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In the past two years we have been doing whole houses of cabinetry for a developer that has been keeping us very busy, large kitchen, butlers pantry, 5-6 vanities, laundry room, all closets and home offices, mostly high gloss our textured melamines with some painted shakers as well, new builds and from 35-90k per house, we do the design work and drawings and get 50% deposit and payments as we progress with 75% paid before we install. At times there may be two or three homes at once finishing weeks apart, we produce as soon as we get deposit and install in stages depending on when finished floors go in. We sometimes can be sitting on a whole house of finished cabinetry for a few weeks. We have rented a 1400sqft warehouse to keep everything as we only have a 3600sqft shop, is it standard to charge for this storage in any way? When they are ready, we can start installing and are always on time, this space is integral to being able to handle these orders. All opinions welcome. Harold.
Here are my thoughts.
From the buyer's perspective (developer), it messes with the numbers if the total cost of the cabinetry keeps changing. Sometimes he may be able to control the schedule. Sometimes not (e.g., weather, subcontractor availability, etc.). Varying the costs introduces uncertainty into his financial plan.
As a buyer of materials for my business, I want a fixed price as well. I do not want any unnecessary uncertainty in the Cost Of Goods Sold (COGS). I really do not care if my suppliers need to rent extra space to store their materials before they ship them to me. That is their issue, not mine.
Yes, I understand that you are making a custom product, not a commodity. I do order a number of custom items for my end product. How those vendors store them before they ship is of no concern to me. I understand there is one difference here. Typically they ship as soon as the product is ready. Occasionally I have asked to delay shipment and no extra charges have been applied.
Yes, I have clients who delay my delivery schedule for one reason or another. Sometimes the delay is days. Sometimes weeks. Sometimes months. Fortunately the very long delays I have known about ahead of time and simply adjusted the Production Schedule to avoid having finished goods sit around for the many months. I do not charge any storage fees, or schedule change fees, to the client.
I would suggest you consider simply building in the extra storage cost as part of your overhead; for every project. Whether or not that results in a price increase to your customer is up to you.
If there is an unusually long storage issue with a particular project (possibly storing a large quantity of completed goods many months or more???), then maybe you could address that particular client as needed on a case-by-case basis. But, I would think having the extra storage space is simply part of your cost of running an efficient business that enables you to deliver whole houses just weeks apart, and realize a healthy reputation and profit because of it.
One of the key goals in my business marketing plan is to make the Sales Process as pleasant and easy as possible. Introducing varying charges that will be dependent on unknown future schedules, that have a reputation for changing, does not meet that goal.
Congrats on having such an issue of so much work. Wishing you continued success here in FL.
Regardless of how you are being reimbursed this obvious overhead needs to be paid...not absorbed.
At this stage you should be able to educated guess how long each project sits in storage. I would go by the week. You could either line item it in your initial quote, simply add it to your blind contract price, or bill it as an extra.
Most builders would rather not see it. So bury it in the contract. Its a legit cost, so don't feel bad about it.
Thanks guys, that's the way I was looking at it as well and I have been putting an extra amount on my costings to account for it, I agree that the developer is not interested in seeing additional charges and it is not his concern, up until two years ago, our projects were smaller and direct to the consumer for smaller residential jobs and these large projects are way more profitable with preselected colors and designs done quickly and no consumer angst over each project. Just wondering if others do add any charges, but your opinion has confirmed my thoughts. Harold
In my opinion, a delay of a couple of weeks should already be factored into your pricing. This is construction, and timing can be shifted due to weather, labour or material shortages, etc. Storage around typical construction timing should be factored into your cost.
Now if the builder tells you he needs to put a project on hold for 8 months, that is a different story. Its worth having the conversation to get storage costs, but I would doubt you will get any money out of them.
All good thoughts above. Have you considered a Just in time model to make the parts and store them, then assemble within a week or so of it going out the door? This would save a ton of space.
The trouble with schedules is that they are really best intentions. There are so many variables that we as cabinet makers cannot control. The further out you're trying to plan, the more likely you're off by some margin of error. But, the GC should know this week if he actually needs cabinets on the site next week.
I realize this approach may not work for everyone, but those that can make it work, (such as those building frameless modular boxes) would certainly see a benefit.
I've always looked at storing cabinets as the lesser of two evils. The other evil of course is not having enough build time in a busy schedule- either by their doing or yours. Storing them is by far the better, and more profitable in the long run, option. Build it and move on. If you have the climate and budget move them directly into delivery trailers or box trucks to keep from having to to move them/load them more than once. Which saves on labor and damage from the occassional ding. Wrapped in stretch wrap,inside a trailer, for only several weeks cabinets will hold up great.
If your customer is a reasonable man, talk to him. Let him know you are allowing a recovery for storage costs to creep into your pricing, not so much as to get rich, but to stay in place so when he - the customer - calls again, you will be there. He is a businessman and understands that for certain.
Do allow those costs to be recovered, and more for the hassle of moving, rescheduling, and even the stress of juggling.
I think your market is like mine in that no one likes to be nickel and dimed to death. Give them a price and stick to it. But do let them know your costs increased because of this or that, but fortunately, you had some room just such things and can cover it.
We only charge storage for major delays that are caused by city or owner changes once we have started production.
But for customers that require predetermined labor rates for change orders we list storage costs
Storage Rates $1.25 Per month, per Square Foot, single stack height.
We have always had storage for larger projects and retail roll outs so most of what you describe is built into our overhead.
You are trying to run a larger business in a building that is designed for small projects.
If you want to compete in this marketplace you need to either increase your overhead and work out of a larger building or else add storage facilities for your projects and build that into the price.
Two years ago your projects were smaller. Two years from now they may be again. Adding to capacity by leasing storage space is a strategy that is flexible enough to handle either economy.
good points all. Thanks. The storage area is another 1K a month and i am getting good prices from this developer and no hassles ever, so i will cosider it part of doing business for now. we are in 3600 sqft and really could use 5.5-6000 sq feet. just got in a new used brandt KDF 530C and it was a job getting it into shop, so will stick with extra storage until i am ready to move to a bigger facility, G-d willing.
I really do not see a reason to talk to the customer to let him know the costs are going up because you have to rent storage space. Think of the storage space as an extension to your current building. Yes, it may not be co-located, but hear me out. Would you also feel the need to talk to the customer about rising costs because you moved to a larger building, that included additional storage space on-site? Probably not. I do not see any reason to concern the customer with how you operate your business internally.
The exception, as many have stated, is when the customer needs to have product stored for a looooong period of time and you have already started/completed the project. That would be an above-and-beyond charge consideration.
BTW, for these loooong exceptions, I would ask for full payment of the product when it was completed and stored. To do otherwise means we are essentially "loaning" the customer funds. We are not a bank!
The customer is interested in a) can he get what he wants, b) when he needs it, c) and at an acceptable cost to him. Everything else is not his concern. Set your pricing to be fair to the customer AND to you and keep on selling, building, and delivering. :-)
We are in 20k feet and grew into it. Then I noticed just junk taking up space.
I bought a used semi trailer and "5 S" the place for unused items. The 3mm edgebanding literally took up 8 wide by 7 tall of valuable space. It went out there.
Now that the semi is completely organized finished small jobs roll out there on carts and we leave an ailse way to move jobs in and out.
We have three box trucks, two trailers . jobs also go right these as complete and inti the yard. As we grow we are looking at semi's to load into and leave in the yard. Road worthy "pups" are cheap as used 24' used uhauls.
Remember to handle as little as possible while keeping your profits intact
We have an agreement to pay storage charges built into our contract.
It comes into effect if the order is not delivered within 2 weeks of the latter of the original ship date, or actual completion date.
Since we are making flooring, the charge is based on SF. We charge $50/M per month. SF is rounded up to nearest thousand.
We almost never enforce it; it's there for extreme cases, but I think it's good to have it agreed upon before hand. For example we once had an order that was not shipped for over three years. We right now are sitting on one that was done in April of 2016.