Volume 8, Issue 7 - July/August 2007

Trend Tracker

And the Survey Says…
by Michael E. Collins

The results of the Door and Window Industry Benchmark Survey for year-end 2006 have been published, highlighting a number of interesting facets of the door and window industry. Two dozen manufacturers from various segments of the industry participated. 

What the Study Reveals
There were a number of questions that were new to the survey this year. With the decline in the new construction market over the last several years, we wanted to determine the extent to which companies have begun to increase their focus on the repair and remodeling market in order to diversify their revenue streams. Interestingly, roughly one-fourth of respondents indicated that they are increasing their focus on the replacement market and not on the new-construction market.

However, another third of respondents indicated that they are attempting to grow their revenues in both areas. As would be predicted, only one survey respondent indicated that they are trying to increase their new-construction revenues to the exclusion of the remodeling market. 

With regard to price increases, roughly three-fourths of respondents indicated that they had increased prices in the last twelve months. The majority of these indicated that their price increases had been sufficient to cover the increase in the cost of their raw materials. In a soft market environment, it is very surprising and encouraging that industry participants have been able to pass along price increases, preventing a collapse of margins.

Lean Manufacturing
It is critical for companies to wring every possible remnant of inefficiency from their operations in order to compete with increasingly large domestic competitors and aggressive overseas competitors. Where having a highly efficient operation was once a point of differentiation, it has become almost a commodity. Lean manufacturing techniques represent an important avenue of eliminating inefficiency and waste. Nearly 70 percent of survey respondents indicated that they had implemented lean techniques. Two-thirds of those companies indicated that they would implement additional lean techniques in the next 12 months. This is a strong endorsement of the lean movement, since these companies have presumably enjoyed success with the lean techniques they have employed to date. Only two companies of the 24 in the survey indicated that they had no plans to implement lean techniques in the future.

Overseas Competition
In conjunction with our ongoing research into the threat from overseas competitors faced by U.S. companies, we included a number of questions regarding sourcing component parts and whole doors and windows overseas. In the hardware area, companies were somewhat more likely to source door hardware overseas than window hardware. Also, companies were more likely to source all of their required door hardware from a foreign company, whereas the majority of window hardware was purchased domestically. China and Germany were the two most commonly mentioned source countries for hardware. Contrary to what would be expected, few companies reported their intention to source additional door or window hardware overseas in the year ahead. In other areas, including entry doors and windows, the reported intention to explore overseas sourcing was very low. 

The next installment of the Door and Window Industry Benchmark Survey will be conducted in early 2008. With participation from a broad cross-section of the industry, benchmark surveys such as this can serve as an increasingly valuable tool for industry participants. Also, by establishing a baseline in areas such as overseas sourcing and the ability to pass on price increases, a benchmark survey serves as a tool for analyzing important changes in these areas going forward. 

Michael Collins is affiliated with Jordan, Knauff and Co., an investment bank that specializes in the door and window industry. He may be reached at mcollins@jordanknauff.com. Mr. Collins’ opinions are solely his own and not necessarily those of this magazine.


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