Our Changing Industry
Is it Time to Rethink How We Create Our Products?
I’m re-posting the article I wrote for February’s PFM magazine in case you missed it. I believe that looking at the new options available in purchasing moulding deserve some consideration, especially in the way they offer us more time to devote to growing business. I’m also including a simplified worksheet I created for my WCAF seminar about this topic, so that you can conduct your own analysis.
Change is everywhere today, especially in the way products are purchased and consumed. Our industry is experiencing this as consumers are continually offered new choices and alternatives to “normal” ways of purchasing art and framing. But change has always been a part of any industry. As demand for products grows or diminishes, industries adapt and develop new ways to compete.
“Industries adapt and develop new ways to compete. The current choices in how moulding can be purchased offer our industry an opportunity to explore new options.”
Years ago, frame shops had fewer options when purchasing raw materials. The only option for purchasing moulding was to commit to box quantities and stock far fewer choices. Then, distributors and manufacturers began to realize that they could sell more types of moulding and make higher margins by pre-cutting mouldings and offering “chopped” products which saved the frame shop time and allowed them to offer new and complex profiles. Next came the ability to purchase one stick of moulding at a time, meaning that shops could still buy length but not have to invest in box quantities. Finally, distributors began to add full service products by chopping and joining frames.
Now, as distributors are forced to fight for market share and remain labor-productive, some have dramatically lowered the cost of joining frames, while delivering the finished products without freight charges. This latest development creates new options for framers and requires that shops analyze if this newest change in finished frames options is actually more profitable than building frames in-shop. Since my job centers on helping shops find more profitable ways to compete, I was interested in exploring this new option. At first glance, it appears chopped moulding is too expensive since the average chop is almost 40% higher than buying the same moulding uncut. But, when you break down the cost of creating a frame, there are many factors to consider which make the choice far less obvious.
Here are some of the costs associated with creating frames:
The labor cost for cutting and joining frames is more than the hourly wage paid to an employee. On average, the cost to the company is about 25% higher than the actual wage paid when you add in unemployment taxes, worker’s compensation, retirement plan contributions, bonuses, vacations paid and discounts. That means that an employee earning $15/hour would actually cost the company almost $19/hour.
The average length of a stick of moulding is 9.7 feet. That means if you have a frame that needs 11 feet, you must buy 19.4 feet, which means that you will waste 43% of your purchase. The average waste on length moulding purchases is more than 20%.
Equipment and Upkeep
Although most shops already own their equipment, cost of blades and blade sharpening can be significant depending on the type of saw you have. Maintaining joining equipment also carries an expense.
When you mis-cut or ruin length moulding, you must re-buy the materials. Most distributors freely replace defective or damaged frames.
Here are some of the things which must be considered when analyzing your time regarding length, chopped & joined mouldings:
- Unwrapping stick moulding, measuring and setting saw guides, clean up, filing of waste.
- Joining of cut sticks, clean up of glue. If a shop uses clamps and nails instead of an underpinner, there is a significant time increase.
- Puttying of frame corners and cleanup of frames.
I created a series of spreadsheets to calculate the cost of these variables. The spreadsheets allowed for different variables of production, like single or double mitre saws & manual or automated joining. Numerous time studies were used to determine the average time for each phase of production. Waste, labor & other the other expense variations were also placed into the spreadsheets to allow for the other variables detailed above.
Variable Expenses In Our Spreadsheets
Here is an example of one outcome:
Frames sold per year = 1000
Average length price per foot = $2.55
Average chop price per foot = $4.25
Average join fee paid to distributor = $10
Base wage paid to frame maker per hour = $15
Location of shop = Ohio
Type of saw = double mitre
Type of join method = underpinner
When we put these example variables into the spreadsheets, it shows that the cost of cutting all the length moulding (when labor, taxes, equipment upkeep, errors and cleanup are considered) increased from $2.55 per foot to $4.80 per foot. When labor to join the chopped moulding was added in to the raw material cost per foot of $4.24, the cost per foot on chopped purchases went to $4.72. This means that chop moulding is actually .08 per foot cheaper than length purchases using this example. If this shop were to buy every frame pre-built from a distributor, the cost would be $4.93 per foot or .13 per foot more than buying everything in length.
But there is one more important thing to consider. In this example, if this shop bought all their frames chopped instead of buying length, they would save 145 hours of labor per year. In addition, even though the cost of buying all frames joined is .13 per foot more than buying it as length, the company could save 618 hours per year by no longer cutting or joining frames! If we use the actual cost of labor per hour of $18.75, the company could save over $11,000 in payroll costs or spend almost 12 hours per week working on ways to grow more business instead of building frames.
The results of this example could vary significantly with different variables for cost of materials, labor rates and equipment used. After conducting numerous different scenarios, one thing becomes clear: switching from length purchase to chop or chop/join does save a shop significant labor hours. One common problem in small businesses today is a lack of time to work ON the business instead FOR the business. Although changing your moulding purchase model might not save your company a lot of money, it will save you a lot of time. The question is, are you going to grow more business by making your frames or eliminating that step and using the hours you save to promote and grow your business? The current choices in how moulding can be purchased offer our industry an opportunity to explore new options. And that is something positive for everyone.