Being Aware of Lost Productivity

Issue #17310 - May 2025 | Page #28

By Todd Drummond

Our perception forms what we think is the “true” reality, and our reality is always biased based on preconceived ideas, limited perspectives, and the big one of protecting our ego. So, how willing are you to review your area of responsibility for improvement beyond what you know?

The vast majority of us fall into the same trap of thinking that if we have been doing something long enough, periodically have made improvements over the years, and are working hard and consistently, we are doing it the best way possible. The truth is that the vast majority of wood component manufacturing (CM) companies experience unnecessary lost productivity throughout their operations. This loss of productivity is exhibited in the loss of potential greater net profits. For most, a single net point profit gain is a substantial gain worth any effort.

One former lumberyard CEO of 17 LBM locations explained that his two CM plants had made up only 10% of their sales yet contributed 30% of his net profits. He told me that when they had all the lumberyards, their CM plants seemed to function so well that they gave it very little thought. At the time of the consultation, he owned a single CM operation, and he found out they were not nearly as good as they could have been, and he wished they had given it far more focus. He added that he is delighted they hired my services to get them on a much more profitable path. These numbers of 10% of sales yet contributing 30% of net profits reflect many other CM locations owned by LBM companies.

One statement I make to clients, which many find surprising, is that regarding component manufacturing, lumberyard-owned operations consistently make lower net profits than independently owned operations, which usually have a 10-point net profit lower performance. This statement has been confirmed by many people within the industry, especially by companies that acquired both lumberyard and independents. Too often, lumberyard-owned CMs feel they should shortchange the CM’s gross margins to achieve greater sales at the lumberyards. Yet, as stated previously, the CM can offer a company a lot more net profit as a percentage of total sales if it is operated more efficiently.

Regardless of whether independent or lumberyard owned, I have found these areas consistently present needless waste for most CMs.

Poor employee practices, which are falsely believed to be good, are a severe drain on productivity. Constant turnover and insufficient personnel are too common, leading to insufficient capacity and quality control issues.
Thinking automation will solve poor company employment practices is a pervasive problem. Expensive conveyor systems and limited personnel reduction can substantially lower capacities and profits.
Regardless of automation, all manufacturing equipment operating at less than capacity is another common issue.
- Five-blade component saws are typically operating at less than 60% of capacity.
- Regardless of automation, assembly tables typically operate at less than 65% capacity.
  - Email me if you think I am exaggerating, and I will give you some simple tasks to prove these statements.
The lack of standardization and optimization in truss design leads to increased material costs equivalent to at least 2% of sales and often as high as 6% to 8% of sales, a hidden cost that far too many overlook.
There are ways to reduce the design time to increase the capacity and effectiveness of the existing design team.
No matter the vendor size, no single vendor is best at every aspect of the CM process. Too many rely on a single vendor for equipment, software, and suggestions for improvement.
And, by far, the overconfidence of key personnel within the company, believing they have all of the best ideas, is the greatest hindrance. A truly confident person is willing to be challenged by an outsider’s perspective and suggestions.

All of the issues in this list can and should be addressed, but the overconfidence of key personnel is the most significant and challenging to overcome. For all areas, my clients quickly realize during the consultations how much more productive each area can be once a road map is provided to them. It is a matter of explaining how to follow through with the key personnel using the list of suggestions. Overcoming large egos is another matter altogether. You cannot convince someone of another method when they are unwilling to listen because they feel threatened by their seemingly own expert opinion. I like to explain that every consultation challenges and expands my expert knowledge. Every consultation offers an opportunity to learn something new. Yes, I don’t always have the best solution that I may not have thought about or known before, but by working with the group, we can formulate the best solution at that time. Once I gain something new, I add that idea to my training seminars and disseminate it to my existing and new clients.

Everyone wants to believe that they are somehow unique and above average. However, the fact is that most companies fall well within the wasteful areas described in this article. The companies that have achieved the top 20% of productivity use the best practices, which I provide those same practices to my clients, have typically taken years of constant refinement and improvement. Good enough is never sufficient within those companies.

The cost of a TDC consultation is an insignificant fraction of a one-point gain in net profits for most CMs. Yet, a one- or two-point gain in net profits is an extremely low bar for TDC services. There is no better value than TDC for getting the best ROI for professional consulting services. TDC is your best source for learning about proven and practical lean manufacturing best practices combined with industrial engineering principles to keep your company at the leading edge of competitiveness. Cost savings and net profit gains that usually take months or years can be accomplished in weeks or months with TDC. No one is better at providing your team with proven results for good employee practices, pricing, truss labor estimation, and so many other best-in-class practices. All areas are addressed, not just manufacturing. Please do not take my word about TDC’s services, though. Read the public testimonials many current and past clients with decades of expertise and experience have been willing to give.