Fabricators are feeling positive about 2007 business conditions, investing in both staff and new technology to keep up with the influx of business. That’s the word according to a recent survey by Kitchen & Bath Design News.
The spot survey – which polled over 125 fabricators across the country – looked at fabricators’ business practices and plans for 2007, changes in material demands, as well as their greatest challenges in working with kitchen and bath dealers and designers.
Overall, those surveyed found growth to be the buzzword of the day, with some 71% rating current business conditions as “excellent” or “good” for 2006 (see Graph 1). Additionally, more than a third (35.7%) said they’d increased their staff in 2006 to keep up with incoming work (see Graph 2).
Conversely, only 7.1% said they decreased the number of employees in their shop, and of those who did, many said they’d like to add staff, but have not because of the difficulties in finding quality personanel.
Growth and Diversification
Gone are the days when a fabricator was more likely than not a single guy working out of his basement shop, specializing in just one material. Indeed, fabricators surveyed showed an average of 12.1 employees per shop.
Additionally, the vast majority said they handle multiple materials, including granite (81.5%), quartz (74%), solid surface (63,9%), plastic (32%) and other surfaces (30.8%) such as stainless steel, copper, tin and other metals. Those surveyed noted that in 2006, roughly half of their business (48.5%) was in granite, while another 25.6% was in solid surface jobs. Additionally, 10% was in plastic, 8.9% was in quartz products and 7% was in other areas (see Graph 4).
For 2007, they said they expect to see a slight drop off in granite and solid surface in favor of quartz products. In fact, as one noted, “One of our biggest challenges right now is making the technological investments needed to make the change over to quartz, since that is clearly growing into a very big up-and-coming area.”
Indeed, diversification seems to be the name of the game, as fabricators talked about the increased demand for fabrication of new and unusual materials, from a variety of real and man-made stone products to different types of metal to complicated multi-material projects with decorative inlays and designs.
And just as growth isn’t confined to one type of material, neither is it confined to one customer group. Fabricators surveyed noted that in 2006, 34.9% of their business came from residential builders, 20.6% came from sales direct to consumers, 17.6% was derived from sales to kitchen and bath dealers and designers, 9.8% came from remodelers, 9.4% came from home centers and 7.7% was derived from sales to commercial builders.
And, in 2007, 72% of those surveyed said they expected to increase their business with remodelers, 50% projected increased sales to consumers, 48.4% expected to increase their sales from kitchen/bath dealers and designers, 47.7% projected increased sales to commercial builders and 47% foresaw greater sales to residential builders.
While the majority did not expect dramatic changes in their customer make up, most agreed that serving such a diverse group requires a greater knowledge of both materials and job processes, “since one day you may be educating a consumer who knows nothing, and another day partnering closely with a kitchen designer who has very distinct ideas about the project, or working with a home builder who wants to leave it entirely in your hands – as long as you can keep it within their budget.”
Fabricators are also increasingly investing in technology to keep up with projected growth, according to the survey. In fact, more than half (56.7%) of respondents said they had made a significant investment in new technology or tools in 2006, and 48.7% said they expect to make such an investment in 2007.
When it comes to buying materials, the majority (61.5%) said they buy at least some materials direct from the manufacturer, while 3.9% only buy direct from manufacturers and the other 34.6% said they don’t buy direct from manufacturers at all (see Graph 5).
As for outsourcing work, only a small portion of fabricators (11.1%) said they currently outsource some of their jobs overseas (see Graph 6), with another 10.8% noting that they plan to increase their outsourcing in the next five years.
However, far more fabricators expressed concerns about outsourcing which they believe may well negate cost savings. Shoddy product quality and lack of quality control were frequently cited worries, as well as damage to the industry’s reputation as a whole due to quality issues from outsourced jobs. Competing on price with shops that hire illegal aliens was also an issue.
“Its difficult,” said one survey respondent. “On the one hand, you’re competing with cheaper labor and price matters. But when you outsource, you lose control of quality, and that can cost more than money – it can cost you your reputation.”
Fabricators also noted several key challenges in working with kitchen and bath dealers. Their number one challenge, reported by two thirds of those surveyed, was designers’ and dealers’ failure to properly educate clients about the material/process (see Graph 3). As several fabricators said, “Kitchen and bath designers need to know the product and what works – not just like the color. If they can’t explain the properties of the material, they need to let us help manage customers’ expectations.”
Another 38.2% complained about designers “passing the buck” when problems arose on a job, while 35.8% cited scheduling issues, 33.3% noted poor communication as a key problem, 18.5% pointed to payment issues, and 11% complained about a lack of professional respect.
Relationships were also cited as key by fabricators. As one explained, “Dealers should stick with one or two fabricators they trust, not just go for the lowest price. Keep us in the loop by informing us of schedules for templating and installing. It’s a team effort, and we do our best work when we’re part of that team, not just brought in at the last minute with no idea of what’s what.”
Finally, they suggested to dealers /designers, “Make the commitment to your customers to truly learn about the performance characteristics of the various materials, and the time requirement for each. Visit our shop and we’ll be happy to help you understand the process, so we’re all on the same page.”