbucks, and I asked him what he really wanted.

He fumbled and mumbled a bit and then, frustrated,  he just threw up his hands and blurted out “… I just want to work less and earn more. “

But what he said next really floored me. “... I mean- I feel guilty saying it- but that's what I want Dom…”

I hear the word “guilt” more often that you’d think.

That’s because the owners of most woodwork shops got to where they are now by 100 percent, all-out work ethic. They’ve worked hard, sacrificed everything and now they just can’t believe how big their company has gotten.

I hear things like

• I started in the garage
• My first job was my Aunt's house.
• I started working with my dad in high school and now I’m the owner.

But at some point, these owners start to realize that no matter how hard they work, they aren’t getting ahead. What they did to get here… is holding them here.

Think of an Olympic weightlifter. He has to walk up to that heavy bar and get it over his head- every day.

Now what? A business owner is like that. Where your business is at today is the same thing. You figured out how to get that business- that heavy bar -up over your head and then stand there with it – holding it up. But you physically can’t get it any higher. And, by the way- you’re getting tired of holding it too.

So what’s next? Do you let it crash down - or do you need to build a rack to hold it up for you?

Wow! Imagine building a rack. You’d be able to step back. You could rest. And then you’d be able to figure out how to get that bar even higher!

The good news is that you’re not the first one to tackle this problem. There’s a system to deal with it- and it’s called “the Huddle”.

Just like in football, this meeting is where the team comes together to share quick information before the next play.

In a business we use the huddle to do the same thing. Owners put it in place to increase 2 things. Communication and Accountability.

It’s an on-time, productive, and painless meeting that you hold once a week with all your key staff.  You talk about numbers, who’s doing what, and where people are stuck.

And once you learn how it works, a team of five can complete this meeting in under 13 minutes – and everyone gets to talk at least twice!

Owners love it, because once you have it set up – the owner doesn’t run the meeting. The person running the meeting just follows the agenda and keeps everyone on task.

It’s not a beefing session – as a matter of fact it’s a massive part of putting a winning culture in place in your business.  Here’s an inside tip – it’s also used to keep family businesses from imploding….

Here are some important things for you to do introduce “the Huddle” to your company.

Know your critical numbers.  These will go on a whiteboard or monitor that everyone can see.

Know exactly who needs to be in this meeting.  The owner, the finance person, your admin, your PM’s and your foreman.

Same old/Same old. This meeting is at the same time of day, in the same place every week.

The meeting starts on time.  It ends on time too.  If your people are frustrated with meetings that go nowhere you’re going to love the Huddle.

The huddle master is in charge- but only of the meeting. The huddle masters job is to keep the meeting on the agenda and on time. If a side conversation starts up, then the huddle master simply redirects the people involved to talk about this immediately after the huddle – but not during it.

Bonus- since the huddle is run by different people, the owner can take a backseat to listen and watch to see what’s going on.   Rotate the huddle master position every week – and you’ll quickly see who runs a better, tighter meeting

The Huddle Agenda. It’s simple- and it’s the same for every meeting.

• The meeting starts on time
• Everyone is standing around the whiteboard with their info ready.
• Welcome everybody to huddle
• Looking at whiteboard, the HuddleMaster asks everyone for their numbers going around the room one-by-one. (The only thing that can be reported here is numbers. See “Critical Numbers” above)
• Now, again 1-by-1, going around the room, the HuddleMaster asks for an update on “What’s going on in your department this week?” (In 30 seconds or less per person, just tell me the facts. There’s no complaining,  no finger-pointing,  no blame.)
• Next, going around the room again, one-by-one the HuddleMaster asks each person “Where are you stuck this week?” (In 30 seconds or less per person, just tell me the facts. There’s no complaining,  no finger-pointing,  no blame.)
• The meeting ends on-time. We thank everyone and get back to our day
• Side conversations can now happen

There are a few more tidbits that can be added, but let’s get you started before we get fancy!

I recently introduced this to a 16-man architectural millwork company.  The two partners were run off their feet. Every time they needed a piece of info it took half a day to dig it up.

Now, by coming up with their critical numbers, and creating a simple whiteboard that everyone can see at the weekly huddle – it’s a completely different business.

Out of curiosity I asked them if they would ever stop doing huddle now that they have in place.

The answer…..” Not a #$%^& chance, Dom ! “

It’s really clear who’s responsible for what and everyone gets their turn to talk.

Since this meeting was started with very clear rules that there is no blame excuses or finger-pointing- its easily the most energetic and positive meeting of the week.

The Huddle is the base of the weight rack. It’s a simple system.

If you’re wondering how to work less and make more then you’ll need to put a lot of simple systems in place – and this is the perfect one to start with.

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Author Dominic Rubino is a professional business coach focused on wood product companies. He also hosts the Cabinet Maker Profit System Podcast. Learn more about Dom here:  https://www.bizstratplan.com/

from https://www.woodworkingnetwork.com/management/huddle-how-it-works-and-why-you-should-consider-it

How to make it in the cabinet industry: Part 1

In 2006-2007, I thought we had it all figured out. I thought there was nothing that could stop our company and the sky was the limit.

 

We were “making it!”

 

Just as we were riding high, and even before the recession hit us, we got hit in the face with something else: the consequences of everything that we had done wrong up to that point.  

 

Previous to this slap in the face, we had purchased a couple machines. Because of our growth trends at the time (and our 18 foot tall and bulletproof attitude), we thought we would be just fine.

 

To our surprise, it wasn’t long before we were in crisis mode. Our main issue sprang from the fact that we simply had too much debt for a new company.

 

Ultimately, we did not lose the whole company, but we came closer than I ever care to go again. Not only was it frustrating, it was embarrassing. However, many folks lose more than their pride in this situation.

 

We were one of the lucky ones. We had a foundation to handle the changes that were coming.   

 

MAKING IT IN THE CABINET INDUSTRY

 

In this article series, we will peel back the layers of the loaded question “how do you make it in the cabinet industry?” and uncover the key tactics that can change your trajectory from stress to success.

 

When it comes to “making it” in the cabinet industry, we all default to the same strategies: Increase Sales and Increase Capacity.

 

Increase Sales

 

We know that we have to have more sales to grow. Build a sales plan that will grow with your capacity.

 

Increase Capacity

 

Once we add sales we have to add capacity. If you make a logical decision about increasing sales we need to apply the same logic towards our capacity.  

 

Both strategies are correct, both are necessary, but both are detrimental if not guided by a third strategy: maintain low debt and reserve cash.

 

YOU NEED CASH

 

According to a U.S. Bank study, a whopping 82 percent of businesses that fail do so because of cash flow problems. If we are burning our cash financing receivables and debt, there is not enough left over to fuel our growth engine.

 

We must redefine what it means to grow and implement the type of strategy that doesn’t lead to cash flow crisis and destruction. Growth is not only a top line deal. If we only focus on sales as our primary indicator for growth we will subordinate all of our decisions to that ideal.

 

ARTICLE 10 things I wish I knew before starting my cabinet shop I want to dive into the top ten things I really wish I would have known before I got into business.

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For example, if you are looking at a new saw that will gain you capacity, but it’s going to cost $100,000, the only decision you have to make is, “will you create enough extra monthly sales to cover the cost?”

I'm here to tell you there's a flaw in your logic.

 

There is no safety valve built in for if and when things go bad or slow down. No debt is not reasonable, but an unreasonable amount of debt will destroy your business.

 

IS LOW DEBT POSSIBLE IN THE CABINET INDUSTRY?

 

Okay, on paper, low debt seems great, but is it actually possible?

 

We go into debt to fund our increase in sales and increase in capacity, not to mention to hopefully gain a profit.

 

What if I said that I knew a way that you could double your top line sales without spending a dime on capital improvements such as space or equipment?

 

Would you call me a snake oil peddler or a liar?

 

OUTSOURCING

 

Outsourcing is the only way you can double sales without adding any debt, labor, or additional capital expenses.  

 

For example, if you have a three-person crew and you do $300k/year in sales, you are maxed out. You can’t take on any more work and all of your time is consumed with your production schedule and managing your crew.

 

ARTICLE Why would you want to increase your woodshop's capacity? And how would you do it? Increasing capacity is a conversation we have all had with ourselves as shop owners at some point or another. So what exactly are we talking about when we say “Increase Capacity”?

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Now, what if your three crew members only had to assemble and deliver the final product?

 

You’d be able to toss out your production schedule, win more jobs, and focus on working on your business rather than working in it. With all the extra time and energy, doubling sales becomes realistic.

 

Buying outsourced components can get you there.

 

Some people think that it is more expensive to outsource their production, but when you drill into the numbers, outsourcing in the new economy makes a lot of sense. I will explain more in Part 2 of this article.

 

KEY STRATEGIES IN THE CABINET INDUSTRY

 

Once you’ve begun outsourcing capacity needs, your debt risk is not only minimized, but you are also then freed up to practice the next key strategy to making it in the cabinet business: delegation.

 

As you begin to delegate, you’ll find you finally have time for another key strategy to making it in the cabinet industry: standardizing.

 

TAKE ACTION

 

Maintaining low debt and reserving cash is the first, and most critical key to “Making it in the Cabinet Industry” and outsourcing is one of the most practical ways to do so. Once in place, delegation and standardizing, two other critical tactics to making it in the industry, can actually come into play.

 

If you haven't figured out the right formula for “making it” in this industry, try the steps outlined above and put your business on the fast track to success. You can drive your business in the direction you need to go rather in the direction that your current workload drags you.

 

Stay tuned for Part 2.

 

 

 

 

 

 

 

 

 

 

from https://www.woodworkingnetwork.com/management/how-make-it-cabinet-industry-part-1

40 Under 40 honoree: Are you ready for the cabinet industry of 2030?

Cabinet production has remained consistent over the last 40 years. Production technology improvements have worked to enhance productivity and profits while maintaining the process.

 

However, it’s clear to see that a significant shift is happening now. The jobs today will not be the jobs of tomorrow. How your father operated his business is not the way you can manage your business and expect the same results. The market is changing, and it’s changing fast, so you’re either green and growing or ripe and rotten.

 

Here’s how you can prepare for the woodworking industry of tomorrow.

 

1. Desire

 

In the words of Napoleon Hill, it all starts with desire.

 

“The starting point of all achievement is DESIRE. Keep this constantly in mind. Weak desire brings weak results, just as a small fire makes a small amount of heat.” – Napoleon Hill, Think and Grow Rich

 

We need to first and foremost be motivated to think outside the box and be open to the possibility that significant change is required for us to succeed in the future.

 

2. SWOT Analysis

 

SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis can help you understand your competitive advantage and develop ways to take advantage of your strengths and new opportunities. Create a new SWOT) analysis document for your company. If you have never done this, here’s how to do one for yourself.

 

3. Rank & Prioritize the SWOT

 

To identify where your company has the most room for improvement. Have each manager/leader do this for their department and for the company. Then match them together to sift from the most impactful to the least.

 

4. Focus on the Top 3-5

 

These are your most significant challenges and opportunities where a change in how your company operates would have the most considerable impact regarding profitability. Eg. 3D Printing or On-Demand Cabinets

 

5. Begin With The End

 

Clearly articulate what you want from the improvements you choose to pursue. Be as clear and descriptive of the end result. Eg. Deliver our first 3D printed cabinet.

 

6. Implementation Plan

 

Create a detailed improvement implementation strategy to make changes that will positively impact the bottom line. Implementation is a key component of any strategy and must be project managed with detailed who, what, when documents created for each priority. Eg. Alex to create a proposal of all possible 3D printers capable of printing furniture by May 15, 2019.

 

7. Measure

 

Create performance metrics to measure your performance. What gets measured gets done. This may be as simple as what percentage of tasks were completed on time or as complex as cost per square foot of 3D printed cabinets.

 

This may seem like a simple list but it is powerful in its application. It requires deep diving into uncharted territories and may or may not always provide instant results. But if Henry Ford had invested in horse harnesses instead of the Horseless Carriage, the 4 trillion-dollar automotive industry may not be where it is today!

 

 

 

from https://www.woodworkingnetwork.com/management/40-under-40-honoree-are-you-ready-cabinet-industry-2030

Why would you want to increase your woodshop's capacity? And how would you do it?

Increasing capacity is a conversation we have all had with ourselves as shop owners at some point or another. So what exactly are we talking about when we say “Increase Capacity”?

 

Capacity is defined as the maximum amount that something can contain. If you ask my wife about capacity the answer you will get is, “The only capacity I want to talk about is the capacity of this vehicle. Between our kids and their friends we need another row of seats.”

 

Although not exactly shop related, it is a great example of not having enough capacity.

 

ONE STEP FORWARD, TWO STEPS BACK.

 

There is nothing more frustrating than selling more work and not being able to produce it. If your current throughput can no longer match your monthly sales, then you have a dilemma. Increase capacity, or ultimately lose the ground you just made by getting extra sales.

 

One step forward, two steps back. 

 

If it were a matter of just stating, “We need more capacity” and it was so, then there would be no problems with increasing capacity.  

 

However, increasing capacity often means spending capital, taking out debt, or adding more building space.

 

Either way you go, your expenses are going to go up to increase capacity.  

 

EMOTIONS AND QUESTIONS

 

The fact that we must invest to gain capacity usually brings with it a variety of emotions: Fear that we will not keep the work to support the investment, excitement that we will be able to handle more work and grow, deep thought about the logic of our upcoming decisions.   

 

As we are running the gamut of emotions we start uprooting several potential questions surrounding increasing capacity:

 

• Are we ever going to get the business to a point where we can grow without investing everything we have made?
• Is there any other way to increase capacity without spending all our capital or going into debt?
• What is our new break even if we add debt service to our current balance sheet? 

In this article, we will answer some of these questions by exploring the when, why and how of adding capacity to your shop and offer you resources to help make your growth decisions much easier.  

 

WHEN, WHY, AND HOW

 

The discussion of increasing capacity can be overwhelming, but if you start by listing out the when, why, and how, then the task will become much easier. 

 

So let’s get started on the main questions.

 

• When do we expand capacity?
• Why should we increase capacity?
• How do we expand capacity and minimize potential negative effects on business?

WHEN TO INCREASE CAPACITY

This is a pretty easy question to answer.

 

To most owners it is intuition that tells us we are maxed out with our current setup. In order to keep up with increased sales we must add capacity to keep up with the workload.  

 

Evidence of the "when” comes when jobs are falling further behind because of production bottlenecks. Generally, there will also be a lack of either quality control or oversight of the finished product. Quality control seems to suffer the most when we are at capacity because the jobs are getting farther behind and we don't have the time complete a thorough check before they leave the door.

 

The problems that stem from poor quality can devastate a business and WILL shut down a business’ growth engine quicker than any other force.  

 

You probably won’t have to think too hard of a business that is experiencing this phenomena right now. Maybe it was a service company you used for repairs at your house and the worker was inexperienced or late because they were too busy to get to you. Or a flooring company that never even returned your call for a quote.

 

If your quality and your customer service seem to be going downhill, your "when" may have arrived. 

 

As stated earlier the “when” of needing additional capacity is pretty easy to identify. The important step to take now is to not act in haste or make a snap business call that may put your business in jeopardy down the road. First, let’s take a deep look at the “why” and “how” to increase capacity.

 

WHY INCREASE SHOP CAPACITY

 

Identify your “why” as soon as the “when” has become apparent. Your “why” can be anything. You want to grow, you want to be the best in your area, you want to be the biggest, you want to have more employees, whatever the reason, we all have a why.

 

I suggest making a list of "Why I Desire to Increase Capacity". You may consider making this a pro/con list so you can evaluate the positives and negatives of your actions. List an action in the center of the sheet, on the left put a pro of that action and on the right of the sheet list a con of that action. This should put everything into perspective.  

 

In high school I asked a local farmer how his farm seemed to always look great and just get better every time I came by. His response was, “If you're not growin’ you're dyin'.” This stuck with me and helped me to form my own why for growing. 

 

HOW TO INCREASE CAPACITY

 

If you are like me you probably just skipped down to this point of the article so you can get to the meat of the whole thing. If you did, I understand, but at least make sure you have your “Why” list that we talked about earlier.  

 

One of the first things I learned when I was new to the cabinet making world was, “There's a hundred ways to skin . . . .” I don't even have to finish it! While that statement is surely true, let’s lay down a framework to go about your “skinning” a little smarter.

 

We can increase capacity in the following ways:

 

• Add labor and equipment.
• We can try to become more efficient in our processes to maximize efficiency.    
• We can outsource our manufacturing bottlenecks to an outsource company capable of handling our work load. 

 

SKINNING SMARTER

 

We know our options, but which one is the best and why?

 

Adding labor and equipment is probably the first option we consider when we realize we need to grow. There are times when that is the answer, but we have to consider that it will generally result in added debt or lease payments that the company will now be responsible for. Is your company in a place to take that on? Will you really be able to get ahead?

 

Becoming more efficient in our processes is also another option we consider early on. It is always a great thing to do in all of our operations. For tips on maximizing efficiency check out our articles on Delegation, Standardizing Systems, and Theory of Constraints. Although becoming more efficient is always a win, at some point you will likely find that capacity will still need to be expanded to truly continue growth.

 

Typically the last option we consider is outsourcing our bottlenecks. There's actually lot of pride and emotion that can block us from considering it. It's difficult to keep our pride of being cabinet makers on the shop floor, but if we want to continually get better in business we have to keep an open mind.

 

When it comes to the "how" we have to look at it strictly as a business decision so our judgment isn't clouded by our emotions. That's when we can see that outsourcing can often be our best option. 

 

OUTSOURCING ENABLES GROWTH

 

The idea behind outsourcing is not a new idea, but it is just recently becoming popular and viable. 

 

Opting for an outsource partner for increasing capacity allows you to keep your cash where it belongs, in your company!  In our experience, outsourcing can allow a shop to double capacity without spending any additional capital. More cash will leave your company in a strong position to gain more sales and be able to grow within your limits.

 

With systems like Lockdowel for frameless cabinet, a shop can offer frameless cabinets with no extra investment or tooling. Basically, you could be a frameless cabinet pro in no time and assemble it on the same workbench you assemble everything on now. With assembly time in the 2-5 minutes per box range you are sure to see the value in the Lockdowel system for easy, fast assembly.

 

KNOW TO GROW

 

As a cabinet maker, I understand that once a craftsman, always a craftsman. The problem though, is at some point you are going to want to grow beyond just your own, personal capabilities. In fact, the value of your shop depends on it. 

 

If you have the grit to grow beyond your personal capabilities, you will soon find your when, why, and how.

 

The “when” is easy which begs the all important “why”. If you take the time and pin down exactly why you want to increase capacity, then you are ready to tackle the “Hhw." Remember when addressing the "how", keep an open mind and keep your pride of being a cabinet maker on the shop floor. 

 

If you can push thru and execute these steps in detail you will be able to come up with a clear, concise plan of action that will keep your company nimble and eager for growth.   

 

 

 

 

 

from https://www.woodworkingnetwork.com/management/why-would-you-want-increase-your-woodshops-capacity-and-how-would-you-do-it