“Value added” manufacturing -- five approaches
by Gene Wengert
1. Add value to present product
2. Sell the same product you now manufacture, but sell it to a different market where it is more valuable
3. Make a new product (i.e., new for your operation)
4. Get more value from the present resource (less low value; less waste; better processing)
5. Improve marketing and sales
Gene’s hints for value-added
Yield is the biggest factor controlling profitability.
Consider either purchasing another mill’s production to help develop enough product to satisfy the demand.
Consider the proper use of a broker and wholesaler. Do some direct selling yourself whenever possible.
Test a new market by using someone else’s equipment at first. For example, rent kiln space first before buying a kiln. This allows you to test the market and also discover the true needs of the customer.
Many of the value-added markets are developing a JIT attitude, which means they are not carrying an inventory. So, the inventory will shift more and more to the primary producer or to the wholesaler. Watch cash flow, especially when using a broker.
Consider a retail outlet to move low grade material. The customers include contractors, builders, hardware stores, towns, counties, marinas, hobbyists, do-it-yourself-ers, schools, sign shops, etc. Do not grade this lumber. Sell short wood, narrow wood, thin wood, low grade wood, planer defects, trim pieces, etc.
Do you have bark? Don’t call it bark--call it landscape mulch and weed inhibitor. Do you have wood particles? Have you stained them so they look aged and ready to enhance property values when used as mulch? What will the retail market pay for landscape timbers that are reject ties?
With all the emphasis on the customer, don’t forget yourself and your employees. Don’t forget community goodwill.
Niche markets--small and local, most often. Highly profitable.
Remember that profit is the objective, not production.
More value added means more care, more perfection, and more accuracy is required.
Gene Wengert, Professor of Wood Processing, Emeritus, Univ of Wisconsin-Madison and President, The WoodDoctor's Rx, LLC, 2872 Charleston Drive, Madison, WI 53711-6502; 608-271-4441; Preferred e-mail: email@example.com
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