Question
I've noticed that a lot of people outsource. I for one outsource my doors. You would be silly financially if you didn't. I am going to look into outsourcing the drawers on the big jobs as well. I am wondering if anyone outsources everything and then only assembles. The shop next door also builds cabinets and told me that he would rip my melamine material for $27 a sheet, guaranteeing a clean edge. It sounds good, but I like to think I do it all. But I would like to not do anything either. I would love to outsource everything if it made financial sense and if I didn't have to wait around for two weeks for a guy to cut five sheets of material when I could have done it in 30 minutes. Does anyone have any thoughts?
Forum Responses
(Business and Management Forum)
From contributor R:
We used to build our own line of kitchen cabinetry and only outsourced our doors. We considered outsourcing our dovetail drawers too. However, I am a journeyman, trained and tested in Germany, and my feeling is that if I can't do it, no one can
.
I disagree a little with your statement that one would to be silly financially not to outsource. Consider this, the people to whom you outsource are going to mark-up the price in order to make a profit. You, in turn, mark-up what they sold you so that you can make a profit too. Eventually, you may find that you are losing customers because you cannot stay competitive in pricing. You can't change much about how much they charge you, so your mark-ups become your only area where you can cut prices. What would it mean to your bottom-line if you did the work yourself, made their profit and maybe even a little more on top of that?
Another drawback, as you stated: what happens when your supplier is late? First, you have to call your supplier and tell him/her how upset you are. Second, you have to call your customer and explain why the project is going to be delayed. After two weeks of delays, the product finally arrived and was all the wrong color.
My advice to you is, make a list of your strengths and weaknesses. Concentrate on your core strengths and go from there. If you want to become stronger in areas that you are weak in, then concentrate on them one-at-a-time, train, study and practice. Once you feel that it's financially feasible, implement the change in procedure. Who knows, if one's greatest strength is being able to sell anything to anyone and keep them coming back for more, outsource it all.
Not once in my past ten years have I gotten a quote that made financial sense to me. Every quote was 3-4 times my in-house cost. For example, I recently inquired from a neighboring company to rip a unit of 2.7mm lauan (220pcs)into 14" wide strips for me. Now they have a nice Holzma saw and can cut 25 sheets at a time. Their price was $270. My in-house cost was $50 in labor (4 hours at $10.50 plus insurance and taxes) on a SSC vertical saw. Now if the other company quoted me $50-$75 I would have considered it. It is also extremely unfair to the end user to have to pay more for their products because of the manufacturers inefficiencies.
Just because you can make doors for the same price that you can buy them for does not mean that you are making money doing it. On the first job that I outsourced the doors I found that I was able to get it out of the door twice as fast, and that means that I am making twice as much money, minus the difference in the cost of the doors. The end result of outsourcing is that it gives you an opportunity to make more money. There was a survey in Cabinetmaker Magazine some time back that showed that shops that outsourced had higher profit levels than ones that did not.
We are doing some natural cherry built-ins and you can see the kitchen cabinets that were made from a guy that we know out sources his components. Well we have no sapwood on ours and his is just loaded with it. The customer asked me why does his wood have two different colors and I just said that it is all cherry, just one is the sapwood and the other is the heartwood and the only difference is the color. The next day the customer said that after they get settled in the new house they will have us back to remake the doors.
We do high-end work, with specialty woods, and it seemed our customers loved choosing exactly what they were getting (different edge details, wood types like curly cherry, or rustic cherry). I could have a door company build anything, but there was a huge amount of quality control I was pushing off to them.
I came to the conclusion that if I were truly building high-end cabinetry, and catering to a market that would pay for the details, it would be in my best interest to charge them for my company to make them. I don't have the equipment to be competitive at making a standard 3/4" raised panel oak door. But that's not what we sell. We sell custom made, unique styles, which means we can make them more productively than outsource them.
What happens when the customer wants to see a curly cherry door, with a unique combination of profiles? We make it for them. If we outsourced, it could be made but who knows how long it would take. It came down to the fact that we sell service (and that includes unique designs). I couldn't get that flexibility outsourcing to door shops. And, I wanted to control quality before the doors showed up on a crate.
I do not have any problem making the drawers and I would love to live somewhere where I could build one kitchen a month and pay for two months worth of bills while I hang around nit picking on every detail. But it isn't so. So for everyone who has a piece of property with a shop and owns everything, sorry for the financial comment. But for anyone living in areas where the cost of living, renting a shop, paying people, etc is more then the price of three months the other guys mortgage, you are silly financially if you don't outsource at least your doors.
Many people there would order doors and drawers before making a single box. And by the time the boxes were ready, all the parts showed up, got installed and delivered. Sure, if I make the doors myself, I pocket that money. But if I order out, work on other things, aren’t I now making twice the money? I long ago got over the “I Made It All” mentality. Now, I just want to “Make It All” (as in money).
When you add all of this up it is cheaper to outsource than it is to make them in-house. If you are paying $40-50 per door then you are silly financially. The company that I buy from charges about $25 on average per door or about $10 per square foot if you do it that way; including shipping with a very consistent six day lead time. All of the panels and stile/rail edges are made with shape and sand equipment, which makes them perfectly smooth. Better quality that I can produce with three shapers and a wide belt. That being said, I get a better price from my finisher because he doesn’t spend endless hours hand sanding the shop made doors.
It's a personal decision based on your business goals. For us, quality and service is what makes us profit. Outsourcing may appear to save money on the surface, but we've found the poor lead times (mainly on extras, lack of custom choices, and bottlenecks it caused our production), cause us to choose to make our own. There's not one right answer for everyone though.
True enough, there are a lot of sources that don’t do it effectively enough to be dependable. There are those that do, and once you've found them (trial and error) you really come to appreciate the systems and ingenuity that it takes to make it all happen on a large scale. It can be inspiring. My company was founded on the concept (with cabinet boxes) that grew the door companies. I am an outsourcing fan. Pick out what you do best and exploit those talents and those of your people. Bottom line is productivity equals profits, however the equation balances itself out.
