The Evolution of Hardwood Lumber Distribution in the US
The manner in which hardwood lumber products are distributed has changed significantly over that last 20 years and the pace of change continues to increase.
In the recent past large manufacturers and millwork shops, concentrated mainly in the Southeast and Northeast US, were focused on production of furniture, cabinets, flooring, doors, mouldings and other types of large scale hardwood lumber production runs. These manufacturers typically bought full truck-loads and containers of random width and length, kiln dried hardwoods from larger sawmills, concentration yards and brick and mortar distributors.
This really started to change in the early 80’s when other countries such as China, India and others stepped up and showed that they could produce an acceptable quality product at much lower costs than many American companies that were doing similar work. The U.S. market has also seen a decrease in the overall demand for some of the major domestic species such as red oak, white oak, cherry, walnut and maple and conversely an increasing demand for exotic lumber imports such as afrormosia, ipe, genuine mahogany, African mahogany, sapele, sipo, rosewood, Spanish cedar, wenge and many more. Other factors affecting this segment include the slowing in the housing market, a significant spike in both home and commercial remodeling domestically, as well as changing buyer habits such as the environmental or green movement.
The continued decline of these larger U.S. manufacturers has forced the remaining market participants as well as any new companies to focus very hard on the overall efficiency of their operations in order to stay competitive. These smaller manufacturing companies tend to be much leaner operations. Thay have found niche products that they can produce and market very well in their individual industry segments. These manufacturers often have very precise needs and tend to buy much smaller volumes, with greater specifications and much shorter lead times in order to maximize their yields.
The trend away from larger, centralized manufacturing companies to highly-customized just-in-time manufacturing continues to play out in not only lumber products, but many other industries worldwide including entertainment, clothing, steel and plastics etc. Most industry professionals believe that this trend will continue into the foreseeable future.
These newer entities will continue to evolve in response to the changing market place. As a result, the industry has started to cater to this segment, albeit very slowly and often kicking and screaming along the way. A lot hardwood lumber companies have gone out of business over that last few years. Beginning to emerge are those who have re-tooled their operations and have taken a much more customer-centric approach to the way they do business. This includes offering more value-added services, including length and width pulls, color and grain selection, surfacing and straight line ripping. They also may offer smaller dimension orders and are generally learning how to accommodate a new type of clientele with much higher expectations.
Technology has had an impact on virtually every product that is sold in the world and it is now starting to transform the way that hardwood lumber and dimensional hardwoods are bought and sold. The old system was anything but fast and efficient. Mills typically sold most of their stock to regional distributors who warehoused materials and sent generously paid salesmen out to find customers to sell to. This method worked well for the mill and distributor but was not great for the end user who could only buy what the distributor had to offer. This was not always the best product for his needs. Pricing of the actual product has always been difficult as well. If a small contractor wanted to quote a job using exotic wood, they could end up making 10 to 20 phone calls and still have no confidence that if they got the job, they would actually be able to buy the product at the price they were quoted. The hardwood lumber companies are still operating with mostly fragmented data systems that do not share pricing or customer information, but this is starting to change as companies recognize the need to cater to a more demanding lumber buyer.
Most lumber industry professionals believe that there will be more consolidation in the supply side of the hardwood lumber industry and increased fragmentation on the buyer end due to niche custom manufacturing of specialized, just in time wood products. More companies are specializing in what they do best and not trying to be the best at all things. The strong companies are embracing new technologies to help them produce and market their products in a rapidly changing market place.
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