If you have been in the cabinet industry for several years, then you probably remember when imported plywood started to become a major player in the market. I remember the first unit I bought was a 50 sheet bundle of 1/2 “ raw china birch.
That was in 2003 and at the time the price was in the vicinity of $15/sheet! That price held for years until the AD (Anti-dumping) lawsuits started to take place. The prices started to creep up until the boiling point was reached in 2017.
That’s when it really hit the fan.
Prices seemed to just go on a wild run and nobody knew what to do. At the time, we used several units per week and it deeply impacted our bottom line. Then, prices seemed to stabilize until the next round of tariffs hit.
Every round of tariffs has brought a punch to our bottom line. In our cabinet box component company, customers can login and create quotes so they can then bid their projects. In the past this was not an issue but now we can only honor quotes for a couple weeks while supplies are in fluctuations.
What to do?
For our business we have decided to play the waiting game and see what happens in the long run. Many local shops have started buying the ‘Pine’ imported products but we hesitate for a few reasons:
A new import product generally means there will be quality issues and what little I have seen of the product that is exactly the case.
Supply shortages WILL happen. With this being a new product, there are not the warehouses of old stock waiting to fill demand like the import birch.
The last and most important is that, in my opinion, it is only a matter of time before this product is thrown into the AD lawsuit. Once that happens, it will probably fall off the face of the earth. They are just putting a pine on the same ply-core so why wouldn’t it get thrown in the lawsuit?
The great thing about today’s market is there are some alternatives that perform very well. MDF has become very popular with the skyrocketing price of plywood.
Like I say to many of my customers that only want plywood, “Today’s MDF is nothing like the old stuff.” It is much better and the glues and manufacturing methods are more refined, making a very durable product.
Another great contender is the textured and grained melamines. There are thousands of choices and they all perform very well and are durable as well.
Hedging your bets
As a medium sized manufacturer, we don’t have the resources to buy several truckloads of plywood to hedge our price until the market smoothes out so we just do what we can. We buy a few units at a time so we can at least honor the current bids we have out.
Steps to conserving your profits
Change your quote form to say BID GOOD FOR XX Days. Ours say 15 right now.
Educate your customers and just let them know what is going on.
Take material deposits if your customer wants to move forward, but it will be after the material you have in stock.
Call your suppliers weekly and get an update on price.
Resist the urge to not raise your prices accordingly. You still have to maintain your margins. Raise prices accordingly and do not just price the hard difference of the upgrade into your price. If you do, then your margins will erode quickly and consume all of your cash.
Many business owners are scared to raise prices because they fear losing business. This simple calculator tells you how much business you could lose before higher prices would reduce your profit.
If your cash situation allows for it, try to buy a few weeks of stock so you can fix your prices to your customers. Do not assume the price you buy at this week will be the same next week. This is a fluid situation and it will continue to move, upward in price.
Control what you can
Everyone in the industry has their opinions as to why these tariffs are taking place. I have a few of my own, but for all intensive purposes, the shop owners that are buying these panels get stuck with the bill and if we are not diligent, then it can cost us our businesses.
It is an unfortunate situation and we do not have control of the outcome, but we do have control of our pricing. Be proactive and stay up with the current situation. Here is a great resource that is keeping up with the action.
If you have any comments or great resources, then please share them as we are all going through this together.