Tough times make for a better company

Sitting in Timber Products’ head office in Springfield, Oregon, vice president of sales and  marketing Roger Rutan appears the epitome of American marketing savvy. Energetic and knowledgeable, with long experience in product branding and placement, he also appears content. Odd, considering the current business climate.

“It’s been the worst downturn in memory. But we’re dealing with it and actually doing pretty well,said the 25-year veteran of North America’s panel industry.

It’s a bold statement, given the carnage of recent years, but one he’s keen to explain:

“The market has shrunk so much it has made us look seriously at our business model and how we go to market. It’s made us a better company,he said.

The old way of doing business, according to Mr Rutan, was to ramp up production and assault the market with volume.

“That model doesn’t work any more,he said. “Now, the industry is learning how to make money at significantly reduced levels of production.”

He believes the downturn was years in the making and that the lengthy period of oftendouble- digit growth enjoyed by many producers was largely fuelled by residential construction.

“Many thought it wouldn’t end,he said, citing several kitchen cabinet manufacturers who invested in expansion as recently as five years ago when housing starts hit over two million and the growth potential of housing appeared unlimited.

“As a member of the board of the Kitchen Cabinet Manufacturers Association, I’ve witnessed an industry that consumes a huge volume of hardwood plywood, MDF and particleboard go from courting custom home builders who built million-dollar homes to those building tract housing.”

Those same companies, according to Mr Rutan, are now selling to remodellers, home improvement stores and companies making closets and garage utility cabinets.

“They’re doing what’s needed to survive,he said, adding that the market has declined in every category.

“New home and commercial construction, store fixtures, residential and commercial furniture, cabinetry, architectural millwork. All are rethinking the way they do business.”

Distribution redefined
Mr Rutan explained how the downturn has changed the way distributors operate.

“Four years ago they would order  truckloads of product and break deliveries into smaller units at their warehouses. Most maintained good inventory levels for fast delivery. Demand was strong and most believed it would remain so.”

What has changed, he said, is that many now order at the last minute.

“Truckloads of one or two items have become pallet-loads of assorted line items. So we’ve employed ‘just in time’ principles and have met the challenge.”

A truly vertically-integrated company, Timber Products’ own transportation company – TP Trucking – delivers the company’s products nationwide. This complements its 50,000ha of forest land in northern California and nine US manufacturing facilities.

“We grow it, process it, add value to it and ship it,stated Mr Rutan.

He commented further on how other  aspects of distribution have changed, mostly out of necessity.

“With less inventory on hand, many distributors have gone from being just ordertakers to being advisors and partners in their customers’ businesses; they must offer valueadded services in order to compete,he said.

An example he gave was of a distributor who visits his customer and talks with equal authority on saw set-up and tool sharpness as he does on market trends.

“Adding value to the distributor-customer relationship can be a game changer,he said.

A moving experience
A recent major change saw Timber Products merging its White City, Oregon softwood plywood operations into its Grants Pass, Oregon hardwood plywood mill.

“People said we couldn’t make both products in the same mill. Apples and oranges! But we do, successfully, and in so doing we’ve satisfied our goal of right-sizing and operating at proper capacity,Mr Rutan said, adding that, whereas December 2008 ended a challenging year, it was a different outcome a year later.

“The changes returned us to profitability,he stated, adding that the successful merging of the two mills was due to proper planning.

“A management structure was put in place  which clearly delineated the two manufacturing methods. This was necessary because different techniques are needed to make hardwood plywood with expensive faces versus panels used to side houses.”

The merging of the two mills saw many of the White City softwood crew moving to the Grants Pass mill.

“Keeping our crews was very important. You can’t expect a softwood grader to instantly know the hardwood grading process and vice versa. Hardwood plywood cannot have any debris in the inner cores whereas  softwood plywood can tolerate it to some extent,Mr Rutan said.

Going green
Keeping up with Timber Products’ marketing boss on the subject of green initiatives was challenging – there have been so many.

“Compliance with the California Air Resources Board’s CARB I and II standards for formaldehyde emissions set the bar high from the outset. California is a huge market for us and compliance is necessary to sell there,he stated, further describing the culture shift that saw green initiatives implemented across the entire product line and throughout every tier of the company.

“We introduced ‘Green T’ hardwood panels in 2007. They use innovative resin that meets green building requirements and surpasses the toughest standards for formaldehyde emissions,he said.

Satisfying CARB I and II is only the tip of a very green iceberg for Timber Products. Other green initiatives include being the first hardwood plywood manufacturer to carry the Sustainable Forestry Initiative label; achieving Mixed Sources Chain-of-Custody certification by the Forest Stewardship Council; planting over half a million trees annually from seeds collected from Timber Products’ own land; utilising 100% of each tree harvested in manufacturing; and serving on committees for the US Green Building Council’s LEED programme and CARB.

In addition, Mr Rutan has been busy developing and taking his company’s Green Educational Forum out into industry.

“Our Green Forum shows architects, designers, producers and academics what being green in this business means. We want to eliminate confusion and teach that not every green initiative has to reach the lofty heights of, say, the LEED Platinum Programme.”

Mr Rutan spoke of equally important programmes that are more attainable, like The Natural Step, The Green Building Initiative, NAHB residential standards and Green Globes.

“Our green education programme has been very popular. In 2009 we held 24 forums, most in person, others by tele-conferencing,he said. “In 2010 we’ve done about one a month.”

MDI Conversion
Three hours’ drive south of Timber Products’ head office is the company’s Medford particleboard mill.

Opened in 1964, the mill began transitioning to MDI resin in late 2009. In August of this year, final acceptance tests cleared the way for total conversion.

Plant manager Dave Pope described the transition: “We had to go from being an excellent UF resin mill to a no-added-formaldehyde (NAF) mill. Although we’d been moving in that direction for some time, because of our need to meet lower formaldehyde emission standards, it was still a big step into somewhat unknown territory.”

To stress his point, he used the very descriptive analogy of an accomplished baseball player being asked to become an equally accomplished cricket player.

“Both sports use a bat and ball and runs are scored when you hit one with the other.

There, however, is where the similarities end,he said.

Mr Pope explained that UF resin has a twothirds solids content, with water making up the balance. MDI, conversely, has no water content. It uses the moisture in the furnish, combined with the heat and pressure generated during pressing, to react and form a bond.

The way the two resins are handled is completely different, too, he added, stating that MDI must be isolated from all forms of moisture prior to use. It is transported in a heated tanker and all replacement air in the holding tanks must past through a dessicator.

“It must be kept absolutely dry before use. To accomplish this we had to install two new 4,500-litre tanks, complete with a new pumping system and insulated piping,he said.

Despite the resin companies having conducted every test possible using MDI, Mr Pope admitted that he and his colleagues remained cautious about using it because it is so different to conventional UF resin.

Originally touted as an adhesive that could ‘bond anything’ when it was introduced more than 60 years ago, MDI is used widely throughout the composite panel industry. It was adopted by Timber Products because it exceeds all regulations regarding formaldehyde emissions.

“We weren’t the first to switch to MDI, but we’ve certainly embraced it,said Mr Pope, adding that his mill received considerable assistance from Sierra Pine’s Medite Division, a sister company of Timber Products, located in Medford.

“Medite has been using MDI since the eighties. Different application, but their knowledge and experience was invaluable,he said.

He went on to state how his original scepticism was replaced with great satisfaction once the full extent of MDI’s benefits became realised.

“It provides excellent moisture resistance, less swelling, is odourless, makes a stronger product and has a longer shelf life than UF resin. In addition, it doesn’t clump in the formers or screws, doesn’t care about the acidity level of the furnish and we are projecting it will end up costing less because it is a low dose resin compared to UF,said a very satisfied Mr Pope.

In later conversation he brought up another key benefit of using MDI resin: Degradation caused by stacking panels when hot has been eliminated, improving both quality and appearance of the product.

Mr Pope was insistent that staff buy-in and professionalism were what made the transition to MDI work. He especially praised the work of production superintendent John Fountain, maintenance superintendent Dick Marcoulier and electrical superintendent Dan Webb. Special mention, he said, also needed to go to long-time employee Bob Croucher, who has worked at the mill since it opened in 1964 in a number of capacities, the most recent as technical director.

Perhaps the statement that best sums up the success of the mill’s conversion to using MDI resin was one Mr Pope made as the interview concluded.

“After the success we’ve had with this resin, if I was my boss, and I wouldn’t have changed over, I’d have fired myself. It was just so cut and dry.”

Now, that’s an honest man!