Part 2: How to Make it in the Cabinet Industry - Outsourcing
About 10 years ago I realized that, for a small to medium cabinet shop, outsourcing cabinet doors was the only reasonable way to go.
Beyond the normal problems of quality control, training, turnover, and capacity was the enormous amount of equipment needed to build doors.
So, I decided to source my doors…and I didn’t look back.
The inner struggle with outsourcing is mostly one of pride and emotion, not logic and numbers. As a cabinet maker, I understand that once a craftsman, always a craftsman. The problem though, is at some point you are going to want to grow beyond just your own, personal capabilities.
So, it boils down to two options:
do it myself
hire a specialized company to do it for me.
Applying the Pros of outsourcing
To start, first identify the areas of your business that are capacity constraints or bottlenecks and analyze how the following pros of outsourcing apply to that particular need.
A few areas that come to mind are cabinet doors, drawers, and cabinet boxes.
Economies of Scale
As an outsource cabinet component provider, I know that we can mill parts for cheaper than most operations because our whole operation is set up for just that.
From the conveyors, layout, automation, and software, our whole business is geared for cranking out large amounts of components in a short amount of time. On the flip side, a normal cabinet shop may only mill a couple days a week and cannot benefit as much from these economies than from utilizing our operation.
This is a biggie.
Knowing exactly what your costs are before you ever cut a board is like seeing the future. By eliminating the majority of the variables that can fluctuate, your chances of making a great profit go up exponentially. Outsourcing allows you to do just that.
Shorter Delivery Times
Generally, outsource component providers can reduce your overall time by several days. For example, with our goal of producing parts in a week or under, you are left with plenty of time to focus on selling more jobs than you ever had time to before.
Maintain Low Debt
If you don't use it, you don't lose it.
Cash that is.
If you purchase all of your components from an outside supplier, you only pay for the service when you order something. However, when you take a capital lease out on a $150k CNC router or edgebander, that payment rolls in every single month like clockwork.
Not to mention, payroll for the operator that you have to keep around to run the equipment for when the work picks up.
This point may be the most important aspect of consideration, as it allows you to follow the first rule of making it in the cabinet industry : Maintain low debt, while increasing your capacity and profitability.
The effects of Outsourcing
What can outsourcing really mean for your business?
By freeing up your labor to only assemble cabinets and install, you are in turn doubling your capacity and reducing your overhead.
When you move the bottleneck to sales instead of somewhere in the production process, new doors begin to open that you had never thought of before.
Imagine, how many jobs could you sell if you actually had the time to do nothing but that, just sell?
double capacity with outsourcing
In our experience, a shop can double capacity without adding any capital to their business or hiring more labor.
One of our earliest customers was a local cabinet maker that added frameless components as a supplement to her current offering. Before she knew it, she was selling more frameless because it just went through her shop so much faster and easier.
Not long after that, practically everything she did was coming from an outsource supplier. Working with only 3 shop hands and a 3000sf shop, they were producing close to $1 million in annual revenues.
Still not convinced? If any of these 10 statements apply to you...then it’s time to consider outsourcing.
Step out and outsource
Now that you’ve seen the pros of outsourcing, give it a try.
Grab one of those small projects that are hard to get through the shop and source the cabinet boxes or doors and just get a feel for the process. Test drive the turnaround and then try it again.
Remember, the first time you switch from what you normally do, it can be a little rough to get accustomed to.
Overall, pay attention to the points from above and give it a fair go.
Also, make sure to choose an outsource partner that is right for you.
For further reading on the benefits of outsourcing, read this article featured on WoodShop News.
Thank you for reading. I welcome your questions, comments and suggestions for future articles. Please leave your comments in the box below.