Why Outsource Wood Components Versus
Manufacturing Them Yourselves
Better Control Over Costs
When purchasing wood
components, the exact material cost can be determined. This eliminates the
guesswork that often enters into the calculation of a given products' cost.
This knowledge will make it easier to calculate a profitable selling price
for the finished product.
Reduce Capital Investment
The purchase of wood
components permits companies to operate with a minimum investment in land,
labor, buildings, machinery and equipment. To compete in a volume market,
the component parts manufacturer must maintain a large investment in modern
woodworking machinery. Not every furniture and cabinet manufacturer can
justify this investment.
Realize a Greater Return On
Investment
Studies have indicated that
furniture and cabinet manufacturers can achieve a higher return on
investment by allocating their resources to the design, assembly, finishing
and marketing areas, while letting someone else make their wood parts for
them.
Save On Transportation Costs
Raw lumber is heavy, bulky
and consequently very expensive to transport for many woodworking firms. By
purchasing wood components, companies can save on transportation costs since
nearly 66% of the weight and bulk of the lumber is removed at the wood
component manufacturer.
Save On Inventory and Lumber Costs
Companies who produce their
own wood components find it necessary to carry a lumber inventory of the
various species used, which ties up working capital that could be more
effectively used elsewhere. By purchasing wood components, a manufacturer
can increase working capital and reduce inventory carrying costs through
quick turnover.
Reduce Overhead Expenses
The use of purchased wood
component parts will reduce overhead expenses without a reduction in sales
volume. Reductions of raw material inventory and machinery purchases will
cut the cost of inspection, supervision, maintenance, indirect mill costs,
insurance, depreciation and taxes. More time and talent can be devoted to
improving the design of the finished product, marketing and efficiency in
assembling and finishing the product.
Advantages of
Specialization
Component manufacturers can
justify more and better equipment because they serve a variety of markets.
They can maximize their lumber yields by cutting sizes for more than one
customer from each board, have the opportunity to develop more skilled
labor, have advantages in basic raw material procurement, and have the
economic justification for research and development in their specialty. They
can supply parts more economically than companies making their own parts.
