Month: October 2010

RESEARCH BRIEF: Analysis of Exports from Eastern Forest Products Companies at the 2010 International Woodworking Fair

Scott Lyon, MS Candidate
Virginia Tech

 

 This article was published  in the October 2010 number of HMR Executive

At the 2010 International Woodworking Fair in Atlanta, Georgia, 27 exporting forest product companies were interviewed about current export markets.  The purpose of the survey was to identify export market drivers and barriers of Appalachian forest products.  In the past few years, the Appalachian region has suffered from the economic crisis including forest product mill closures and loss of employment due to an increase in global competition.  The region needs to increase product competiveness by expanding export markets and improving product promotion (Wang et al. 2010). Exporting of products offers many advantages for firms entering the global market, such as increased profits and credit, market growth, and economic strength (Parhizkar 2008; McMachon and Gottko 1989). Nonexporting companies trying to enter a global market have not primarily because lack of market information regarding product specifications and distribution channels (Ifju and Bush 1993). Overall lack of market information is the main limitation for potential exporters of forest products overseas.  A 2002 study of Appalachian hardwood lumber exports (Parsons 2002) showed that a lack of employees and production limitations did not significantly affect exporting, but the need for marketing information was a major hurdle for companies. The companies were asked to identify:

  • Top export markets
  • Drivers for exporting
  • Barriers for exporting
  • Primary products and species sold
  • Percent of production being exported

The main limitations for the study were the size of companies attending and company representation.  Primarily companies interviewed were larger, with more than 100 employees.  Also, most of the company representatives interviewed were not directly associated with the company’s export operations, so they may not have been familiar with some of the topics covered in the questions. 

Results

Figure 1. Export destinations

The manufacturers surveyed primarily are located in the Middle Atlantic states including Pennsylvania, Virginia and North Carolina. Most of the brokers that were interviewed had locations in the southeastern U.S. near shipping ports.  Currently, forest products companies included in the survey are primarily exporting to Europe and Asia (Figure 1), with some companies exporting to Latin America, Canada or other countries. On average 36% of the production from participants is being exported (Figure 2).

Percentage of Production Exported

 The main products exported to Europe and Asia are Appalachian hardwood lumber and veneer, and also some furniture parts and medium density fiberboard (MDF).  Currently the main species exported to Europe and Asia is white oak (Quercus alba) (Figure 3).  It was found that veneer companies export a higher percentage (65-90%) of their production than hardwood lumber companies (15-40%).  A majority of companies interviewed exported their products through brokers.  Companies focused on exporting to Europe and Asia because of business opportunities in the furniture industry and the shrinking of the domestic secondary industry because of the economic downturn. The main barriers affecting exports are custom paperwork, such as phytosanitary documents, and new country regulations (Figure 4).   These documents may contain errors or misplaced forms, causing a delay in the arrival of the products to the customer.  Companies selling to brokers were not familiar of any trade barriers occurring.

Figure 3. Appalachian hardwood lumber species exported

According to the interviewees, a shortage of shipping containers for exporting has been a problem lately.  Companies commented that returning containers back to the United States costs more than shipping them from the U.S.  This shortage of containers was brought on mainly because of a decrease in container production during the economic downturn of 2008-2009. Also Chinese container manufactures have gone on strike causing an even larger shortage during the peak shipping time from June-October (D’Altorio 2010).   Struggling economies in other countries have also deterred companies from exporting to them.  A hardwood lumber company stated a lack of continual flow of orders from Latin America has caused them to overlook that region for market opportunities.  Also, the time frame it takes to contact the product buyer in Latin America has deterred companies from doing business in that region.  One company stated it took over a year to receive an email reply from a Guatemalan company inquiring about a quote.  Receiving payments from overseas companies has also affected companies exporting to certain areas.  Most forest products companies interviewed require a letter of credit from the customer prior to taking the order.  Some companies have encountered problems with language barriers and currency exchange rates when trying to enter a new export market.  

Figure 4. Barriers effecting exporting operations

Conclusion

The amount of production exported overseas depends on the markets available for products and species.  The inconvenience of customs paperwork and the unavailability of containers is the main barrier affecting the amount of U.S. forest products exported.   Also it was found that Latin America has been overlooked for market opportunities in part because of the culture differences and past struggling economies.  The need to build relationships is critical in these countries to foster partnerships and increase trade with this region.

References

  • D’Altorio, T. 2010. The Global Shipping Container Shortage: Riding The Waves To Profits.Invest ment U Research. June 30.
  • McMahon, R.O. and J. Gottko. 1989.  Export marketing activities of small-firm lumber manufacturers. Oregon State University, College of Business and College of Forestry,Studies in Management and Accounting for the Forest Products Industry, Monograph no. 31.
  • Parhizkar, O. 2008. Identifying Impact Factors on Successful Exporting of the United States Hardwood Industries to Mexico, Asia, and Europe. Doctoral Dissertation. Virginia  Tech, Blacksburg, VA.
  • Parsons, B.A. 2002.  An Examination of Appalachian Forest Products Exports. Masters of  Science Thesis.  Virginia Tech, Blacksburg, VA

RESEARCH BRIEF: Process Boundary Analysis, a Case Study in a Furniture Manufacturer

Chao Wang, MS Candidate
Virginia Tech

 

Context diagram is used to show the interaction between a system and its important external factors (Kossiakoff and Sweet 2003). We use this method to analyze the system boundary of the engineering process in a wooden furniture firm. From Figure 1, we could identify two suppliers in the current engineering design system – product development and production. In this case, product development leads the following tasks:

Ÿ   Fabricate original product samples and ship to customers for confirmation

Ÿ   Confirm the design changes and acquire product original drawings from customer

Ÿ   Compile engineering and fabrication specifications for each product collections and handover to engineering for generating production documents

Ÿ   Deliver the customer-confirmed color boards to facilitate production

Figure 1. Engineering design context diagram

The other supplier, the production department, needs to make sure that they can deliver the updated production plan to the engineering department on a timely basis because this schedule is the foundation to set up the engineering plan. As engineering always takes up a great portion of production lead time, an accurate engineering plan could always ensure the on-time delivery of products. According to our survey results in a furniture company, it shows the engineering accounts for 21%-40% of production lead time.

In the customer perspective, engineering provides service for a number of manufacturing processes:

Ÿ   Rough mill: since rough mill is responsible for processing the raw material into treated material that prepared for machining process. So engineering provide bills of material to the rough mill by providing the following information:

  • The quantity of materials needs to be prepared
  • The rough and net dimension of each pre-machining component
  • The number of each component
  • The board dimension for panel gluing or brick stacking

Ÿ   Machining process: engineering needs to provide machining process with a number of essentials:

  • Fabrication drawings for making components
  • Assembly drawings for subassembly and final assembly of products
  • Profile drawings for verifying the precision of component fabrication accuracy
  • Programs for CNC manufacturing
  • Bills of material for checking component dimension and part number
  • Bills of material (BOM) to require hardware and accessories for assembly

Ÿ   Production quality control: engineering provides essential assembly drawings, instructions, and specification to help quality control ensure the quality of products during production proces

Ÿ   Thermoforming center: in general, this process has three functions:

  • Provide wood-based panel to production plants. In this case, the engineering needs to prepare bills of material for thermoforming process that indicates the amount and dimension of the material in demand.
  • Fabricate fancy panel for production. In this case, the engineering provides them with veneer drawings for parqueting veneer on face panels.
  • Fabricate plywood panel. In this case, the engineering provides drawings for verifying the shape of fabricating panels. Also, the CNC engineers are responsible for providing programs for the die fabrication.

Ÿ   Carving process: engineering provides carving drawings to the carving process

Ÿ   Packaging process: packaging engineer takes in charge of generating packaging documents for packaging process. A packaging document typically includes the drawings, bills of material, and instruction of packing up a specific furniture product

Ÿ   Procurement department: engineering provides drawings and specification for the new material and tooling purchase

Ÿ   Mock-up team: this team taking in charge of implementing preproduction and it is a very necessary step before mass production. It has the full function in mass production. Thus engineering not only provides preproduction documents for this process, but also track the fabrication progress and help to solve problem due to design flaws.

Reference:

Kossiakoff, A., and W. N Sweet. 2003. Systems engineering: principles and practice. Wiley-Interscience.