Market Showing Strength

In an effort to determine market trends, I monitor 30 stocks on a monthly basis, and was shocked to see September’s numbers so high.  With the current strength being the strongest since February when 27 out of 30 showed an increase in value, I am baffled to see this month that 28 out of 30 stocks monitored showed an increase in value with the volatility of world affairs, and sweet crude around $95/barrel.  Since last month when 15 out of 30 showed positive increases and sweet crude was around $93/barrel, this is an obvious shift of market strength. 

Whether it be an increase in consumer confidence or inflated numbers from family vacations and back to school, seeing such an incline in market strength is a positive for our economy.  While not all the questions can be answered by these results, one must hope for this trend to continue.

Included in the list of stocks I follow, there is a wide array of industries including retail, construction, health care, consumer goods, food & beverage, along with others to establish a viable basis to determine market strength and trends.  Although the list only includes 30 companies, I believe it provides a sound base in order to provide enough evidence to make an educated determination of market strength and industry trends in a timely fashion.

Although there is a number of variables that control a stocks increase or decrease in value, I monitor sweet crude oil to determine the effects fuel prices have on a particular industry.  While we are all aware, when fuel prices increase in value, we usually notice a reduction in consumer confidence, and then see a reduction in stock value based on less spending of non needed items.  In addition, the longer the trend exists the harder the consumer confidence is to rejuvenate or restore to a respectable level.  Since peoples incomes do not fluctuate up and down as fuel prices increase and decrease, we are forced to alter our budgets and spend money more wisely.

Whatever the case may be for September’s trends, although it is still too early to tell what the following months will bring, I hope the trend continues.  While we can stand to see fuel prices fall to a more moderate level, with a continuation of positive market strength across all industries, we will ensure a strong and healthy economy.                       

Fuel Prices Adversely Effect Manufacturing

Although fuel prices have recently crept back to record highs, we anticipate the fallout to cause unfavorable effects soon.  Since we know fuel prices adversely affect manufacturing, it is only a matter of time until consumer confidence falls and spending of discretionary income comes to a halt.  While many retailers have recently relinquished funds for capital improvements, when consumers quit spending, they too quit spending until consumer confidence is restored.  With 2012 being an election year and many other variables, we can only hope that fuel prices fall before consumers pull back on spending.  Although manufacturing has been very favorable over the past few months and projections are solid for the next couple of months with plenty of contractual obligations, it is the scope beyond that is unknown.

We have spoken about consumer confidence before, but it is imperative for manufacturers to monitor.  Since we are directly affected by the amount of business that retailers receive, we must monitor consumer confidence in order to be cognizant of the potential shortfalls in work, and excess labor.  Unfortunately, when consumers quit spending it is a vicious cycle, and causes many negative affects to occur.

While the workload for the next couple of months is favorable, with many retailers having released funds to complete capital improvements, it is the first quarter scope that could prove troublesome if work is not acquired and consumer confidence is not restored.

Having spoken with several manufacturers throughout various industries, they too are “feeling the heat” caused by the increase in fuel prices.  Although we all know fuel is crucial in our lives, economic leverage is often barred on its price being low and affordable for most. 

Since the government has required oil companies to produce a cleaner fuel which now includes ethanol which is derived from corn, and bean crops, our food prices have increased as well.  Although alternative energy is important, I would point to the ineffectiveness of ethanol as a viable source.  While the concept of cleaner energy is wonderful, when incomes and inflation can’t keep up with the increases, it causes negative affects on the economy.  Fuel is vital in all of our lives weather we like it or not, but should not dictate our economy.  With plenty of oil and alternative energy sources like hydrogen (most abundant element on earth), we have the potential to be sustainable for numerous years, and generate a strong economy with a consumer confidence that is unparalleled.  You probably are asking yourself “If ethanol isn’t the best alternative fuel source, why did oil companies go this direction?”, the answer is, it was the best short term solution to a long term problem.  In order to meet the regulations that the government had implanted, they had to act fast in order to satisfy the guidelines.  Although hydrogen is the most abundant element on earth and “pollution-less”, it is very hard to extract, which would cause it to be expensive, but with some government help could likely be achieved more easily.  I also would say that when the extraction takes place on economies of scale that the price would become more affordable, and is by far a better alternative fuel source than ethanol.

By using a viable alternative energy source that is sustainable, we as a nation would be less dependent on oil and our economy would be rejuvenated with jobs and expendable income that could be used within retail establishments, restaurants, entertainment, etc, or to start a new company.  Since consumer confidence is based off of expendable income, I believe we should look ahead at the real problem and fix the problem at hand which is FUEL PRICES.  If we can get closer to a controlled fuel price meaning alternative fuel source, we can create a STRONG Economy and Manufacturing Will Be Sustainable.  Until then, we are tied to the hips of oil companies and must hope that fuel prices fall, consumers keep spending, retail establishments continue to flourish, and that a viable fuel source is created to lessen our dependence on oil companies.  

Manufacturing in the 21st Century

Manufacturing has been established for thousands of years, but distinctly different now.  Although time has evolved manufacturing, the basic principle of producing an end product has remained the same.  Along with the evolution of tools for manufacturing, now comes automated machinery.  While Manufacturing in the 21^st Century is significantly different than even 25 years ago, we must continue to look to the future in order to continue staying profitable and remain a valid competitor within the industry.  In this blog post, I will be focusing on the vision of automated machinery and how it will forever change the manufacturing of store fixtures and industries alike.

Although some believe automated machinery is causing fewer jobs, from our experience and from what numerous statistics show, I find that claim to be FALSE.  While automated machines Do Not Cause staff reductions, They Do Cause a shift in job placement.  With the need for fewer employees doing what once was performed manually, there often is an employment shift to running the new machines, some into various departments like assembly, as well as some in to management roles.  Since automated machines improve performance, it allows for the ability to increase production, which in turn will increase gross revenue, profits, and continue to generate jobs throughout the future.

With automated machinery being the true direction of the manufacturing industries future, investing into automation is a MUST.  In an effort to reduce the labor factor per unit and increase precision, moving in the direction of automated machinery is a great solution.  In addition, by switching to automated equipment it allows the ability to moderate production times, and provide little variance unlike humans.  By converting to automated equipment, it also allows a company to become more competitive within the global marketplace. 

Since many products we produce within the United States are also produced in countries like China, Japan, the Philippines, and other similar countries where labor is significantly less, we are forced to operate within the spectrum of the global marketplace for fear of losing business to foreign competition.  While some clients are still very focused on supporting U.S. businesses, the loyalty to buy made in the United States products has fallen to “price” by foreign competition.  In an effort to remain globally competitive, automated machinery is vital.

Even though the cost involved to purchase automation machinery comes with a hefty price tag, the Savings involved are Huge.  While automation equipment can range from $60,000 to $250,000 per machine or more, with all of the capabilities they allow in addition to the growth potential, the machines often pay for themselves relatively quick.  Obviously, depending on how much automation equipment you have installed will determine your ability to increase efficiency and manufacturing productivity.

Having monitored the trend and watched fellow competitors move toward automation throughout the last 10 years, I would conclude that automation is the developing trend of the 21^st Century for Manufacturing Companies throughout the United States and abroad.  In order to evolve with Manufacturing it is crucial to switch to automated Equipment before the evolution passes and you are no longer globally competitive and out of business.  While we at Interior WooDesigns have several pieces of automated equipment within our current manufacturing facilities, it is with time, that we too will slowly transform with more automation to remain globally competitive and allow the ability to increase our capabilities. 

Automation Equipment is the key to success for Manufacturing in the 21^st Century and should not be overlooked as a fad, but more as a developing long term trend of manufacturing.  With tools having evolved a long way over the years, it is with great pleasure we welcome automated equipment into our lives, to increase productivity and enhance our capabilities.  With such measures, we can ensure sustainability throughout the future near and afar.  

Account Diversification a Must for Manufacturing Companies

While statistics nationwide show U.S. Manufacturing to be down, diversifying your client portfolio is a MUST.  Just like stock brokers diversify their portfolio over high risk, low risk, and a variety of stocks, it is equally important for manufacturers to establish themselves into various types of the market as well.  Having All of your Eggs in One Basket would be considered high risk, and potentially catastrophic if you are solely focused rather than having a scope on a broader spectrum for company revenue. 

Although a horizontal diversification strategy should be implemented first, with a relatively low amount of risk it will help penetrate into similar businesses that the manufacturer is already serving.  With this strategy it requires the creation of additional product/products that would likely serve the clients you already have captured.  While a horizontal diversification strategy is important, it should not be implemented alone, in order for the company to be fully sustainable if a particular industry calls for a decrease in manufacturing output. 

Along with the horizontal diversification strategy, it is suggested that a concentric diversification strategy is also in place.  Even though it is a basic principle which identifies the strategic advantage your manufacturing plant has over your competitor, managers often forget to monitor this on a regular basis.  Identifying what or where you have a strategic advantage manufacturing your current products over your competitors is something that should be monitored regularly and be tweaked when necessary.  Monitoring a concentric diversification strategy also helps identify inefficiencies and helps to ensure industry quality standards are being achieved.

Another diversification strategy which can be implemented, but should be monitored closely due to it volatility and riskiness is a lateral diversification strategy.  Because a lateral strategy calls for the creation of new product/products that are unrelated and completely different than currently produced, they hopefully will reach an all new client base.  Due to the high risk associated and significant investment which is required to develop and market a completely new product to a different client base, it must be monitored closely.  While leveraging a manufacturers other profits to establish a lateral diversification strategy, it can generate a great ROI, but must be monitored to ensure smooth operations.

Even though a Horizontal Diversification Strategy is most common with the least amount of risk, and has the best ratio of success, one cautions no matter what strategy your manufacturing plant is implementing that maintaining profitability throughout the transition is crucial.  Like a stock broker monitors stocks, manufacturers should monitor there diversification strategy to ensure a company is sustainable if an industry in which you serve is negatively affected and there production needs are reduced.  Diversifying your client portfolio is a must, but should be implemented with caution and a close eye.  Consulting with a team of experts is often a good idea, and should be instituted with due care.

Repair VS Replace During Times of Struggle

Recently we have been plagued with automation malfunction which sparks the question, “Repair VS Replace during times of struggle?”  Although there are many Pros and Cons for both ways (if thinking optimistically in regards to the economy), one must choose wisely.  While manufacturing has been relatively slow over the past 8 months, and the economy is still sluggish to regain strength, many questions are raised.

Although we believe the economy is going to slowly regain strength and retailers will begin investing back into capital improvements, at Interior WooDesigns we haven’t seen the increase in production that speculators have stated.  Having spoken with other manufacturers, they too are embracing similar issues.

While some automation equipment can range in replacement value from $100k to $250k or more, they come with a significant investment decision.  On the other hand, when a piece of automated equipment goes down, it could be as little as $500 to as much as $3000 or more in a single visit.  Although our occurrences for needing repair are not frequent, with several machines more than 10 years old, one must ask, “Is Replacement Needed?”  Although automation equipment when properly maintained can last a long time, when repairing at the tune of $3000 or more per visit, it can certainly add up quick. 

Although most machines are depreciated out over 6 years, with the replacement value so great and manufacturing having been so slow, justifying capital improvements VS repairing a machine is a brain battle, and a strategic decision that doesn’t come easy.

Many manufacturing plants are facing similar situations, and some that have chosen to purchase new machines instead of repairing are no longer in business.  Although having new automated machines could provide a strategic advantage and would likely allow additional benefits, during struggling times spending excess cash on capital improvements could be a “cut throat” decision causing a company collapse.  At Interior WooDesigns we are constantly re-investing profits back into the company, maintaining the machines we have to the best of our ability and praying they last for a while longer.  With the economy having remained relatively stable over the past 18 months with a  slow progression, we believe that the best choice is to maintain what we have, invest back into the company, hold cash, spend wisely, continue to produce top quality store fixtures for our clients, and wait for the recession to fade and the golden economy to emerge.

Even though this is our plan of action, with aging machines and a sluggish economy for manufacturing, big investments with little work are nightmare decisions I can only pray we are not forced to make.  For those manufacturing plants that do have to replace machines, I wish you the best for I know the challenge of relinquishing cash in order to continue company operations.

The decision of “Repair VS Replace During Times of Struggle”, is not an easy choice, but one that should be well thought out and administered with due care.

How Will The Drought Effect Manufacturing

Although manufacturing store fixtures isn’t directly effected by the severe drought throughout the United States, we certainly are impacted indirectly.  While the drought is causing havoc on corn farmers who supply corn crops for ethanol which supply’s about 10% to our U.S. Gas Supply, we soon will feel the ripple effects from the extremely dry conditions.  Using some basic economic principles I will show you how we too will be affected, and how consumers will be affected as well.

While sources suggest a spike of nearly 15 cents a gallon in the months to come, and currently recording record high prices for corn, consumers can anticipate paying more for many items that are derived from corn or need corn to be produced.  With the increase in costs for food along with fuel increases, it will decrease expendable income.  Since manufacturing store fixtures is based off of consumers expendable income in buying non necessity items from retailers, if retailers are negatively affected they too will pull back spending on capital improvements.

Since the Supply of corn is low, and the Demand is remaining constant, Price is bound to increase.  Unfortunately, when commodities increase in price and cost of living remains constant, unless someone strikes rich, the expendable income decreases, and consumer confidence often falls as well.  Since Consumer Confidence can quickly slide, with a slow trek back upward, it is crucial we pay close attention to this drought crisis.

With manufacturing having been hit hard over the past 5 years with the recession, this drought I fear could be a final blow to many.  Since many manufacturers have been holding on by threads for some period of time, it would be no surprise if the drought doesn’t cause some manufacturers to go out of business.

Since Manufacturing is a staple to the well being of our U.S. Economy we ALL should be concerned about the drought, and will be affected by its wrath.  Unlike a Hurricane, Tornado, Fire, Earthquake, Tsunami, etc, which occur leaving a disaster zone in a specific area, this drought will affect our entire nation and should be taken very seriously.

So, although Manufacturers won’t be directly affected by the drought, I hope you can now see how we will be affected indirectly and the severity of this natural disaster.  For the unforeseen rain storm I hope it floods the crops with the necessary water to help provide healthy corn crops, and that we bounce back quickly stabilizing commodity prices, which will help stimulate economic growth.                    

Source: Martha White – www.MSNBC.com -

http://bottomline.msnbc.msn.com/_news/2012/07/19/12834892-gas-prices-may-go-up-too-because-of-drought?lite

You Get What You Pay For

We have all heard the phrase "You Get What You Pay For", and we believe that statement to be TRUE.  While we are constantly monitoring our fixture quality compared to others, and after years of modifying to reduce costs we are confident that customers "Do get what they pay for".  While Store Fixtures years ago were manufactured with real wood, then went to Laminate Fixtures with Real Wood Trim accent, and now are primarily laminate fixtures, chrome fixtures, or cardboard fixtures.

Although some consumers may overlook the product display, I would argue the point that it is hard to sell a $20 pair of socks from a cardboard box, whereas if the product was displayed in a descent fixture, it may help persuade consumers to buy with the ideology that it must be of a higher quality than the other socks.  I truly believe that display of a product is crucial in order to maximize a retailer’s return on investment.

In addition to helping diversify your products from the competition, with the higher quality fixtures, the fixture life expectancy is extended dramatically and is one less burden for a human to constantly monitor.  Depending on the quality of the fixture you choose, durability and life expectancy are 2 characteristics that are diminished with the lesser quality a client chooses.  Having manufactured thousands of store fixtures to client specifications and needs, we have witnessed first hand the damage that is incurred when using the philosophy "Cheaper is Better".  While real wood fixtures can last for 12-15 years or more and be presentable, when we compare that to solid laminate fixtures we typically see them last 7-10 Years under normal operating conditions before needing to be replaced.

Another thing to check is the materials being used to make sure that a comparison of "Apples to Apples" is being made before ordering your store fixtures, no matter what level of quality you choose for your retail environment.  We often find when we are doing comparisons that other manufactures in order to win a bid will use less expensive materials such as .5mm Edgebanding as compared to 2mm or 3mm which will help protect the edges of the laminate from some damage.  Although it doesn't sound like much of a difference, it can help extend the life of a fixture dramatically under normal conditions.

Since many retailers often move fixtures around the store and change the appearance, it can be expected that they probably will bump into another fixture or be drug without casters under them, but as a fixture manufacturer it is our job to make them as durable as possible.  Since store fixtures are not indestructible, it is important when making a comparison that "Apples to Apples" are being made.

We make every effort to provide our clients with the Very Best products we can possibly produce meeting the criteria of our clients needs.  Although the product may not last as long as the higher end product would, it is the nature of the beast.  Since many clients often wonder why our fixtures last longer no matter the base material, it's because we at Interior WooDesigns use the best quality materials, craftsmanship, and take extra precautions to insure our products outlast our competitors.  Having been in business more than 25 years, and having an extensive background in the retail industry we know the use and the abuse that the store fixtures receive.   

So I ask, "Do You Get, What You Pay For?" Yes, you do get what you pay for and the longevity of a store fixture is heavily based on the materials and craftsmanship of each and every fixture produced.  I also would be cautious when making comparisons from one manufacturer to another that Quality isn’t being sacrificed to win the bid.  At Interior WooDesigns we are firm believers in Quality over Quantity, because “You Do Get What You Pay For.”