Outsourcing Pros and Cons
With the added equipment and work, my business has grown larger than I expected it too. It has given us more potential or opportunities than if I outsourced this work. For my shop this has worked out very well.
I'm not trying to start an argument. I am not calling anyone wrong for outsourcing. I am just trying to point out that there is more to it than meets the eye. The extra equipment, space, manpower and overhead may not be practical or even wanted by everyone. For those who want to grow their business, it may be a good option.
My market is very different from that in the states, but our shapers are running all the time. If not cabinet or entry doors, we are making one-off moulding. A corrugated head was one of my best investments for my shaper.
From contributor M:
I made the same decision as the questioner 35 years ago and have never looked back. Shops in the area have told me it was a waste of time - they could buy doors for less than they paid for material. Strange. Whenever I priced outsourced doors - the material cost was easily double or more than what I pay (for lumber in the rough). I've got several shapers set up - all dedicated to panel raises, stick and cope, edge profiles, etc. A 24" planer and 37" drum sander round out the grouping. They also run on a daily basis performing multiple tasks other than door work. These machines have all been paid off many, many years ago.
I see other shops in my area now closed, dead in the water or struggling with reduced manpower. They succumbed to outsourcing - yet those outsource companies are mostly still around. My equipment is totally paid for, and like the questioner's, has performed multiple duties many a time. Heck - I've made hundreds and hundreds of doors for other shops in the area. Many times they'll come to me when short on an outsource order, or a mistake was made. I can turn out a door (panel glue-up aside) in ten minutes with my dedicated setup.
Another benefit is better pricing for my lumber purchases. The increased demand (door materials) puts me in a better position for pricing as I buy minimum 1,000 bd ft at a time - mostly 3-4 thousand feet. This alone is a huge plus - the increased inventory also facilitates a better selection of woods as well as always having plenty of stock to choose from for other millwork.
For myself - no doubts at all. The best part of this equation is the knowledge that every door is done to my standards. And in 39 years of doing business, never has a single door come back to haunt me.
Another plus is when clients come into the shop and see our setup - they are impressed that all work is done in-house. I've walked them through the process of laying out, cutting parts, milling and assembling their doors. This does help sway them to me when deciding which shop to hire.
I always considered myself a cabinetmaker. Outsourcing frames, doors, cabinet components, etc. may work and be a viable solution for many - but I'm proud of what we've accomplished across 39 years, all in-shop. You can also see the pride in employees' faces as they complete each project - knowing they were part of a 100% effort.
From contributor M:
I should add that we have a 24" resaw bandsaw. This alone is a godsend on saving material - we buy 5/4 in the rough, face it on our 12" jointer and then run it through the bandsaw for our panels - kind of a 2 for 1 deal! We used to buy 4/4, then throw a ton of it out in planer waste. Buying the thicker wood and using all of it (resawn into two slices) gives us more usable yield, paying off the bandsaw in less than six months. And again - it gets used for all kinds of other projects beyond our door panels - increasing its usability and value. Of course, this demands a high quality blade - we use Lenox carbide. But they last forever and give an almost mirror cut.
I'm not saying I want to grow my business. Actually, I'm pleased to be reducing my time as I get on in years (sigh). But for at least this guy's shop - making our own doors has been a successful formula for us.
From contributor S:
You say material cost was easily double. I am curious - what is your average yield for red oak? How about knotty alder?
From contributor T:
While there are obviously all kinds of shops doing very well with outsourced doors, there are a lot of reasons to bring them in-house. To be successful at this, however, you do have to make a modicum of investment into door making technology.
If we just rely on cost as the criteria for decision making, then outsourcing wins every time. There is no way I can build a door for $16. If we are willing to consider flexibility or differentiating yourself in the marketplace, then being able to build a door in-house starts to make sense.
Early in my career we outsourced all of our doors. We tried a big company in Texas, a company in Missouri, a company in Cathlamet and one just down the road. Often times when we were stymied in production it had something to do with a door that was not in the building. Either we were still waiting for it to arrive or waiting for it to be replaced.
Proper planning solves a lot of these issues, but sometimes events happen that we cannot control. Waiting 10 days to solve a problem that just showed up can be as expensive as just having bought a shaper in the first place.
There is also a quality issue. Most cabinet door making companies have a caveat in their specifications that states something to the effect of "a warp or twist of 3/16 inch is not considered a defect." That would not work in my marketplace. Almost every job we build is flush inset and 75% of those are fully mortised butt hinges. We have to have a flatter door than we can buy.
Differentiating yourself in the marketplace is also a consideration. A lot of cabinets that are produced with outsourced components have a cookie-cutter appeal. It is hard to tell one of them from another. This is not such a problem in a boom economy but today's customer has a different set of expectations and goals. They want a good value but they want it in a better product.
We build a heavy bottom rail on all of our base cabinet doors. We do this because we think it provides a better sense of proportion to the project. Good proportion tends to sneak up on you and make you feel good about being in the space. We pay attention to proportion for this reason.
We align all of the insets on our end panels with the insets on our doors. The cabinets look better as they wrap around the corner for this reason. While I we could probably buy an end panel like this or a door with a heavier bottom rail, I don't think we could do this for the price we do it in-house.
I think, in general, outsourcing doors made more sense in a boom economy. Today there are probably more reasons to bring this back in-house if only to create more employment for your own workers.
From contributor M:
Red oak around here is pristine. We purchase most of our raw lumber from Rex Lumber (Englishtown, NJ branch - talk to Peter) who supplies us with 10" and wider (16') for better than 85% usable. Their 4/4 comes through with at least 50% of the boards cleaning up at 1-1/16"! You'd think it was 5/4". I don't use much alder - cherry is our forte, and that also is spec'd at 10" and wider for a better, cleaner yield. We pay just a bit more for the wider boards, but it comes back twofold with less waste and more consistent color - virtually free of sapwood. You have to keep in mind that catering to one supplier has added benefits of more careful consideration for boards that fit our needs. 12" and wider at 16' lengths for poplar is our biggest buy with 10 and wider at 10' - 12' lengths in cherry and maple close behind. Oak, on a lesser scale (running about $1.80 at 1,000 ft minimum rough) is easily less than 1/3 the price Meridian quotes for board footage on their doors. Conestoga is even higher. These are the two biggies in my area (Central NJ).
We also find hickory to be quite popular and that yields high percentage, as most clients like the mix of heartwood and sap coloring - which suits my yield requirements to a tee!
I can see where you might want to dispute dollar for dollar for each door - whether it's close or even slightly more to build our own - but I'm looking at a bigger picture here than just doors. Like I said - in-house keeps our doors open, rather than outsource suppliers', my crew has a more rounded out experience, customers love it and we utilize almost all waste.
In this economy it's important to diversify and learn how to pick up money from every facet available. When a guy finishes a project early in the day, he jumps right on our cottage business of small craft items - including ripping, gluing and clamping up dozens of cutting boards each week from small cutoffs that bring in a nice penny several times each year as we sell through craft vendors. These often are not rectangular - but in many shapes (ovals, circles, football, hearts, fish shapes, etc.). Per piece a loss - but in quantity these things keep men on the payroll and never an idle moment on our 40 hour work week (the men - me, I pull in 60 minimum).
We also do a lot of millwork, especially radius work for many of the contractors in our area. That accounts for at least 30% of our output. Again - milling uses up a large percentage of what would normally be wasted cutoffs in our door department. Shoe moldings, small crowns, neck moldings, door stops, etc. all take advantage of those narrow rippings otherwise heading for the hogger.
We see very little waste of cutoffs as we also have a product line of a craft type cradle that calls for tons of 3" x 4" cuttings (4/4") and 5/8" x 3/4" x 4" rippings in most species. A virtual blessing for our waste bin. This cottage line was initiated specifically to utilize our cutoffs.
From contributor M:
Contributor T added a lot more of my own thinking and perspective here. He is right on with the advantages of making your own doors with wider rails, etc. as well as quality control to our own levels. Those are the options that make outsourcing not so attractive price wise (deviate from standard doors and pricing hits the roof)!
His real custom approach to inset doors, integral end panels matching in lines with the doors, etc. all help substantiate in house manufacture here. I'm sure I'm missing tons of other points that I take for granted, but I'm sure many others feel the same.
Again - these are not arguments. Just pointing out what works for some of us. And as my shop works in complete harmony with many in the area, we all get along real well. We attend seminars, trade shows and visit conventions together. Weekly we find ourselves driving back and forth borrowing materials, hardware, sharing equipment, etc.
From contributor U:
There are many pros and cons to making products in house or outsourcing some or all. I tend to work both sides of the fence. I would never outsource my main products, but I will when the need is short term for certain accessories, or I do not have the budget to add equipment for a one time proposition.
One big shortcoming of outsourcing is where do you find yourself when not only one, but your favorite three suppliers close up shop? Obviously back to square one. We just had this happen with the suppliers providing one of our components. Thank goodness I have kept our equipment tuned up and our skills sharp so we can turn out these parts ourselves while we refigure our options.
From contributor N:
Contributor M, well said. If you are so busy you can't keep up, then outsourcing the doors while the shop knocks out boxes may produce more completed jobs. So for some shops, sometimes outsourcing may make sense. As a one man shop, I have only bought one set of doors in 29 years.
There is no way a door factory can grain match the way we can. We can be much more discriminating on our panels and faces that lead to the overall beauty of a job, end panels and cabinet ends that all look right.
I run 5 shapers all set up. One or two I change out when needed. Makes it easy even for a few doors. I outsource painting occasionally, but do my own wood finishes.
From contributor E:
I had a chat with one of the largest furniture manufacturers in Canada a few years ago. They started out as a small company outsourcing most of what they did. They now do everything in house - metal, painting, you name it. They said their level of success was mostly due to not having to rely on other companies and having complete control. I am guessing that doesn't always work for everyone, but some days I have to agree.
From contributor K:
We do both, in-house and outsource. We outsource when we do refacing jobs (when we have to) and in-house for most anything else. That said, there are a myriad of door companies out there that provide not only just as good a door as most of us (including grain matching, etc.) but do so at a very good price for a finished piece.
We outsource for refacing because it does not bottle up the shop to throw a set of doors in the mix, and we can order it in at fixed cost prices (which does not change with variable lumber/labor prices). The doors and drawer fronts are the most time consuming part of the equation. Not to mention if something were going to go wrong with a door, in most cases, it's going to happen during the first year, and if it does, it's on someone else's dime (including shipping).
And most door companies have expedited shipping available (including making it today and getting it in a day or two) for when we make a mistake (on our dime, but better than stopping a project flow for what you are working on to make a single door), or they make a mistake (their dime). I'd rather spend 10 minutes on the phone ordering a replacement than 2-3 hours (including finishing) making a one-off new one.
For those who say that they save money by doing themselves, I find it hard to believe, because at the same time they cite quality control, yield, and finished product, they forget that when you outsource a finished door, you forego the following:
1. Ordering lumber (and sorting if you maintain any level of quality).
Door companies do this because that is what they do. They don't stop to make and assemble other parts of the cabinet, so they are quite proficient at it. If you think that is expensive, you really haven't done a cost study on it. We've looked at this so many times over the years, it always comes to the same conclusion... outsourcing doors/drawer fronts saves money. The reason we still do it in-house is that once you outsource doors/drawer fronts (the emotional heart of the product) for cabinetry, it becomes real hard to call yourself a cabinetmaker anymore, let alone a custom one at that. Might as well buy a cabinet line and private label it.
That's the only reason we don't. Our name goes on it, so we want our name to mean something.
The argument could easily be made that outsourcing not only increases opportunities, but realizes lost potential, because you are in essence hiring very experienced inexpensive employees with really cool tools (that you never have to worry about maintaining or downtimes) that you can hire/fire at will with no extra employee costs/headaches such as taxes, insurance, etc., and you can do anything that anyone else can.
From contributor R:
Everything contributor K says is true, but outsourcing something also means you need more work and you have to warranty more work. There are costs in those two things also. Let's say you are comfortable with either a one man or eight man shop, whichever. In either scenario you can basically do twice the amount of work when you outsource doors (especially if they are finished doors), but it also means you need to have twice as many customers (something that can be tough in this economy), and you have to deal with twice as many customers and their issues.
On the other side of the coin, you can also get twice the word of mouth from that twice as many customers. It comes down to what you are comfortable with. No one thing is right for every company... Or we'd all be the same company.
From contributor J:
Outsourcing works - the car industry has done it for years. You can have different vendors supplying you and you are the customer, so you do control the quality. We buy doors from 3 different suppliers - a low, a mid and a high end guy. I know what I am getting from each and depending on the job, I know where to go.
Bidding jobs, I have a fixed price to plug in. We do not have to carry 3-4 species of lumber in large amounts and if oak is not moving, we are not stuck with it.
That said, since we got our CNC, we have started to make our own MDF doors. With every new style we buy the cutters, develop the program, and the first job justifies the cost. This made sense to us because it didn't use up any more floor space and we already owned the door software.
From contributor M:
Amazing thread! I'm proud to be part of it! Very respectful debate (well, not really a debate) and both sides of the coin are showing merit. We all have to analyze what works best for each of us and choose that path. Obviously it doesn't mean a hard and concrete direction - I do know of a lot of shops that make their own doors as well as outsource some - as posted here. Both have their pros and cons; weaving them together is the finite choice that can make or break any one of us.
Contributor K is closest to my own feelings and justification for keeping ours in house -our name. I won't say there haven't been times I've cursed myself on a tough schedule for not outsourcing doors, but in the end I ultimately know I made the right decision. Again - the bottom line is not and never should be the almighty dollar. Because that can really come back to bite you in the butt. I feel fortunate that back in the 80's our shop was seeing lucrative money that enabled us to invest in this equipment. Not sure I'd be doing this were I just starting up. Having the luxury of owning every piece of equipment in our shop with no leases (ever) makes us much more adept at competitive pricing in today's falling economy. The overhead of just a mortgage (with the huge benefits of tax savings on those payments) means I don't have to worry if a slowdown occurs.
Meanwhile - I'm very happy to read the intelligent and intuitive posts I'm seeing here.
From contributor O:
Great discussion. To each his own. Everyone has their reasons to defend their positions, or else they'd be doing something different. I side squarely with the in-house work. I started building doors from the beginning with minimal equipment and lots of elbow grease (to be fair, most of it from my one employee at the time). I did not know any better, having come to this cabinet shop ownership gig with zero experience in woodworking.
Many eloquent points have been made in support of the in-house practice. My main reason to keep it in house is the overall quality and appearance of the finished doors. Our doors are finished to at least 7/8" thickness. Each pair of doors is sized the same, no 1/8 - not even a 1/16" difference. Overkill, probably. I have shown potential clients the difference of an outsourced or home center door which is between 5/8 to 3/4" thick and the thicker door makes an immediate impact.
I have outsourced a couple of times but the difference in cost is not that much after you add the freight. Some of the top tier door company prices would leave no profit margin in this market. Then there are the inevitable transit damage, change orders, and to me, the door itself. Still, if I had to I would outsource.
As has been noted, the difference in cost will greatly depend on your available equipment. To produce our doors, we use, in no particular order, a 60hp gang rip saw, an upcut saw with Tiger stop, radial arm saw to size center panels, 6 station rotating Taylor pneumatic carrousel for panels glueup, glue applying devices for panels and cope cuts, 6 dedicated shapers, large door clamping/squaring device, 3 dedicated edge profile sanders, Woodmaster double drum sander with 80 and 100 grit sandpaper, double belt sander with 120 and 150 grit belts, joiner oscillating edge sander, DMC orbital sander, and a Fladder machine to open up the grain as the orbital sander leaves a glass-like surface. We have a 4 head molder but have not yet tried it to run stile/rail stock. The point is, I can produce doors efficiently. With all this, I am sure someone can show me it still costs me more to do doors in house. My reply is, respectfully, frankly my dear...
From the original questioner:
It is interesting to see the reasons for outsourcing and doing work in house all in one thread. Do those of you who keep the work in house feel this has opened doors for other work? Work that uses the equipment and knowledge already in place that often is outsourced? If so, has the work helped grow your business physically or financially?
From contributor K:
Just remember, when you had an employee who did most of the work making doors, you were outsourcing... The only difference was that you paid their taxes, etc. and let them use your machinery, power, materials, etc. Outsourcing is just the ability to rent someone else's employees/machinery, and if they don't perform, they replace what is not up to standards on their dime, and you can hire/fire them at will. If your employee makes the mistake, it is on your dime, and it costs exponentially more to recover in-house production.
When we outsource doors for refacing (we make our own for most everything else), we don't just use any supplier, and there are door suppliers that have excellent quality and will make it however you want. But you can also order doors up to 1" thick. We don't do that anymore, because we found it is not a value to our clients. One put it best when he said, "When I am facing a cabinet, I can't tell whether it is a 3/4" thick door or a 1" thick door. I can only tell when I look at it from the side, and to be honest, I don't do that very often and even if I did, I don't know if I could tell the difference because I am not a woodworker."
After ruminating on that statement, I thought to myself, when was the last time I had a client say to me I want/need 1" thick doors? I could remember only one time in all these years. Conversely, I have had clients ask me on many occasions how thick our cabinet sides/backs/shelves are and what they are made out of. If you wonder why, type "comparing cabinet quality" into a search engine. That is what the customers are seeing. You don't find a lot of discussion of door thickness.
In addition to all the above steps you forego when outsourcing, you also don't have to worry about machinery downtime, expendables like sandpaper, shaper cutters, additional electric demand to run the machinery, etc.
I don't know a lot of woodworking companies that do everything in-house. Even if they don't outsource doors/drawer fronts, they most likely outsource some combination of the following - corbels, moldings, specialty moldings, cabinet components, drawers, lazy susans, lumber, plywood... And that is all wood. Never mind the glides, knobs/pulls, injection molded cabinet components, shelf pins, hinges, etc.
With the exception of lumber and plywood, which we only process to final form, we make most of the above wood items in-house, but we outsource what we don't have the time or expertise to accomplish in an efficient manner.
The main advantage to outsourcing, aside from cost savings, is that it opens up your company to be able to present a final product anyone else can. For a one man shop or newbie looking to gain market share or increase output without having to worry about employee issues and management, outsourcing is excellent. After all, instead of processing one set of cabinets a month, they could process 3-4 sets and make a lot more money (if they don't fall prey to the pricing game).
I think a lot of cabinetmakers (us included) resist outsourcing doors/drawer fronts/moldings because they realize that at some point if they do, you have to ask yourself why not just go one step further and outsource the whole thing. Most woodworkers want to work with wood, and not so much sell, and outsourcing the whole thing, no matter how much sense it makes financially, takes us away from fabricating to salespeople/installers.
You still get the business, you still design it, it can be private labeled to be your own to your own standard, and you can install it. Can you think of another reason why we hold onto doors/drawer front production?
I want to be able to say I made it, and the more I actually make in the product the better I feel in saying that. And the doors/drawer fronts are the thing the client sees the most, so it makes you wonder why we don't outsource the cabinet boxes, while we work on the doors/drawer fronts, if it is that important to us? Or are we just stuck in a paradigm? Most companies (not hobbyists or part-timers) use jigs nowadays to make a dovetail joint (most don't even know how to do it otherwise), but are we holding on to what some would consider an antiquated way to do things? Is outsourcing just the next step in jigs? Go figure.
From contributor O:
As a business, the overriding reason for any decision we make should be to maximize profit. No one could accuse me of being a great businessman. I run this business to a great extent doing things I enjoy doing, maximum profit be dammed. I have done very, very well nonetheless. None of these posts are going to change one's fundamental way of doing things. I'd be willing to bet that most of us know what it is we have to do to make our businesses better, yet we don't do much that gets us out of our comfort zone. In the midst of this economic mess, how much have we really changed? As much as we could have, or just enough, or really not at all?
Contributor K makes some great observations, as usual. Your point, "I thought to myself, when was the last time I had a client say to me I want/need 1" thick doors? I could remember only one time in all these years..."
I have not had anyone bring that up either. It is my job to point out the things that set me apart from the competition. It is up to the client to decide if is of sufficient value or not. We are at the very top of the pricing pyramid in this market, and yet, as compared to the Cabinetmaker pricing survey, we are no more than mid-level, so I have to try anything I can to stand out. I have definitely enjoyed this thread.
From contributor T:
Contributor O, you raise an interesting point about people refusing to leave their comfort zone. This is probably a thread all by itself. Complacency comes from a sense of well being because you are unaware of impending information. In two to three years the construction industry will likely only support 1/4 of the people who were involved in the industry two or three years ago. This eventuality is still not enough to cause a change in personal trajectory. Inertia is a powerful motivator. There have been a lot of advancements in our industry over the recent decades but we are still employing management systems that are not unlike those who owned cabinet shops around the time of the Civil War. Task management still pretty much relies on brute memorization and powers of observation.
The comments below were added after this Forum discussion was archived as a Knowledge Base article (add your comment).
Comment from contributor A:
The large shops dedicate a man or a crew to doors and or millwork, in a sense outsourcing in-house. Currently I run a mill department in a large 50 man shop. Typically doors are outsourced. The doors we receive are of exceptional quality, 1 inch or 7/8 inch thick. But when a size must be changed, or additional doors are requested late in the game or at punch out we must be capable of matching those doors or repairing those doors if damaged in shipping.
We do end up making truly custom doors as well. The quality of door company only doors is fantastic these days. If you are ordering from a quality company, yes you do get what you pay for. We have a six head molder, straight line rip, jointer, planer, five shapers, and a 37 inch double belt sander. Still, having made thousands of doors (cabinet and entry/interior) there had better be a good reason I am making the doors instead of outsourcing. I am too busy feeding s4s and trim to the rest of the shop.
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