Despite ongoing labor and supply chain issues, compounded by fears of a recession, wood products manufacturers in the architectural woodwork and retail fixtures segments remain relatively optimistic for 2023.

According to Doug Hague, CEO of the Architectural Woodwork Institute, “With an understanding of variance in regions, members are reporting an ‘excellence’ in 2023 sales. The supply chain has not been a recent factor as we are far enough in that there is some acceptance of the new normal and other supply items have simply stabilized.”

Projections also are optimistic but tempered for 2024, he added. “The term most identified with was ‘2024 backlogs are good,’” Hague said, adding, “Many followed up quickly with ‘still hesitant to look too long term.’”
AWI conducts an annual Cost of Doing Business survey which provides benchmarks for companies to gauge their performance compared to industry peers, including expenses, staffing, profitability, and productivity and helps track industry trends. Participation in the 2023 survey is open through May 25. For information visit awinet.org/publications/codbs.

In a positive sign, architecture firm billings improved slightly in March, following five months of year-over-year declines. The American Institute of Architects (AIA)/Deltek Architecture Billings Index for March was 50.4, up from the 48.0 recorded in February.

The retail fixtures industry is also seeing a slow rebound, highlighted by the encouraging news of companies such as Nordstrom Rack and Whole Foods planning expansions, and many others announcing plans for remodels.

“Across our Shop! Association membership base, companies have a cautiously optimistic outlook for both the remainder of 2023 and looking ahead to 2024,” said Murray Kasmenn, executive director, Shop! Association.“Though the cost of doing business can be more expensive in 2023 when compared to previous years, and supply chain logistics are still top-of-mind for many companies, retailers continue to expand their store footprints, open new locations, and continue to work toward supporting the customer experience through varying approaches in-store. This translates to continuing opportunities for our members as we move ahead in the future.”

The Mastercard SpendingPulse saw U.S. retail sales (excluding automotive) overall register a 4.7% increase in March compared to a year ago, with in-store sales rising 2.8% for the period. Lodging (+23.5%), restaurants (+11.6%), and grocery (+5.6%) were key drivers for the growth, the report noted, while the home improvement, home furniture and furnishings, and electronics sectors continued to dip in YOY growth.

“[W]e’re seeing varied growth sector by sector, with purchases largely shifting to necessities and experiences,” said Steve Sadove, senior advisor for Mastercard.

Placer.ai’s Mall Index also reported increased foot traffic in March compared to February, up 15.6%, 15.3%, and 23.4% for indoor malls, open-air lifestyle centers, and outlet malls, respectively. And although the YOY comparison is down for all three shopping center formats (7.4%, 5.0%, and 8.6%), Placer.ai noted the median visit length was up on all three, indicating consumers are visiting less frequently but spending more time browsing during each visit.

Mixed projections
The FDMC 300, an annual ranking of the largest wood products producers in North America, saw sales for those in the architectural woodwork/millwork and retail fixtures segments reach an estimated $1.1 billion and $1.6 billion respectively in 2022. How does 2023 and 2024 look?

“I can’t speak for the entire industry but based on what I see here at Montbleau, I expect 2023 to be a great year,” said Chris Gioia, president of Montbleau & Associates (#142). “While I think certain markets or territories may fall, others are continuing to bloom and rise, outweighing some of the declining markets.”

“Our projections for 2024 are good,” he added.  “We anticipate they fall somewhere between 2022 and 2023. We have an opportunity to make them excellent, but that will be due to a great deal of internal strategic planning.”
Wisconsin Built Inc. (#177) is also bullish on its sales projections. “We are forecasting a solid 2023 increase over 2022,” said CEO/owner Dan Petersen, adding that sales for 2024 are also expected to be good. “Supply chain issues, although still present, are diminishing, or are being accommodated with better forecasting and greater inventories.  Customer education, transparency, and loyalty earned over years of partnership has also helped customers understand the environment we work in.”

“We are fortunate to have a booming construction economy in Texas,” said Faisal Hussain, principal at ROOMI Group (#139). “I know our sales in other markets we serve are down, but Dallas is a hot market for the next several years.” With the 2023 and 2024 looking “excellent and strong in Dallas” the company is projecting sales for this year and next to exceed 2022 by $25 million.

Cohen Woodworking (#290) is also projecting growth. “Our forecast for 2023 sales exceeds 2022 sales, and it’s not because we’re banking on a booming economy,” said Nate Cohen, CFO. “We’ve been working hard to build an awesome team and position ourselves in the industry, all in preparation for the inevitable economic slowdown. You can call us pessimists, but we prefer realists. And we’re confident that our hard work will pay off.” Projections are also good for 2024, he added.

Keeping a close watch on the economy, Panel Processing Inc. (#123) is neutral on 2024, said Eric Smith, president and CEO.  “I think the federal reserve can put the general economy in a recession – waiting to see.”

Workforce recruitment and supply issues also have Panel Processing projecting a slight dip for 2023. “I expect sales at Panel Processing to be slightly lower in 2023 than last year,” Smith said. “[While] some raw material pricing has come off its peak, other raw materials are still hard to source. Labor, he added, “is still in very short supply, limiting production.”

See Strategies for Success - sidebar below

Labor again top challenge
Labor, or lack thereof, continues to be a top concern for many. “It is a challenge that needs an industry solution and with the collaboration of many associations hopefully we can start making steady progress,” Hague said.
Smith also cited “finding, retaining and training employees” as a top concern for the company. “The early retirement wave and turnover have created an extensive training issue,” he said.

“Supply chain issues have become less challenging, but a skilled workforce is a continued concern,” Cohen added.

“Skilled and unskilled labor availability continues to be a constraint,” Peterson agreed.  “Relationships with the local technical college woodworking program, and on-the-job experience are having a favorable effect. Relevant manuals skills, curiosity to learn, and demonstrated life skills are sought after in candidates looking for perhaps a second career path.”

Gioia concurred. “Our 2023 primary concern is keeping up with the demand. I do not believe there is enough labor available in our industry overall to collectively stay on schedule with what the customer target deadlines are.  We will all need to get creative. Our 2024 concerns for projects that we specifically target are our submittals.  In general, our submittal process for 1st Quarter 2024 will start now, but we have a heavy backlog of projects that all complete in 2023. We are internally strategizing each week on how to achieve the scheduled milestones ahead of us.”

Hussain commented, “The top issues on the leadership deck include human resource management and bringing in new talent.  Woodwork is a stressful industry when doing commercial millwork.  To help balance the stress our leadership is involved in providing work-life balance and supporting the workload by increasing overhead to share in the pressures of the deliverables.”

Industry opportunities
Improvements in supply chain management, including establishing domestic supply chains for much of their purchases, increased collaboration "and being seen and treated as a valuable partner on projects," and educating clients on lean manufacturing and JIT production – "share our building style" – are among the opportunities cited by manufacturers.

The use of AI (artificial intelligence) also is gaining popularity in all industries, including woodworking. "The first people to leverage automation and AI to enhance process or perhaps assist with the labor concern"  may gain an advantage, Hague said. "AI is just scratching the surface, understanding its possibilities and how it may provide opportunity for our industry."

About the FDMC 300
More than 50 architectural woodwork/millwork and retail fixture firms are included in the 2023 FDMC 300, an annual report published in February that tracks the largest wood prdoucts manufacturers in North America and ranks them by sales. Updates of the FDMC 300 firms and the industry segments are posted throughout the year. For information on how to be included, contact [email protected].

FDMC 300 offer strategies for success
We asked some of the FDMC 300 architectural woodwork and retail fixture manufacturers to share a tip for succeeding in the coming year. Here’s what they had to say:

• “Be as flexible in your employment practices as possible,” said Eric Smith, president and CEO for Panel Processing Inc. (#123)
• “Diversification has served us well for years,” said Dan Petersen, CEO/owner of Wisconsin Built Inc. (#177). “It’s never too late to assess where your staff’s talent might accommodate a modest change in market focus.”
• “Our mission is really the best tip I would share and what we’re focusing on…work hard, treat people right, and strive for excellence,” said Nate Cohen, CFO at Cohen Woodworking (#290).
• “The tip I can give is don’t panic,” said Chris Gioia, president of Montbleau & Associates (#142).  “With the workload that most of us have in front of us to conclude 2023, the first gut reaction is to panic.  When people panic, it is an emotional response to improper planning. In our industry, change is a daily occurrence, be proactive, don’t be reactive.”
• “Our goal is to serve our employees by getting involved in day-to-day operations and use our experience to help broken supply chains and constant inflation adjustments on the materials to save clients’ money on their budgets,” said Faisal Hussain, principal at ROOMI Group (#139). “Too often a project cannot get off the ground if the financial performa fails.  We are focused on helping our customers maintain those financial goals for the clients, so all the projects have a chance to be built in this tough financial environment.”

(More tips by large, mid-size and small wood products manufacturers can be found in the WOOD 100: Strategies for Success.)

Editor’s note: The print version of this article inadvertently attributed Panel Processing’s quotes to another individual at the company. It has been corrected here to Eric Smith, president and CEO.