STATE OF SUPPLY FOR THE MILLWORK INDUSTRY

------------ BY TYLER SHARPE

THE MILLWORK industry has been rocked by significant changes these past few years with supply chain breakdowns, product import duties, COVID-fueled growth and a sharp decline in demand.

Ocean freight and raw material pricing experienced a cost multiplier leading to high inflation, widespread disruption and continued uncertainty before falling back to pre-pandemic levels. Millwork product manufacturers, suppliers and installers were forced to adapt quickly while many struggled to navigate an unpredictable landscape brought on by external forces.

After years of volatility, the industry expectation in 2023 is that we should be able to deliver our products and services with pre-pandemic reliability, even in the face of continued uncertainty. Raw material pricing is still fluctuating, supply chains are distressed with strikes, blank sailings and GRIs, unexpected outcomes of annual CVD/AD duty reviews and a cloudy demand pipeline one to two quarters down the road.

In this article, we will explore strategies to help millwork businesses navigate ongoing instability and change. We will examine strategic supply considerations and offer practical advice to increase product reliability while remaining competitive and situated for growth in this rapidly evolving landscape.

Following an unpredictable 202022, I wholeheartedly embrace that we’re at the mercy of market forces. We operate in a world of fragile supply chains, inflation, challenges in employee recruitment/retention and a daunting geopolitical atmosphere. It’s not all doom and gloom, it’s far from it. The path forward acknowledges that continued uncertainty should be embedded into long-term sourcing strategies.

Logically, continued uncertainty in the market implies the likelihood of change. We all faced considerable disruption these past few years. How do we take stock of recent lessons learned? One of the biggest chal- lenges experienced revolved around our supply chains, whether it be stock outs, delays, price increases, or quality issues. We are only as strong as our weakest link and should be evaluating the SWOT (strengths, weaknesses, opportunities, threats) of our supply chain. Knowing that many product costs peaked almost a year ago and will eventually bottom out, is there an effective strategy to balance short-term cost savings with long-term strategic planning? It is mission critical for all millwork businesses that supply partners ensure you are well positioned to deliver on your value proposition.

For sourcing directors, key considerations include a supplier’s ability to deliver:

• High service level commitments

• Quality control and assurance procedures

• Diversified supply sources

• Local warehousing, buffer stock and last mile logistics services

• Overall reliability

Although cost was not on the list of considerations, we all know it’s essential. The reason it doesn’t make the list is price needs to be competitive, but the lowest price is not a key indicator of the best supply choice.

Each of the considerations above could have a 10 times greater impact on the total cost of ownership as opposed to a small variance in delivered prices. Supply needs to be competitive, but this might be the time to caution that pricing that seems too good to be true, may in fact cost considerably more in the end. Access to reliable supply with the ability to ramp up quickly, increase volumes and deliver on new requirements is valuable for companies looking to grow.

From another perspective, late shipments or poor product quality result in stock outs, missed opportunities or shift reductions for manufacturing businesses. Knowing that economies are cyclical and a bear market will eventually be followed by the bull, there is no better time to focus on assembling the right team of supply partners who can play critical roles by delivering product as demand fluctuates or new opportunities emerge.

When considering suppliers, who do you want on your side to endure the next unexpected market shift?

Evaluating your suppliers’ capabilities directly correlates with the understanding of the quality and limitations of the products that you source. The demand experienced over these past few years presented a gold rush opportunity to new suppliers in our industry to gain market share with limited due diligence when it came to product composition or properties. Should this be the year where we learn about the intricacies of the products that we use?

It’s easy to decipher at a high level the reliability of your products. We can start with basic documentation and processes: fluctuations and emerging government policies?

• Does your supplier have a brochure or a technical data sheet for each product?

• Can they answer questions about dimensional tolerances, MoE, MoR, screw holding, etc.?

• Continuity of a trained local workforce, infrastructure to transport materials, stable energy, wages and other operational costs?

Unfortunately, market forces, pandemics, natural disasters and continued geopolitical conflicts all have the ability to drive considerable delays, shutdowns and costs. 2023 is a year to embrace geographical diversification of supply. This could be a daunting challenge on your own but the right partner can provide transparency and support to quickly implement a diversification strategy while maintaining the consistency your business depends on.

To recap, our industry is well positioned to deliver low market pricing to combat inflation, quality control assurances that products meet required specifications, additional value added services to improve your business, and a geographically diversified supply chain. Your landed pricing or COGS is exceptionally important, but the savings opportunities are minimal when compared to an overall reduction in the total cost of ownership of your products.

• Does your MSDS spell out the composition of the product including species, raw material sources, glue types, etc.?

• Is there a series of QC processes and destructive testing performed to ensure each batch meets long-term expectations?

• Do your products come with a transferable warranty?

• Are you comfortable with your supplier’s compliance (social, regulatory, environmental)?

We may be at the mercy of unpredictable market forces but you can avoid the subpar “pandemic quality” by conducting a simple evaluation of product performance.

Our products are further defined by the country of origin as the supply map is changing rapidly. The primary driver of this massive change is the geopolitical climate and the implications are enormous. What is the outlook of your country of origin in terms of:

• Import/export duties, currency

2023 is the year to build reliability protocols, understand your products supply chain, and identify the key partners that can propel your business through the next economic cycle. The millwork industry has experienced significant disruption these past few years; by evaluating the capabilities of our supply chain, we build resilience into our businesses and stand better prepared for future disruptions. MM