by Gaurav Kakkar, kakkarg@vt.edu

Development of global economy have led to significant increase in the level of globalization. The companies now look at geographical expansion as an opportunity to grow. This also implies that these companies need to prepare themselves for the challenges not seen in the native markets (Lu & Beamish, 2001). The industries thus need to learn and adapt to new culture, environment and markets. The global forest product industry, traditionally evolved to be heavily dependent on locally harvested resources. This gave an advantage to forest-rich regions over the others for potential production and processing installations. The majority of the industries would preferably be located close to the forest due to high transportation and handling costs. Recent advancement in harvest and handling technologies, forest management, expansion of planted forests etcetera have led to a major change in this traditional view. The processing industries no longer have to tie themselves with the close proximity of forest (Bael & Sedjo, 2006). As a result, the forest products industry can now share and impact the globalization. The products and services can now be directed to specific regions of the world where they can be most effective. More and more people across the world can now be benefited from the new and innovative methods. Despite this substantial change, the very nature of wood resource still limits the feasible expansion of this industry.

United States leads global production and consumption of forest products. But this share have been declining since 1990 (Farmer, 2015). This article thus aims to highlight few of the major opportunities and barriers for internationalization of specific product categories in the forest products industries.

Opportunities (Prestemon, Wear, & Foster, 2015):

1. The forest management program in the United States assures that the derived products are environmental friendly. This gives industry an added advantage in the markets with growing concern of nature friendly products.
2. Asian market has high potential for furniture industry. The U.S. companies can expand and be competitive in this market segment.
3. With positive recovery after the housing decline, the companies can increase investment in this sector. Foreign housing markets can also be explored for expansion.
4. Wood pellets manufactured in the U.S. can target the renewable energy market across the world, especially Europe.
5. An increase in demand in biomaterials sector for wood fiber is also expected. It includes construction, auto manufacturing and personal care products.
6. The timber supply from the U.S. have increased considerably over time and this further will support the comparative advantage in global markets.
7. New initiatives to use wood as structural component in tall buildings can open up new market segment for U.S. forest products industry.

Barriers:

Any industry attempting to do business in a foreign market tends to face certain trade barriers. These can be broadly classified into tariff and non-tariff barriers.

1. Tariff trade barriers: A tariff (duty) is the tax on the value of product including freight and insurance of imported product levied by the government. The rates depend upon nature of product and vary between countries. Additional taxes (national and local), customs fee are often collected along the tariff at the time of customs clearance. This leads to increase in the cost of delivered good. Most of the U.S. made/originating products can qualify for duty free entry in more than 20 countries that have signed Free Trade Agreements (FTA).
2. Non-tariff trade barriers (Sun, Bogdanski, Stennes, & Kooten, 2010):
   1. Import quotas, export quotas and tariff quotas are some of the most common quantitative restrictions on the volume of different wood products.
   2. Complexity of licensing procedures, customs, financial transactions act as administrative restrictions and vary from one country to another.
   3. Different price control measures employed in the target market like custom surcharges, import taxes, minimum/maximum price limits, prior deposits, anti-dumping and countervailing duties.
   4. Domestic policies aiming to improve the competitiveness of domestic producers in international markets. These include producer or exporter subsidies, financial assistance to domestic industries, tax concessions etc.
   5. Forest management certification and product labeling to assure that the forest was sustainably managed and is an environmental friendly product is growing to be an important barrier.

These are the few of the key available opportunities and associated barriers that the forest products industries in the United States have to consider while successfully expanding to global markets. Development of new technologies and applications of forest products in this adapting global market can provide a major opportunities to all associated industries.

References

Bael, D., & Sedjo, R. (2006). Toward Globalization of the Forest Products Industry: Some Trends. Resources for the future discussion paper.

Farmer, S. (2015, December 3). U.S. Forest Products in Global Economy. Retrieved from Compass live: Southern Research Station: http://www.srs.fs.usda.gov/compass/2015/12/03/u-s-forest-products-in-the-global-economy/

Lu, J. W., & Beamish, P. W. (2001). The Internationalization and Performance of SMEs. Strategic Management Journal, 565-586.

Prestemon, J. P., Wear, D. N., & Foster, M. O. (2015). The Global Position of the U.S. Forest Products Industry. Asheville: Southern Research Station, USDA.

Sun, L., Bogdanski, B., Stennes, B., & Kooten, G. C. (2010). Impacts of tariff and non-tariff trade barriers on the global forest products trade: an application of the Global Forest Product Model. International Forestry Review, 49-65.

 

by Gaurav Kakkar, Virginia Tech MS student. kakkarg@vt.edu

Introduction

Traditional construction process involves shipping of raw materials to the construction site. The contractor/sub-contractors would then use on-site workers to process and use them in building. Since most of the work is done on site, majority (up to 90%) of the total cost is incurred on the actual construction site (Somerville, 1999). This means majority of the project is done in open, uncontrolled environment. Instead, Prefabricated construction refers to construction for which 2/3 or more construction process are finished in factory and the main parts of the house, such as walls and floors, are fabricated following certain industry standards. This gives builders an option to build faster assuring safety and quality at lower prices as compared to on-site construction (WoodWorks, 2014). The components are prefabricated in batches and then shipped to site for assembly. The level and nature of prefabrication can vary from project to project.

Depending upon the extent of prefabrication, these off-site manufactured systems can vary from just pre-cut and prefabricated components to panelized leading up to fully advanced modular systems. These are also called building systems (Na, 2015). Factory manufactured components in these systems replace some of the on-site labor built structures. The process is mainly feasible in repetitive components of house like, walls, floors, doors and windows etc. which when assembled easily on site can be very effective in saving time.

Evolution of Building Systems in Wood construction

Home manufacturers provide builders with a different product types with varied degree of prefabrication. These houses in the United States are manufactured strictly according to the concerned state wide building codes. This report does not include the manufactured/mobile housing which is regulated under HUD codes.

Prefabricated systems

This is the most basic type of off-site factory manufacturing of building components. This system evolved with the wide spread of lumber mills which started to supply processed dimensional lumber to the builders. All the cutting, drying and processing is done in a central location and then supplied to the builder on the construction site. The builder would then use these to make walls, floors or roof systems. This system further gained popularity with the development of engineered wood products like Structural Insulated Panels (SIP), trusses, I-joists (WoodWorks, 2014) etc. which required mechanized manufacturing by skilled labor and cannot be done easily on the construction site. The manufacturers now make them in many configurations and types giving builders a wide variety to select from to fulfill the design and regulatory requirements.

Panelized systems

With further development in factory manufacturing of wood products, the wood products industry moved to assembling the prefabricated products into larger panels or complete assemblies. These panelized systems can be engineered according to construction design. Use of computer added design further helps the manufacturers to manufacture exact dimensions quite easily (WoodWorks, 2014). Using panelized systems, complete wall panels, floor and roof systems can be delivered to the site ready for assembly and installation. Some systems come even with plumbing and electric fittings so that factory built systems are not tampered.

Modular systems

This is the most advanced building system in which the entire house is divided into independent modules during the design. These modules are then built in a factory on a production line like any other manufacturing. Controlled environment, skilled labor and use of automation in construction makes this off-site manufacturing very quick as compared to on-site construction. These modules are fitted with all the utility fittings and insulated properly before they leave the facility. Some modules might even come with interior finishing like carpeting, kitchen cabinets and shelves etc. A complete module is transported to the job site where it would be connected and sealed with the rest of the structure to complete the building. This type of the building system has maximum amount of prefabrication ranging up to 95% of the total construction work done off-site. In order to assure sufficient safety and durability, the modules are inspected at factory during construction and on site at the time of installation as well. This method can complete a project in half the time as compared to traditional stick built on-site construction (WoodWorks, 2014).

Adoption of prefab system in the United States.

Prefabrication in residential construction is not a new concept. The first adoption of off-site construction in the United States dates back to mid-1800s (O’Brien, Wakefield, & Beliveau, 2000) but the industry is still to have a widespread acceptance of advanced prefabricated systems. This is supported by 2014 Survey of Construction (Zhao, 2015) which reported that only 10,334 single family panelized/precut home and 10,560 single family modular homes were started in 2014 which also were geographically concentrated in East North central, South and Mid-Atlantic regions of the country. This amounts to 3.2% of the total single family residential construction in 2014. Along with less adoption, the market penetration of off-site construction was observed to be diverse.

Drivers for future growth

The key feature of off-site construction and adoption of factory manufacturing techniques in construction sector is improvement in project schedules. With optimized manufacturing processes, builders can achieve a considerable improvement in time taken to complete a project. Including prefabrication can also reduce construction costs mainly by optimizing material use and reducing waste. There can be substantial improvement in site safety with majority of the work done in the controlled environment of a manufacturing facility. Green and Energy efficient buildings can be constructed in a more efficiently by including prefabrication. Prefabrication in construction can also give builders and architectures a flexibility to use wide range of materials and work without any interruption by inclement weather conditions (McGraw-Hill Construction, 2011). As the industry gain more maturity, these factors In future would further encourage the builders to adopt higher levels of off-site manufacturing in residential construction.

References

McGraw-Hill Construction. (2011). Prefabrication and Modularization: Increasing Prductivity in the Construction Industry. Bedford, MA: McGraw-Hill Construction.

Na, Z. (2015, October 1). System Built Single Family Homes in 2014. Retrieved February 10, 2016, from Housingeconomics: http://www.nahbclassic.org/generic.aspx?sectionID=734&genericContentID=247892&channelID=311

O’Brien, M., Wakefield, R., & Beliveau, Y. (2000, July). Industrializing the residential construction site. Retrieved from HUD User: http://www.huduser.org/portal/publications/manufhsg

Somerville, C. T. (1999). Residential Construction Costs and the Supply of New Housing: Endogeneity and Bias in Construction Cost Index. The Journal of Real Estate Finance and Economics, 18(1), 23-62.

WoodWorks. (2014). Putting the Pieces Together. WoodWorks.

Zhao, N. (2015). System-built single family homes in 2014: Special Study for housing economics. Retrieved from http://www.nahbclassic.org/generic.aspx?sectionID=734&genericContentID=247892&channelID=311

 

by Melissa Brenes-Bastos, mbrenes@vt.edu  

The wood products industry has become a multinational business with plantations and mills around the U.S and the World. By 2007, there were 38,614 firms with shipments valued at $186,7 billion and employment of 1,037,806 people  (United States Census Bureau, 2007)

Marketing is easily misunderstood as a process of telling and selling products but it must be understood as a new sense of “satisfying customer needs”. (Armstrong & Kotler, 2005). Moore & Pareek (2006) mentioned that marketing has two goals: (1) first, attract new customers by emphasizing the value of the product or service offer by the company and (2) second, retain the current customer and keep satisfying the customer with old and new products and services.

By conducting marketing activities in the wood products industry new and different information can be obtained. According to Dasmohapatra (2009), the North America forest products industry is losing its domestic markets to a slow economy and high manufacturing costs causing the close of many mills and many workers losing their jobs in recent years.  Dasmohapatra also argues that the new marketing drives or new era of the forest products industry relies in opening the minds to global markets, targeting products to changing demographic structure and customers taste, designing products with environmental taste, innovation, efficient management, trade practices, and policies.

Anderson, et al. (2005) developed a study about current consumer behavior in forest products. The study focused on how forest firms can satisfy consumer’s wants and needs. Results show that this is possible only if the firm focuses on understand consumer behavior. Regarding the method used (mail survey or mall intercept methods) researchers need to cautiously control the bias in the data that is typically used in forest products business/marketing field. The two most important results found by Anderson, et al. (2005) were: 1)researches will need to adapt their efforts to incorporate the networking aspects, and 2)surveys have been and will continue to be, a mainstay in forest products marketing research.

References:

• Anderson R, Fell D, Smith R, Hansen E & Gomon S. (2005). Current Consumer Behavior Research in Forest Products. Forest Products Journal. Vol.55  No.1, PP. 21-27
• Armstrong, G & Kotler, P. (2005). Marketing: an introduction. Pearson; Prentice Hall. 7^th ed.  Upper Saddle River, New Jersey.
• Dasmohapatra, S. (2009). Future marketing drivers for the forest product industry. BioResources. Vol.4 No.4, PP. 1263-1266 Retrieved  February 5, 2013 from http://su8bj7jh4j.search.serialssolutions.com.
• Moore, K & Pareek, N. (2006) The basics Marketing. Routledge. New York, NY.
• United States Census Bureau (2007). Retrieved December 5, 2012, from Us. Department of Commerce website: http://www.census.gov