Outsource, or Build it Yourself?

      Shop owners discuss the pros and cons of outsourcing doors and drawers. August 29, 2005

Cab Parts

Question
I've noticed that a lot of people outsource. I for one outsource my doors. You would be silly financially if you didn't. I am going to look into outsourcing the drawers on the big jobs as well. I am wondering if anyone outsources everything and then only assembles. The shop next door also builds cabinets and told me that he would rip my melamine material for $27 a sheet, guaranteeing a clean edge. It sounds good, but I like to think I do it all. But I would like to not do anything either. I would love to outsource everything if it made financial sense and if I didn't have to wait around for two weeks for a guy to cut five sheets of material when I could have done it in 30 minutes. Does anyone have any thoughts?

Forum Responses
(Business and Management Forum)
From contributor R:
We used to build our own line of kitchen cabinetry and only outsourced our doors. We considered outsourcing our dovetail drawers too. However, I am a journeyman, trained and tested in Germany, and my feeling is that if I can't do it, no one can
.
I disagree a little with your statement that one would to be silly financially not to outsource. Consider this, the people to whom you outsource are going to mark-up the price in order to make a profit. You, in turn, mark-up what they sold you so that you can make a profit too. Eventually, you may find that you are losing customers because you cannot stay competitive in pricing. You can't change much about how much they charge you, so your mark-ups become your only area where you can cut prices. What would it mean to your bottom-line if you did the work yourself, made their profit and maybe even a little more on top of that?

Another drawback, as you stated: what happens when your supplier is late? First, you have to call your supplier and tell him/her how upset you are. Second, you have to call your customer and explain why the project is going to be delayed. After two weeks of delays, the product finally arrived and was all the wrong color.

My advice to you is, make a list of your strengths and weaknesses. Concentrate on your core strengths and go from there. If you want to become stronger in areas that you are weak in, then concentrate on them one-at-a-time, train, study and practice. Once you feel that it's financially feasible, implement the change in procedure. Who knows, if one's greatest strength is being able to sell anything to anyone and keep them coming back for more, outsource it all.



From contributor J:
When you outsource you give away your profits to another company. Outsourcing is a matter of personal preference, but not a matter of financial sense. I often hear cabinet makers say "I can buy the doors cheaper than I can make them". Well if you can't make a door in-house for $40-$50 each, then you must not be doing good woodwork.

Not once in my past ten years have I gotten a quote that made financial sense to me. Every quote was 3-4 times my in-house cost. For example, I recently inquired from a neighboring company to rip a unit of 2.7mm lauan (220pcs)into 14" wide strips for me. Now they have a nice Holzma saw and can cut 25 sheets at a time. Their price was $270. My in-house cost was $50 in labor (4 hours at $10.50 plus insurance and taxes) on a SSC vertical saw. Now if the other company quoted me $50-$75 I would have considered it. It is also extremely unfair to the end user to have to pay more for their products because of the manufacturers inefficiencies.



From contributor G:
To the original questioner: The way you talk, why even mess with assembling cabinets? Why not just sell someone else's cabinets altogether. Also, Why would you outsource ripping your melamine for $27 a sheet when you can do 5 sheets in 30 minutes? That works out to $270/hr. Sounds silly to me.


From contributor W:
For me, outsourcing is nothing more than hiring extra employees without the hassle. I hire my door maker to make the doors to my specifics. He has outlaid a couple of hundred through on his equipment and produces a better quality product than I can make.

Just because you can make doors for the same price that you can buy them for does not mean that you are making money doing it. On the first job that I outsourced the doors I found that I was able to get it out of the door twice as fast, and that means that I am making twice as much money, minus the difference in the cost of the doors. The end result of outsourcing is that it gives you an opportunity to make more money. There was a survey in Cabinetmaker Magazine some time back that showed that shops that outsourced had higher profit levels than ones that did not.



From contributor P:
I think for some guys it works well for the market they are in and for other it won't. I will only outsource what I have nothing more to do. I hate to get that call or make the call to find out that something is not on time. Control in the number thing for me. If it is due at a certain time and we are doing it, we can be the only ones to blame that it is not on time. We make all of our doors and drawers and I make money doing it, plus I can pick the wood so it matches in color, grain etc.

We are doing some natural cherry built-ins and you can see the kitchen cabinets that were made from a guy that we know out sources his components. Well we have no sapwood on ours and his is just loaded with it. The customer asked me why does his wood have two different colors and I just said that it is all cherry, just one is the sapwood and the other is the heartwood and the only difference is the color. The next day the customer said that after they get settled in the new house they will have us back to remake the doors.



From contributor G:
The decision to outsource anything depends on each shop, and several factors including type of machinery, available suppliers, quality expectations, etc. I used to outsource all my doors and drawer boxes, but became tired of inferior quality, material selection, the wait.

We do high-end work, with specialty woods, and it seemed our customers loved choosing exactly what they were getting (different edge details, wood types like curly cherry, or rustic cherry). I could have a door company build anything, but there was a huge amount of quality control I was pushing off to them.

I came to the conclusion that if I were truly building high-end cabinetry, and catering to a market that would pay for the details, it would be in my best interest to charge them for my company to make them. I don't have the equipment to be competitive at making a standard 3/4" raised panel oak door. But that's not what we sell. We sell custom made, unique styles, which means we can make them more productively than outsource them.

What happens when the customer wants to see a curly cherry door, with a unique combination of profiles? We make it for them. If we outsourced, it could be made but who knows how long it would take. It came down to the fact that we sell service (and that includes unique designs). I couldn't get that flexibility outsourcing to door shops. And, I wanted to control quality before the doors showed up on a crate.



From the original questioner:
I can completely understand everyone’s opinions and I must apologize for the financial comment. It really does pertain to the area that you are living. I outsource my doors and nothing else at this time. But I live in Southern California and the longer I'm stuck on one job, the less money I make overall. You see there are months that I will make four medium size kitchens and install them and then there are months were I only do a few built-ins and vanities. So on the months that I do the kitchens I would only be able to make two kitchens, maybe, if I was stuck making the doors.

I do not have any problem making the drawers and I would love to live somewhere where I could build one kitchen a month and pay for two months worth of bills while I hang around nit picking on every detail. But it isn't so. So for everyone who has a piece of property with a shop and owns everything, sorry for the financial comment. But for anyone living in areas where the cost of living, renting a shop, paying people, etc is more then the price of three months the other guys mortgage, you are silly financially if you don't outsource at least your doors.



From contributor G:
To the original questioner: Paying high rent and labor is no excuse for not being efficient. We all have bills to pay and mouths to feed. If you can't make money making doors, buy them. If you have the equipment and help in place, build them. I personally would rather build everything and do fewer jobs per year. The more jobs the more customer hand holding. That is my preference.


From contributor J:
To contributor R: If a company is that busy that they have so many boxes to make, you can easily afford to hire another person to make doors. 60 hours of labor a week at $15 an hour is:
$600 straight time
$450 overtime
$1,050 in total labor.


From contributor F:
To contributor R: Just by making the decision to outsource the doors I’ve right off the bat I've lost $4,000 regardless of how much money I could make in constructing boxes. So yes, that frees us 60 hours that I can use elsewhere, but I have to start by digging myself out of a huge hole. Even if I could make enough cabinets in the 60 hours to give myself the same amount of profit, I would only break even if you think about it. Obviously, there is more labor and profit built into doors than boxes due to tooling.


From contributor B:
There is no right or wrong answer to what you should outsource. I think the key is to understand your own numbers. Determine where your price points are. Know what your variable and fixed costs are. Then look at the numbers, figure out your core competencies and use them to make a profit. Keep in mind that your core competencies could be anything including sales, design, manufacturing etc.


From contributor L:
I went to the Atlanta IWF show last year and I was about to buy a dovetailing machine that I described to attendees at a Small Shop Efficiencies conference. Everyone jumped all over me. Why in the world would I want to stock rough maple, sand, cut, butt glue sand again, cut to size, dovetail, assemble, sand again and clear coat drawer boxes when there was so much else to do? I wont be able to take on other work because I’m making drawers.

Many people there would order doors and drawers before making a single box. And by the time the boxes were ready, all the parts showed up, got installed and delivered. Sure, if I make the doors myself, I pocket that money. But if I order out, work on other things, aren’t I now making twice the money? I long ago got over the “I Made It All” mentality. Now, I just want to “Make It All” (as in money).



From contributor W:
60 hours of labor paid is one thing but what about the rest? The initial equipment cost for shapers, sanders, saws and clamps. Then there are consumables such as belts, blades and cutters. Then you have setup and teardown time every time you change a pattern, then you have periodic maintenance and repair costs of the machinery. After that is the material cost of the wood to make the doors, and insurance, taxes, and benefits expense for the employee. Then you have to spend endless hours sanding and sanding.

When you add all of this up it is cheaper to outsource than it is to make them in-house. If you are paying $40-50 per door then you are silly financially. The company that I buy from charges about $25 on average per door or about $10 per square foot if you do it that way; including shipping with a very consistent six day lead time. All of the panels and stile/rail edges are made with shape and sand equipment, which makes them perfectly smooth. Better quality that I can produce with three shapers and a wide belt. That being said, I get a better price from my finisher because he doesn’t spend endless hours hand sanding the shop made doors.



From contributor R:
To contributor J: You did at least include labor. But surely you both realize there are more costs involved than that, and Contributor W mentioned some. My argument holds more merit than you think. You just choose to have a different level of outsourcing than others. You give the profit you could have had to many other businesses. As mentioned earlier, do you have a crew of lumberjacks? A sawmill? A kiln? The list goes on. For you to outsource doors obviously doesn't wash, for many others it does.


From contributor G:
Again, some are assuming employee's cost money as mentioned by Contributor W. Good employees make you money.


From contributor I:
The decision is different for every shop. We can find many companies cheaper for building boxes, making doors, and drawer boxes. We could even find someone cheaper for design, engineering, etc. What does that leave us? The other side of it is how far do you go? Cut the trees down, grow the trees, start a foundry?

It's a personal decision based on your business goals. For us, quality and service is what makes us profit. Outsourcing may appear to save money on the surface, but we've found the poor lead times (mainly on extras, lack of custom choices, and bottlenecks it caused our production), cause us to choose to make our own. There's not one right answer for everyone though.



From contributor W:
To contributor G: A good employee does not lose or make you money. You do that by being a good or bad businessman. If your best guy works his butt off and is very productive, you could still loose money just by making a mistake on the quote. I was simply stating that there are real costs involved, other than labor, when it comes to making doors.


From contributor C:
This is an interesting topic. The one point that strikes me first is that if the door guy in Contributor F's scenario is pocketing $4000 on a $5000 order, wouldn’t we all be rushing into the door business and leave all the other stuff behind? The door manufacturer was probably once a full service cabinet shop. Then one day he decided to outsource his sales to other shops and outsource the box as well. He could thereby grow in geographic area and service a specialized product, and get really good at only that.

True enough, there are a lot of sources that don’t do it effectively enough to be dependable. There are those that do, and once you've found them (trial and error) you really come to appreciate the systems and ingenuity that it takes to make it all happen on a large scale. It can be inspiring. My company was founded on the concept (with cabinet boxes) that grew the door companies. I am an outsourcing fan. Pick out what you do best and exploit those talents and those of your people. Bottom line is productivity equals profits, however the equation balances itself out.



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