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Market survey of California furniture manufacturers Goudie, Derek 1994

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MARKET SURVEY OF CALIFORNIA FURNITURE MANUFACTURERSbyDEREK GOUDIEB.Sc., The University of British Columbia, 1991A THESIS SUBMITTED IN PARTIAL FULFILLMENT OFTHE REQUIREMENTS FOR THE DEGREE OFMASTER OF SCIENCEinTHE FACULTY OF FORESTRY(Department of Wood Science)We accept this thesis as conformingto the required standardTHE UNIVERSITY OF BRITISH COLUMBIAJuly 1994© Derek Goudie, 1994In presenting this thesis in partial fulfilment of the requirements for an advanct.degree at the University of British Columbia, I agree that the library shall make itfreely available for reference and study. I further agree that permission for extensivecopying of this thesis for scholarly purposes may be granted by the head of mydepartment or by his or her representatives. It is understood that copying orpublication of this thesis for financial gain shall not be allowed without my writtenpermission.(Signature)_______Department of/The University of British ColumbiaVancouver, CanadaDate_____DE-6 (2)88)ABSTRACTThe solid wood sector of the forest products industry in British Columbiahas begun to shift its focus away from the low cost manufacturing ofcommodity products and toward the extraction of higher value from the timberresource. One of the most important constraints to these efforts is the lack ofinformation about markets for value-added wood products. This paperpresents the results of an investigation of one such market, the wood furnitureindustry in California. A survey was mailed to all furniture establishments in thestate. The results were compiled from the data provided by 81 respondentsand were determined to be representative of the entire furniture industry inCalifornia in 1992.More than 88% of furniture manufacturers in California are single plantcompanies, and just under 50% employ 20 or fewer people. More than 40% ofmanufacturers have been operating for less than 11 years. Just under 50% offurniture manufacturers spent less than $50,000 on solid wood raw materials.This emphasizes the role played by the small manufacturer.Lumber represents about two-thirds of furniture manufacturer’sexpenditures on solid wood; the remaining third is divided between semifinished components, fully-machined components and sub-assemblies.IIHardwood species represent 77% of wood volume used; alder is the mostpopular species accounting for more than 40% of consumption followed byoak at 28% Among softwood species, ponderosa pine is the most popularaccounting for just under 50% of consumptionFurniture manufacturers in California rely heavily on wholesalers as asource of supply of solid wood. Most manufacturers prefer to deal withbetween two and four suppliers. Nearly all manufacturers use trucking as themeans of inbound transport.The furniture industry in California offers potential as a market into whichB.C. solid wood manufacturers can sell higher valued, specialty type woodproducts. The industry is fragmented and would demand a greaterunderstanding of end-user needs than that which is used to market dimensionlumber products in commodity markets. Distribution middlemen, primarilywholesalers, play an important role in supplying raw materials to furnituremanufacturers in California. Any attempt to exploit opportunities in this marketmust begin with research into the current supply strategies and tactics of thesemiddlemen.IIITABLE OF CONTENTSABSTRACT iiTABLE OF CONTENTS ivLISTOFTABLES viiLIST OF FIGURES ixACKNOWLEDGEMENTS x1.0 INTRODUCTION 11.1 Objectives 62.0 THE U.S. WOODEN FURNITURE INDUSTRY 72.1 History of the U.S. FurnitureIndustry 72.2 Industry Segmentation 92.3 Industry Structure 102.4 Industrial Performance 122.5 Imports into the U.S 132.6 Employment in the U.S. Furniture Industry 142.7 Technology in the U.S. Furniture Industry 152.8 Market Characteristics 163.0 FURNITURE PRODUCTION 193.1 Furniture Product Types 19iv3.2 Furniture Style Types 213.3 Furniture Construction Type 223.4 Wood Raw-material Use 234.0 METHODOLOGY 304.1 Sample Frame 304.2 Data Collection 314.2.1 Instrument Design 314.2.2 Pretesting 324.2.3 Mailout Procedures 335.0 RESULTSOFTHESURVEY 355.1 Response Summary 355.2 Survey Error 375.2.1 Response Bias 375.2.2 Non-response Bias 385.3 Respondent Profile 405.3.1 Firm Structure 405.3.2 Geographic Concentration 405.3.3 Firm Size 415.3.4 Firm Age 425.4 Products and Styles Manufactured 435.4.1 Product categories 435.4.2 Style categories 45v5.5 Raw-material Use 465.5.1 Expenditures on Solid Wood 465.5.2 Expenditures on Wood Composites 485.5.3 Lumber and Component Use 495.5.4 Species Use 515.5.4.1 Hardwood Use by Species 515.5.4.2 Softwood Use by Species 525.6 Supply characteristics 535.6.1 Sources of Supply 535.6.2 Number of Suppliers 545.6.3 Inbound Transport 556.0 SUMMARY AND CONCLUSIONS 567.0 LITERATURE CITED 61APPENDIX 1 LIST OF SPECIES DISCUSSED 66APPENDIX 2. SURVEY QUESTIONNAIRE 69APPENDIX 3 COVERING LETTERS 81APPENDIX 4 TESTS FOR NON-RESPONSE BIAS 84APPENDIX 5 SURVEY DATA 93APPENDIX 6 RESPONDENT’S COMMENTS ON NUMBER OF .... 121SUPPLIERSAPPENDIX 7 RESPONDENT’S COMMENTS ON LONG-TERM .... 124CONTRACTSviLIST OF TABLESTable1. Basic Data on U.S. Furniture Industry 212. Employment Levels in the U.S. Furniture Industry 243. U.S. Wood Furniture Production by Product type 294. Wood material Use in the U.S. Furniture Industry 345. Material Use Estimates for the Furniture Industryby Region 356. Percent of Total Hardwood Lumber Consumptionby Species 367. Percent of Total Softwood Lumber Consumptionby Species 378. Distribution of Respondents by Firm Size 509. Distribution of Respondents by Year of Startof Operations 5110. Product Groups Produced by Respondents 5211. Style Groups Produced by Respondents 5412. Respondent’s Expenditures on Solid Wood Raw Materials 5513. Proportion of Respondent’s Raw Material ExpendituresRepresented by Solid Wood 5614. Respondent’s Expenditures on Wood CompositeRaw Materials 57vi’15. Respondent’s Wood Raw Material Expenditures byProduct Type 5816. Respondent’s Hardwood Species Use 6017. Respondent’s Softwood Species Use 6118. Respondent’s Wood Raw Material Supply Sources 6219. Number of Suppliers, by Product Group, Usedby Respondents 63VIIILIST OF FIGURESFigure1. The Product-market Matrix 132. Questionnaire Response Rate Summary 44ixACKNOWLEDGEMENTSI offer my sincere gratitude to my wife, Stephanie, for her patience,understanding and support, and to Dr. David Cohen for his wisdom,guidance and unending enthusiasm.x1.0 INTRODUCTIONThe solid wood sector of the forest products industry in B.C. ischaracterized by an infrastructure that is directed to the production anddistribution of construction grades of softwood lumber (Anonymous 1992a).The sector is largely comprised of cost efficient, high volume processors whohave effectively utilized what has historically been a high quality, low costtimber resource as a source of international competitive advantage.Focusing principally on commodity markets for dimension lumberproducts, B.C. solid wood producers have become the largest part of what hasbeen called the engine that powers the provincial economy. Manufacturingshipments of lumber in 1991 totalled $4.095b, accounting for 18% of totalprovincial shipments that year (Price Waterhouse 1992). As further evidence ofthe industry’s importance, B.C. is the largest exporter of lumber in the worldaccounting for 34% of total exports in 1990.Although sawmilling profitability is normally somewhat erratic, growthhas been realised by those manufacturers who, by virtue of their scale ofoperations, have been able to withstand the troughs and losses associatedwith downturns in global markets for lumber. Not all sawmillers are so wellpositioned, however, and there are a number of factors which threaten the1industry’s long-term prospects for growth.Markets for construction grades of softwood lumber are mature andgrowing slowly (Woodbridge Reed and Associates 1988). Softwood lumbermills are approaching the limits of profitability of their processing technologiesand innovation aimed at boosting productivity and lowering cost structures willbe less beneficial than in the past (Meil 1990). These factors, along with thethreat of imposed reductions in harvest levels, suggest that the historicalindustry focus on maximizing productivity must be reevaluated.Diversification and further integration into higher value-added productshave been the main strategies advocated by industry analysts. Schuller andMeil, 1990, propose that, “...the prevailing practice of processing as many logsas possible must give way to the practice of product value maximization..and further, that growth will require “...vertical and horizontal integration tobetter utilize the resource and add value”. Nilsson, 1985, goes further to claimthat, “Inevitably there will be some closing down of sawmilling capacity in B.C.The extent will depend on how successful the industry is in getting into highervalued products”.Igor Ansoff developed the product/market matrix in 1956 as an aid in theassessment of a company’s growth opportunities; the concept has since beendeveloped and used by many researchers (Chisnal 1989). The matrix is auseful tool in the analysis of the options available to industries operating inmature markets (Figure 1).2The matrix defines the firm’s markets and its products as either new ormature and offers specific strategies for particular combinations of each. Forexample, it is suggested that a firm wishing to increase sales of an existingproduct in current markets should pursue a strategy of market penetration.Conversely, for the firm wishing sell existing products into new markets, astrategy of market development is indicated.MARKETCurrent NewCurrent Market MarketPenetration DevelopmentPRODUCTProduct DiversificationNew DevelopmentFigure 1. The product-market matrix.The strategy of market penetration typically involves stimulatingconsumption among present customers, taking business from competitors, or3attracting new users to the product. Each of these options is infeasible sincesolid wood producers operating in commodity markets must play the role ofprice taker where demand is dictated by economic factors they do not control.Since opportunities to market construction lumber to new customers arelimited, and since there is little need for product innovation to serve presentcustomers, a strategy of diversification is appropriate. The industry shouldpursue new markets through the development of product lines that can bedifferentiated from the construction lumber that dominates the present productmix.Booth and Vertinsky (1991) discuss the concept of related diversification.They suggest that although strong links between old and new product lines interms of resource and technology characteristics are important, there need notbe interactions between markets for final products. Booth and Vertinsky alsostate that, in general, related diversification accrues higher net benefits to thefirm than does unrelated diversification. These findings agree with those of anumber of other studies (Bettis 1981, Palepu 1985).Related diversification can be viewed as forward vertical integration thatoccurs along a resource - technology - product- market continuum. In thiscontext, from the perspective of the solid wood producer in British Columbia,this suggests some measure of additional processing of the existing productmix. The aim is to add value, or more appropriately, to add margin, to theexisting product mix.4Indeed, many manufacturers are actively pursuing a strategy of productand market diversification. Coastal producers in particular, are becomingadept at producing non-traditional products, grades and sizes for new markets.In 1978, 69.7% of coast lumber shipments went to North American marketswith the remaining 30.3% being shipped overseas; however, there has been aslow but definite trend to increasing offshore shipments. In 1989, the coastsector exported more than 53% of its production offshore in the form of metricsized lumber, door and window blanks, and other products tailored to specificmarket needs (Council of Forest Industries 1990).Many interior manufacturers, while continuing to produce mainlydimension lumber, are also beginning to look for alternate markets. Premiumgrades and specialty sizes for Japanese and European markets as well asmachine stress-rated lumber for residential and non-residential construction areexamples of efforts of interior sawmillers to enhance product and market mixes.It is clear that the industry is gaining some penetration and productacceptance in the more important markets for higher valued wood products.However, industry knowledge of most markets for higher valued wood productsis limited. This is not surprising since historical success in commodity marketshas generated little incentive to invest the resources required to investigateother opportunities.As market pressures and raw material constraints continue to force theindustry to adapt, more detailed information describing the characteristics of5specific markets for higher valued wood products is needed. It is in thiscontext that this analysis of the wood furniture industry in California isundertaken.The furniture industry is the most important industrial user of theproducts of the secondary wood using industries; California manufacturersalone used more than $2.56 billion worth of materials in 1990 (U.S. Departmentof Commerce, Bureau of Census 1992). The raw material needs of furnituremanufacturers comprise a range of products from rough lumber to highervalue-added items such as semi-finished and finished components and sub-assemblies.1.1 OBJECTIVESAssuming there is a market opportunity present, this descriptive study isintended to serve as the groundwork for a market development program. Thebroad objectives of this research project are as follows:1. define and explain the present raw material supply strategiesand tactics of wood furniture manufacturers in California2. develop a clear understanding of marketing opportunities andconstraints for B.C. solid wood producers in the Californiawood furniture industry.62.0 THE U.S. WOODEN FURNITURE INDUSTRY2.1 History of the U.S. Furniture Industry1Furniture manufacturing in the U.S. began with the earliest settlers asessentially a handicraft. European producers with their vast experience inproducing fine furniture controlled much of the American market in spite of theadded cost of shipping their product to the U.S. It was not until the War of1812, and a 30% tariff on imported furniture that followed, that the industrybegan to develop as a commercial entity. The protection of the tariffessentially gave U.S. furniture manufacturers a captive market and allowedthem to produce on a scale that could justify the utilization of superiorproduction methods used by European producers.The plentiful hardwoods of the eastern U.S. forests, along with rapidpopulation growth in the region, spurred the development of an importantfurniture manufacturing centre in Jamestown, New York, and as the domesticmarket continued to expand, so too did the U.S. furniture industry. However,the concentration of manufacturers in the northeast region, was such that thesurrounding forests were rapidly depleted. As competition for raw materials1Much of this section is from Wisdom and Wisdom (1983)7intensified, many manufacturers began to look west for the high gradehardwoods they required.By 1880, a strong furniture manufacturing centre had developed inGrand Rapids, Michigan. It was in this city that the first Furniture Market washeld, a method of marketing that has evolved to become the predominanttechnique by which manufacturers show their products to potential buyers.Grand Rapids quickly became the major U.S. furniture marketing centre and animportant producer; however, it was not long before the depletion of the timberresource once again had manufacturers looking to other regions for growthopportunities.By the turn of the century, a combination of plentiful timber andinexpensive labour had resulted in a shift in manufacturing activity to the U.S.South, particularly North Carolina and Virginia. During the early 1900’s,furniture manufacturers in the South concentrated on supplying regionalmarkets with lower priced furniture. When cotton prices collapsed in the early1920’s, a recession was triggered that destroyed local furniture markets, andforced the region’s producers to look to other regions for market opportunities.A number of manufacturers exhibited their products at Furniture Marketsin New York and Michigan. The unfavourable reaction their low-quality furniturereceived prompted manufacturers in High Point, North Carolina to develop aline of medium-priced reproductions of higher quality furniture. It was thisproduct line shift that initiated North Carolina’s development as a leading8furniture producing state.In 1925, New York was still the major furniture supplier producing 15.8%of the nation’s output of furniture. By 1954, this had fallen to 9.1% and in 1987,the state was responsible less than 4% of national production. During thisperiod North Carolina increased its share from 8.2% in 1925, to 16.1% in 1954,to more than 30% today. Although much of the industry is still concentrated inthe Southern states, significant manufacturing centres have also developed inother regions including California, Texas and Florida. For example,manufacturers in California were responsible for $4.7 billion worth of furnitureshipments in 1989, representing nearly 27% of the nations output that year.2.2 Industry SegmentationU.S. furniture manufacturers are diverse in terms of plant structure andscale, raw material input, and product mix. Categorization is mostconveniently accomplished using U.S. Department of Commerce standardindustrial classification codes (SIC) which segments the industry according toboth product end-use and principal raw material input. The major wood usingsegments of the U.S. furniture industry are wood household furniture (SIC2511), upholstered household furniture (SIC 2512), and wood office furniture(SIC 2521).The relative scale of these industry segments, along with some smallersegments is shown in Table 1. Wood household furniture is the largest single9segment in each of the indicated categories. With manufacturing shipmentsvalued at nearly $8 billion, producers of wood household furniture areresponsible for nearly 50% of household furniture shipments and 20% of totalindustry shipments. Upholstered furniture manufacturers represent the nextlargest segment; shipments in 1989 were $5.66 billion.Table 1. Basic Data on U.S. Furniture Industry for 1989SIC SIC Value of Value Added in Total SectorNumber Description Shipments Manufacture Employment2511 Wood household $7.98b $4.1 7b 121,400furniture2512 Upholstered household $5.66b $2.83b 80,300furniture2517 Wood TV and radio $0.24b $0.12b 2,800cabinets2519 Furniture and fixtures $2.47b $1.42b 31,000nec2521 Wood office furniture $1 .72b $0.99b 22,500Total $1 8.07b $9.53b 258,000Source: U.S. Department of Commerce, Bureau of Census, 19912.3 Industry StructureThe U.S. wood furniture industry exhibits many characteristics of theeconomist’s model of pure competition. Data from the U.S. Department ofCommerce Census of Manufactures indicate that the production of wood and10household furniture is highly fragmented with many thousands ofmanufacturers, none of whom dominate the market (U.S. Department ofCommerce, International Trade Administration 1985).Furniture products are relatively homogeneous and there is limitedrecognition of specific manufacturer’s brands in the marketplace. Furnitureproducts within a given end-use grouping tend to be defined by manufacturersaccording to their price point category; the low price point category includesthe lowest quality and least expensive furniture products while high price pointitems include more expensive, fine furniture products. Within a given pricepoint category, very strong price competition is evident among manufacturersVertical integration in the manufacturing sector describes the movementof a firm or an industry back along the value chain into the area of raw materialsupply, or forward into distibution and retailing. The U.S. furniture industry asa whole is not vertically integrated. The large number of small producers andtheir limited access to capital, along with the wide range of materials used infurniture construction have acted to inhibit manufacturers from integratingbackwards. Some of the larger firms have successfully developed their ownsupply sources, carrying inventories of lumber, running breakout lines andoperating dry kilns. However, the small, single plant operations that make upthe majority of this sector purchase most of their solid wood materials fromlumber wholesalers, brokers or, increasingly, component manufacturers.U.S. furniture manufacturers have not integrated forward either.11Although some manufacturers, such as La-Z-Boy and lnterco’s Ethan Allen,have an established presence at the retail level, most wood and upholsteredfurniture manufacturers market directly to retailers at events known as FurnitureMarkets (Sinclair 1992, 227-228). Again, the large number of small operators,both retailers and manufacturers, inhibits forward integration by manufacturers.2.4 Industrial PerformanceThe low wage structure of the U.S. South, along with the accessability ofa large and growing market, helped to ensure growth for the industry throughmuch of this century; however, these advantages are disappearing. The Southis becoming more industrialized, driving up wages, and foreign suppliers areovercoming barriers of distance through improved shipping and assemblytechniques. The rising cost of increasingly scarce hardwood timber has alsocontributed to a poor record of profitability in the industry (U.S. Department ofCommerce, International Trade Administration 1985).These low rates of return have, in turn, had a detrimental effect on theability of the furniture industry, relative to other manufacturing sectors, toreinvest in productive assets such as new machinery and equipment. This hasslowed growth in labour productivity and, again, the result has been tighterprofit margins.122.5 Imports into the United StatesU.S. furniture manufacturers have suffered from strong import pressuresand have experienced a steady erosion of their domestic market share. In1979, foreign suppliers held a 6% share of the U.S. market; by the end of the1980s this had grown to 25% (Widman 1990). In 1988, the U.S. imported$4.028 billion worth of furniture while exporting only $304 million. The trend ofrising imports was somewhat surprisingly reversed in 1990 and 1991 withimports falling to $2.854 billion and $2.71 3 billion respectively (Anonymous1992b).To a certain extent, the long-term trend of rising imports reflects theincreasing wold-wide competition and shifting trade patterns that have comewith expanding international trade. However, the rapid success of foreignsuppliers in U.S. furniture markets also acts to underscore some characteristicsof the U.S. furniture industry that impede long-term industrial performance.U.S. firms face significantly higher cost structures than do their foreigncompetitors who benefit from substantially lower labour costs. Furnitureproduction is typically a labour intensive process which does not require highlevels of skill or education. Developed economies such as that of the U.S. aregenerally less competitive in these kinds of industries since they are unable tobenefit from a more technologically sophisticated workforce (U.S. Deptartmentof Commerce, International Trade Administration 1985).The major source of market insulation enjoyed by U.S. manufacturers13has traditionally involved the high transportation and inventory costs faced byforeign suppliers. However, improved shipping techniques and the movementof containerloads of ready to assemble (RTA) furniture have eliminated much ofthat insulation. Some types of furniture, such as upholstered with its highvolume to weight ratio and high risk of fabric damage, are still protected bytransportation costs; however, foreign suppliers have, in general, been able toovercome historic transportation barriers (Smith and Ma 1990).2.6 Employment in the U.S. Furniture IndustryU.S. wood household, upholstered and wood office furnituremanufacturers, the key wood using furniture sectors, employed 243,000workers in 4,500 establishments in 1990. Total payroll for the year was $4.16billion and the annual payroll per employee, averaged between the threesectors was $18,000. Total sector payroll is the entire annual payroll for thesector, not including social security and other nonwage and salary employerpayments. Payroll per employee is total sector payroll divided by the totalsector employment. Levels for each of the sectors are provided in Table 2.A survey of 620 U.S. furniture manufacturers conducted in 1990 foundthat 45% of firms employ between one and five people and that 66% employfewer than 20 (Vance Research Services 1991). The mean number ofemployees was reported as 35.7; however, the median was just 9.3. Thisindicates the significance of the size difference between the many small firms14Wood householdfurniture2512 Upholstered 83,800 72 $17,700furniture2521 Wood office 28,200 48 $20,300furnitureSource: U.S. Department of Commerce, Bureau of Census 19922.7 Technology in the U.S. Furniture IndustryAlthough technological innovation is an important tool in gainingcompetitive advantage in most manufacturing activities, this has historicallybeen much less so in furniture production. The furniture industry is a matureindustry where most change has been intended to fine-tune existing practices.Technological innovation has thus been gradual and, in general, aimed atimproving efficiency of raw material use (Martens and Araman 1986).It has been rare for any furniture manufacturer to attempt to gain anabsolute technological advantage over its competitors since the machineryand the few large ones operating in this industry. It was also determined thatthe percentage of firms with fewer than 20 employees was highest in the Westat 75%.Table 2. Employment Levels in the U.S. Furniture Industry in 1990.SIC SIC Description Total Sector Employees per Payroll perCode Employment Establishment Employee2511 130,900 47 $16,00015used is nearly always purchased from suppliers who sell worldwide (Sinclair1992: 223). The dramatic loss of the domestic market share to foreignsuppliers has perhaps acted as a catalyst to U.S. manufacturers, opening theireyes to the cost of complacency in today’s competitive marketplace. Theincreasing number of large, well established plants appears to be moreresponsive to technological innovations, and more willing to invest in itsdevelopment (West and Sinclair 1991). As the industry restructures andconsolidates in an uncertain market environment, this trend would appear likelyto continue.Technological innovations that have increased the efficiency of wooduse in furniture manufacture in recent years include computer programs thatallow a closer correlation between raw material mix and cutting orderrequirements and the development of thin kerf sawing to reduce the amountwaste in manufacture. In addition, improved staining and finishing techniquesare allowing a wider range of species and grade mixes to be utilized.2.8 Market CharacteristicsThe market for furniture has historically been driven by the need tofurnish new homes; furniture demand normally follows housing starts byapproximately one year (Howard 1988). In recent years, however,repair/remodel expenditures as well as the sale of existing single family homeshave become the dominant influences on furniture demand (Smith and Ma161990).Between 1983 and 1989, single and multi family housing starts in theU.S. fell from 1.7 billion to 1.4 billion while sales of wooden householdfurniture by U.S. manufacturers rose from less than $6 billion to more than $8billion. During this same period, annual repair and remodel expendituresincreased from less than $50 billion to nearly $100 billion, and existing homesales jumped from 2.5 billion to 3.5 billion.Annual household expenditures have been shown to vary greatly withage of household heads. The primary purchasers of furniture in the U.S. arehouseholds headed by persons in the 35-54 age group (Epperson and Wacker1989). This age group is expected to grow as a proportion of the U.S.population (U.S. Department of Commerce, International Trade Administration1985). This market growth is favourable for increased sales of wood furnitureat the retail level (Engordio 1986) and increased market opportunities for U.S.manufacturers and their raw material suppliers.Furniture/Today, in its annual composite forecast, predicts that, buildingon 1991’s long-awaited turnaround, the U.S. furniture industry can look forwardto continued rising demand (Howard 1992). It is suggested that theseincreases in consumer demand will result mainly from continued modestgrowth in employment and purchasing power, a more optimistic consumer,and a continuation of the housing industry’s rebound that began in 1992.The projected level of furniture retail sales is $38.3 billion in 1993 and17$40.9 billion in 1994. This represents an 11% increase in consumer spendingon furniture since 1989 (Howard 1992). The key issue again, however, iswhether or not U.S. manufacturers can capitalize on this demand growth in anenvironment of intensifying international competitiveness.183.0 FURNITURE PRODUCTION3.1 Furniture Product TypesThe three largest segments of the U.S. furniture industry, in terms ofwood raw materials consumed, are wood household furniture, upholsteredhousehold furniture and wood office furniture. The wood household furnituresegment of the industry produces mainly living room furniture such aschesterfields, occasional tables and entertainment centres, bedroom furnituresuch as beds and dressers, and formal and informal dining room furniture suchas tables, chairs and cabinets. The upholstered furniture industry producesdual purpose sleep furniture, as well as beds, sofas and chairs. The woodoffice furniture industry manufactures mainly desks, chairs and storage units.Some census data describing product types are available. For example,the 1987 Census of Manufacturers reports that bedroom furniture represented31.9% of the value of shipments of wood household furniture in 1987. Thiswas followed by living room furniture with 20.0% and dining room furniture with20.8%. The census data are useful for primary analysis; however, they are notdetailed and are somewhat dated. Meyer 1992a, report data on the U.S.furniture industry that is more comprehensive and more timely.As is shown in Table 3, bedroom furniture was produced by 66.7% of19responding firms; 65.2% produced dining room furniture; and 53.6% producedoccasional furniture. The authors noted that the number of furniture categoriesproduced per firm decreased as the size of the responding firm increased.More than half of respondents with less than $1 million in annual sales weremanufacturing at least seven of the ten furniture categories listed. Only threefurniture categories were manufactured by more than half of the firms withmore than $1 million in sales.Table 3. U.S. Wood Household Furniture Production by Product TypePercent Manufacturing by Firm’s Value of SalesFurniture Category < $1 million $1-b million > $10 million overallBedroom 75.0 63.6 70.6 66.7%Dining room 68.8 67.0 58.8 65.2%Occasional 56.3 52.3 55.9 53.6%Entertainment 56.3 48.9 41.2 47.8%Living room 62.5 48.9 35.3 47.1%Home office 50.0 37.5 32.4 37.7%Kitchen 62.5 34.1 26.5 35.5%Source: Meyer et al, 1992aThere were also some marked differences in the product mixes of firmsin different geographic regions. For example, more than 90% of respondentsfrom the Northeast produced dining room furniture and 70% produced livingroom furniture compared to national averages of 65.2% and 47.1 % respectively.20In addition, home office furniture was produced by 52.9% of manufacturers inthe West and only 37.7% nationally.The authors acknowledged that the survey respondents are morerepresentative of larger manufacturers, so it cannot be inferred that the resultsare truly representative of the U.S. furniture industry. However, respondingfirms were classified according to sales volume, allowing for consideration ofthe effect of this response bias in analyzing the data. It also must be notedthat the authors did not sample such segments as upholstered and wood officefurniture, choosing to focus only on firms classified as wood furnituremanufacturers (SIC 2511). Given the aforementioned size of the woodhousehold furniture segment, the study is still representative of a largeproportion of the wood furniture constructed in the U.S.3.2 Furniture Style TypesThere are no available U.S. census data describing the importance ofspecific furniture styles; however, Furniture/Today conducts an annual surveyof furniture manufacturers to determine the best selling and fastest growingstyles (Anonymous 1993). Respondents are asked to calculate their productshipments within 24 style categories grouped in five style families: American;contemporary; European country; formal European; and Oriental.American 18th century was found to be the best selling furniture style asnamed by 33% of respondents, followed by casual contemporary as named by2121%. Casual contemporary was projected to be the fastest growing style by22% of respondents, followed by shaker by 14%. Styles in the “American”family dominate the market in three of the four product categories surveyed. Inbedroom furniture, American styles account for 52% of the market; in diningroom, 50%; and in occasional tables, 44%. Only in curios and entertainmentcentres does another style family, contemporary, represent a greater proportionof production.3.3 Furniture Construction TypeThere are no available U.S. census data describing the importance ofspecific furniture construction types. However, in the results of recent survey offurniture manufacturers, Meyer et al, 1 992a, report that respondent’s 1989 salesof wood household furniture consisted of the following: 44.7% solid hardwood;25.9% artificial laminates over composites or solid softwood; 16.8% hardwoodveneers over composites or solid softwood; 8.4% solid softwood; and 4.2%other construction type.The study also noted some differences in preferred constructionmethods across regions. The greatest relative volume of solid hardwoodfurniture was manufactured by firms in the Northeast where solid hardwoodsaccounted for just under 66% of furniture shipments. In all other regions, solidhardwood construction represented less than 50% of production. The use ofartificial laminates over wood composites also varied greatly between regions.22In the Midwest, this method represented close to 40% of the value ofshipments followed by just 11% in the South and 10.4% in the West.Meyer also asked furniture manufacturers to indicate their perceptions ofthe direction of demand for various types of furniture construction on a scale of1 (strongly decreasing) to 5 (strongly increasing). Respondents perceivedincreasing demand for solid hardwood (3.5), artificial laminates overcomposites (3.5), softwood veneers over composites or solid wood (3.4), andhardwood veneers over composites or solid wood (3.3). Respondentsproducing solid softwood furniture perceived a stable demand for this type ofconstruction (3.3).3.4 Wood Raw-material UseThe U.S. wood furniture industry is the country’s most important user ofhigh valued hardwood lumber and veneers (Ackerman 1987) as well as beingan important market for softwood lumber and wood composite products. Thevolumes of these materials consumed by furniture manufacturers are such thatthe industry’s use trends are an important factor impacting demand and pricemovements for a range of solid wood raw materials. Information describingthese trends is thus of benefit to primary and secondary processors in general,and to suppliers to the furniture industry in particular. The information is usedto anticipate demand and price in developing supply strategies as well as inplanning for production levels and workforce size.23Comprehensive data describing the U.S. manufacturing sector arecollected every five years, in years ending with two and seven, by the U.S.Department of Commerce; the information is published three years later. Thedepartment also conducts a less detailed annual survey of manufacturerswhich attempts to compensate for the length of time between the censusdates.Although the census data are useful, it does suffer from a number ofdeficiencies. Perhaps the most serious shortcoming is the lack of datadescribing certain categories in certain census years. The 1987 Census ofManufacturers, for example, did not report consumption of softwood orcomposite materials and did not include consumption by wood office orupholstered furniture manufacturers. These gaps, along with the time betweendata collection periods, result in much of the available data being obsolete.Another deficiency in the census data is that all of the dimension stock,components, and pre-assembled frames purchased by manufacturers arecombined by the Bureau and reported with either hardwood or softwoodlumber, neither of which is broken down by species. In addition, the majorcensus classifications do not capture the small manufacturers who are groupedby the bureau into the not-specified-by-kind (nsk) category of the material usecategory. Since the industry is relatively fragmented, with many smallproducers, this omission likely represents a significant volume of wood.Since many of the census data available on material use by furniture24manufacturers are of limited value, researchers have attempted to analyze theindustry using mail and/or telephone surveys. Furniture manufacturershistorically have a low record of replying to such surveys; however, someresearchers have succeeded in obtaining reliable data. The results of severalof these studies are reported here.Table 4 provides estimates of the volume of lumber used by the majorindustry segments in 1990, as well as projected levels for 1992 (Forbes 1993).The total volume of hardwood lumber used in 1990 was reported as 2.335billion board feet (BBF). This was expected to rise to nearly 2.752 BBF in1992, an increase of 13.5%. Softwood lumber usage for 1990 was reported as831 million board feet (MMBF); a more modest increase of 5.7%, to 862 MMBFwas predicted for 1992.Table 4. Wood Use in the U.S. Furniture IndustryHardwood (MMBF) Softwood (MMBF)ceIndustry Segment1990 1992 1990 19922511 Wood household furniture 1,196 1,329 744 7742512 Upholstered furniture 1,018 1,277 64 882521 Wood office furniture 121 146 31 25Total 2335 2752 839 887Source: Forbes, 1993Although the study did not measure purchases of components or pre25assembled frames, the authors did account for materials used by dimensionpart facilities owned by furniture manufacturers. In addition, they surveyedfirms whose primary product is something other than wood household, office,or upholstered furniture, and took care to ensure that all classes of firm sizewere sampled in a representative manner.Manufacturers of wood household furniture were the largest consumersof hardwood lumber in 1990, using 1.196 BBF; manufacturers of upholsteredfurniture followed closely, using 1.108 BBF. Wood household furnituremanufacturers were also the major users of softwood lumber in 1990.Consumption by this sector was reported as 744 MMBF, representing 88.7% oftotal consumption; upholstered and wood office furniture followed with 64MMBF (7.6%) and 31 MMBF (3.7%), respectively.Meyer et al, 1992b, while not providing values for specific industrygroups, did segment 1989 usage according to broad geographic regions(Table 5). Not surprisingly, the South is reported as the largest consumer ofboth hardwood and softwood lumber. What is notable is the variability ofsoftwood use as a proportion of total lumber use among geographic regions;softwoods account for nearly 70% of the lumber use by western manufacturersas compared to a national average of less than 30%.26Table 5. Material Use Estimates for the Furniture Industry by RegionNortheast South Midwest WestHardwood (MMBF) 254.9 1747.0 207.0 130.4Softwood (MMBF) 53.3 362.6 130.7 287.5Source: Meyeri, 1992bThe scientific names of all the species referred to in this thesis are listedin Appendix 1. According to Forbes, 1993, red oak was the most frequentlyused hardwood species (Table 6); just under 700 MMBF of this species wasconsumed by furniture manufacturers in 1990. This represented 30% of allhardwood lumber used by the industry and was projected to increase to 32%in 1992. White oak was the second most popular species, accounting for 16%of the total and poplar was third at 11%.Table 6. Hardwood Lumber Consumption by SpeciesSpecies Percent of 1990 total Percent of 1992 totalRed oak 30 32White oak 16 18Yellow-poplar 11 10Soft maple 9 7Black cherry 7 7Hard maple 6 5Ash 3 3Other 18 16Source: Forbes, 199327Southern pine was by far the most frequently used softwood species(Table 7); furniture manufacturers used nearly 500 MMBF of this species,representing 58% of total softwood consumption, in 1990. Eastern white pinewas second with 17% or 143 MMBF. No other species accounted for morethan 3% of the total.Table 7. Percent of Total Softwood Lumber Consumption bySpeciesSpecies Percent of 1990 total Percent of 1992 totalSouthern pine 58 51Eastern white pine 17 21Western pine 3 11Radiata pine <1 2Other 12 12Not reported by species 9 3Source: Forbes, 1993While these estimates provide a reasonably accurate picture of overallspecies usage levels, they are national in scope and are of limited value inanalysis of a particular region. Since manufacturers are constrained to somedegree by the cost of inbound transport, there is by necessity, a close fitbetween the firm’s location and its species mix.As an example, it is likely that the proportion of total softwoodconsumption that Southern pine represents in the west is far less than the 58%28that is reported nationally. Since much of the furniture industry is concentratedin the South, however, where this species is harvested, national estimates areheavily influenced by this region’s supply patterns.In addition the volume of alder used by manufacturers in the West islikely to be much higher than 1 % of the total hardwood volume as is reportednationally. Again, this is due to the proximity of the resource and the resultantlower inbound transport costs for furniture manufacturers as well as the mills,wholesalers, brokers and component manufacturers who supply them.It is notable that in among furniture manufacturers in 1990, theavailability of raw materials was the third most frequently mentioned ‘greatestconcern’, behind the economy and the availability of skilled labour (VanceResearch Services 1990). It is likely that this concern will grow in importance incoming years. Although annual hardwood harvest levels in the U.S. remain farbelow the annual growth, economic and societal barriers limit availability andmany mills find it difficult to get enough timber (Araman and Tansey 1991).Land-use conflicts also contribute to uncertainty surrounding softwood rawmaterial availability. Timber output in the U.S. Pacific northwest has beenpredicted to fall an estimated 35% by the year 2000 (Anonymous 1991).294.0 METHODOLOGY4.1 Sample FrameThe classification system used by the Bureau of Census segments thefurniture industry according to the principal raw material input. Historically,researchers analyzing wood use in the furniture industry have used as asample frame, wood household furniture (SIC 2511), wood office furniture (SIC2521),and upholstered furniture (SiC 2512).The difficulty with restricting the analysis to these segments, however, isthat if a firm’s expenditure on wood is not its greatest single materialexpenditure, or if wood products are not its primary output, then it is notclassified as a wood furniture manufacturer. Based on traditional techniques,such firms have no chance of being sampled.A further complication is that in the material use tables compiled by theBureau of Census, smaller furniture manufacturers are combined withmanufacturers from other sectors in the not-specified-by-kind (nsk) category.Again, using traditional survey methods, these manufacturers are notrepresented. An unknown amount of wood is thus being consumed by smallfirms and by firms whose principal material input is something other than30wood.In order to ensure that as many wood users as possible were given theopportunity to respond, it was decided to approach the survey as a census;that is, to contact all of the furniture plants in the state of California.4.2 Data CollectionThe market survey research method served as the basic researchdesign. A mail survey was used as the data collection vehicle because it is themost efficient and cost-effective means of securing data from a dispersedpopulation (Churchill 1987, 224-258). A mailing list of the entire population offurniture manufacturers in California was purchased from the firm CanadianBusiness Information (CBI) in Toronto; the list included 1051 individual furnituremanufacturing firms. According to CBI the list had been updated in January of1993 and was comprehensive at that time.4.2.1 Instrument DesignAn important objective in undertaking this analysis was to construct afoundation on which to build a market development strategy targeting thewood furniture industry in California. This objective, and the quantitative31description of the industry required to meet it, was the key factor in decidingon the survey variables.The primary challenge in designing the survey instrument lay in finding abalance between the detail needed for analysis, and the brevity and simplicityneeded to encourage response. Wherever possible, questions were limited totwo or three lines of text and required fact rather than opinion type answers.It was judged to be difficult in many cases for participants to provideprecise answers, so the majority of the questions were designed in the fixedalternative form. This technique allows respondents to choose between alimited but all-inclusive number of categories . As well as making thequestionnaire easier to complete, standardization of alternative responses tothe questions allows more efficient comparison of answers which facilitatescoding, tabulation and ultimately interpretation of the resultant data.The questionnaire is provided in Appendix 2. The layout was in the formof a booklet measuring 21.6 centimeters by 14.0 centimeters. Included witheach survey was a personally signed covering letter briefly describing thepurpose of the research project and encouraging the subject to participate(Appendix 3).4.2.2 PretestingThe survey was pretested on Mr. Gary Stafford, the director of theWestern Furniture Manufacturers Association. Mr. Stafford made only minor32suggestions with regard to the structure and content of the questionnaire;however, he stated that, based on his experience with other University andprivate market research projects, it would be difficult to convince furnituremanufacturers in California to participate in such a study. He suggested that aresponse rate of no higher than four percent could be expected. Afterdiscussions with the research supervisor, Dr. Cohen, it was decided thatsufficient means were being employed to ensure enough returns and that thestudy should proceed nevertheless.4.2.3 Mailout ProcedureForcing respondents to pay for the postage required to return thequestionnaire can deter substantially reduce response rates (Zickmund 1989,224-225). For this reason a business reply mail permit was purchased from theU.S. Postal Service. A bar code was provided which was photocopied alongwith the return address on the outside of the back page of the booklet. Thisallowed the subjects to simply staple the booklet together and mail it withoutcost.Because the Business Reply Permit does not allow for mailing acrossinternational boundaries, a post office box was leased in Blame, Washington.The first mailing was conducted on June 18, 1993. On August 12, after aperiod of two weeks during which no further responses were received, asecond mailing was carried out. On September 30, responses were cut-off. At33that point, no responses had been received for two weeks.345.0 RESULTS5.1 Response SummaryThe response to the survey is detailed in Figure 2. The initial mailing listconsisted of the names and addresses of 1057 furniture manufacturing plantsin California, the population of manufacturers in the state. After adjusting forincomplete addresses, 1051 surveys were mailed. Of the 1051 mailouts, 860were delivered to the addressee and 191 were returned as undeliverable.The 191 surveys returned as undeliverable was a higher number thanhad been anticipated. The stamps made by the postal service on the returnedenvelopes showed the following breakdown of the reasons for non-delivery: 81firms had moved and left a forwarding order which had expired; 90 firms werenot at the address provided and had left no forwarding address; 20 firms couldnot be contacted because of an incorrect or insufficient address.It is likely that most of the 90 firms that had not provided any forwardingaddress were no longer in business. It is not possible to determine theproportion of the 81 firms whose forwarding order had expired that were still inbusiness; some may have ceased operations altogether. In either case, sincethe mailing list had been updated four months prior to the first mailing, the high35number of surveys returned as undeliverable, and the associated high numberof shutdowns or movements, suggests a competitive and dynamic industry inwhich many firms compete, perhaps often unsuccessfully, for market share.1051mailed860 (81.8%) 191 (18.2%)delivered undeliverable134 (15.6%) 726 (84.4%)responded did not respond19 (14.2%) do not manufacture furniture34 (25.3%) manufacture furniture without wood81(60.5%) manufacture furniture using woodFigure 2. Questionnaire Response Rate Summary.Of the 860 firms contacted, 726 did not respond to either of twomailings. Responses were received by 134 firms; 19 of the respondentscontract manufacturing to other firms and 34 manufacture furniture withoutwood. The remaining 81 firms use wood to manufacture furniture.365.2 Survey ErrorThe two major sources of survey error are sampling error and systematicerror. Random sampling error occurs because of chance variation in theelements of the population that are selected to be sampled; as sample sizeincreases, random sampling error decreases. Since a census of the producerswas conducted rather than a sampling procedure, the degree of randomsampling error is related to the response rate to the survey.Systematic, or non-sampling error is a result of some aspect of theresearch design that causes respondent error, or from a mistake in theexecution of the research. The latter type of error is avoided through care indata collection and compilation; the former, respondent error, is more difficultto avoid and is comprised of response bias and non-response bias.5.2.1 Response BiasA response bias occurs when respondents tend to answer questions ina way that either inadvertently or intentionally misrepresents the truth.Inadvertent misrepresentation typically results from poorly worded orambiguous questions or from difficult questions that require the respondent toresearch the answer. The latter type of question can also lead to deliberatemisrepresentation.The task of minimizing misrepresentation in this survey was related to37the steps taken to encourage response. Questions were kept brief and weredesigned to be as easy to understand and answer as possible. Whereverpossible, respondents were given a choice between categories and thenumber of categories was limited to five or six. Since respondents to thissurvey were not asked to identify themselves, it is not likely that they would seeany reason to intentionally misrepresent the truth.5.2.2 Non-response BiasThe major limitations of mail surveys relate to low response rates(Zickmund 1989, 225). To utilize the data resulting from a survey with a lowresponse rate, that is to draw inferences about the industry as a whole, it isnecessary to determine if those who responded to the questionnaire arerepresentative of those who did not.The mailing list included employee size data for 707 firms, representing67.2% of the population, as well as sales volume size data for 690 firmsrepresenting 65.7% of the population. The data were not obtained directlyfrom the firms, but through the California Department of Commerce. It is notsurprising then that the data were available for a similar proportion of the 134respondents, 67.9%, or 91 firms for employee size and 62.7%, or 84 firms forsales volume size. This information allowed convenient comparison betweenthe population and the respondents.A chi-square contingency table test was used to determine if the38employee size distribution of the non-respondents was the same as that of therespondents. A similar test was carried out using the sales volume size data.As is detailed in Appendix 4, the tests indicated no significant difference.In the absence of data describing the population, error associated withnon-response can be studied based on the assumption that late respondersclosely resemble non-responders (Fowler 1984, 48-49). A comparison betweenearly and late respondents would thus give results similar to a test comparingrespondents and non-respondents. The data for the study were collectedusing two mailouts, spaced six weeks apart, allowing comparison betweenthose who responded to the first mailout, early respondents, and those whoresponded to the second, late respondents.Independent sample t-tests, at the 0.05 level of significance were usedto compare the means of firm ages, as well as the means of proportion of totalwood consumption represented by hardwood species, of early and laterespondents (Appendix 4). For each, the null hypothesis that the means arethe same could not be rejected.The decision to designate all furniture manufacturers as the sampleframe makes it very important to ensure that the sample is not skewed towardthose who use or do not use wood. To deal with this situation, the proportionof wood-users among early respondents was compared to the proportionamong late respondents. Using a z- test for differences in proportions, the nullhypothesis that the proportions are equal could not be rejected at the 0.0539level of significance (Appendix 4).Although some degree of non-response bias is almost certainly present,on the basis of these tests it is believed that those who returned thequestionnaire are largely representative of those who did not, and thatinformation gathered in the survey can be used to infer to the population offurniture manufacturers in California.5.3 Respondent Profile5.3.1 Firm StructureThe data compiled from the responses to all questions are provided inAppendix 5. The fragmented nature of the furniture industry in California isevidenced by the fact that of the 77 firms reporting on their structure, 69 aresingle plant companies. Of the eight firms that operate more than one plant,six reported having additional manufacturing locations in states other thanCalifornia, and one reported a plant outside North America.5.3.2 Geographic ConcentrationThe furniture industry in California is heavily concentrated in the LosAngeles area; analysis of the locations of the 1,051 furniture plants on themailing list revealed that more than 80% are located within 80 kilometres of theLos Angeles core. A further 15% of plants are located in the area around San40Francisco, Oakland and south to San Jose, and the remaining five percent orso are spread between smaller cities such as Sacramento and Bakersfield withonly a few firms located in other towns throughout the state.Of the 134 firms that responded to the survey, 21 did so anonymously,or under a name not on the original mailing list; the location of these firms isthus unknown. The remaining 113 firms show a pattern of geographicconcentration that is similar to that of the population. Seventy-two percent arelocated within 150 kilometres of Los Angeles, 23% are within 150 kilometres ofSan Francisco, and the remaining five percent are in smaller centres.Among those respondents who identified themselves as wood users,just under 70% are located within 150 kilometres of Los Angeles, 24% arewithin 150 kilometres of San Francisco, and six percent are located in otherareas.5.3.3 Firm SizeA summary of firm size as measured by number of employees isprovided in Table 8. As expected, smaller companies dominate; nearly 25% ofrespondents employ five or fewer people and 58% employ 20 or less. Theseresults emphasize the fragmented nature of the furniture industry and thedegree to which it is dominated by small, owner-operated firms.41Table 8. Distribution of Respondents by Firm SizeNumber of Employees Respondents1 - 5 20 (24.7%)6 - 20 27 (33.3%)21- 50 20 (24.7%)51 - 100 8 (9.9%)> 100 6 (7.4%)Total 81 (100%)5.3.4 Firm AgeRespondents were asked to indicate the year in which their companybegan operations; the results are provided in Table 9. Of interest is the factthat more than 40% of respondents have been operating for ten years or less,and only 27.5% have been in business for more than 30 years.As expected, a positive relationship was found between firm size asmeasured by number of employees, and the length of time the firm had beenoperating. The average number of years in business for the 20 firms withbetween one and five employees is 11 years; among the 27 firms withbetween six and 20 employees, the average is 14 years and among firms with21 to 50 employees, average firm age is 22 years. The trend continues withthe eight firms employing between 51 and 100 people having an average ageof 29 years.42Table 9. Respondent’s Year of Start of OperationsYear of Start of Operations Number of Firms1922 or before 2 (2.5%)1922-1932 0(0%)1933 - 1942 1 (1.2%)1943 - 1952 8 (9.9)1953 - 1962 3 (3.7%)1963 - 1972 8 (9.9%)1973 - 1982 26 (32.1%)1983 - 1992 33 (40.7%)Total 81(100%)5.4 Products and Styles Manufactured5.4.1 Product categoriesRespondents were asked to describe the categories of furniture theymanufactured in 1992, along with the percent of production represented byeach category. The results are provided in Table 10.Overall, 49.3% of respondents produced living room furniture, 48.1%produced upholstered furniture, 38.3% produced dining room furniture and34.5% produced bedroom furniture. A more useful measure of the importanceof a particular category of furniture is the percent of production that categoryrepresents. On average, upholstered furniture represented 29.1% ofrespondent’s production, living room furniture, 18.7%, dining room furniture,4312.6%, and office furniture, 12.3%.Table 10: Product Groups Produced by Respondents.Product Group Number of Firms Percent of TotalProducing Production Valueliving room/occasional 40 (49.3%) 18.7dining room 31(38.3%) 12.6bedroom 28 (34.5%) 9.4children’s 7 (8.6%) 2.6upholstered 39 (48.1%) 29.1office 24 (29.6%) 12.3institution 8 (9.9%) 2.0wall units/shelves 18 (22.2%) 6.2ready-to-assemble 3 (3.7%) 0.8other 15 (18.5%) 6.5Meyer et al, 1992a, reported that, among U.S. furniture manufacturers,as firm size increased, the number of furniture categories produced per firmdecreased; this was also found to be the case among manufacturers inCalifornia. The average number of product groups produced by firms withbetween one and five employees was 3.0; firms with between six and twentyemployees produced an average of 2.88 product groups; firms with between21 and 50 employees produced an average of 2.3 groups and firms withbetween 51 and 100 employees produced an average of 1.1 product groups.The trend is reversed among the largest of respondents; firms with more than44100 employees produced an average of 2.8 product groups.5.4.2 Style categoriesRespondents were asked to indicate the style or styles of furniture theyproduced in 1992, along with the percent of production represented by each.The results are provided in Table 11. The most frequently produced styleswere contemporary and American; together, these style groups represented85% of respondent’s furniture production. No relationship was found betweenthe size of the firm and the number of style categories produced, or betweenthe number of product categories and the number of style categoriesproduced.Table 11. Style Groups Produced by Respondents.Style group Number of Firms Percent of TotalProduction ValueAmerican 31(38.3%) 38.3Contemporary 38 (46.9%) 47.0Formal European 8 (9.9%) 3.7European Country 3 (3.7%) 10.0Other 1 (1.2%) 1.1455.5 Raw-material Use5.5.1 Expenditures on Solid WoodRespondents were asked to estimate their 1992 expenditures on solidwood raw materials including lumber, semi-finished and fully machinedcomponents, and excluding veneers and wood composites; the results areshown in Table 12.Companies who spent less than $50,000 on solid wood in 1992represent 47.5% of respondents. Companies who spent between $50,000 and$100,000 made up 12.5% of the sample; between $100,000 and $200,000,16.3%; and between $200,000 and $500,000, about five percent. Somewhatsurprisingly, companies who spent more than $500,000 on solid woodrepresent 20% of the sample.Table 12. Respondent’s Expenditures on Solid Wood Raw MaterialsExpenditures on Number ofsolid wood respondentsless than $50,000 38 (47.5%)$50,001 - $100,000 10 (12.5%)$100,001 - $200,000 13 (16.3%)$200,001 - $300,000 2 (2.5%)$300,001 - $500,000 1 (1.3%)more than $500,000 16 (20.0%)Total 80 (100%)46As expected, a positive relationship was observed between firm size, asmeasured by number of employees, and expenditures on solid wood. Amongfirms with between one and five employees, 85% report expenditures of lessthan $50,000. Fifty-two percent of firms with between six and twentyemployees spent less than $50,000 on solid wood and only one firm spentmore than $200,000. Half of the firms with between 50 and 100 employeesand all of the firms with more than 100 employees report expenditures of morethan $500,000 on solid wood in 1992.Respondents were asked to indicate whether they expected the volumeof solid wood that they purchased to increase, stay the same, or decreasebetween 1992 and 1995. Just 3.7% expect to be using less wood in 1995,46.9% expect no change, and 49.4% expect their volume purchases of solidwood to increase. A summary of respondents percentage of total expendituresrepresented by solid wood is provided in Table 13.Table 13. Percent of Respondent’s Expenditures to Solid WoodPercent of expenditures Number of respondentsgoing to solid wood1 - 20 33 (40.7%)21-40 17(21.0%)41-60 9(11.1%)61-80 11(13.6%)81 -100 11(13.6%)total 81(100%)475.5.2 Expenditures on Wood CompositesUntil the 1960’s, the furniture industry in the U.S. relied almostexclusively on solid lumber as a source of woodraw materials. Few, if anyother types of materials were used in the fabrication of furniture (Dufrense,McLagan, Daignault Inc. 1970). As lumber became a scarcer resource,technology was developed which allowed the industry to make more efficientuse of lumber. Typical of these developments are the veneers andparticleboards now widely used in furniture manufacturing.No attempt was made here to analyze firms using wood as compositesonly; however, wood composite use among firms using solid wood wasinvestigated. As is shown in Table 14, the majority of respondents spent lessthan $25,000 on wood composites in 1992.Table 14 Respondent’s Expenditures on Wood Composite RawMaterialsHardboard Particleboard Veneer LVL$0 45 (55.6%) 57 (70.37%) 49 (60.49%) 76 (93.8%)$0 - $25,000 19 (23.5%) 11(13.6%) 11(13.6% 2 (2.5%)$25,000 - $50,000 7 (8.6%) 10 (12.4%) 10 (12.4%) 2 (2.5%)$50,000 - $100,000 3 (3.7%) 0 (0.0%) 3 (3.7%) 1 (1.2%)$100,000- $200,000 4 (4.9%) 1 (1.2%) 1 (1.2%) 0 (0.0%)more than $200,000 3 (3.7%) 2 (2.5%) 7 (8.6%) 0 (0.0%)total 81(100%) 81(100%) 81(100%) 81(100%)485.5.3 Lumber and Component UseA major trend in the U.S. furniture industry over the last twenty years hasbeen the move toward the use of wood components, as opposed to lumber,precluding the need to maintain a large lumber inventory and to operate a widerange of processing equipment. Wood and Wood Products, in a nationalsurvey of furniture and fixture manufacturers reported that an average of 14.7%of the components used to manufacture furniture production were purchasedfrom component manufacturers in 1990 (Vance Research Services 1990).As noted, the furniture industry in California is heavily concentrated inthe area around Los Angeles, an area notably deficient in supplies of wood,and so, understandably, deficient in manufacturers of primary wood products.In addition, land and labour costs are characteristically high, and wastedisposal problematic. For these reasons, it was anticipated that the tendencyto job-out production among California furniture manufacturers would be higherthan the national average. Indeed, this was found to be the case.As is shown in Table 15, 65.6% of respondents expenditures on solidwood materials in 1992 went to lumber, and the remaining 34.4% was spreadbetween semi-finished components, fully-machined components and subassemblies. Very few respondents indicated that they expected the distributionof their expenditures on wood to change appreciably by 1995.49Table 15. Respondent’s Wood Material Expenditures by ProductTypeProduct Type 1992 (actual) 1995 (anticipated)Lumber 65.6% 64.3%Semi-finished components 11.7% 11.5%Fully-machined components 12.4% 13.2%Sub-assemblies 10.3% 11.0%100% 100%Of interest is whether or not the size of the firm has any influence on theamount of outside processing it does. Intuitively, one might expect that smallfirms are more likely to purchase components than large firms sincespecialization as an assembler, for example, would dictate a narrower range ofprocessing equipment, thus require lower capital expenditures. Surprisinglyhowever, this was not observed to be the case among respondents.The highest proportion of solid wood expenditures going to lumber, asopposed to components, was observed among the smallest firms, those withbetween one and five employees; among this group, lumber accounted for81.4% of expenditures. Among firms employing between six and twentypeople, lumber accounted for 61.4% of expenditures and among firmsemploying between 21 and 50 people, an average of 68.2% of wood materialexpenditures went to lumber. The largest firms surveyed, those with more than50 employees, showed the lowest level of lumber use at 55.2%.505.5.4 Species UseRespondents were asked to indicate the proportion of total solid woodpurchases in 1992 represented by hardwoods and by softwoods. On average,hardwoods accounted for 78.5%, and softwoods for 21.5%, of total purchases.Nationally, Forbes et al, 1993, reported the distribution to be 75% hardwoodsand 25% softwoods.5.5.4.1 Hardwood Use by SpeciesAs noted, Forbes 1993, report that oak is the most frequently usedspecies among furniture manufacturers nationally, accounting for 46 % of totalhardwood lumber consumption. As is shown in Table 16, oak is less popularamong California manufacturers, representing, on average, 27.9% of hardwoodconsumption. Of interest is the volume of alder being consumed by furnituremanufacturers in California. Alder is the most frequently used species by awide margin, representing 40.6% of hardwood consumption, compared to anational level of less than three percent. Clearly, the plentiful supply of thisspecies in the Pacific Northwest makes it the wood of choice among furnituremanufacturers in California.51Table 16. Respondents Hardwood Species Use.Species Number of respondents Average percent ofreporting use hardwood consumptionOak 44 27.9Cherry 13 3.1Poplar 8 2.6Maple 26 8.9Birch 11 4.9Walnut 17 2.8Ash 10 3.6AIder 45 40.6Mahogany 11 0.9Other 7 4.95.5.4.2 Softwood Use by SpeciesA similar discrepancy between species use nationally and in Californiaexist for softwoods. Southern yellow pine was by far the most frequently usedspecies nationally, accounting for more than 58% of total consumption (Table6). However, in California, as is shown in Table 17, this species averaged lessthan three percent of consumption. Conversely, the use of Ponderosa pinewas so low as not to be reported nationally; but in California, this speciesaccounted for nearly 50% of softwood consumed.52Table 17. Respondents Softwood Species Use.Species Number of respondents Average percent ofreporting use softwood consumptionPonderosa pine 21 48.9Yellow pine 1 2.9Sugar pine 11 13.9Lodgepole pine 3 3.5Douglas fir 8 16.7Redwood 2 5.4Spruce 0 0Hemlock 0 0Western red cedar 3 3.0Other 3 5.7None of the respondents reported using any hemlock or spruce, andonly three respondents reported using lodgepole pine. Douglas fir was usedby eight respondents, representing just under 17% of total softwoodconsumption.5.6 Supply characteristics5.6.1 Sources of SupplyRespondents were asked to indicate the proportion of solid wood rawmaterials they obtained from wholesalers, brokers, mills and componentmanufacturers. As is shown in Table 18, the greatest proportions of lumber53and semi-finished components were obtained through wholesalers, while fully-machined components and sub-assemblies tended to come directly fromcomponent manufacturers.Table 18. Respondent’s Wood Material Supply Sources.Percent of material from:Product Type Wholesaler Mill Broker Comp. Mfr.lumber 75.6 17.7 6.5 0.0semi-finished 46.6 10.9 13.6 28.9componentsfully-machined 33.0 7.6 1.7 57.6componentssub-assemblies 23.1 0.0 0.0 76.95.6.2 Number of SuppliersRespondents were asked to indicate the number of suppliers they usedfor each raw material category. As is shown in Table 19, the majority ofrespondents deal with between two and four suppliers, regardless of theproduct type being considered. Respondents were asked to indicate whetherthey preferred to keep the number of suppliers they deal with to a minimum;22.3% said yes and 77.6% said no. Comments are provided in Appendix 6.Respondents were also asked whether or not they prefer to establish long-termcontracts with their suppliers; 55.4% said yes and 44.6% said no. Comments54are provided in Appendix 7.Table 19. Number of Suppliers, by Product Group, Used byRespondentsNumber ofsuppliers12-45-78 or moreResondents Re,ortinaLumber Semi-finishedcomponents12 (19.0%) 6 (27.2%)42 (66.7%) 14 (58.3%)7(11.1%) 4(16.7%)2 (3.2%) 0 (0.0%)63 (100%) 24 (100%)-for Each Product GrourFully-mach. Sub-components assemblies4 (17.4%) 5 (33.3%)17 (73.9%) 8 (53.3%)2 (8.7%) 1 (6.7%)0 (0.0%) 1 (6.7%)23 (100%) 15 (100%)5.6.3 Inbound TransportRespondents were asked to indicate the mode of transport by whichthey received their raw materials; for all product categories, trucking isoverwhelmingly the preferred method. Only five respondents indicated theyreceived goods by rail and none indicated any other mode. Given the strongreliance on local wholesalers as a source of supply, this result is not surprising.It is likely that many of the wholesalers, who purchase larger volumes andcarry larger inventories use rail to receive goods.55SUMMARY AND CONCLUSIONSThe wood furniture industry in California is fragmented, with the majorityof firms operating as single plant entities. Although there are some large scaleoperations, close to 25% of manufacturers in the state employ fewer than sixpeople and only 42% employ more than 20.More than 40% of furniture manufacturers in California have beenoperating for less than 11 years, and more than 70% for less than 21 years.Although a large proportion of new entrants is often an indicator of a rapid rateof industrial growth, this is not likely the case in the furniture industry inCalifornia. The number of undeliverable mailouts suggests that many firms arealso leaving the industry.Manufacturers tend to expand business activities over time, asevidenced by the fact that older firms were shown to employ more people. Itis likely that the small furniture manufacturer in California operates in anenvironment of intense competition and that survival is particularly tenuousduring the firm’s early years.The industry is heavily concentrated in the Los Angeles area; more than70% of firms are located within 80 kilometres of the city core. San Francisco isalso an important furniture manufacturing centre with nearly 25% of firms56located within 150 kilometres of the city core. Since virtually all solid woodmaterials must be brought in from outside the state, the priorities in decidingon a location are likely proximity to transportation and distribution centres aswell as to markets for finished products.The furniture industry in California is a large, though fragmented, marketfor solid wood. Although the majority of firms spent less than $100,000 onwood, a sizable minority, 20%, spent more than $500,000. Even the relativelysmall firms, by virtue of their number, represent a significant marketopportunity. Half of the manufacturers expected volume purchases of wood tobe higher in 1995 than they were in 1992.Regional wood supply characteristics as well as land and labour costssuggested that the tendency to job-out’ production would be higher amongCalifornia furniture manufacturers than the 14.7% reported nationaly (VanceResearch Services 1990). This was found to be the case with components andsub-assemblies accounting for nearly one-third, on average, of the firmsexpenditures on solid wood. Few firms expect this distribution of solid woodpurchases to change significantly.The choice of species for solid wood used to manufacture furniture isdriven, to a large degree, by consumer demand; however, regional availabilityand inbound transport costs also play a large part. It is not surprising then,that oak, accounting for 46% of hardwood used nationally, is less popularamong California manufacturers, representing, on average, 27.9% of hardwood57consumption.Of interest is the volume of alder being consumed by furnituremanufacturers in California. Alder is the most frequently used species inCalifornia, representing 40.6% of hardwood consumption, compared to anational level of less than three percent. Clearly, the plentiful supply of thisspecies in the Pacific Northwest makes it the wood of choice among furnituremanufacturers in California.Furniture manufacturers in California, like those elsewhere in the U.S.,tend to prefer hardwood species; hardwoods represented more than 75% ofsolid wood purchases in 1992. Among softwoods, ponderosa pine was foundto be the most popular softwood species, accounting for nearly half of totalexpenditures on softwoods.Wholesalers and brokers play a critical role in supplying solid wood rawmaterials to furniture manufacturers in California. These manufacturingmiddlemen contribute considerably to the large number of small firms thatmake up the furniture industry in California. Because they perform such highlyspecialized functions, they allow small firms to exist competitively with largerones.In 1992, more than 75% of lumber and nearly 50% of semi-finishedcomponents used by manufacturers in California were supplied by wholesalers.Purchases of finished components and sub assemblies were more likely to bedirect from manufacturers. These results are not surprising since furniture58manufacturers purchasing materials which require only finishing and assemblyare likely to place smaller, custom type orders. This necessitates direct contactwith the manufacturer so that specific requirements can be detailed.Conversely, purchases of lumber, a relatively standardized product whetherrough or dressed, can be more conveniently made through a mass distributorsuch as a wholesaler.Furniture manufacturers in California deal with few suppliers; the majorityuse fewer than five and very few use more than seven. Overwhelmingly,trucking is the preferred mode of inbound transport. Given the strong relianceon local wholesalers as a source of supply, this result is not surprising. It islikely that many of the wholesalers, who purchase larger volumes and carrylarger inventories use rail to receive goods.The wood furniture industry is an attractive market due, in part, to therelative stability of demand for its finished products. While not on a scale withresidential construction as a market for solid wood products, the furnituremanufacturing sector is less vulnerable to general economic cycles. Duringeconomic downturns, consumers are less likely to delay purchases of furnituresince the expenditure is small relative to housing. In addition, although theindustry is a mature one, its finished products are not likely to be substitutedfor or to become obsolete.According to Ackerman (1987), future levels of wood material use by thefurniture industry in the U.S. will depend primarily on the proportion of North59American demand for wood furniture met by furniture imported from othercountries. It is therefore significant that furniture imports into the U.S. fell from$4.028 billion in 1988 to $2.854 billion and $2.713 billion respectively in 1990and 1991.The furniture industry in California offers B.C. solid wood producerspotential opportunities for increased profit margins through further processingof the resource to meet customers specific requirements. However, developingthese opportunities will require a great deal of effort due to the large number ofsmall producers and their preference for purchasing raw materials throughwholesalers.It is clear that any attempt to exploit market opportunities in theCalifornia wood furniture industry must involve solid wood wholesalers in theLos Angeles area. It is suggested that any follow-up to this preliminary marketinvestigation focus on the raw material supply strategies of solid woodwholesalers in California.60LITERATURE CITEDAckerman, J.C. 1987. Annual Meeting Review: Markets for Solid andComposite Wood Products for Furniture and Cabinets. Forest ProductsJournal. 37(10):1 1-15.Anonymous. 1991. Loss of NW Timber too Great to Make Up. ForestIndustries. 1 18(1):16Anonymous. 1992a. The Wood Products Industry in British Columbia. TheNext Twenty Years. A Discussion Paper. Prepared for Forest SummitConference 1992. H.A. Simons Ltd. Vancouver, B.C.Anonymous. 1992b. U.S. Furniture Trade Gap Narrows. Wood and WoodProducts. Volume (April) :10-12.Anonymous. 1993. Manufacturers’ Top Case Goods Style Survey.Furniture/Today 1993 Annual Retail Marketing Guide.Araman, Philip and John Tansey. 1991. U.S. Has Plenty of Hardwood butMuch of it’s Not for Sale. Forest Industries. 118(9):16-17Bettis, R.A. 1981. Performance Differences in Related and UnrelatedDiversified Firms. Strategic Management Journal. 2:379-383Booth, Darcie and llan Vertinsky. 1991. Strategic Positioning in a TurbulentEnvironment: An Empirical Study of Determinants of Performance in theNorth American Forest Industry. Forest Science. 37(3):903-92361Chisnall, Peter M. 1989. Strategic Industrial Marketing. Prentice-HallInternational, Inc. LondonChurchill, G.A. Jr. 1987. Marketing Research: Methodological Foundations,fourth edition. The Dryden Press, Chicago, II.Council of Forest Industries. 1990. Coast Lumber Sector Strategic Plan 1991- 1995. prepared by K.A. McKeen. UnpublishedDufrense, McLagan, Daignault Inc. 1970. Report of a Study to Determine theMarket in the United States for Hardwood Furniture Components. preparedfor Wood Products Branch, Department of Industry, Trade and Commerce,Government of Canada, Information Canada. Cat no. 1D32-570. Ottawa.Engardio, P. 1986. What’s Rearranging America’s Furniture Industry.Business Week. Sept 29, 1986, 86D,86FEpperson, W.W., and B.E. Wacker. 1988. 1988 Home FurnishingsCompendium. Wheat First Securities. Richmond Va.Forbes, Craig L., Steven A. Sinclair and William G. Luppold. 1993. WoodMaterial Use in the U.S. Furniture Industry: 1990 to 1992. Forest ProductsJournal. 43(7/8) :59-65Fowler, F.G. Jr. 1984. Survey Research Methods. Sage Publications, Inc.Beverly Hills, Calif.Howard, H. 1988. Ff1 Composite Outlook Points to Modest Sales Growth in1989-90. Furniture/Today Dec. 19, 1988, 8-10Howard, Henry. 1992. Uptick Will Extend Through ‘94. Furniture/Today Dec.28, 1992.Luppold, William G. 1988. Material-use Trends in U.S. FurnitureManufacturing. Southern Journal of Applied Forestry. 12(2):102-107.62Martens, David G. and Philip A. Araman 1987. North American IndustrialMarkets: Importance of Technological Innovations in Industrial Markets. InNorth American wood I fiber supplies and markets: strategies formanaging change, proceedings 47351. Forest Products Research Society.Meil, J.K. Value-added Trends and Technology Feasibility Limits inCanadian Softwood Lumber Producing Regions. The Forestry Chronicle.66(1):45-50Meyer, Christopher J., Judd H. Michael and Steven A. Sinclair. 1992a. The U.S.Wood Furniture Industry: A Profile of Products and Channels ofDistribution. Forest Products Journal. 42(3):65-70.Meyer, Christopher J., Judd H. Michael, Steven A. Sinclair and William G.Luppold. 1992b. Wood Material Use in the U.S. Wood Furniture Industry.Forest Products Journal. 42(5):28-30.Nilsson, Sten. 1985. An Analysis of the B.C. Forest Sector Around the Year2000. Forest Economics and Policy Analysis Project.Palepu, K. 1985. Diversification Strategy, Profit performance and theEntropy Measure. Strategic Management Journal. 6:239-255Price Waterhouse. 1992. The Forest Industry in British Columbia 1991. PriceWaterhouse, Vancouver, B.C.Schuller, Albert T. and Jamie K. Meil. 1990. Markets, Products andTechnology in the 21st Century - A Canadian Solid Wood ProductsPerspective. The Forestry Chronicle, December.Sinclair, Steven. 1992. Forest Products Marketing. McGraw-Hill, Inc.New York, NY.63Smith, P.M. and H.O. Ma. 1990. The Global Wooden Furniture Industry: AnEmphasis on the Pacific Rim. CINTRAFOR working paper 25. Centre forInternational Trade in Forest Products. University of Washington. Seattle,WashingtonSmith, Paul M. and Cynthia D. West. 1990. A Cross-national Investigation ofCompetitive Factors Affecting the United Stated Wood Furniture Industry.Forest Products Journal. 40(11/12) :39-48.U.S. Department of Commerce, International Trade Administration. 1985. ACompetitive Assessment of the U.S. Wood and Upholstered FurnitureIndustry. U.S. Department of Commerce. Washington, DC.U.S. Department of Commerce, Bureau of Census. 1993. 1991 Annual Surveyof Manufacturers. Statistics for Industry Groups and Industries, SeriesMgi (AS)-1. U.S. Department of Commerce. Washington, DC.U.S. Department of Commerce, Bureau of Census. 1992. 1990 Annual Surveyof Manufacturers. Statistics for Industry Groups and Industries, SeriesM91(AS)-1. U.S. Department of Commerce. Washington, DC.U.S. Department of Commerce, Bureau of Census. 1991. 1989 Annual Surveyof Manufacturers. Statistics for Industry Groups and Industries, SeriesM91(AS)-1. U.S. Department of Commerce. Washington, DC.Vance Research Services. 1991. “Wood and Wood Products’ Project 1991Survey” Prepared for: Wood and Wood Products.Vance Research Services. 1990. “Wood and Wood Products’ Project 1990Survey” Prepared for: Wood and Wood Products.West, Cynthia D., and Steven A. Sinclair. 1991. Technological Assessment ofthe Wood Household Furniture Industry. Forest Products Journal. 41(4):11-18.64Widman, 1990. Markets 90-94. The Outlook for North American ForestProducts. Widman Management, Ltd./MilIer freeman Publications, Inc. SanFrancisco, Ca.Wisdom, H.W., and C.D.C. Wisdom. 1983. Wood Use in the AmericanFurniture Industry. Journal of Forest History 3(27):122-125Woodbridge, Reed & Associates Ltd. 1988. Canada’s Forest Industry: TheNext Twenty Years: Prospects and Priorities. Prepared for the CanadianForestry Service, Industry, Trade and Technology Directorate, EconomicsBranch, Ottawa. Volume IV, Solid Wood Products.Zickmund, William G. 1989. Exploring Marketing Research, third edition. TheDryden Press, Chicago, II.65-D-o m z x - I C,,-1 0 ‘.1 Cr) -D m C.) m Co C,, C.) C C,, Cl) m0) 0)Name Used in Surveys Common Tree Names Botanical NamesRed oak Red oak Quercus rubraPin oak Quercus palustrisBlack oak Quercus velutinaWillow oak Quercus phellosWhite oak White oak Quercus albaBlue oak Quercus douglassiBur oak Quercus macrocarpaPoplar Yellow-poplar Liriodendron tulipiferaSoft maple Red maple Acer rubrumSilver maple Acer saccharinumHard maple Black maple Acer nigrum.Sugar maple Acer saccharumAsh Black ash Fraxinus nigraWhite ash Fraxinus americanaBeech Beech Fagus grandifoliaCherry Black cherry Prunus serotinaBirch Gray birch Betula populifoliaPaper Birch Betula papyriferaRiver birch Betula nigraYellow birch Betula alleghaniensisWalnut Black walnut• Juglans nigraAlder, red Red alder Alnus rubraMahogany True mahogany Swietenia macrophylla67Name Used in Surveys Common Tree Names Botanical NamesSouthern yellow pine Longleaf pine Pinus PalustrisShortleaf pine Pinus echinataLoblolly pine Pinus taedaSlash pine Pinus elliottiiPitch pine Pinus rigidaPonderosa pine Ponderosa pine! Pinus ponderosaYellow pineWhite pine Eastern white pine Pinus strobusNorthern white pineWestern white pine Western white pine Pinus monticolaIdaho white pineRadiata pine Radiata pine Pinus radiataSugar pine Sugar pine Pinus lambertianaLodgepole pine Lodgepole pine Pinus contortaDouglas fir Douglas fir Pseudotsuga menziesiiSpruce White spruce Picea glaucaRed spruce Picea rubensBlack spruce Picea marianaEngleman spruce Picea engelmanniiBlue spruce Picea pungensSitka spruce Picea sitchensisHemlock Western hemlock Tsuga heterophyllaEastern hemlock Tsuga canadensisMountain hemlock Tsuga mertensianaRedwood Redwood Sequoia sempervirensWestern red cedar Western redcedar Thuja plicata68-o m z x Cr,C m 0 m cr -I 0 z z m0) (0INDUSTRIAL MARKET SURVEYCALIFORNIA FURNITURE MANUFACTURERSForest Products Marketing ProgramDepartment of Wood ScienceFaculty of ForestryUNIVERSITY OF BRITISH COLUMBIA70The first group of questions asks for some general information aboutyour firm1. Company Name:___________________________________________________2. In what year did your firm start producing furniture?3. How many furniture manufacturing plants does your firm operate in California?2-4 D 5 or more 0How many in North America? How many outside North America?Answer the remaining questions only for your furniture operations in California.4. How many people does your firm employ?1-5 0 6-20 0 21-50 0 51-100 0 more than 100 05. Does your firm use any solid wood, either lumber or components. as a raw material tomanufacture furniture? (Hardboard, particleboard, veneers and laminated veneerlumber (LVL) are not considered to be solid wood).NoD Yes 0The questionnaire is complete! Please continue.Simply staple and drop in the mail,or you can fac it back to us.Thank you for your participation.71The second group of questions asks for information about your firm’sproduct line, price categories and style mix.1. Estimate the percentage of your 1992 gross sales value for furniture manufactured withsolid wood represented by each of the following product grouping. Also, indicate theprice category for each grouping (5 = high price, 1 = low price).Product GrouDin % of Sales Value Price Cateooivliving room/occasionaldining roombedroomchildren’supholsteredsofas/chairsbeddingofficeinstitutionwall units/shelvesRTAOther_____________total= 100%(high)2 3 4 52 3 4 52 3 4 52 3 4 51 2. 3 4• 51. 2 3 4 51 2 3 4 51 2 3 4 51 •2 3 4 51 2 3 •4 .51 2 3 4 51 2 3 4 52. Estimate the approximate percentage of your 1992 gross salesrepresented by the following product style families.American:(Early, Country, Traditional, Shaker, Mission/arts & crafts)Contemporary:(Soft, Casual, Architectural, European modern, Art Deco)European Country:(French, English, Victorian/nostalgia. Mediterranean)Formal European:(French, Neoclassic, English/French traditional, Italian)Oriental:(Chinese, Japanese)value for wood furniture0II0total= 100%(Tow)%%0//0%0//072f The third group of questions asks for information about the solidwood your firm uses as raw material Input.1. Estimate your yearly expenditure on all solid wood raw materials, either lumber orcomponents, but not including hardboard, particleboard, veneers, or LVL.$50,000 or less$100,001- $200,000$300,001- $500,000D00$50,001 - $100,000$200.00 1 - $300,000more than $500,0002. Do you expect your yearly volume purchases of solid wood raw materials to increase,decrease, or stay about the same between 1992 and 1995?increase 0 decrease 0 about the sameIf you indicated a change, please explain why.3. Estimate your yearly expenditure on hardboard, particleboard, veneers and 1Y!.$25,000 or lesshardboard particleboard0 0veneers0LVI..0$25,001 $50,000$50,001- $100,000$100,001- $200,000more than $200,000000•00000000000000•0734. Do you expect your yearly volume purchases of hardboard, particleboard. veneers andLVL to increase, decrease, or stay about the same between 1992 and 1995?increase D decrease D about the same DIf you indicated a change, please explain why.____________________________________5. What percentage of your firm’s total expenditure on all raw materials used tomanufacture furniture in 1992 went to solid wood products?1-20% 0 21-40% 0 41-60% 0 61-80% 0 81-100% 06. a) Indicate the proportion of your total b) Indicate the proportion of your totalvolume of hardwood raw material use- volume of softwood raw material userepresented by the following species in represented by the following species in1992. 1992.Oak______%Ponderosa pine______%CherryYellow pinePoplar Sugar pineMaple Lodgepole pineBirch Douglas firWalnut RedwoodAsh SpruceAlder___HemlockMahogany Western cedarOther Othertotal= 100% total= 100%747. Of your total solid wood raw material use in 1992, what was the distribution betweenhardwood and softwood?hardwood_____%softwood_____%total= 100%Use the following definitions where applicable in subsequent questions.lumber: dressed or rough, includes beams, boards, planks, and turning squares which havereceived no contouring.semi-finished components: includes precut and dimensioned length stock; may havesome contouring or drilling, but will require further shaping or finishing.fully machined èomponents: individual pieces, ready for assembly, may require lightsanding.sub-assemblies: components assembled to some degree by supplier; examples are bedand chair frames.8. What percentage of your expenditures on soild wood raw materials in 1992 wasrepresented by each of the following categories? What do you expect it to be in 1995?1992 (actual) 1995 (ancipated)lumber_____% _____semi-finished components__ ___fully machined componentssub-assembliestotal= 100% tctal= 100%If you expect your expenditures in any category to change by more than 20% by 1995,please explain why.______________________________________________________759. What were your most frequently purchased solid wood raw materials in 1992 in each ofthe following categories? Include size and tolerance if applicable.Lumberproduct/grade species size and tolerance1)_______________________________________________________________2)________3)__Semi-finished Componentsproduct/grade species size and tolerance1)_ ____________2).3)_Fully Machined Componentsproduct species size and tolerance1)2)3)_Sub-assembliesproduct species size and tolerance1)_ ______________2)3)_76[ The final group of questions asks for information about your firm’sI logistical control of its solid wood raw material supply.1. How many suppliers did you use in 1992 for solid wood raw materials purchased as:lumbersemi-finishedcomponentsfully machinedcomponentssub-assemblies10iO2-402-402-402402. Estimate the proportion of volume of solid wood raw materialpurchase from the following sources.Wholesaler Broker Mill5-705-708 or more 08 or more 05-7 0 8ormorèD5-7 0 8ormoreOin each category thatyouComponentManufacturerlumbersemi-finishedcomponentsfully machinedcomponentssub-assemblies0I________I0+0/________/0 + %If you would like to increase or decrease your supply from any of the above sources,please explain.= 100%= 100%•% =100%= 100%773. For each raw material category, estimate the proportion ofvolume that arrived at yourplant in 1992 by the following modes of transport.0/ 0/0+___of_____tatal= 100%_____0If you would like to increase or decrease the use of any of these systems of transport,please explain.4. Do you prefer to establish long term contracts with your solid wood raw materialsuppliers?Yes DNoDIf yes, please explain.Truck Rail Other______________lumbersemi-finishedcomponentsfully machinedcomponentssub-assemblies__%%total= 100%total = 100%tota!= 100%785. Do you prefer to deal with a minimum number of suppliers?Yes 0 No 0If yes, please explain.6. Describe any specific packaging requirements you have for incoming solid wood rawmaterials in each category.lumber______________________________________________semi-finished componentsfully machined componentssub-assembliesThe questionnaire is complete; your participation is greatly appreciated. You can remove thestaples arid return it to us by fax at (604) 822-9104 or staple it closed and drop it in the mail;the postage has been prepaid!790HIIIBUSINESSREPLYMAILFIRST-CLASSMAILPERMITNO.284BLAINE. WA.POSTAGEWILLBEPAIDBY.ADDRESSEEDR.DAVIDCOHENUNIVERSITYOFBRITISHCOLUMBIAdOP0BOX8014NO.133BLAINEWA.98231-9981NOPOSTAGENECESSARYIFMAILEDINTHEUNITEDSTATESIIIIliiiIIIiI1III111111111IIIIIIIlIIlIII111111 IIAPPENDIX 3: COVERING LETTERS81THE UNIVERSITY OF BRITISH COLUMBIA- .1 Department of Wood Science________June 11 1993 Faculty of Forestry____#389 - 2357 Main MallVancouver, B.C. Canada V6T 1Z4Tel: (604) 822-5303Fax: (604) 822-9104Dear Furniture Manufacturer:I am a graduate student in Forest Products Marketing at the University of British Columbiain Vancouver, Canada. Along with my research supervisor, Dr. David Cohen, I ampresently working on a research project focusing on the furniture manufacturing industry inCalifornia. This survey questionnaire is intended to collect information about the rawmaterial supply strategies of furniture manufacturers such as GEORGE’S. AUTOUPHOLSTERY.Although a number of studies have been conducted which characterize the U.S. furnitureindustry as awhole, much of the focus has.been on the.U.S. Southeast. Given theincreasing importance. of the industry in California, we believe that it is important that yourunique priorities and problems be recognized and addressed. .By participating in thissurvey, you will enable suppliers to better meet your raw material supply needs.The questionnaire is designed for quick and easy completion; we expect it will take lessthan fifteen minutes of your time.The information collected in the survey will be summarized in a report. All answers will bekept strictly confidential; individual firms will not be identified and any informationpublished will use aggregate data only.If you should have any questions or comments you can contact us by telephone at (604)822-6716 or by fax at (604) 822-9104. When you have completed the questionnaire youcan return it by fax or staple it where indicated and drop it in the mall; the postage hasbeen prepaid!Thank you in advance for your cooperation.Derek GoudieMSc Candidate 82University of British ColumbiaTHE UNIVERSITY OF BRITISH COLUMBIA________Au ust 9 1 993Depirtment of Wood Scienceg Faculty of Forestry——#389 - 2357 Main Mall_______Vancouver, B.C. Canada V6T 1Z4Tel: (604) 822-5303Fax: (604) 822-9104Dear Furniture Manufacturer:You may recall that I recently sent you a survey questionnaire that was intended tocollect information about California furniture manufacturers such as yourself.Although overall industry response to the survey has been encouraging, itisimportant that firms such as yours be represented in the analysis. I would like toencourage you to participate and have enclosed another copy of the questionnairefor your convenience.In order to take as little of your time as possible, I have designed the questionnaireto be quick and easy to complete; it should take just a few minutes of your time.All answers w:ll be ‘ept st9ct’y cc’4idert’a’, ind’v,dua[ firms wi’! riot be identifiedThe information collected will be summarized in a report, using aggregate dataonly. The report should help your suppliers to serve you better.As a graduate student in Forest Products Marketing at the Universityof BritishColumbia, I am relying on the results of this survey to complete the thesis that isrequired for my graduation. I would be personally grateful for your cooperation.If you have any questions or comments, you can contact me by telephone at (604)822-6716 or by fax at (604) 822-9104. When you have completed thequestionnaire, you can return it by fax or staple it where indicated and drop itinthe mail; the postage has been prepaid.Thank you in advance for your cooperation!Yours truly,t2LJDerek GoudieM.Sc. CandidateUniversity of British Columbia83-o-o m z x -I m (I) - (1) ‘1 C z 0 z m Cl)-o 0 z U) rn w U)Chi-square contingency table test to determine if the employee size categorydistribution of non-respondents is the same as that of respondents.Ho: there is no relationship between employee size category and whether ornot the firm responded to the surveyEmployees Non-respondents Respondents TotalCategoryA 1-4 279 33 312B 5-9 72 11 83C 10-19 75 14 89D 20-49 88 18 106E 50-99 60 7 67F,G,H 100-999 42 8 50Total 616 91 707(Note that categories have been combined to ensure no cells have expectedfrequencies less than five.)Observed Expected (0 - E)2/E Observed Expected (0 - E)21ECategoryA 279 271.8 0.1885 33 40.2 1.2760B 72 72.3 0.0014 11 10.7 0.0094C 75 77.5 0.0835 14 11.5 0.5652D 88 92.4 0.2055 18 13.6 1.3910E 60 58.4 0.0452 7 8.6 0.3057F,G,H 42 43.6 0.0562 8 6.4 0.3803Totals 616 616 0.5802 91 91 3.9276D ((0 - E)2 I E) = 4.51with df 5 = 11.07therefore, the null hypothesis cannot be rejected.85Chi-square contingency table test to determine if the sales value size categorydistribution of non-respondents is the same as that of respondents.Ho: there is no relationship between sales value size category and whetheror not the firm responded to the surveySales Volume Non-respondents Respondents Total(x $1,000)CategoryA 1-499 296 37 312B 500-999 70 15 83C 1,000-2,499 93 12 89D 2,500-4,999 58 12 106E,F,G,H 5,000 - 49,999 89 8 50Total 606 84 707(Note that categories have been combined to ensure no cells have expectedfrequencies less than five.)Observed Expected (0 - E)2/E Observed Expected (0 - E)21ECategoryA 296 292.5 0.0428 37 40.5 0.3090B 70 74.7 0.2899 15 10.3 2.0915C 93 92.2 0.0066 12 12.8 0.0479D 58 61.5 0.1968 12 8.5 1.4197E,F,G,H 89 85.2 0.1703 8 11.8 1.2284Totals 606 606 0.7065 84 84 5.0965D ((0 - E)2 I E) = 5.80with df = 4 = 9.49therefore, the null hypothesis cannot be rejected.86t-test to determine if the difference between the means of hardwood use of earlyand late respondents is significant.Ho: the mean proportion of total wood use represented by hardwoods is thesame for early and late respondents= number of early respondentsx1 = percentage of wood as hardwood for early respondent= mean percentage of wood use as hardwood among all early respondentsn2 = number of late respondentsx2 = percentage of wood as hardwood for late respondent= mean percentage of wood use as hardwood among all late respondentsAll data used to generate these values are provided on the following page.n1 = 3877.24E (x1 - 45926.87= 42X2 = 82.2641812.12____+* (1/n + 1/n2)(n1+2-2)77.24 - 82.26145927.87 + 41812 * (1/38 + 1/42)J (38+42.2)= -0.669t005 = + 1.99Therefore, the null hypothesis that the means are equal cannot be rejected.87Early respondents Late RespondentsX1 X1-(X1- X)2 X2-X (X2 - X)2100 22.76 518.16 100 17.74 314.64100 22.76 518.16 80 -2.26 5.1280 2.76 7.64 90 7.74 59.8895 17.76 315.53 50 -32.26 1040.8365 -12.24 149.74 100 17.74 314.64100 22.76 518.16 1 -81.26 6603.50100 22.76 518.16 100 17.74 314.6480 2.76 7.64 0 -82.26 6767.0250 -27.24 741.85 100 17.74 314.64100 22.76 518.16 100 17.74 314.6410 -67.24 4520.79 100 17.74 314.64100 22.76 518.16 50 -32.26 1040.835 -72.24 5218.16 70 -12.26 150.35100 22.76 518.16 100 17.74 314.64100 22.76 518.16 100 17.74 314.6498 20.76 431.11 99 16.74 280.1640 -37.24 1386.58 100 17.74 314.64100 22.76 518.16 80 -2.26 5.12100 22.76 518.16 100 17.74 314.64100 22.76 518.16 100 17.74 314.6420 -57.24 3276.06 100 17.74 314.640 -77.24 5965.53 100 17.74 314.64100 22.76 518.16 100 17.74 314.6460 -17.24 297.11 90 7.74 59.88100 22.76 518.16 100 17.74 314.642 -75.24 5660.58 100 17.74 314.64100 22.76 518.16 100 17.74 314.6498 20.76 431.11 100 17.74 314.64100 22.76 518.16 100 17.74 314.64100 22.76 518.16 100 17.74 314.6450 -27.24 741.85 100 17.74 314.640 -77.24 5965.53 100 17.74 314.6485 7.76 60.27 100 17.74 314.6499 21.76 473.64 100 17.74 314.64100 22.76 518.16 10 -72.26 5221.7898 20.76 431.11 95 12.74 162.26100 22.76 518.16 100 17.74 314.64100 22.76 518.16 80 -2.26 5.12100 17.74 314.640 -82.26 6767.0230 -52.26 2731.3130 -52.26 2731.3188t-test to determine if the difference between the means of firm age of early andlate respondents is significant.Ho: the mean firm age is the same for early and late respondentsn1 number of early respondentsx1 = age of early respondent= mean age among all early respondentsn2 = number of late respondentsx2 = age of late respondent= mean age among all late respondentsAll data used to generate these values are provided on the following two pagesni = 38= 20.26(x1-)2 = 13,153.37= 42= 16.36£(x2-) = 8469.64E (x1j)2+ (x2j* (1/n + 1/n2)(n1 + n2 - 2)20.26 - 16.36113,153.37 + 8469.64 * (1/38 + 1/42).J (38+42-2)= 1.046to05 = + 1.99Therefore, the null hypothesis that the means are equal cannot be rejected.89Early RespondentsYear of Start x1 x1 -3 (x1-1980 13 -7.26 52.751979 14 -6.26 39.231956 37 16.74 280.121982 11 -9.26 85.811983 10 -10.26 105.331918 75 54.74 2996.121946 47 26.74 714.861946 47 26.74 714.861964 29 8.74 76.331980 13 -7.26 52.751989 4 -16.26 264.491988 5 -15.26 232.961988 5 -15.26 232.961946 47 26.74 714.861979 14 -6.26 39.231971 22 1.74 3.021984 9 -11.26 126.861983 10 -10.26 105.331985 8 -12.26 150.391980 13 -7.26 52.751988 5 -15.26 232.961988 5 -15.26 232.961970 23 2.74 7.491980 13 -7.26 52.751918 75 54.74 2996.121992 1 -19.26 371.071980 13 -7.26 52.751980 13 -7.26 52.751987 6 -14.26 203.441986 7 -13.26 175.911975 18 -2.26 5.121976 17 -3.26 10.651946 47 26.74 714.861979 14 -6.26 39.231974 19 -1.26 1.601948 45 24.74 611.911990 3 -17.26 298.021980 13 -7.26 52.7590Late RespondentsYear of Start x1 x1 -x1(x1 - xj21963 30 13.64 186.131982 11 -5.36 28.701990 3 -13.36 178.411987 6 -10.36 107.271990 3 -13.36 178.411990 3 -13.36 178.411937 56 39.64 1571.561983 10 -6.36 40.411978 15 -1.36 1.841990 3 -13.36 178.411980 13 -3.36 11.271981 12 -4.36 18.981984 9 -7.36 54.131986 7 -9.36 87.561976 17 0.64 0.411978 15 -1.36 1.841986 7 -9.36 87.561980 13 -3.36 11.271968 25 8.64 74.701946 47 30.64 938.981963 30 13.64 186.131985 8 -8.36 69.841988 5 -11.36 128.981964 29 12.64 159.841945 48 31.64 1001.271981 12 -4.36 18.981983 10 -6.36 40.411968 25 8.64 74.701978 15 -1.36 1.841985 8 -8.36 69.841953 40 23.64 558.981991 2 -14.36 206.131946 47 30.64 938.981984 9 -7.36 54.131980 13 -3.36 11.271986 7 -9.36 87.561988 5 -11.36 128.981976 17 0.64 0.411958 35 18.64 347.561992 1 -15.36 235.841991 2 -14.36 206.131979 14 -2.36 5.5691z-test to determine if the proportion of early respondents using wood tomanufacture furniture is the same as the proportion of late respondents usingwood to manufacture furniture.Ho: the proportion of early respondents using wood to manufacturefurniture is the same as the proportion of late respondents usingwood to manufacture furniture64 = ni = number of early respondents38 = xl = number using wood69 = n2 = number of late respondents43 = x2 = number using woodz = (xl/nl) - (x21n2)p(1 - p)(l/nl + l/n2)where, p = xl + x2 = 38 + 43 = 0.609nl+n2 64+69so, z = 38/64 - 43/69 = -0.3480.609(1 - 0.609)(1/64 + 1/69)= +-1.96therefore, the null hypothesis that the proportions are the same cannot berejected92-o-o m z ci x 01 C’) C rn ci -ICDSTYLECATEGORIESASPERCENTOFFURNITUREPRODUCTIONEMPLOYEEDATEOFSIZEEUROPEANFORMALFIRMINCEPTIONCATEGORYAMERICANCONTEMP.COUNTRYEUROPEANORIENTAL119801101570502197923010303003195650010000419822105010201051983210900006191840801010071946201000008194620080200919643010000010198020100000111989120800001219882257500013198820100000141946.3400060015197951000000161971495050017198438050150181983115502510019198521000000201980280200002119881505000022198819010000231970190100002419803257500025191841000000261992110000002719803010000028198031000000291987110751500301986101000003119751204020200CDSTYLECATEGORIESASPERCENTOFFURNITUREPRODUCTIONEMPLOYEEDATEOFSIZEEUROPEANFORMALFIRMINCEPTIONCATEGORYAMERICANCONTEMP.COUNTRYEUROPEANORIENTAL3219762257500033194630100000341979590100003519742010000036194828020000371990250500003819801010000039196316020200040198212080000411990150050004219871802000043199010150206544199011000000451937105095046198310010000471978201000004819902100000049198020604000501981201000005119842356500052198625319762602010105419783010000055198632575000561980309055057196830.10000058194636040000591963350500006019854502525006119884100000062196446752800CoSTYLECATEGORIESASPERCENTOFFURNITUREPRODUCTIONEMPLOYEEDATEOFSIZEEUROPEANFORMALFIRMINCEPTIONCATEGORYAMERICANCONTEMP.COUNTRYEUROPEANORIENTAL6319455306505064198142575000651983450401000661968310000006719785703000068198528020000691953309010007019912010000071194620050500721984201000007319801100000074198630100000751988201000007619763802000077195830100000781992380200007919912001000080?5?????81197931085050EMPLOYEESIZECATEGORY1=1-52=6-203=21-504=51-1005=>100CD 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COMP.BY:PCT.FULLY-MACH.COMP.BY:PCT.SUG-ASSEMB.BY:FIRMTRUCKRAILOTHERTRUCKRAILOTHERTRUCKRAILOTHERTRUCKRAILOTHER1100002100001000031000010000100001000041000010000510000100006 710000810000900100101000011100001210000100001310000141090010000151000161000010000171000018100001910000201000010000211000022100002310000100001000024100001000025100002610000100002710000281000010000100002910000100001000030100003110000-L 0,CDPCT.OFLUMBERRCVDBY:PCT.SEMI-FIN.COMP.BY:POT.FULLY-MACH.COMP.BY:PCT.SUB-ASSEMB.BY:FIRMTRUCKRAILOTHERTRUCKRAILOTHERTRUCKRAILOTHERTRUCKRAILOTHER3210000100003310000100003450500351000036 3710000381000039100001000040100004110000100004210043100004410000100004510000461000471000048100001000010000491000050100001000010000100005110000521000053100005410000551000010000561000010000100001000057100001000058100001000059 605050061208001000062900108002010090PCT.OFLUMBERRCVDBY:PCT.SEMI-FIN.COMP.EYPCT.FULLY-MACH.COMP.BY:PCT.SUB-.ASSEMB.BY:FIRMTRUCKRAILOTHERTRUCKRAILOTHERTRUCKRAILOTHERTRUCKRAILOTHER631000064100001000010000100006510000100006610000671000068 69 70100007110000100007210000731000074100007510000100001000076100007710000781000079100008010000100008110000I’)0-D m zZ5zoC”wmmcn 0-Dc,,Im z -I (1)-L“Keep price, quality, availability of supply locked in”.“Ensure consistent quality”.“Results in better service”.“Continuity of supply”.“The supplier would better understand my quality requirements”.“Price stability and product quality are maintained”.“Ensure stability”.“Better pricing”.“We use recycled wood from demolitions”.“Better control of delivery”.0 “Better service and price”.0 “Better service”.0 “Building a rapport with a supplier is important especially if you runinto a problem or need a favor. Someone you know is more likelyto help you.”0 “Better relations.”0 “We don’t like running short of supply”.0 “Easier to order; they know my expectations, etc”.0 “Better discounts”.0 “For a steady source and the best price”.0 “Less expensive and time consuming; more economical”.0 “As long as the product is consistently clear and acceptable”.1220 “Reliability and price”.0 “Better service; if a large customer with one supplier”.0 “Ensure a consistent supply”.0 “Good to establish a working relationship”.0 “I want them to become familiar with my needs”.123APPENDIX 7: RESPONDENTS COMMENTS ONLONG-TERM CONTRACTS124“Less problems.”0 “Better relationships.”0 “Less headaches, better service, better pricing.”0 “Price stability and product quality are maintained.”0 “Competitive pricing.”0 “Service and convenience.”0 “Better service; better problem solving.”0 “Confidence.”0 “Less problems.”0 “Makes things that much simpler.”0 “Better relationships.”0 “Too time consuming otherwise.”0 “Easier to order; they know my expectations, etc.”0 “For a steady source and best price. Best to enter into a contractso both know what each other is doing.0 “Easier to control pricing.”0 “In all major material categories we keep one back-up vendor.”0 “We own our own frame component plant; they are our suppliers.”0 “For standardization and reliability.”0 “Closer relationship.”0 “Too many suppliers is a bother.”0 “I like a personal relationship with the suppliers I use.”125“Less problems.”“They get to know my company and my needs.”“Efficiency, averaging.”“Better prices, better quality and consisitent.”0 “You become more important if you do a small volume with a fewsuppliers.0 “Reliability of inventory.”0 “Consistency.”0 “We can be sure they know the type of material they use.”0 “Better reliability and service.0 “To obtain best price.”0 “We like to have 3-4 suppliers; creates a good working relationship.”0 “General rule for us just to simplify transactions.”0 “Trust and reliability.”0 “Less problems”0 “Become important to each other.”0 “Less paperwork; less confusion.”0 “Better relationships.”0 “Less work; better relations; more trust - credit, etc.”126

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