I have gotten a lot of requests to provide builders and lumberyard owners with a business prospectus for wall panel manufacturing. The obvious reasons for this are the demand for new construction, the shortage of field labor, and the desire to create a new revenue. Many people also think it may be less risky to invest in wall panels than wood trusses. Well, is this true, and are wall panels right for you?
The Not-So-Simple Path
On the surface, it might seem clear-cut to think it takes only a low investment of capital to manufacture wall panels. You already have the sales staff and materials, so theoretically all you need are: 1) A pair of good framers who want better conditions and benefits; and 2) A wood table in a spare building that you may already have.
If you go this route, what you have done is added the cost of wall panel design personnel, transportation, and other hidden costs to the wall framing process, compared with what framing costs in the field. Transporting wall panels requires more trucks than shipping units of lumber. And two guys working on a wood table have not gained you any real efficiency from the manufacturing process to offset the additional cost you will be incurring.
Therefore, do not expect to sell wall panels for any cheaper than those being framed in the field. The field framers would be wise to manufacture wall panels at the job site and best you in your processes.
Get Automated?
You could go to the other extreme and invest in one of those fully, or almost fully, automated systems coming from Europe. But what appears to require less labor, produce more with greater consistency, and reduce headaches can have serious considerations that you may be overlooking.
The flexibility of some of these systems may not meet your market types. The skill of wall panel designers, those office CAD geeks, needs to be on the high end because you have far fewer skilled personnel in the manufacturing process to catch their mistakes. Your sales volume must be far greater to cover the capital investment, and it has to remain at a high level for many years to cover the risk. Please tread carefully if you go this route.
Claims vs. Reality
Now for the middle ground. It seems so obvious that the way to go is to call up the equipment vendors and talk about output, personnel needed, and the expected rate of return by using the most common wall panel equipment on the market. These salespeople will throw out large output numbers that seem reasonable and enticing.
However, I can assure you from the many, many consultations I have performed that many people are not getting the efficiency gains promised and are frustrated with recurring issues. These recurring issues include labor shortages, quality inconsistencies, and the biggest problem of all: the lack of expected output volume promised by the equipment vendors. An example of this is having to climb onto the tables to install horizontal blocking, which is a productivity killer and adds extra labor cost to the project. There are ways to add horizontal blocking effortlessly without adding serious labor costs and slowing the production line, but they aren’t well known.
Two Key Issues
Besides the manufacturing aspect, you need to consider the two most important aspects of this whole new endeavor.
One is the consistent volume of sales needed to keep everything going without large swings in sales volume. Oh my goodness, I cannot say this enough. It is one thing to have enough sales to cover the cost of this new manufacturing, but keeping it busy is just as important. Do not expect to lay off personnel and then rehire them when your sales increase. Manufacturing is only efficient when it is done at a steady pace, and by industrial engineering standards, 92% of full capacity is the ideal rate of efficiency and output. You will encounter terrible personnel retainment, quality of work and productivity output if you go through large sales swings and think you only need these workers when your sales justify it.
The other important aspect of the manufacturing process to keep in mind is that managing the whole manufacturing process is not the same as managing a lumberyard. It is more than just the added personnel for designing wall panels and handling technical issues, and even the actual sales process is not the same as in the lumberyard processes.
Attitude Adjustment
This aspect of the business has merited its own article. In a nutshell, you need to change your mindset to that of a manufacturer for and not expect that your skills as an expert lumberyard manager will carry over. To make it profitable and worthwhile, you will have to acquire new skills, new ways of thinking about processes and new ways of doing business. This manufacturing mindset and the skills needed are the very reason large multi-location companies have a division just for the manufacturing operations, managed by people from manufacturing, not retail.
Some final words of encouragement: Many of you should seriously consider wall panel manufacturing for your business. Having a better understanding that wall panel manufacturing is not as simple or low risk as it may appear on the surface will allow you to be better prepared. Create a plan and get professional, unbiased advice that offers real solutions and better practices based on lean manufacturing specialized for wall panel manufacturing.
Also, as I stated in the article, Why It’s Time to Add Component Manufacturing to Your Business, for the vast majority of larger lumberyards, I believe it is not a matter of if you are going to operate a component manufacturing facility but when. Every day that slips by is only weakening your market position and strengthening that of your competitors as they refine and work through the problems of their new component manufacturing division. Welcome to the component manufacturing world.
