It could have been a great story. Three years ago Dan Davis bought a 120,000 square-foot plywood plant from Chesapeake Hardwood Products and named it Vermont Plywood. He was convinced that lean manufacturing methods could make the facility competitive.
But he said that the lean manufacturing techniques he introduced allowed his 35 employees to produce almost as much plywood in one shift — 3,000 panels — as Chesapeake’s 100 employees did in two shifts.
So what happened? A wicked confluence of bad luck, bad deals, and bad customers.
As part of the purchase agreement he said [Chesapeake Hardwood] agreed to do $2 million a year of business with Vermont Plywood, but quickly abandoned the deal after the sale. “They shorted us $2 million of sales in the first year. It wasn’t a little thing,” [Davis] said.
Ouch. But it gets worse.
More recently Davis thought he had a deal with Canadian firm Kruger Inc. to keep Vermont Plywood afloat. He said Kruger at one point had a letter of intent to purchase the facility, and had promised to provide at least enough raw material to allow his company to make 1,000 sheets a day of plywood. Instead, wood enough for only 500 panels a day showed up, less than Vermont Plywood’s break-even point.
This summer’s housing slump, which is tied into the nationwide sub-prime mortgage lending mess, essentially proved to be the final nail in the coffin. “You don’t have to pick up the paper to figure out what is going on with housing right now … There’s a significant slowdown,” said Davis.
What’s amazing is what lean helped them accomplish in a short period of time… before the floor completely gave way.
And he said before Chesapeake jumped ship the plant was profitable in three out of his first five months.
Yesterday we had a lean-enabled switch manufacturer in Rhode Island that could be had for cheap. Today we have a plywood manufacturer that is three times as productive as an industry peer… ready and waiting to be re-opened.
Anyone interested in betting when the housing slump will be over? Or who wants to take a stab at the current smaller market for plywood currently served by far less productive companies?
Quality over quantity? Local sales instead of nationwide? Where are those cost savings going? Direct marketing? Working on revenue streams that support the business model? These days (or so it seems), even a natural resource is a commodity.
My roof is going to need replacing soon and I’ll have to replace some of the plywood, it’s not like demand is going to fall through the floor. We use plywood for all kinds of things.