THE WCHEGAN FURMTURE INDUSTRY AND ITS
UTlLiZATEOH 0F WOOD PRODUCTS

Thesis- for the Degree of Ph. D.
WSWGAN STATE UNIVERSITY
HAROLD F. KAFSER, JR.
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THESIS

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THE MICHIGAN FURNITURE INDUSTRY AND ITS
UTILIZATION or woon PRODUCTS - -

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Harold F. Kaiser Jr.
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ABSTRACT

THE MICHIGAN FURNITURE INDUSTRY AND ITS

UTILIZATION OF WOOD PRODUCTS

by Harold F. Kaiser, Jr.

The objectives of this study are to: (1) describe the loca-
tion, size, Operations, and products of the firms which account
for most of the wood used by furniture manufacturers in Michigan;
(2) determine the types of raw materials used, as well as their
sources and technical requirements; and (3) determine the factors
influencing decisions in the choice of raw materials.

The research is based on a portion of the data collected in
1965 by the North Central Regional Technical Committee as a part
of the Cooperative Regional Research Project NCM — 3h, "Potential
Markets for Furniture Wood in the North Central Region." Detailed
interviews were held with executives of Michigan furniture firms
to obtain data for the analysis.

The aged facade of most Michigan plants would suggest a pessi—
mistic outlook by management. Nevertheless, the analysis disclosed
a growing home market for Michigan wood producers. While the United
States Forest Service forecasts an increasing national market for
lumber and plywood and veneer, Michigan timber growers have reason
to believe they can achieve a greater than national increase in
their home market. There was a lack of any substantial substitu—
tion away'from wood materials or local species in the last five

years. Moreover, the structure of the local industry, possible

Harold F. Kaiser, Jr.

influences of price changes, and the "new consumer" all point to
an increasing demand for wood.

Although furniture firms in Michigan are located throughout
the state, Grand Rapids still is the industry's capital. Catalysts
that led to the deve10pment of the furniture industry in this area
were the abundant native hardwood resource and the availability of
skilled craftsmen. Through time, Michigan's industry developed
special characteristics. These included a high value added per
establishment, long-lived firms, and either family ownership or
closed corporations. Primary factors that firms feel will limit
future growth are labor, general economy, physical plant, and raw
materials. Nonetheless, most firms believe their future looks
bright.

Type of furniture produced further contributes to the
special character of Michigan's industry. Although the state
industry is more concentrated than the national for the various
primary product groups, within group examination reveals that
most firms succeeded in establishing their own "niche" in the
market. Rather than being in direct competition with large-
scale producers, many Michigan firms put out items designed
for the "carriage trade." The net effect of this policy has
been to isolate Michigan producers from severe competition.

The l96h average labor costs for Michigan firms were 29 per—
cent of total costs; material costs, 39 percent; and overhead,

selling and administrative, and transportation costs, 32 percent.

 

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Harold F. Kaiser, Jr.

The chief component of material costs is wood. It averaged 22 per—
cent of total costs, and other materials averaged 17 percent.

Lumber averaged 55 percent of wood material costs; hardwood
plywood, 19 percent; softwood plywood, six percent; veneer, nine
percent; particle board, nine percent; and fiberboard, two percent.
Michigan furniture firms buy more than Sh million board feet of
lumber and the main species are soft maple, elm, walnut, cherry,
hard maple, oak, and birch. Primary factors that influence firms
to use lumber are appearance, price, strength, dependability of
supply, machinability, and durability.

Michigan's forests can readily meet the demand of its furni-
ture industry. Michigan now has in inventory quality timber to
produce 90 times more than the present annual requirement of its
furniture industry. Moreover, present growth-to-cut ratios are
about two to one. One problem, however, is the scattered nature
of the hardwood resource. But a variety of marketing channels
have developed which adequately furnish wood raw materials to

Michigan furniture firms.

THE MICHIGAN FURNITURE INDUSTRY AND ITS

UTILIZATION OF WOOD PRODUCTS

By

_J

Harold FJ'Kaiser, Jr.

A THESIS

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

DOCTOR OF PHILOSOPHY
Department of Forestry

1967

 

 

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FOREWORD

This study is based on a portion of the data collected in 1965
by the North Central Regional Technical Committee as part of the
COOperative Regional Research Project, NCM—3h, "Potential Markets
for Furniture Wood in the North Central Region."

Eight states participated in the regional project——Illinois,
Indiana, Iowa, Michigan, Minnesota, Missouri, Ohio, and Wisconsin.
COOperating on an advisory basis were the Central States Forest
Experiment Station, the Lake States Forest Experiment Station of
the U.S. Forest Service, and the Wisconsin Survey Laboratory.

The project was supported in part by regional funds provided
under Title I, section 9b3, of the Bankhead-Jones Act, as amended
August 1h, l9h6, and the Hatch Act, as amended August 11, 1955.

The objectives were to: (1) describe the location, size,
operations, and products of the firms in those industry subgroups
which account for most of the wood used by furniture and fixture
manufacturers in the North Central Region; (2) determine the types
of raw materials used, as well as their sources and technical re-
quirements; and (3) determine the factors influencing decisions
in choice of raw materials.

COOperating states followed a uniform approach. Standardized
interview schedules were developed to facilitate analysis. Defini-
tions and procedures including sampling were standardized. The
Standard Industrial Classification of the U.S. Bureau of the Census
was used to divide the furniture industry into subgroups. This
report is limited to analysis of the situation in Michigan.

ii

The author is indebted to many peOple. He wishes to thank
Dr. Lee M. James, chairman of the Department of Forestry, Michigan
State University, who has served as major professor in the prepara-
tion of this manuscript and Drs. R. S. Manthy, V. P. Rudolph, and
H. M. Riley. He is also indebted to Sam Guttenberg, Principal
Forest Economist, Southern Forest Experiment Station, for supply-
ing the time and drive needed to complete this project. Finally,
he wishes to thank his wife, Martha, who has served during this

project as interviewer, typist, and critic.

iii

TABLE OF CONTENTS
Chapter
1. INTRODUCTION . . . . . . . . . . . . . .
Procedure . . . . . . . . . . . . . .
Sample Size . . . . . . . . . . .
2. REVIEW OF LITERATURE . . . . . . . .
Furniture Consumption . . . . . .
The Furniture Industry . . . . . . . .
Utilization of Wood Raw Materials . . .
3. MICHIGAN'S FURNITURE INDUSTRY . . . . . .
National and Regional Trends . . . . .
Michigan Trends . . . . . . . . . . .
Products Manufactured . . . . . . . . .
Institutional Furniture . . . . . .
Non-upholstered Furniture . . . . . .
Upholstered Furniture . . . . . . .
h. WOOD MATERIAL COSTS . . . . . . . . . .
Pricing Policies . . . . . . . . . . . .
Cash Flows . . . . . . . . . . . . . . .
Furniture Manufacturing Costs . . . .
Wood Material Costs . . . . . . . .
Cost Reduction . . . . . . .

5. UTILIZATION OF WOOD MATERIALS . . . . . .

Importance of the Various Wood Materials .

Hardwood and Softwood Lumber . . . . . .

Lumber Selection . .

iv

Page

11
16
21
22
27
38
39
M
50
52
52
55

56 .
62

6h '
68
68
70
80

Chapter

Veneer and Plywood . . . . . . . . . . . . .
Raw Veneer . . . . . . . . . . . . . . . . .
Hardwood Plywood . . . . . . . .
Softwood Plywood . . . . . . . . . . . .

Composition Board . . . . . . . . . . . . .
Particle Board . . . . . . . . .
Fiberboard . . . . . . . . . . . . . .

6. MARKETING OF WOOD MATERIALS . . . . . . . . .

Flow of Materials . . . . . . . . . . . . . .

Importance of Hardwood Lumber Marketing Agents .

7. STABILITY OF THE MARKET . . . . . . . .
The Selectors of Wood Materials . . . . . . .
Substitution of Materials . . . . . . .
Substitution Among Species . . . . . . . . .
Evaluation of Michigan's Furniture Wood Market
Past Stability . . . . . . . . . . . . . . .
Future Consumption . . . . . . . . . . . . .
8. SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS . .
Summary and Conclusions . . . . . . . . . . .
Suggestions for Future Research . . . . . .

BIBLIOGRAPHY . . . . . . . . . . . . . . . . . . . . .

Page
87
89
92
9h
95
96
99

101
101
118
131
131
135
1h1
1A6
1A6
1M8
158
158
168

170

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Table

10.

ll.

12.

13.

1h.

LIST OF TABLES

Distribution of Firms Interviewed by Primary SIC
Class and Number of Employees, 196A . . .

The United States Furniture Industry by Primary
Product Class, 1958 and 1963 . . . . . . . . .

The North Central, Northeastern, Western, and
Southern Furniture Regions Compared by Primary
Product Classes, 1963 . . . . . . . . . . .

The Furniture Industry of Michigan by Primary
Product Class, 1958 and 1963 . . . . . . . . . . .

How'Michigan Furniture Firms Viewed Their Sales
Outlook, by Primary Product Class, 196A . . . . . .

The Most Important Factor Michigan Furniture
Manufacturers Feel Will Limit Their Growth Between
1965 and 1970, by Primary Product Class .

Interindustry Transactions Between the Furniture
Industry and Selected Sectors of the National
Economy, 196A . . . . . . . . . . . . . . . . .

Michigan Furniture Firms' Costs for Labor,
Materials, and Other Costs, 196A . . . . . .

Michigan Furniture Firms' Costs for Wood Mate—
rials and Other Materials, 196A . . .

Proportion of Michigan Furniture Firms' EXpenditure
for Different Wood Materials, by Product Class, 196A

Proportion of Michigan Furniture Firms Using Dif-
ferent Wood Materials, 196M . . . . . . . . . . . .

Volume of Lumber Species Purchased by Michigan
Furniture Manufacturers by Primary Product
Class , 196,4 0 o o o o o o o o o o o o o o o

PrOportion of Michigan Furniture Manufacturers
Utilizing Selected Lumber Species, by Primary
Product Class, 196A . . . . . . . . . . . . .

The Seven Leading Lumber Species Utilized by

the North Carolina, New England, and Michigan
Furniture Manufacturers . . . . . . . . . . . . . .

vi

Page

23

25

28

3h

36

57

6O

63

71

7h

75

79

Table

15.

16.

17.

18.

19.

20.

21.

22.

23.

2h.

25.

26.

27.

Page
Most Important Factors That Influence Michigan
Furniture Manufacturers to Use Lumber, 196A . . . . . 83
Market Agent Sources of Lumber Used by Michigan
Furniture Manufacturers, by Primary Product
Class , 196h O O O O O O O O 0 0 O O O O O O O O O O O 103

Reasons Given by Michigan Furniture Manufacturers
for Using Out-of-State Hardwood Lumber, by Primary
Product Class, 196A . . . . . . . . . . . . . . . . . 107

Market Sources of Plywood and Veneer Used by
Michigan Furniture Manufacturers, by Primary
Product Class, 196A . . . . . . . . . . . . . . . . . 11h

Distribution Methods Used in Marketing Hardwood
Veneer and Plywood by Mills in Michigan and
Wisconsin, 196A . . . . . . . . . . . . . . . . . . . 116

Products Manufactured by North Central Sawmills,
1960 o a o o o o o o o o o o o o o o o o o a o o o o 120

Distribution of Lumber from North Central Mills,
1960 . . . . . . . . . . . . . . . . . . . . . . . . 125

Method of Price Determination for North Central
Mills, 1960 . . . . . . . . . . . . . . . . . . . . . 128

How Michigan Furniture Manufacturers Contact
Their Lumber Sources, by Primary Product Class,
19614 O O O O I O C O O O O O O O O O O O O O O 0 O O 129

Specifiers of Wood Materials Used in Michigan
Furniture Manufacture, by Primary Product Class,
196)4 O O O O O O O O O O O O O O O O O O O O O O O O 132

Materials Substituted for Wood by Michigan
Furniture Manufacturers Between 1959 and 196k,
by Primary PrOdUCt Class 0 o o o o o o o o o o o o o 136

Primary Factors that Influenced Michigan Furni-
ture Manufacturers to Substitute Other Materials
for Wood, by Primary Product Class, 196M . . . . . . lhO

Primary Factor Causing Michigan Furniture Manu—

facturers to Change Wood Species, by Primary
Product Class, 196A . . . . . . . . . . . . . . . . . lh3

vii

Table Page

28. Wood Materials Use Per 1961 Dollar of Manufacturers'
Sales Projected to the Year 2000 . . . . . . . . . . . lh9

29. Wood Material Consumed in Manufactured Furniture
Projected to the Year 2000 . . . . . . . . . . . . . . 151

30. Regression of Sales Volume on Number of Employees
for Michigan Furniture Manufacturers, by Primary
Product Class, 196A . . . . . . . . . . . . . . . . . 153

C1. Forest Area in Michigan, by Major Type, Selected
Years . . . . . . . . . . . . . . . . . . . . . . . . 200

C2. Location of Commercial Forest Area in Michigan,

1955 . . . . . . . . . . . . . . . . . . . . . . . . 203
C3. Location of Sawtimber in Michigan, 1955 . . . . . . . 20h

Ch. Volume of Sawtimber in Michigan Classified by
Log Grade, 1955 . . . . . . . . . . . . . . . . . . . 207

C5. Net Annual Growth of Growing Stock, Sawtimber,
and Poletimber in Michigan, 1955 . . . . . . . . . . . 208

C6. Change in Growing Stock and Sawtimber Volume in
Michigan Between 1935 and 1955 . . . . . . . . . . . 211

C7. Actual Cut, Net Growth, and Allowable Cut of
Total Growing Stock in Michigan, l95h . . . . . . . . 213

C8. Allowable Cut and Actual Cut of Sawtimber in
Michigan, by Region, 195M . . . . . . . . . . . . . . 2l5

C9. Commercial Forest Land in Michigan, by Class
of Ownership, 1955 . . . . . . . . . . . . . . . . . . 217

viii

LIST OF FIGURES
Figure Page

1. Styles of Case Goods Shown in the Chicago and

Grand Rapids Markets from 1933 to 196A . . . . . . . . AS
2. Wholesale Price Index for Lumber, 1929—1965 . . . . . 85
3. Flow of Michigan's Furniture Lumber, 196A . . . . . . 112
h. Selected Hardwood Prices, l9h7-196h . . . . . . . . . 1h5

ix

LIST OF APPENDICES
Appendix Page
A. The Survey Questionnaire . . . . . . . . . . . . . . 179
B. Definitions of SIC Categories . . . . . . . . . . . 196

C. Michigan's Forest Resource . . . . . . . . . . . . . 199

CHAPTER 1
INTRODUCTION

The most important secondary wood-using industry in the
Nation, other than construction and shipping, is the furniture
industry. Four kinds of furniture manufacturing account for
most of the wood used. These furniture types are: non—upholstered,
upholstered, wood office, and public building. The U.S. Forest
Service estimated that in 1960 manufacturers in these four cate—
gories used 2.3 billion board feet of lumber, 800 million square
feet of veneer, 583 million square feet of plywood, 96 million
square feet of particle board, and 253 million square feet of
hardboard.

In terms of value added, Michigan ranks first in the Nation
for public building furniture, fourth for wood office furniture,
and eighth for both non-upholstered and upholstered wood furniture.
But relatively small volumes of Michigan hardwoods are used in
furniture manufacture, even though such timber is abundant. One—
third or more of the graded hardwood lumber suitable for furni-
ture sawn in Michigan is shipped to other states. At the same
time, Michigan furniture manufacturers purchase more hardwood

lumber from other states and Canada than is exported.
Procedure

Representatives of Michigan furniture manufacturing firms

were interviewed in the summer of 1965. Interview schedules were

0.:

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2

standardized to facilitate analysis.1 Interest was focused on data
for the year 196A. The objectives were to: (1) describe the loca-
tion, size, operations, and products of the firms which account for
most of the wood used by furniture manufacturers in Michigan; (2)
determine the types of raw materials used, as well as their sources
and technical requirements; and (3) determine the factors influenc-
ing decisions in the choice of raw materials.

Firms to be sampled were drawn from a stratified list compiled
from manufacturers' directories. A minimum number of three full—
time employees was required for a firm to be included. Firms were
stratified by number of employees and by the U.S. Bureau of the
Census Standard Industrial Classification (SIC). Stratification
was adopted because volume of furniture wood used was thought to
be related to the number of employees and type of furniture pro-
duced.

Four major SIC subgroups were selected to be interviewed
because they accounted for most of the wood materials used in
furniture manufacturing. These groups were: (1) wood furniture,
non-upholstered (SIC 2511), (2) wood furniture, upholstered (SIC
2512), (3) wood office furniture (SIC 2521), and (A) public and
related furniture and fixtures (SIC 2531).2

Population variances were unknown and hence sampling to a

specific accuracy standard was not possible. Instead sample size

 

1The schedule is in Appendix A, page 179.

2Items in these SIC subgroups are in Appendix B, page 196.

a

3
was set by time and budget limitations. A systematic stratified
sampling procedure was employed in drawing firms. Sampling ratios
were selected so that there was a margin for noncooperators, mis-
classified firms, and those out of business. Within-strata tabu-
lations were then expanded according to the sample-pOpulation
ratio of the strata.

In presenting the results of the survey, an institutional
furniture class was formed by combining the wood office furni-
ture and public and related furniture and fixture classes. They
were combined because the majority of the firms made furniture

included in both of the SIC groups.

Sample Size

 

All firms in the four selected SIC groups with 50 or more
employees were interviewed as well as all those classified as
making wood office furniture or public building furniture.
One-fourth of the upholstered-—and non-upholstered--household
furniture firms with less than 50 employees were sampled.

A total of 78 firms were interviewed--two did not coop-
erate. Distribution of firms interviewed, reclassified by

196A primary SIC class, is shown in Table l.

A

Table 1. Distribution of firms interviewed by primary SIC class
and number of employees, 196A

 

Number of employees Total
SIC class 3-h9 50-99 100+ firms

 

 

(Number of firmsj

Wood furniture,

non-upholstered 12 ll 12 35
Wood furniture,

upholstered 10 h 7 21
Wood office furniture 1 1 l 3

Public and related
furniture and fixtures

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Total 31 18 27 76

 

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CHAPTER 2
REVIEW OF LITERATURE

Four broad areas of literature have developed concerning wood
used in the manufacture of furniture. These are: (1) furniture
consumption, (2) structure of the furniture industry, (3) lumber
for furniture, and (A) utilization of wood raw materials.

The first portion of this review is concerned with the con-
sumer and his attitudes towards furniture. Due to the large number
of articles and studies, only those pertaining to changes in con-
sumer tastes are discussed.

The second section discusses the three important furniture
manufacturing regions--New England, the Southeast, and the Midwest.
Emphasis is placed on the importance of the local wood resource
and the market for wood.

The final section is concerned with utilization of wood mate-
rials by the furniture industry. First there is a brief review of
the advantages and disadvantages of wood for furniture. Finally,

the importance of the emergence of new wood materials is discussed.

Furniture ConSumption

 

Many authors have claimed that the furniture industry has
failed to maintain its share of the consumer's dollar. As an
example, Arno Johnson (1955, p. 30) stated:

Between 19h0 and 1950 consumer expenditures for

furniture increased 186%. A substantial sum...
but discretionary Spending power grew 308%.

 

 

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Between 1950 and 1955 consumer purchases of fur-

niture increased only 16% while discretionary

spending power grew 32%. Furniture has fallen

well behind its potential.
Among others, Forman (1950), the Furnishings Council of America
(1958), Baumeister (1965), O'Hanlon (1967) presented facts to
support Johnson's conclusion.

However, Carman (1963) did not support the declining share
thesis. Using statistical analysis, Carman found an absence of
a downward trend during the past 30 years. He felt that the
reasons for this absence were: (1) The American consumer of
today buys furniture as if it were a necessity and not as a
discretionary purchase. (2) Furniture marketing has not been
as bad as most thought. (3) Though there have been changes in
the distribution of income and in the life cycle distribution of
the population, they were more than offset by increase in home
ownership, urbanization, and population migration from the North-
east to the Northcentral region.

During the last 30 years behavior among young consumers had
changed drastically. Taking a less quantitative approach than
Carman, Social Research, Inc. (1958) related consumer behavior in
furniture consumption to stages in the life cycle. They concluded
that the motivation for buying furniture had changed. This resulted
in increased consumption of less durable but more stylish products.

The conclusions of Social Research, Inc. were supported by a
consumer survey by Motivation Research (1963). The survey dis-

closed four important differences between young and old consumers

depending on their stage in the life cycle. These differences were:

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7
(l) anticipation of future moves, (2) acceptance of annual changes
in style, (3) anticipated improvement in economic standing, and
(h) the use of furniture.

Mobility of Americans undermined the notion that furniture
should last a lifetime. The Bureau of the Census (1965) reported
that about 20 percent of our pOpulation moves each year. There
are a variety of reasons why mobile young people do not buy highly
durable furniture. A new home can make old furniture obsolete or
psychologically call for an upgrading in taste. The family may
purchase furniture to achieve visible status in a new community.
Also, Habel (1963) reported sentimental attachment to wood furni—
ture can often cause trouble and expense when moving.

Annual style changes in automdbiles, refrigerators, and tele-
vision sets have conditioned young consumers to rapid replacement.
Today most products are not valued for their durability. Techno—
logical advancements have been so rapid that many goods become
Obsolete, thereby eliminating any inheritance value. These atti-
tudes are just beginning to prevail in furniture. For young con-
sumers, permanence of home furnishings seems to be less desirable
than change. But mature consumers still seem to favor buying fur-
niture that will last a lifetime. The idea of constant change con-
flicts with the traditional view that home furnishings should last
a long time and possibly into the next generation. This has re-
sulted in hand-me-downs losing their place in the affluent society

of young consumers.

8

Another difference between youth and maturity, pointed out
by Motivation Research (1963), is expected improvement in economic
and social standing by young consumers. Anticipated promotions are
often associated with a change in status. This can be expressed
by buying a better home and furniture.

Young consumers feel that homes are to be lived in; whereas,
the older generation still has the idea of restrictive use of some
furniture. The living room for Sundays only seems to be a passing
custom in the modern home. Functionalism has also given the young
consumers more confidence. Since their furnishings are no longer
merely looked at but are used, they consider themselves the best
authority on what is functional. Comfortable chairs where one can
relax and read is one of the points stressed in selecting today's
furniture.

The Federal Reserve Bank of Philadelphia (1960) and Motivation
Research (1963) pointed out other changes in characteristics of
today's consumers. These included: (1) rapid acceptance of style
changes, (2) no longer looking to a small group of influential
persons to establish good taste, (3) thinking about the overall
appearance of the room, and (h) involvement of the total family
in selection of furniture.

Frequent changes in furniture styling have taken place in the
last few years. Such changes are important to forestry because they
can influence the degree of utilization of the various tree species.
Rising pOpularity of Early American designs led to increased use of

maple and cherry. Magazines such as House Beautiful and American

 

,“1

9
Home have helped furniture to become part of the fashion world.
Consumers absorb fashion news in home and service magazines to a
far greater extent than ever before. The sense of belonging to
fashion's "inner circle" is a strong factor in allowing the con-
sumer to know what is available. This has resulted in frequent
changes in style by manufacturers to keep pace with what is con-

sidered "in"

in home furnishing.

Authors in the 1950's wrote about a small group of influential
persons establishing good taste. These individuals usually were
called "tastemakers." However, consumers no longer look to a small
group of influential persons to guide their taste. Motivation Re-
search (1963) reported that rules for distinguishing between right
or wrong in home furnishings are a thing of the past. In the last
few years the manufacturer, the press, consumers, retail merchan-
dizers, and interior decorators are all important factors in estab-
lishing good taste.

Today, selection of a chair or a sofa is not made without
considering the overall appearance of the room. The importance of
individual personality in total expression is a common cliché of
the home furnishings trade. Retailers have noted that a great
amount of browsing takes place while the prospects attempt to
establish their overall theme. These long planning and shOpping
periods help consumers achieve greater satisfaction with their
purchases but create challenges for furniture manufacturers.

The concept of colleague spouses, with each having a defi—

nitely marked area of authority, does not describe the actual

 

 

 

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10

situation in purchasing furniture today. Such authors as Sharp
and Mott (1956), Wolgast (1958), Kenkel (1961), and Reynolds and
Meyer (1966) pointed out that the role of the husband has changed.
Retailers and manufacturers agree that a few years ago men did not
enter into style and color decisions. If the husband was present
at the time of purchase, it was to make sure that the furniture was
comfortable and that the wife was not Spending more than they could
afford. Now the entire household has become involved in the selec-
tion process. Motivation Research (1963) found that husbands and
wives have similar views on style, brands, fabrics, and color.

Changes in the furniture trade have created a new challenge
for the industry. Consumers have found new confidence and desire
to be different and progressive in home furnishing. Many books
and articles have been written about creeping conformity in Ameri-
can life. Our modern suburbs, supermarkets, schools, and mode of
life add to this conformity. Selection of furniture meanwhile has
offered a greater Opportunity for creative self expression. Con-
sumers can set themselves apart from the crowd by selecting a dis-
tinctive pattern or combination of patterns and wood finishes for
their homes. Many home magazines continue to stress the idea that
old rules just do not fit today's conditions. Styling, color, and
accessories give each home individual identity. In the last ten
years, the furniture industry has found it necessary to stress new
fibers, color trends, and styling developments as well as new wood

products to meet the challenge.

11

The Furniture Industry

 

Three important furniture manufacturing regions have developed
in America. These are New England, the Southeast, and the Midwest.
In each, there was a gradual development from small, but numerous,
handicraft shops making a few pieces per month to some of the large
establishments producing more than a million dollars worth of furni-
ture per year.

Brown (1952) stated that one factor influencing the location
and development of these regions was availability of suitable timber.
The New England manufacturers had such native species to utilize as
black cherry, oak, and maple. Midwesterners had black walnut with
its outstanding features of beauty of grain, seasoning qualities,
hardness, and workability. Manufacturers in the southeastern area
had an abundance of yellow poplar and red gum. Brown felt that
every technical prOperty such as workability, attractive grain and
finish durability, hardness, strength, seasoning and finishing pro-
perties, machinability, and other specialized features were found
in the woods of the native American forest.

Of the three furniture regions, New England seems to face the
bleakest future. Many authors stated that unless steps are taken
immediately to correct weaknesses in the economic environment, the
New England industry will decline further. However, most authors
feel this change will be gradual. The following statement by Nelson
(l9h7, p. 181) summarizes their ideas about future prospects.

The industry is too poor, too diffuse, too low in

the caliber of its executive personnel, too afraid
of the retailer, to make big changes in a hurry.

12

The most complete study of the New England furniture region
was made by Wickman (1963). His study presented a historical survey
of the industry from the time of the Pilgrim craftsmen to the modern
factory era. Cost structure of the industry and interregional vari-
ation in such areas as wage costs, the availability of furniture
wood, the level of productivity and the extent of unionization were
described and analyzed with reference to the current problems of
the industry. Wickman claimed one reason for continued industrial
decline was the diminishing hardwood resource. Other causes were
insufficient capital investment, a significant New England-South
labor cost disadvantage, a high degree of locational immobility,
a frequently unfavorable business climate, and increasing remote-
ness from the national market.

The most complete study of the marketing of lumber used in
the New England furniture industry was made by Whitmore 33 El:
(1963). They found that the furniture industry used 28 percent
of all lumber produced in the region and was the largest single
market. About 85 percent of the lumber used came from within the
region. The most frequently mentioned problems in the lumber re—
ceived by the manufacturers were the failure to meet grade, size,
and seasoning specifications.

In contrast to the declining New England region, the Southeast
has emerged with a progressive furniture industry. The South-
eastern region has also received the most literary attention.

Authors such as Klontz (l9h8), Craig (1959), and O'Hanlon (1967)

 

 

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13
have given insight into the formation and growth of the industry
there.

Craig's study (1959) best revealed how furniture manufacturing
began in the Southeast and why it prospered. Craig felt the native
hardwood forest was the most important advantage producers of the
area had in their first 20 years. Inroads on the resource by a
multiplicity of users gradually diminished the local hardwood stands.
Fortunately, while depletion of hardwood stands was occurring,
Southeastern furniture manufacturers were acquiring the advantages
of a good reputation in the market, a trained labor force, and
experienced management. Together with whatever advantage remained
in local timber supplies, they sustained the area's rank as the
major furniture producing region.

The most recent studies of furniture-wood marketing in the
Southeastern region were made by Rodenback (1960) and Applefield
(1965). They reported that a little less than half of the North
Carolina furniture wood came from within the state. However, only
about 35 percent came from outside the Southeastern region. Yellow
poplar was the most important species accounting for 36 percent of
all lumber received. Gum and oak were next in order of importance.
From 1958 to 1963 significant increases in utilization were re-
ported for walnut, cherry, pecan, hickory, and other figured woods
while yellow pOplar declined.

The Midwest has received the least attention of the three fur-

niture regions. No analysis of the region has been published.

 

 

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However, a historical study was made by Ransom (1955) of the Grand
Rapids, Michigan, furniture industry.

Ransom's study presented a complete historical record of the
formation and growth of the Grand Rapids furniture industry until
1950. The original hardwood resource was again cited as an impor-
tant factor in the location and development of the industry.
Ransom characterized the manufacturers by their small units, in-
dividual rather than large corporate entrepreneurships, quality
products, and individual workmen. He felt this pattern has re-
sisted all attempts at alteration. Monopolistic tendencies, the
efforts of organized labor, and other movements away from the
accepted mores have failed to alter this basic pattern.

Garrison (1965) and Lydens (1966) updated Ransom's analysis.
Both arrived at the same basic conclusions as Ransom did about
the Grand Rapids furniture industry. They stressed that Grand
Rapids still depended upon quality and reputation rather than
quantity production. Also, Garrison reported that there was a
popular fallacy that firms have moved out of the area and were
going south. She reported that no firms have permanently left
Grand Rapids and moved to the South. One firm Opened in the
South and then returned to Grand Rapids and three firms opened
plants in the South but kept their Grand Rapids Operations.

In a review of Michigan's furniture industry development,

G. R. Gregory (1959) felt that although Michigan still produces
a relatively huge prOportion of the country's fine furniture,

the furniture capital moved south quite a few years ago. The

l5
shift was due to changing raw material supplies, labor cost dif-
ferentials, and complacency of Michigan firms. He felt that some
Michigan firms are among the most progressive in the Nation; some
have not yet caught up with the technological advances that pres-
ently characterize the southern segment of furniture manufacturing.

The Midwest has had no published description or analysis on
the marketing of wood raw materials for the furniture industry.
Consequently, there will be no comparison of data or conclusions
between this study and others.

Five significant national studies have been made. These
studies were by DeVillars (l9h9), Harrison (1951), Davis (1957),
Fitzpatrick (196A), and Baumeister (1965). DeVillars (19h9) and
Harrison (1951) analyzed the national furniture industry com-
pletely. Their analyses included the evaluation of competition,
demand, styling, price, and production practices. Unfortunately,
because of the changes within the national industry since the
early 1950's, most of their analyses today serve only as a his-
torical record.

Davis (1957) considered the production, pricing, and pro-
motional policies of manufacturers. His study dealt intensively
with the marketing procedures of the industry. He found that the
repeated attacks on the marketing policies of furniture manufac-
turers were not warranted. Most of them failed to take fully
into account the inherent nature of the furniture industry or
its product. Davis (1957, p. 212) stated:

Past marketing policies of furniture manufac-
turers have necessarily reflected imposed

 

16

Operating conditions. To suggest that firms in
this industry adopt methods of other industries
where those conditions are not present is to be
unrealistic.

Baumeister (1965) felt that the furniture industry had four
major problem areas. These were (1) the lack of communication and
cooperation among various segments of the industry, (2) a shortage
of adequately trained sales personnel at all levels, (3) overly—
frequent style changes, and (h) ineffective management practices.

Fithatrick (196A) reviewed the pricing methods of the fur-
niture industry. He concluded that the widely recognized marginal-
cost pricing technique was not used. Fithatrick cited the follow-
ing three reasons why this was so: (1) Firms can not measure the
demand with sufficient accuracy to adjust sale price to maximize
profits. (2) Firms are not trying to maximize profits. They are
seeking a reasonable return on investment and good public rela-
tions. (3) Firms are apprehensive of their competitors' reactions
when they lower prices to utilize idle plant capacity. Fitzpatrick
described pricing policy as a quasi—full cost estimate adjusted for
competition and marketing conditions and then marketing temporarily

at that price. If any factor changed sufficiently, the firm ad-

justed its price.

Utilization 9f_Wood Raw Materials

 

 

Brown (1952) postulated eight major advantages of wood as a
furniture material. In brief they are: (1) Wood is available with
nmny diverse prOperties regarding color, grain, hardness, work-

ability, bending qualities, strength for weight which are

17

advantageous to the furniture manufacturers. (2) It is easily
worked by hand or machine and lends itself to shaping, gluing of
joints, inlaying, carving, and other aesthetic treatments. (3)
It is relatively inexpensive as compared with other materials.
(N) Parts may be efficiently joined and held together with
various agents such as glues, screws, nails, dowels, and other
devices. (5) It is a relatively poor conductor of heat, there-
fore warm to the touch as well as in appearance. (6) It pos—
sesses beauty of figure, color, and grain not matched by any
other material. (7) A permanent available supply of wood, both
from domestic and foreign sources, is assured. (8) There is a
deeply—seated and well-founded tradition in favor of wood which
is not easily displaced by new and untried materials.

Technological advancements have enhanced the basic advantages
of wood. An example is the wood-graining method. James Johnson
(1965) and Helmes (1966) reported that graining methods are being
used to transform a plain or light-colored wood with little or no
grain pattern into a wood with a face of walnut, mahogany or other
prestigious species. Maple is preferred for graining because its
hard surface gives better definition to the print. Softer woods
may cause some blurring of the grain.

Brown and other authors have stressed disadvantages of wood.
In the seasoning process, wood is susceptible to warping, shrink-
ing, twisting, honeycombing, and other features which degrade it
or cause it to be unsuitable in furniture. Even when dry, wood

may shrink or swell depending upon the atmospheric moisture and

18
temperature in which the wood is stored. Brown claimed proper
kiln—drying would solve many of these problems provided that all
surfaces of the wood were properly treated with protective and
adequate finishes.

The develOpment of substitute materials has influenced the
utilization of wood as a furniture material. As reported by the
U.S. Forest Service (1965) in Timber Trends, lumber was the most
important wood material used in furniture. However, demand for
lumber has not kept pace with increased furniture production.
Style change alone contributes greatly to the lessened demand
for lumber. Modern furniture has been requiring progressively
less and less lumber per item. Heavy inroads have also been
made by such materials as steel, aluminum, and plastics. More-
over, new wood raw materials such as particleboard, hardboard,
and veneer have invaded the industry with varying degrees of
success.

Robinson (1965) showed the impact of these substitutes on
lumber consumption. Between l9h7 and 1960, the furniture industry
made 71 percent more furniture with one percent less lumber.
Relative to output, lumber used in the manufacture of furniture
and fixtures declined by l.h billion board feet. Robinson found
that some of this decline was caused by style and design changes.
However, another reason for the decline was the substitution of
other materials. Robinson felt that particleboard was replacing
lumber in the manufacture of furniture and fixtures more than

any other competitive material.

 

 

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Furniture Methods and Materials (September, 1965, pp. 20—22)
reported that particleboard was the newest of the wood panel
products. Particleboard has been manufactured in this country
for a little more than a decade. It can compete in virtually any
application where a smooth, stable panel product is needed. This
material, because of its dimensional stability, smoothness, ease
of application, and economy, is now being widely accepted as
core material in all furniture having veneer or plastic overlays.
Furniture Methods and Materials described it as the fastest grow-
ing segment of the wood products industry. Production has doubled
since 1959.

Hardboard has also been substituted for lumber. Fuldauer
(196M) and the American Hardboard Association (196A) reported
that furniture manufacturers utilized 20 to 25 percent of all
domestic hardboard production, which totaled about 2.5 billion
square feet annually. Hardboard is manufactured from wood which
is reduced to chips, further refined to fibers, and rebound under
heat and pressure using lignin to form a dense, hard, smooth
board. It is as hard as oak and is splinter and sliver free
because it has no grain. Furniture manufacturers bind face
veneer to hardboard. They use this in COnjunction with frame
construction to replace most of the core lumber formerly required
on flat surfaces. And, since the develOpment of wood graining
techniques, hardboard has replaced lumber in case goods, dinette
tables, chair backs and seats, and living room and bedroom furni-

ture.

20

Robinson (1965) reported that technological advances in glues
and gluing techniques have allowed furniture manufacturers to con-
vert from solid wood to veneered construction. He felt that veneered
construction permitted better and more efficient utilization of wood
which ultimately resulted in lower furniture prices. The savings
arise from the greater care given to the selection of surface woods
and swelling and shrinking are greatly minimized.

Gatewood (1965), vice-president of the Fine Hardwood Associa-
tion, showed the importance of the furniture industry in veneer
consumption. The industry consumed 60 percent of the output of
hardwood veneer. Walnut was the most pOpular species used in
furniture, accounting for 53 percent of the total amount of hard-
wood veneers shipped in the first six months of 1965. It was
followed by cherry, mahogany, maple, oak, and pecan. He felt
that the increased use of walnut veneer by both American and
European manufacturers has pushed the availability of walnut
quite hard. This increased the search for other veneer Species
such as hickory, ash, and elm.

The literature discloses changes in consumer preference and
depletion of the native hardwood stands of the major furniture
regions. This, with the develOpment of new construction materials
for furniture, has influenced the utilization of wood raw materials.
However, wood with its many advantages still remains one of the

most pOpular furniture materials.

CHAPTER III

MICHIGAN'S FURNITURE INDUSTRY

This chapter describes the location, size, Operations, and
products of the firms which account for most of the wood used by
furniture manufacturers in Michigan. First, national and regional
trends are briefly discussed to give the reader an awareness of
the total system. Next, Michigan's furniture industry is discussed.
Statistics are included for the metal furniture manufacturers for
comparison. subsequent chapters will Show the influence the present
industry exerts on the future development of the market for Michigan's
wood raw materials.

Tables 2 through A and associated analyses are based on data
from the Bureau of the Census, Census of Manufacturers. Other data
are based on results from the Michigan portion of the survey of
furniture manufacturers. Results of the Bureau of the Census and
the Michigan survey agree closely for number of firms employing
more than 20 persons. However, results for firms employing less
than 20 persons do not agree because the Bureau of the Census
defines an establishment as a firm employing one or more persons
and the Michigan survey required three or more persons. The dif-
ference in minimum firm size should not appreciably affect the

figures except for data on number of establishments.

21

 

 

 

 

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22

National and Regional Trends

 

The furniture industry in the United States is characterized by
an atomistic structure. There are over 6,000 furniture establish-
ments in the United States employing more than 281,000 persons
(Table 2). The atomistic structure of the furniture industry is ap-
parent in the distribution of establishments by number of employees
as reported by the 1963 Census of Manufacturers. An almost constant
60 percent of the firms in the various wood furniture classes have
less than 20 employees. Furniture establishments having more than
500 employees account for less than one percent of the industry.

There is no indication of a trend towards concentration of
capital within the furniture industry. From 1939 to 195A, the
percentage increase in the number of household furniture manu-
facturing establishments exceeded all manufacturing (Carman, 1963,
p. 1h). From l95h to 1963, however, the number of furniture estab-
lishments increased by only about four percent. The diminished rate
of increase in establishments has brought the rate back to the
average for all manufacturing.

Most furniture firms do a relatively small amount of business.
The average value added of shipments per establishment was $277,000
in 1958 and increased to $357,000 in 1963. The one-third increase
in value added is well below that for all manufacturing establish—
ments.

Concentration ratios for the furniture industry are also far

below the average for the other industries. In hearings before the

 

 

 

 

 

 

 

 

 

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House Committee on the Judiciary (1965, pp. 1720-1731), the furni-
ture industry was cited as an example of low concentration. The
1958 value of shipments ratios for the non-upholstered wood furni-
ture companies are nine percent for the four largest companies, 13
percent for the eight largest companies, 22 percent for the 20
largest companies, and 3h percent for the 50 largest companies. The
value of shipment ratios are even lower when establishments are used
rather than companies.

Nationally, the structure of the furniture industry seems set
and not subject to drastic change. The implications for present and
future wood raw materials suppliers are continued dealings with
numerous small firms. However, there are also develOpments region-
ally which will influence marketing of wood raw materials.

Traditionally there have been three major furniture production
regions in the United States. These are the Northeast, the South,
and the North Central regions. Now the West must be added to this
list because of its growing importance. In each region, there has
been a gradual develOpment from the small handicraft shOps making
a few pieces of furniture per month to the present establishments.

Today, the furniture industry in the Northeast region is de-
clining relatively in national importance. Once it was the Nation's
major producer of furniture. Now, furniture production in the North—
east ranks third nationally in value added by manufacturing (Table 3).
The decline has been attributed to a diminishing native hardwood
resource, insufficient capital investment, and a movement of the

national market away from the region.

25

 

 

 

 

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26

The Northeast is decreasing in terms of both total number of
firms and those employing over 20 persons. Although firms have been
declining, increasing size of survivors in this region is causing
total employment to decrease but value added by manufacture to rise.
Even with the decrease in the number of firms, average value by manu—
facturing per firm.was still $115,000 below the national average in
1963.

The South is the leading furniture producing region in the
Nation (Table 3). Furniture manufacturing began in the Southeast
and has developed across the entire South. Native hardwood forests
were one of the most important advantages producers had in their
early develOpment. This advantage diminished gradually with the
depletion of the hardwood stands. Fortunately, while the deple-
tion was taking place, the furniture manufacturers of the South
acquired the advantages of market reputation, a trained labor
force, and experienced management. The average value added by
manufacture for a southern firm is over $580,000, highest in the
Nation.

The West has the lowest average value added by manufacture per
firm in the Nation, $152,000 in 1963. The average reflects the
youth of the Western industry. Many small firms have recently been
established. The total number of firms expanded from 1,11h in 1958
to 1,h65 in 1963, fastest growth in the Nation.

' The North Central region is the leading producer of public
building furniture and metal furniture. The number of firms has

not been changing greatly. There were 1,818 firms in 1958 compared

27
with 1,855 in 1963. The average value added by manufacture per
firm, however, increased from $383,000 in 1958 to $h78,000 in
1963, second only to the South.

Nationally, the potential markets for Michigan furniture wood
producers appear promising in both the Western and Southern regions.'
Although these regions are the fastest growing in terms of value
added by manufacturing, the South lacks abundant supplies of quality
hardwoods such as walnut. While the West does have a hardwood
resource, it has yet to be developed. Michigan producers will have

to contend with selling to many relatively small firms in the West.

Michigan Trends

 

Since the Michigan furniture industry's rise to national promi-
nence in the late 1870's, it has been a leading production center.
Today, Michigan ranks first nationally in value added by manufactur-
ing for public building furniture, fourth for wood office furniture,
and eighth for both non-upholstered and upholstered wood furniture.
Although the total number of firms decreased slightly between 1958
and 1963, the value added by manufacturing increased in every prod-
uct group (Table A). The product class enjoying the greatest in-
crease during this time period was the upholstered wood furniture
group which increased 57 percent.

Although furniture manufacturers of Michigan are located in such
areas as Sturgis, Monroe, Bay City, Muskegon, and Iron Mountain,
Grand Rapids is the heart of the furniture industry. Fifty-two per-

cent of the furniture manufacturers are located within 35 miles of

28

 

 

 

 

 

 

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29
Grand Rapids and they produce 77 percent of the total furniture
sales. The highest concentration of manufacturers in the greater
Grand Rapids area is found in the non-upholstered wood furniture and
institutional furniturel classes. Fifty-seven percent of the non-
upholstered wood furniture manufacturers and 5h percent of the insti—
tutional furniture manufacturers are located within 35 miles of Grand
Rapids. The magnitude of economic concentration is more fully re-
vealed in the sales for these classes. Seventy-seven percent of the
non-upholstered wood furniture and 90 percent of the institutional
furniture sales comes from within 35 miles of Grand Rapids.

Catalysts that led to the development of the furniture indus-
try in this area were the native hardwood resource and the avail—
ability of skilled craftsmen. Early Grand Rapids furniture manufac-
turers were characterized by their small units, individual rather
than large corporations, quality products, and individual workmanship
utilizing native woods. While the national trend toward quantity TE
production is continuing, manufacturers of Grand Rapids generally
stress quality at the expense of volume.

The furniture industry in Michigan developed some special char-
acteristics. Some main features of Michigan's furniture industry are

the high value added per.establishment, the number of years in

business, and the type of ownership.

 

1The institutional furniture class is formed by combining the
wood office and public building furniture classes.

 

Akita

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the

30

Value added by Michigan furniture establishments averaged
$605,000 in 1963. This represents a 12 percent increase from the
$h51,000 average per establishment in 1958. Comparing the 1963
average with the national average, Michigan establishments average
$2h8,000 higher. Not only is Michigan's average higher than the
national figure, but it also averages $130,000 higher than the'
North Central region and $25,000 higher than the Southern region.

The high average value added per Michigan establishment results
from a slight decrease in total establishments but an increase in
the total value added by furniture manufacturers (Table A). In
1958 there were 223 establishments in Michigan compared with 218
in 1963. Even though establishments declined Slightly, the larger
ones with 20 or more employees increased during this same time.
This plus the increase in value added from $100,h75,000 in 1958
to $131,709,000 in 1963, results in an industry with an average
value figure higher than both the national and regional averages.

Michigan's furniture industry is also more highly concentrated
than the national industry. Overall, the four largestfirms accOunt
for 38 percent of the product sales and the eight largest, M6 per-
cent. Institutional furniture is the most concentrated segment of
the industry. The four largest firms account for 72 percent of
the total product sales and the eight largest, 82 percent. American
Seating Company with its subsidiary E. H. Sheldon is the largest in-
stitutional furniture manufacturer having net sales over $53,000,000
(Moody's Investor Service, Inc., 1965, p. 698). Other wood furniture

product groups are not as concentrated but still exceed the national

31
average. For both the non-upholstered and upholstered wood furniture
groups, the eight largest firms account for M9 percent of sales.

Maturity of Michigan's furniture industry is reflected by the
number of years the firms have been in business and in the same com-
munity. Michigan furniture manufacturers average 37 years in busi-
ness. Merely eight percent of the firms have been in business less
than ten years; but 30 percent have been in business more than half
a century.

Usually once the firms locate in a community, most of them
remain. Few choose to relocate from where they were founded. As
an example, only two relocated their base of operation in the last
ten years. Consequently, Michigan firms average over 30 years of
being located in their present.communities.

Another distinguishing feature of Michigan's furniture manu-
facturers is that most firms are either single proprietorships,
partnerships, or closed corporations. Type of ownership varies
with the size of firm. Most firms with less than 20 employees
are either single proprietorships or partnerships; whereas, those
having more than 20 employees are corporations. Most of these
corporations, however, are closed and owned by a few individuals
or a family. Hence, the overall pattern of ownership is basically
(where one family or a small handful of individuals controls the
firm.

The special characteristics of the furniture industry in
Michigan seems certain to endure. Based on past results, only minor

changes should result from firms Opening new furniture plants

_,. 0—“.

 

32
outside of Michigan or mergers between firms within the state.
Moreover, the majority of manufacturers are looking forward opti-
mistically to future expansion. This should continue the present
trend toward increasing average firm size.

Only nine Michigan firms Operate outside of the state. Most
of these plants are located in the Southeast or in California.
Reasons given for having manufacturing facilities in the South—
east varied. Among them are: the supply of wood needed for
their product is limited in Michigan, they bought an established
firm to diversify their product line, and the type of workers
needed are not available in sufficient quantity in Michigan.
Manufacturers who opened plants in California mentioned the
need to be close to the West Coast market. Those with Opera-
tions outside the state mentioned that they would continue their
operations in Michigan, but their reactions were almost evenly
divided as to whether or not they planned to expand their capa-
city in Michigan.

Based on past evidence, mergers or consolidation of firms
should have little impact on the future of the furniture industry
in Michigan. Some firms have acquired assets of other Michigan
Ifurniture manufacturers, but usually to acquire their name or

established accounts. One major exception was the American

h.h

4a,. 5“

Seating acquisition of the E. H. Sheldon assets. Before the
merger American Seating was a principal manufacturer and dis-
tributor of seats and other furniture for schools, theaters,

stadiums, and churches. With the acquisition of E. H. Sheldon,

33
their line was expanded to include laboratory furniture with
their facilities being used for production.

The trend toward larger firms should continue as most furni-
ture manufacturers believe that-their gross sales will increase
by 1969 (Table 5). All firms with 100 or more employees that
gave estimates, felt their future sales will rise. For firms
with less than 20 employees, the outlook is less bright. Of the
firms giving an estimate, only 3h percent claimed sales will
increase. One—third of the firms expressed a pessimistic out-
look on their ability to stay in business.

The relationship between excess capacity and future facilities
illustrates the dynamics of growth. Presently 66 percent of the
firms believe they have excess capacity. The belief is consistently
shared by all product classes and different sizes of firms. Of
the firms with excess capacity, 23 percent could expand production
10—19 percent, A7 percent from 20-59 percent, and 30 percent could
more than double output.

But much of this excess capacity will be obsolete. Single-
floor operations reduce costs per unit because of increased floor

I

potential. But many Michigan plants were built during an era of

muItI-floor technology. Although some of these upper floors are

presently used in periods of high demand at an increased cost per
unit, much of the present excess should be considered obsolete

for normal operations. Future expansion during times of normal

operation will not utilize this capacity. Instead either a new

 

 

 

 

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311

Table 5. How Michigan furniture firms viewed their sales outlook,
by primary product class, 196A

 

Primary product class

 

 

Sales Wood Wood Institu- All
outlook furniture furniture tional product
non-upholstered upholstered furniture classes

(Percent of firmS)

Increase 5h 76 5O 61

Stay the same 20 9 17 15

Decrease 7 0 8 5

No reply _pg; _15_ _jfi; _12_

Total 100 100

100

 

35

physical plant will be required or adjustments of present facilities
will have to be made.

Although firms anticipate future growth, most feel that it will
be difficult to achieve. Growth of the firms over the next five
years isilikely to be limited by problems with labor, markets,
capital, and management personnel (Table 6). Other factors in-
clude the general economy, physical plant, and raw materials.
Although these are not independent, they do show what presently
concerns manufacturers as they face the future.

Manufacturers in all primary product groups feel that labor
shortages are imminent. Statistics from the Department of Labor,
Michigan Employment Security Commission (1966) partially reveal
the problem faced by furniture manufacturers. Unemployment rates
in Michigan have decreased from 6.2 percent in 1963 to 3.2 percent
in 1966. In such furniture manufacturing centers as Grand Rapids,
unemployment rates have been as low as 2.7 percent. Furthermore,
the average weekly wage rate in 1965 was $97 for furniture manu-
facturers and the average hourly income was $2.50. The only other
major manufacturing sectors paying less on a weekly or hourly basis
were lumber and wood products, and canning and preserving industries.

Furniture manufacturers are experiencing external pressures in

\Nva _

(attracting and retaining both skilled and unskilled labor. One manu-
facturer reports that when General Motors opened a plant in his town,
he lost most of his besthorkers. He was unable to meet the security
and hourly wages offered by General Motors. Recruitment of both un-

skilled and skilled workers is also a problem. One reason cited is

 

 

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37

that though he offers above average wages, young people feel that
ythere is little future in working with wood. Young men prefer to
work in jobs requiring work with metal or plastic.
The inability to attract workers results in some furniture
_manufacturers having many of their employees near 65 years old.
Onefirm reports that it may be forced to close in a few years
for lack of trained personnel. Other manufacturers are experienc-
ing similar problems.

Manufacturers also feel that marketing their product will be
an important determinant of future growth. Basically most manu-

facturers expressed concern over the problem of finding more cus-

tomers. Because many of these producers manufacture products in

—\

-~._... .- .- .2

the

a

low to medium-price range, they recognize stiff competition

I

from the South. To meet the challenge they propose to develop
new-prOdugt lines and seek marketing exclusives through merchan-
dising organizations operating in the Lake States.

While lack of local raw materials does not appear to be
limiting, the concensus is it will influence future growth.
One manufacturer stated, "I wish Michigan would grow more oak...
walnut and maple seem to be becoming less available. TherestI
hardwood I receive now comes from Canada." Similar concern is
voiced by other Michiganders.

In summary, the future of Michigan's furniture industry looks
brighter than crude statistical comparisons would imply. Future

expansion of the industry is apt to occur through expansion of

present establishments. Growth will depend largely on the ability

 

——______.._,_—..__._...—._._._I .2...-

38
to raise the marginal productivity of labor to the point that

wages are competitive.
Products Manufactured

The type of furniture produced further contributes to the
special character of Michigan's industry. Although the state
industry is more concentrated than the national for the various
primary product groups, close examination within the various
groups reveals that most manufacturers succeeded in establish—
ing their own "niche" within the system. Rather than being in
direct competition with large scale producers, many Michigan
firms put out items designed for the "carriage trade." In many
instances the merchandise is made to order. The net effect of
this business policy is to isolate Michigan producers from com-
petition.

Three major types of furniture are manufactured in Michigan
utilizing wood raw materials. These types of furniture are non-
upholstered wood furniture, upholstered wood furniture, and in-
stitutional furniture.' But the industry continues to defy an
orderly grouping of firms based on products manufactured. Products
vary widely by materials, methods of construction, and style and

design. These within-class variations are important and must be

emphasized in the development of the product pattern.

39

Institutional Furniture

Based on the value added by manufacturing, the institutional
furniture class is the largest segment of the industry in Michigan.
Moreover, this segment has been growing steadily. During the 1958-63
period, value added increased from $30,163,000 to $h2,9hh,000.

Two major types of institutional furniture are public building
and wood office furniture. The public building segment comprises
firms primarily engaged in manufacturing furniture for theaters,
schools, assembly halls, churches, and libraries. Wood office
furniture includes items which may be padded, upholstered, or
plain. In 1963, value added by Michigan manufacturers of public
building furniture was $37,933,000 and for wood office furniture
$5,011,000.

Production of public building furniture in Michigan includes
church pews and other church furniture, library furniture, chairs
and seats for theaters and auditoriums, stadium and bleacher seats,
and school desks and seats. Although some of the larger manufac-
turers produce more than one type of public building furniture,
many choose to specialize in only one area such as theater and
auditorium seating.

Michigan leads in the production of theater and auditorium
seating. Of the six leading companies in the United States,
American Seating, Ideal Seating, and Irwin Seating Company are
located in Michigan. They market their products nationwide with

close price competition among the companies.

110

The major trend in theater and auditorium seating has been
substitution of plastics for wood. Although all manufacturers
stressed the need to give the customer what he wants, they felt
that there was no single factor that determined the use of designs
and materials. In general, orders tend to be unique and production
must be adjusted to meet specifications. As a consequence, one of
the leading manufacturers uses little wood raw material. In the
future, leading manufacturers anticipate that the trend towards
plastics will continue to make inroads on wood.

Another Michigan specialty is school furniture with such
firms as Brunswick Corporation and American Seating in the lead.
School furniture is marketed nationally but each firm has devel-
oped its unique way of reaching the ultimate consumer. This re-
sults in diverse marketing channels between manufacturers. All
price ranges of school furniture are available from Michigan but
there is a greater effort to dominate the medium to high-price
field.

The major trend for school furniture has been toward the use
of plastic materials and away from wood. The consumers stress
clear designs and above all durability. Some manufacturers feel
that the use of plastics will continue to grow with a further
decline in the use of wood materials. On the Other hand, others
feel that the present relationship will continue between wood raw
materials and plastics with minor modifications due to changes in

designs.

hl

Manufacturers of church furniture restrict their market to
the Midwest with the majority of their sales in Michigan. They
deal directly with the consumer and most sales are on a custom-
made basis. Sales are typically in the high to medium-price level
and the designs are influenced by architects.

A recent development in the church furniture field has been
increasing concern of customers for quality. This has reduced
selling problems for Michigan manufacturers over what traditionally
has been their strongest competitors, the Southern furniture manu-
facturers. Moreover, they can now use a better quality wood prod—
uct and some claim to buy only the best wood available in the United
States. Michigan manufacturers feel that church furniture will tend
toward simplicity in design with more upholstering and cushioning of
the pews. This means less use of wood per pew with an increase in
plastic and metal materials. But the anticipated market growth is
so large that overall demand for wood is certain to rise.

Michigan output of library and laboratory furniture goes largely
to the Midwest with a few speciality items marketed on a national
basis. These manufacturers feel that their products would be con-
sidered high to medium-priced but point out that many of their
orders are on a customrmade basis. Architects and ultimate custo-
‘mers are the major factors influencing their decision as to the
types and designs of furniture which their Operations will manu-
facture.

Manufacturers of library and laboratory furniture have found

that there is a trend toward lightness of design and brighter colors.

1+2

Moreover, they have found that their customers spend more money and
feel that the real inexpensive furniture market is dead. These
changes have resulted in some manufacturers substituting the use

of steel legs, more plastic surfacing, and new finishes on wood.
Other than some slight substitutions of steel for wood in the
future, most manufacturers do not anticipate a great change in

the utilization of wood.

Manufacturers of wood office furniture, the smaller of the
two segments of the institutional furniture class, report that
because of style changes over the last few years they increased
the use of metal parts but at the same time increased the use of
wood in the exposed parts. This trend results in an overall in-
crease in wood raw materials, but there has been some substitu—
tion of solid lumber for plywood and veneers. Expanding use of
plastics is also foreseen.

The complete array of wood office furniture is manufactured
in Michigan including such products as cabinets and cases, tables,
upholstered chairs, and desks. Although the small firms do their
work on a custom—made basis, most wood office furniture is pre-
designed and modified for the specific order. Architects influence
the types and designs of furniture and on some occasions special
customrmade furniture is made because of their suggestions. Al-
though the smaller firms restrict themselves to only Michigan, the
larger manufacturers market their product nationwide. These manu-

facturers aim their production at a select high-priced market.

t3

Production of wood office furniture in Michigan could be con-
sidered a yardstick of national business growth. Business expan-
sion leads to orders for new executive furniture which in turn are
directly related to capital expenditures. This is particularly true
in Michigan because the firms are geared to the select high-priced
market. One leading furniture executive's statement reflects the
impact of big business expansion by stating that every change in
gross capital expenditures causes fluctuation in our sales.

Overall, the manufacturers of institutional furniture in
Michigan produce a complete array of goods, but most would be
considered in the high to medium-price range. Most of the
larger manufacturers market their goods on a national basis with
the medium to smaller manufacturers marketing their product in
the Midwest with special emphasis in Michigan. The marketing
channels are diverse and vary between the segments of the in-
dustry and also with the segments. Architects were the most
frequently named as influencing the manufacturers as to the type
of design of furniture which their operations will manufacture.

The major trend has been toward simplicity and durability.
There has been some substitution of plastic and metal for wood
materials. In the future, many manufacturers anticipate that
{this trend will continue but the overall utilization of wood

materials should not be greatly affected.

hh

Non-upholstered Wood Furniture

Based on value added, the non—upholstered wood furniture class
ranks second in Michigan for firms utilizing wood materials. Dur-
ing the 1958-63 period, value added increased from $28,9h9,000 to
$33,h19,000. But this segment of the industry employs the largest
number of workers and has the largest number of establishments both
in total number and with 20 or more employees.

Buying patterns of consumers influence the production and
materials used by both non-upholstered and upholstered furniture
manufacturers. Firms usually follow national trends in styles.
Those changes in styling preference can affect both the total
quantity of wood used and degree of utilization among the various
tree species. As shown in Figure l, the bulky Borax design was
replaced in popularity by the thin-lined Modern design. Because
of the change in preference from Borax to Modern, the quantity
of wood used for each piece of furniture was reduced. On the
other hand, rising popularity of the Early American design led
to increased use of maple and cherry.

Other buying patterns also influence the type and materials
used in the production of non-upholstered furniture. It has been
.found that sales of non-upholstered furniture in stores are based
primarily on eye appeal. Since most of its construction features
are visible, consumers can readily ascertain the quality of fur-
niture which is being purchased. Further, Stanley Slom (1963,

p. 36) in his book "How to Sell Furniture" states that, "Consumers

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pretty well know before they enter a store whether they want a
natural wood finish or a painted surface. You will find they
know less about the relative merits of solid wood pieces, veneer
and plastic tOps. For some unknown reason, probably motivated
by snob appeal, the higher the price the more the demand for
natural wood finishes." Because of these buying patterns, fur-
niture manufacturers in Michigan adjusted their production as
shown in the following analysis of the various segments of the
non-upholstered furniture group.

Case goods are an important segment of the non-upholstered
furniture industry. The name derives from the chests of drawers
which resemble cases and today the term includes such items as
dressers, wardrobes, and desks. While some individuals mean
only bedroom furniture when speaking of case goods, most also in-
clude furniture for the dining room and living room.

Most of the manufacturers market their product nationally.
Although prices vary from high to low, the offerings are chiefly
in the high to medium range. The majority of production is sold
to retailers but some manufacturers sell through wholesalers.
Wholesale accounts per firm vary from four to 16, while the
number of retail accounts ranges from 300 to 2,000. Over the
years, little change was reported by manufacturers in their
marketing channels although one reports that interior decorators
are starting to become more important. Because of the price of
his product line, his customers can afford interior decorators

and more of them are utilizing their services.

 

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Success of some case good manufacturers in Michigan is in-
fluenced by the pOpularity of specific styles. Rather than manu-
facture a complete range of styles, these manufacturers choose to
feature only one style. Through time, many of these firms have
become nationally known for their design speciality. In some
degree this isolates them from competition with other companies
but their present success hinges on sustained popularity of their
style.

The major trend in case goods has been the substitution of
the Mediterranean theme for Early American and Modern (See Figure 1).
This caused no basic change in the use of wood products beyond
favoring walnut and maple over other species. Walnut and maple
are preferred for their color in Mediterranean designs. Most
Michigan manufacturers do not anticipate any future changes that
will influence their use of wood products. One exception, how-
ever, was reported by a manufacturer of medium-priced furniture
who feels that he will use more metal over printed with wood
patterns. But this should not result in a great change in the
overall utilization of wood materials.

Tables and chairs is another important segment of the non-
upholstered furniture class. Most manufacturers market their
product nationally with price ranges varying from high to medium.
Although some firms sell their product through wholesalers, the
majority market through retailers. The number of wholesale ac—
counts per firm varies from five to 20 whereas retail accounts

vary from h80 to 3,500. Some report that interior decorators

1:8

\-

are starting to influence buyers of their products and anti-

N...

cipate their future importance will grow.

As with the case good manufacturers, chair and table manu-
facturers' styles have undergone changes over the years. Although
some Michigan manufacturers specialize in only one style and gener-
ally do not follow the style trend, the majority have substituted
the Mediterranean theme for Early American and Modern. This caused
no basic change in the volume of wood products used but did affect
the species favored. None of the manufacturers anticipated changes
in the use of wood products because of variation in style.

Other areas of specialization in Michigan are premanufactured
kitchen cabinets, television and stereo cabinets, and lawn fUrni-
ture. Premanufactured kitchen cabinets manufacturers generally
have experienced growth in demand over the last few years. Al-
though the basic product remains the same, manufacturers generally
follow style trends from other types of furniture. The large manu-
facturers market their product nationally but the majority of the
sales are in the Midwest. Contractors are the main buyers although
some market through wholesalers. The concensus of the firms is
that more plastics will be used but their overall use of wood mate-
rials will not be affected.

0 Television, stereo, and liquor cabinets form another segment

of non-upholstered furniture. Although most manufacturers sell
their product to only a few wholesalers or television manufacturers,
they market their product nationally. Illinois and Indiana are the

location of the largest out-of—state buyers. The major trend has

1:9
been toward traditional furniture. One unique aspect of this seg-
ment is that designs of the cabinets lag up to three years behind
other furniture. This is because people usually buy cabinets to
match the furniture that they already own. Although most manu-
facturers have not changed their use of wood materials because of
style Changes, one reported that he now uses more solid woods on
exposed parts. Most manufacturers feel that they will combine
more plastic and wood materials but all reported that they should
have about the same usage of wood materials.

Lawn furniture is another area that is included in the non-
upholstered wood furniture class. This area has few manufacturers
employing more than three persons. Because most of the produc-
tion is sold directly to consumers, manufacturers base their pro-
duction on what people tell them they want. The only trend reported
is more metal is being used but this does not greatly influence
spruce and cedar consumption.

Overall, non-upholstered furniture manufacturers form an
important segment of the industry in Michigan. Their products
are such items as case goods, tables and chairs, premanufactured
kitchen cabinets, television and stereo cabinets, and lawn furni-
ture. Most prices are in the high to medium range. This prob—
ably was one reason that there was little substitution of wood
material reported as designs changed. Most changes were due to
the shift from Early American and Modern to the Mediterranean
theme. Manufacturers did not anticipate design changes that will

influence their use of wood products.

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Upholstered Furniture

Upholstered furniture is the third major area of the furniture
industry in Michigan. Value added of shipments increased during
the 1958—63 period from $12,107,000 to $19,050,000. Upholstered
furniture manufactured in Michigan includes sofas, sectional pieces,
and reclining chairs. Prices range from high to low with the ma-
jority in what would be considered the medium range. Although the
small manufacturers market their output in Michigan, most of the
large firms market nationally. Retailers are the main market but
some manufacturers market through wholesalers or interior decorators.
The number of retail accounts per firm varies from 10 to 3,000.
Although most manufacturers have not noticed any change in their
buyers, one reported that cooperative buying by retailers is be-
coming important.

The major trend has been the substitution of the Mediterranean
influence for such designs as Modern. Manufacturers also report
that consumers are blending designs more than they have in the
past. Style changes caused manufacturers to update their finishes
and experiment with new woods. The new styles increased the
amount of wood exposed and thus forced the use of more expensive
woods such as walnut or maple. Manufacturers feel that style
changes will not influence the use of wood products except that
there may be an increase in the use of exposed woods.

Wood frames are also included in the upholstered furniture

group. Not only do manufacturers make frames, but they usually

51

make such products as carvings and turnings. Most of them limit
their market to the Midwest and sell their product directly to
other furniture manufacturers.

In summary, a complete array of furniture products is manu-
factured in Michigan and generally follow national design trends.
Although the small firms restrict themselves to the North Central
region or Michigan, the large manufacturers market their product
nationwide. About 20 percent of the manufacturers sell a major
share of their production to a single or few buyers. A complete
price range is available in many product areas but the high to
medium-price furniture dominates offerings. In the past, because
of design changes, institutional furniture manufacturers substi-
tuted plastic and metal for wood materials but both non-upholstered
and upholstered furniture manufacturers generally shifted only
from one wood species to another. .Institutional furniture manu—
facturers anticipate continued.substitution of plastics for wood
materials; nevertheless, manufacturers in all classes feel that

wood materials should not be greatly affected.

CHAPTER h
WOOD MATERIAL COSTS

This chapter discusses the relative importance of materials used
by Michigan furniture firms. First, pricing policies for furniture
items are related to material costs. Next, cash flows and.manufac-
turing costs of the firms are presented with special emphasis given
to wood materials. Finally, cost reduction efforts are considered

in reSpect to wood materials only.
PricingpPolicies

Manufacturers' pricing policies directly affect their use of
wood materials. While there seem to be as many policies as firms,
they can be lumped into four alternatives. These are: (I) using
marginal analysis to evaluate the possible effect on revenue of
each price adjustment, (2) adding an established and inflexible
percentage rate of profit to the costs of production per unit of
output, (3) pricing by a cost-plus-margin formula but varying the
margin with changes in market conditions, and (h) adopting the
price set by a leading competitor. All four policies have impli-
cations for utilization of raw materials.

Michigan firms typically follow a cost-plus-margin formula
and generally vary the size of the margin in response to changing
market conditions. Of the manufacturers interviewed, 93 Percent
followed some form of this policy. The others used such methods

as trying to keep pace with competition or only considering

52

53
merchandising with costs not entering into pricing. One success-
ful manufacturer even suggested that he had no formal policy but
mainly guessed.

While many factors contributed to the develOpment of the cost-
plus-varying-margin policy, most frequently mentioned were lack of
managerial control over style and other aspects of consumer tastes
and the notion of low profits. Traditionally, the industry has
had the desire to gain control over its product lines to obtain
a satisfactory profit rate. But because of the changing consumer
preferences, managerial control of sales has been highly elusive.
The furniture manufacturers still hope to emulate the automobile
industry's control of the markets but they are currently at the
mercy of market whims. Meanwhile, they find it necessary to
center their attention on paring manufacturing costs to meet
the competition.

Many furniture manufacturers labor under the illusion that
their profits are less than those enjoyed by manufacturers gener—
ally. Statistics, however, do not support their feeling that
theirs is a low-profit industry. According to the United States
Treasury Department (1960) their average net profit after taxes
from 1938 to 1952 was 3.6 percent of sales and nine percent of
‘ invested capital. These rates are slightly above national aver-
ages which are 3.5 percent of sales and eight percent on invest-
ments. The abiding belief in low profits and the highly competitive
nature of their business have led furniture manufacturers to be-

come highly cost conscious.

5h

While provisional prices are set strictly on costs, the degree
of variation from the original cost-plus estimate depends upon the
firm's method of marketing. For manufacturers selling to many
buyers, there are several factors which contribute to the adjust-
ment of their price schedule. Most producers seldom know the actual
costs of an item. Aside from the usual problems in marginal cost-
ing, the frequent changes in styles and products cause a huge
bookkeeping problem. Consequently, they are at a disadvantage
when it comes to knowing either their costs or estimating those
of a competitor. Items offered are fundamentally based on their
appraisal of the market and their belief in what will sell at a
profit. In practice, this results in competitive conditions
governing selling prices.

Material costs often become controlling when prices are
adjusted to meet competition. For example, a manufacturer shows
a line at a price at the Chicago Merchandise Mart but a competi-
tor offers a closely similar product at a lower price. The manu-
facturer must either lower his price or close out the line. If
he meets the competitive price, cutting manufacturing costs may
become necessary and substitution of less expensive materials
might be one way to do this. On the other hand, if the initial
response was favorable at the furniture show, costs considera-
tions are not as important. Prices might even be increased and
_ profit margins raised. Hence, while costs are important in
isetting the original price, adjustments are made based on market

acceptance, especially, for firms selling to many buyers.

55

Estimates from cost-plus-margin formulas are more closely
followed by manufacturers who sell a major share of their pro-
duction to a single or a few buyers. About one—fifth of Michi—
gan firms operate with such a marketing arrangement. A typical
way for arriving at a price was reported by one manufacturer,
"From the blueprints we establish a price by costing the mate-
rials, and then we add labor and overhead costs. This price is
adjusted from experience to form a bid price." Again there is
an adjustment of the original cost estimate but most manufac-
turers stressed the importance of cost-plus-pricing. They
study material costs closely for ways to reduce expenditures.

Therefore, pricing does affect the use of wood materials
but is generally most important when manufacturers adjust sell—
ing prices downward or sell in volume to a few buyers. In such

cases, material costs are scrutinized very closely.

Cash Flows

 

A broad view of the importance of wood and other materials
for furniture manufacturing can be gained from.input-output anal-
ysis. The 196M cash flows of the furniture industry can be deter—
mined by adjusting Department of Commerce input-output tables for
the year 1958 to a gross national product of $600 billion first
surpassed in l96h (Leontief, 1965). By selecting only the in-
dustries where the input-output coefficient exceeds 1/81 or
$12.35 per $1000 of output, the key industrial suppliers for the

fUrniture industry can be identified.

 

 

56

Lumber and other wood products are the most important of the
six major industrial sectors supplying materials or services to
the fUrniture industry (Table 7). Nationally, $675 million worth
of lumber and wood products were Supplied, illustrating the impor-
tance of the wood material input. Household furniture consumed
$555 million and miscellaneous furniture and fixtures $120 million.

Other subsectors are also important for furniture production.
The significance of wholesale and retail trade is illustrated by
the $350 million it adds to the consumers' bill. Suppliers of
raw materials such as fabricated metal products and primary iron
and steel also contribute significantly. But many of these mate-
rials are used primarily in the production of such products as

metal office furniture, mattresses, and bedsprings.
Furniture Manufacturing Costs

The highly aggregated input-output categories shed some
light on relative importance of different raw materials. The
relative weight of wood to other raw materials in the total
cost structure of the firms is also revealing. Respondents
were asked to subdivide their total costs into labor, mate-
rials, selling and administration, and transportation.

Earlier analyses on the cost structure of the furniture
industry were consistent in their findings. For example,
DeVillars (l9h9) stated that under normal conditions material
costs would range from M2 to hh percent of total sales value;

v?»—

direct labor costs, 19-21 percent; overhead, 16—17 percent;

57

Table 7. Interindustry transactions between the furniture industry
and selected sectors of the national economy, 196111

 

 

Miscellaneous
Sector2 Household furniture and
furniture3 fixtures”
($1,000,000)
Lumber and wood products 555 120
Fabricated metal products 288 -
Primary iron and steel 105 187
Broad and narrow fabrics 2H9 -
Rubber and plastic products 177 -
Wholesale and retail trade 2M2 108

 

1Department of the Commerce input-output table for the year
1958 adjusted to a gross national product of $600 million which
was surpassed in l96h.

2Includes only the industries exceeding $12.35 per $1,000
output from the furniture industry.

3Includes non-upholstered and upholstered wood and metal
furniture and mattresses and bedsprings.

l’Includes both wood and metal and wood office furniture,
wood and metal partitions and fixtures, and venetian blinds
and shades.

Source: Leontief, Wassily W., 1965.

58

selling expenses, six to eight percent; and profit, five to nine
percent. In a more recent study Seidman (1965) reported that
average 196A furniture plant material costs were MO percent of
total sales; direct labor, 19 percent, factory overhead, 18 per-
cent; selling expenses, nine percent, administrative expenses,
five percent; and profit before taxes, nine percent. These cate—
gories are essentially the same as those used in the question-
naire.

Michigan furniture manufacturers' cost averages differ from
the national studies previously published. The 196A average labor
costs for Michigan firms were 29 percent of total costs; material
costs, 39 percent; and overhead, selling and administrative, and
transportation, 32 percent. Overall, the data indicate that
under average conditions Michigan labor costs comprise a larger
share of total costs and material less than in the country as a
whole. Previous studies have shown the national averages for
labor between 15 and 25 percent of the total and.material, NO
to 50 percent. The difference between Michigan and national
data can largely be attributed to the predominance of high grade
furniture output which requires a high 1abor9materia1 ratio.

Average cost figures necessarily conceal the wide variation
in the different categories. Based on previous national analyses

of the cost structure of the furniture industry, direct labor

.0...”—

should vary about 10 percent between firms. In this study, 20

percent of the manufacturers specified that direct labor accounted

94—9-9

for less than 19 percent of total costs, and 18 percent related

59
that they are more than hO percent (Table 8). Material costs and
factory overhead, selling and administrative, and transportation
costs also vary more widely than previous national analyses indi-
cated but this is consistent with Wickman's (1963) experience in
New England.

Three important reasons for explaining the wide variation
within the cost structure of Michigan firms are: (1) each type
and quality of product manufactured yields a different pattern
of costs; (2) raw material and labor cost percentages depend
upon the amount of preprocessing of materials; and (3) many
small firms do not maintain accurate records of their costs
and supplied only guesses.1

Variation between firms can be explained in part by the
type and quality of products manufactured. Most Michigan manu-
facturers offer a unique combination of products both in type
and quality to establish their "niche" within the market. The
combination of the various cost distributions results in a wide
variation between firms within the industry and also within each
of the SIC classes. For instance, three successful institutional

furniture manufacturers in Michigan have quite different cost dis-

tributions. One producer of high—grade furniture indicated that

 

lFirm size did not enter into the variation between firms.
When firms are weighted by sales volume, there is a small devia-
tion from the average based on number of firms. Also, throughout
this study, firms were weighted by sales volume and these averages
agreed closely with the firm average.

60

Table 8. Michigan furniture firms' costs for labor, mate-
rials, and other costs, 196M

 

 

 

PrOportion

of total Type of costs

costs Labor Material OtherT
(Percent) (Percent of firms)

0-9 1 - _
10-19 19 3 3
20-29 25 10 1h
30—39 37 M 55
ho—h9 6 25 27
50-59 11 13 1
60-69 1 5 -

70 _:_ __’ _:
Total 100 100 100

 

1Other costs include factory overhead, selling and
administrative, and transportation.

61
35 percent of total costs are for labor; materials 32 percent;
and other costs, 33 percent. Another firm, which manufactures
medium to high—grade furniture, stated that labor costs are 25
percent of total costs; material costs, h6 percent; and other
costs, 29 percent. The third manufacturer of low to medium-
grade products suggested that labor costs are only eight per-
cent of total costs; materials, 51 percent; and other costs,
#1 percent. These differences are in harmony with product
lines. Where low-priced furniture is being made, material
costs should be proportionally higher and labor costs lower
because less labor is needed to produce this furniture. Even
when each of these firms makes institutional furniture, their
product offerings are unique and this is reflected in their
cost structure.

Other factors attributing to the variation in cost struc-
ture are the amount of preprocessed material purchased and the
accuracy of cost records kept. Material costs are higher and
labor costs lower when dimension stock and finished parts are
purchased. For example, the institutional furniture manufacturer,
whose labor costs are eight percent, not only makes low to mediumy
priced furniture but also buys premanufactured parts. A con-
siderable amount of labor is thus absorbed in material costs.
Despite the importance of keeping costs within bounds, inter-
views revealed that many of the small firms do not keep detailed

records.

62

Wood Material Costs

The chief component of material costs is wood. It averaged
'22_percent of total costs and other materials, 17 percent. This
reflects a decline in the use of wood over the years. During
most of the early history of furniture manufacturing, wood was
the dominant material. In recent years, there has been substan-
tial changes in raw material inputs with the development of such
substitute materials as metal, plastic, reed, and rattan. How-
ever, wood still maintains its leadership because of widespread
availability, firmly entrenched appeal, workability, strength,
and beauty.

Again there is wide variation of costs between firms due
to the Specialized products manufactured and methods of construc-
tion (Table 9). This is shown by average wood costs for the
three major product groups. Average wood costs for the non-
upholstered wood furniture class are 29 percent of total costs
and 11 percent for other materials. There is a considerable
decrease in wood material cost percentages for upholstered
wood furniture. Average wood material costs are 13 percent
of the total; whereas, other materials are 21 percent. The
institutional furniture manufacturers' wood costs average 23
percent of total costs and other materials 17 percent. Dif-
ferences between classes coupled with the variation within

causes the wide range.

63

Table 9. Michigan furniture firms' costs for wood materials
and other materials, 196M

 

 

 

Proportion of Type of costs
total costs Wood materials Other materials
4(Percent) (Percent of firms)

0-9 1h 22
10-19 2h M9
20-29 36 10
30-39 17 10
ho—h9 6 9
50-59 3 -
60 _ _

Total 100 100

 

6M

Cost Reduction

In an effort to reduce wood material costs, M3 percent of the
firms use premanufactured stock. The net effect of this policy is
to reduce the amount of money needed for plant and equipment and
lower working capital requirements. Difficulties of premanufac-
tured stock procurement include delivery problems and quality
control. However, the use of premanufactured parts depends
upon whether or not the firm has a modern rough-end mill or
turning equipment. If it does not, using premanufactured stock
may be preferred to developing competitive facilities. On the
other hand, those who own this equipment probably find the cost
of premanufactured stock high if they consider the Opportunity
_cost of dismantling their facilities.

Although furniture manufacturers generally believe that
the use of premanufactured stock is most feasible for firms
making medium to low-priced products, this study shows that it
is usedrin all price lines. For example, M7 percent of the firms

making high—priced furniture use it. These firms have turned to

_,.-u-

.u r‘
\_ -—-—--‘~*~.-w --"‘*‘

reliance on premanufactured stock rather than £6 modernize their
'facilities. Most of them have experienced good delivery and
quality control and a few even provide raw material to their
processors.

Dimension lumber comprises the majority of premanufactured
stock. Thirty-eight percent of the manufacturers use this product

which is about the national average of 39 percent (Haas, 196M, p. 5).

65

Dimension lumber averages M5 percent of the wood material cost for
firms using it. The use of purchased dimension is most pOpular in
the production of dining room, dinette, living room, and institu-
tional furpiture. It is less pOpular in the manufacture of bed-
room and upholstered furniture but some small firms find buying
dimension cheaper than manufacturing it themselves. Purchases
include tOps, cores, drawer parts, bed rails, and upholstery
frames.

Other major purchases are turnings and moldings. Eleven
percent of the firms purchase this stock and it accounts for
about two percent of their wood material costs. A few large
manufacturers of non—upholstered furniture recently increased ,

their purchase of this material rather than investing in new 1;
equipment.

Firms have also reduced costs by inaugurating quality con-
trol departments. Twenty-nine percent of the firms have these
departments; most of them employ more than 100 persons. The
organization of quality control departments varies widely.
Techniques used include written instructions and sampling at
various stages of production.

Firms without quality control departments maintain high
standards by depending on skilled workers in key positions.
These individuals have worked with the company so long that
they maintain proper quality standards as part of their job.

They produce their work to standard or do it over on their

own accord. Although these products may consistently conform

66

to standards set by management, the cost of maintaining quality
is usually uncontrolled and may be unknown by managers of large
firms. This is why 52 percent of the large manufacturers have

established quality control departments. In the future, other i

!

firms may have to inaugurate these departments as their supply

_w——-.-_ _—

of experienced workers diminishes.

Quality control departments could make large cost savings
by inspecting incoming materials. Keeping below par materials
out of production is a fundamental method of maintaining good
quality. The problem results because incoming materials such
as lumber are bulky and are frequently delivered to the depart-
ment using the material rather than to a centrally controlled
supply room. This causes inspection of these materials to vary
considerably.

Better control of materials could save money by only using
the proper material for the product being made. As examples, the
yard foreman or his assistants usually inspect incoming lumber.
Frequently this man is supervising a lumber stacking crew at the
same time he is grading lumber. He only gains a general impres-
stion of the quality and usually has little time to keep improper
materials out of the production flow. Even more serious is the
handling of face veneer. It is purchased from samples but most
manufacturers do not check deliveries. An inspector could make
statistical checks on footage for size and moisture content to

see that the supplier's quality is maintained.

67

”Additional revenues can presumably be derived from further
processing of wood residues. But, converting residues to addi-
ltional products is difficult in Michigan. The efficiency of
handling, concentrating, and transporting residues plays an
important part in determining prospects for their profitable
conversion. If cost advantages of a residue over roundwood
or lumber is lost through collection, transportation and
handling, the firms must necessarily regard it as waste.

Thirty-eight percent of the plants in Michigan utilize
their wood residues. Sixty percent use it to generate power
or provide heat, 21 percent sell chips, shavings or small boards,
and 19 percent convert it to special products. _Firm;§izewplays.a
an important role in determining whether or not residues are !
utilized. Most plants with less than 100 employees do not
have a sufficient quantity for use in their power or heating
plants or have a mixture of species which can not be sold to
a hardwood pulp mill.

WOOd technologists have the capability to reduce costs
and also enhance product values. Nine percent of Michigan
firms employ wood technologists to help solve problems con-
cerning both marketing and manufacturing activities. Non-
upholstered and institutional furniture firms with more than-

100 workers are their chief employers.

CHAPTER 5

UTILIZATION OF WOOD MATERIALS

This chapter describes the relative importance of various types
of wood materials used by Michigan furniture firms. First the eco-
nomic significance of the different wood raw materials is presented.
Next the utilization of each type of material is discussed with spe-

cial emphasis on hardwood lumber.

Importance g£_Various Wood Materials

 

 

Significance of different wood raw materials to furniture manu—
facturers can be seen by their relative shares of expenditures for
wood products (Table 10). Lumber averaged 55 percent of wood mate-
rial costs; hardwood plywood, 19 percent; softwood plywood, six
percent; veneer, nine percent; particle board, nine percent; and
fiberboard, two percent. As in the early history of furniture
manufacturing, lumber is still the dominant wood material but not
by so large a margin. Between 19M8 and 1962 the lumber use per
dollar of manufacturers sales declined one-third. This is partLy
the result of changes in style but is also due to substitution of
other forms of wood for lumber. In recent years wood utilization
I has undergone substantial changes with the development of improved
glues and new wood materials such as particle board and fiberboard.
However, lumber still maintains its leadership because of widespread

availability, workability, strength, and beauty.

68

69

 

 

 

Table 10. Proportion of Michigan furniture firms' expenditures
for different wood materials, by product class, 196M
Primary product class
Materials Wood Wood Institu- All
furniture furniture tional product
non-upholstered upholstered furniture classes
(Percent)
Lumber M9 92 M2 55
Hardwood
Plywood 21 l 29 19
Softwood
plywood 8 l 6 6
Veneer 8 3 1M 9
Particle
board 11 l 7 9
Fiberboard 3 2 2 ’ 2
Total 100 100 100 100

 

70

Almost all of the gain in use of non—lumber forms of wood oc—
curred in the non—upholstered and institutional furniture classes.
For these firms, lumber accounts for less than one-half of the wood
material expenditures. Plywood and veneer have been the main sub-
stitutes for lumber with hardwood plywood accounting for the majori-
ty of the expenditures; 37 percent of non-upholstered wood furniture
and M9 percent of institutional furniture expenditures involved
plywood and veneer. The remainder of the substitution for lumber
was particle board and fiberboard. These products accounted for 1M
percent of non—upholstered wood furniture expenditures and nine
percent of institutional furniture.

Lumber was virtually used by every furniture manufacturer
(Table 11). Hardwood plywood was used by more than half the firms
which is not surprising but nearly as many used softwood plywood too.
The demand for softwood plywood is a recent develOpment. It comr
plements particle board and fiberboard as an inexpensive material

for application in non-exposed portions of furniture.

Hardwood and Softwood Lumber

 

Michigan furniture firms buy more than 5M million board feet
of lumber annually. Hardwood species account for 51 million board
feet and softwood species 3 million. Volumes used by each of the
product classes represent the following proportions of total lumber
consumption: 52 percent by non-upholstered wood furniture, 27 per-

cent by upholstered wood furniture, and 21 percent by institutional

71

Table 11. Proportion of Michigan furniture firms using different
wood materials, 196M

 

Primary prOduct clasS' “
Materials Wood .' Wood ‘ Institu— All
furniture furniture tional product
non-upholstered upholstered furniture classes

 

(Percent)

Lumber 100 100 96 99
Hardwood

plywood 68 15 96 53
Softwood

plywood 6M 36 57 52
Veneer 30 11 M8 26
Particle

board M9 11 7M 39

Fiberboard 28 13 3O 23

 

72
furniture. The most common thickness purchased is inch boards but
there is also a sustained demand for lumber in thicknesses of 1 l/M-,
1 1/2-, and 2- inches also.

Almost all of the 51 million board feet of hardwood lumber was
number one common or better. Only small amounts of number two common
were utilized. This makes the furniture industry the major user of
high-grade hardwood lumber in Michigan. In ordering lumber, many
firms simply stipulate number one common and better as a standard
practice. Huber, _ei a_l_. (1967) found that for five Grand Rapids
firms averages for this grade were 58 percent number one common, 20
percent selects, and 22 percent firsts and seconds.

A majority of the hardwood lumber is kiln-dried before it is
purchased. Sixty—nine percent of the firms buy most of their hard-
wood lumber kiln-dried; whereas, 17 percent buy it green, and 1M per-
cent, air—dried. Most of the firms that buy their lumber green have
their own kiln-drying facilities. Moisture specifications usually
vary between five and eight percent for kiln-dried lumber.

Hardwood lumber is generally purchased in the form of rough
boards. Seventy-six percent of the firms receive a majority of
their hardwood lumber as rough boards, 15 percent as dimension stock,
and seven percent as finished boards. Although a few large firms
have recently started purchasing dimension stock, most firms that
receive their lumber in the form of dimension stock or finished
boards are either small in size or make specialty products.

Whereas 92 percent of the furniture firms in Michigan use

hardwood lumber, only 38 percent use softwood. Most of softwood-

73
using firms are in the non-upholstered wood furniture class. Ninety-
one percent of the firms that purchased softwood lumber received a
major share of it kiln-dried. Also, for firms using softwood lumber,
53 percent buy it in the form of dimension stock, 37 percent as rough
lumber, and 10 percent as finished boards.

A wide variety of hardwood and softwood species are utilized.1

Ranked in order of volume usage, the hardwood lumber species are soft}
~maple, elm, walnut, cherry, hard maple, oak, and birch~(Table 12). ;
These species account for M1.M million board feet or 70 percent of !
the total volume. Other hardwood lumber species used include beech,
basswood, poplar, aspen, mahogany, ash, magnolia, cativo, cotton-
wood, limba, sycamore, and teak.

Pine is the most important softwood accounting for 90 percent
of the softwood lumber volume. Pine species that are utilized in-
clude ponderosa, white, and red. Other softwoods used are spruce,
fir, cedar, and redwood.

In terms of number of firms using a lumber species, soft maple
ranks first, walnut second, cherry third, and hard maple is tied with
birch for fourth (Table 13). Among individual product classes, soft
maple is used by the largest number of firms in the non-upholstered

and upholstered product classes and hard maple ranks first with birch

in the institutional furniture class.

 

1Throughout the next three chapters the term "species" and
names given for "species" used in furniture refer to the name
generally used in the lumber trade rather than to botanical species.

7M

Table 12. Volume of lumber species purchased by Michigan furniture
manufacturers by primary product class, 196M

 

Primary product class
Species Wood ' Wood Institu- All
furniture furniture tional product
non-upholstered upholstered furniture classes

 

(Million bd. ft.)7

Ash .3 .6 .1 1.0
Aspen l.M — — l.M
Basswood 1.6 — — 1.6
Beech - - 1.9 1-9
Birch .5 .M l.M 2.3
Cherry 3.9 .3 .2 M.M
Elm .5 6.2 .5 7.2
Oak .9 .8 .6 2.3
Maple (hard) l.M 1.2 1.7 M.3
Maple (soft) 8.6 3.6 1.8 1M.O
Mahogany 1.2 l - 1.3
Pine 2.6 - - 2.6
POplar 1.3 2 — 1.5
Walnut 3.3 .6 3.0 6.9
Other ._+i[ .__i2 ___5 _g,1_

Total 28.2 1M.9 11.7 5M.8

 

75

Table 13. Proportion of Michigan furniture manufacturers utilizing
selected lumber species, by primary product class, 196M

 

Primary product class
Species Wood Wood Institu— All
furniture furniture tional product
non-upholstered upholstered furniture classes

 

3(Percent)
Ash 11 13 8 11
Aspen 2 - — 1
Basswood 13 - - 6
Beech 2 - 29 6
Birch 22 11 38 21
Cherry 39 2O 8 26
Elm 7 37 8 19
Oak 30 19 33 20
Maple (hard) 17 18 38 21
Maple (soft) 61 58 33 55
Mahogany 20 11 8 1M
Pine MM — 8 20
Poplar 13 22 - 1M

Walnut 33 . 33 M6 35

 

76
The four key lumber species used by Michigan firms are soft and
hard maple, elm, and walnut. Together, soft and hard maple account
for 18 million board feet or 3M percent of the total lumber volume.

The wood from sugar and black maple is known as hard maple, the

wood from silver maple, red maple, and box elder as soft maple. Soft /
maple is easy to work and is often favored in solid construction. I

i
Hard maple, with its straight grain and good glueing properties is f
favored over soft maple where strength and hardness are needed. i
Manufacturers reported that they used 3.M board feet of soft maple
for each board foot of hard maple with the ratio of soft maple to
hard maple varying among the product classes. The non-upholstered
wood furniture firms use 6.1 board feet of soft maple to one board
foot of hard maple. The upholstered wood furniture firms use 3.1
board feet of soft maple to one board foot of hard maple and the
institutional furniture firms use about equal amounts of soft and
hard maple lumber.

Elm ranks second and accounts for 13 percent of the lumber
volume. Both American elm and slippery elm are used in Michigan.
Because furniture frames made of elm are noted for their strength,
joining and nail-holding qualities, it is one of the key species
used for upholstered wood furniture. Unfortunately, Dutch Elm
disease is starting to make heavy inroads in Michigan forests.

In the summer of 1965, a few manufacturers were anticipating that

they would be forced to substitute other species for elm because

of timber lost to this disease.

77

Walnut ranks third in consumption and second for the number of
firms utilizing the species. Over six million board feet of walnut
are used annually. It is used for such items as dining room tables,
chairs, bedroom and living room suites, and office furniture. Panshin,
232. g. (196M, p. M98) felt that walnut is unquestionably our finest
cabinet wood. Some Michigan furniture manufacturers express concern
that walnut supplies will not be adequate to meet the future needs
of the industry. This view is supported by such foresters as Boyce
(1965) who have stated that walnut trees are being harvested faster
than they are being grown. If this trend continues, there may be
substitution of other species or new materials for walnut.

Other important hardwood lumber species utilized include cherry,
oak, and birch. Cherry accounts for about eight percent of the total
lumber volume consumption but ranks third in the number of firms util-
izing the species. Because of its redébrown color, workability, and
structural strength, cherry is a pOpular species with firms in the
non-upholstered wood furniture product class. Although cherry occurs
in Michigan forests, the main concentration of commercial stands are
in the northern Allegheny and Pocono Plateaus in Pennsylvania and
adjacent areas in the Catskills and western New York.

Oak lumber is used in many products including desks, tables,
church pews, and frames for upholstered furniture. Both white and
red oak are used in Michigan although most firms in the institutional
class prefer red oak. Overall; oak accounts for about four percent

of the total lumber volume consumption.

 

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n
,1 1 \
. f ' . 1 , .1 . 1.
I v
u .
1 . , . »
, _ . , . .
4 1 .
. o »
. 7 1
\
>
. 1 , 1 o
. ~ 1,
. a a
' u
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- 1
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78

Birch is a durable wood similar to maple and is known for its
good working and finishing qualities, hardness, and attractive color;
Birch lumber is used in such products as case goods, exposed parts I
in upholstered furniture, kitchen furniture, wood chairs, and school;
and office furniture. Overall, birch accounts for about four per- /
cent of the lumber volume consumption but ranks fourth in the num- /
ber of firms utilizing the species. k

The number of lumber species utilized by Michigan furniture
firms varies from one to over five and is represented by the follow-
ing proportions: 22 percent use five or more species, 22 percent use
four, 20 percent use three, 26 percent use two, and 10 percent use
only one species. There is a similar distribution for each product
class. For example, the number of species used by firms in the non-
upholstered wood furniture product class represent the following pro-
portions: 17 percent for five or more species, 13 percent for four,
2M percent for three, 17 percent for two, and 13 percent for one
species.

A comparison of the seven leading lumber species utilized in
North Carolina, New England, and Michigan reveals that the species
mix differs by region (Table 1M). Yellow pOplar ranks first among
the species used in North Carolina, but is not listed in the top
seven in Michigan. Other species used in North Carolina to a greater
degree than in Michigan are oak,_gum, willow, and pecan.

Whereas the North Carolina list contains several different

species, New England and Michigan lists contain approximately the

same group of species. Maple is the leading species in New England

79

Table 1M. The seven leading lumber species utilized by the North
Carolina, New England, and Michigan furniture manu-
facturers

 

Region '
Rank North Carolina1 New England27 Michigan

 

(Species) (Percent), (Species) (Percent) (Species) (Percent)

Yellow
1 pOplar 36 Maple 30 Maple 3M
2 Oak l2 Birch 19 Elm l3
3 Gum 12 Pine 9 Walnut 12
M Maple 11 Oak 7 Cherry 8
5 Willow M Redwood 6 Pine 5
6 Pecan M Cherry 6 Oak M
7 Elm 3 Yellow Birch M

poplar 5

Other _18_ Other _18- Other _ggg
Total 100 100 100

 

Sources: 1North Carolina data from Applefield (1965, p. 2).

2New England data from Whitmore, 33.31, (1963, p. 39).

80
as well as Michigan. The only differences in the listing are the
appearance of redwood and yellow poplar in the New England region
and elm and wlnut in the Michigan region.

The availability of local wood species is the major reason for
the difference in the three areas' species mix. A key factor in the
early location of the industry was the availability of a local wood
resource. As each region develOped, furniture manufacturers became
known for their products manufactured.from local woods. Although
today there is utilization of species from.other regions, native

species still continue to dominate.
Lumber Selection

To gain insight into the selection of lumber for furniture manu-
facturing, one must review the development of the industry. In
America the important centers developed from small handicraft shops
making a few pieces of furniture per month to the present establish-
ments using assembly-line techniques.‘ But the influence of early
craftsmen still linger in the production of furniture today. Many of
these craftsmen based their techniques on the English masters such as
Thomas Chippendale, George Hepplewhite, and Thomas Sheraton or the
American master Duncan Phyfe. These individuals were noted for their
' use Of fine wood, most notably mahogany. Through time there were
changes of styles and interest in various woods. Such styles came
into vogue as the Elizabethan types, garish and rococo designs pre-

ceding the l890's, and the sturdy mission oak types at the turn of

81
the century. This resulted in a rich reservoir of styles from
which present-day manufacturers can draw.

Experience gained working with wood during the formative years
led to a deep-seated tradition in favor of wood. While colonial
manufacturers along the Atlantic seaboard were able to get inexpen-
sive mahogany by low cost water transportation form.the west Indies,
others not so favorably situated soon found that local species were
both conveniently located and had desirable manufacturing properties.
Black cherry from New England and the Appalachian Mountains became
known as a high grade cabinet wood. Later manufacturers in the North
Central area recognized walnut for its outstanding features of
beauty of grain, seasoning qualities, hardness, and workability.
Also maple, birch, and red gum.enjoyed their turn as a favorite
for fine furniture. These native species still maintain their
high favor as quality materials. For inexpensive furniture such
species as white pine played an important part in the development
of furniture particularly from the Pennsylvania Dutch sections.
Other species such as beech and elm entered prominently in the
bentwood and kitchen types of chairs. Furniture manufacturers
found every technical property needed in the woods native to
America; these included attractive grain, durability, seasoning
and finishing properties, and machinability. The knowledge gained
working with local woods led to a tradition in favor of wood not
easily displaced by new materials.

While many materials have been introduced in furniture manu-

facturing, no one material has as many advantages as lumber:

82
(1) It can be efficiently joined and held together with various
_agents such as glues, screws, nails, dowels, and other devices.
(2) It is strong for its weight and damaged parts made of wood
usually can be repaired. (3) It is available with many diverse
properties such as color, grain, hardness, and workability. (M) It
is easily worked by hand or machine. (5) It is a poor conductor
and thus does not feel very hot or very cold when touched.

Lumber's main disadvantages are that when green and during the 7
process of seasoning, it is susceptible to warping, shrinking, twistf
ing and honeycombing which may degrade it and also cause it to be t
unsuitable for furniture. This is why the majority of firms now
buy lumber kiln-dried. Even when kiln-dried, wood may shrink or_fifl_
swell depending upon the atmospheric moisture and temperature in
which the wood is used. Often this can be overcome by drying the
lumber to the moisture content it will have while in service or by
giving surfaces moisture-resistant coatings.

Although manufacturers use lumber for many reasons, a few key
ones can be identified. Ranked in order of firms' preferences, they
are appearance, price, strength, constant supply, machinability, de-
sign, durability, moisture content, and customer choice (Table 15).
Among individual product classes, appearance is the most important
in non-upholstered and institutional furniture; but strength is the
most important in upholstered wood furniture. Although price ranks

second in all product classes, the third place factor varies between

classes. Constant supply ranks third in the non-upholstered class,

83

Table 15. Most important factors that influence Michigan furniture
manufacturers to use lumber, 196M1

 

Primarygproduct’class
Factor Wood Wood Institus All
furniture furniture tional product
non-upholstered -upholstered furniture classes

 

(Percent of firms' votes)—

Appearance 27 12 30 2M
Price 18 17 1M 16
Strength 7 27 10 1M
Constant
supply 12 13 M 10
Machin-
ability 9 1M 7 10
Design 11 l 5 7
Durability 1 9 13 6
Moisture
content M 6 8 6
Customer
choice 8 l 9 6
Other 3 — ' - 1
Total 100 100 100 100

 

1Each firm listed four qualities and the firm's first choice
was given the weight of four votes; second, three votes; third,
two votes; and fourth, one vote.

8M
machinability in the upholstered class, and durability in the in—
stitutional class.

Appearance was the major factor affecting use of lumber. Al-
though a wide variety of products were involved, those firms using
a majority of their lumber in exposed parts listed this factor as
crucial. This was especially true of firms making high-priced
furniture and using such fine woods as cherry, birch, walnut, mahog-
any, and maple. The continuing popularity of these species lies in
the seemingly endless variety of figures that can be found in their
grains. Not only did the early leaders in design find these spe-
cies desirable, but today firms continue to find that they can
enhance their product.

Manufacturers ranked price second in importance for choosing
lumber both overall and in each Class. Those firms manufacturing
medium to low-priced furniture were especially cost conscious.
Price was a key factor with all firms that in the last five years
had substituted lumber for uses formerly served by non-wood prod-
ucts. Also, 75 percent of the firms that had substituted among
Species in the last five years considered price important.

Sensitivity to price changes is shown by the impact substi-
tutes had on lumber utilization. Based on the wholesale price
index of the U.S. Department of Labor, wholesale prices of lumber
between 1929 and 1955 increased faster than the index for all com-
modities (Figure 2). The relative rise in the price of lumber
alarmed furniture manufacturers. As a consequence, between 19M8 and

1960, relative lumber consumption by household firms decreased from

85

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86
0.977 board feet per dollar of manufacturers' sales to 0.650 board
feet. Institutional firms decreased their lumber usage from 0.318
board feet per dollar of manufacturers' sales to 0.266 board feet.
Although part of the decrease can be attributed to style changes
and development of new materials, the rapid increase in the price
of lumber contributed significantly to the decline.

Strength is the most important factor in the upholstered furni-
ture class and ranks third overall. Seventy-five percent of the
upholstered furniture firms listed strength as one reason they
selected lumber. The key species used by these firms were elm,
hard maple, birch, and ash.

Although the remaining factors for lumber selection vary in
relative importance among the primary classes, each is important
to.some segment of the industry. A dependable source of supply is
of special concern to non-upholstered manufacturers with limited
storage facilities. Design is a major consideration to those non-
upholstered firms using designs associated.with certain species.
As an example, early American furniture styles developed in the
East are traditionally associated with maple and cherry. It is
often costly to imitate the qualities of these woods with substitute
materials. Institutional furniture firms are concerned with
durability and use such species as hard maple, birch, and beech.
Customer choice is an important factor to non-upholstered and in-
stitutional furniture manufacturers which sell a major share of

their product to a few buyers who dicate what materials to use.

 

87
Few firms listed the same four reasons they selected lumber il-
lustrating the versatility of this material. Although the knowledge
gained working with woods led to a tradition in favor of wood, firms
still find that lumber possesses a combination of qualities not
available in substitute materials. With the relative stabilization
of its price between 1955 and 196M, lumber continued to be the major

material used in furniture manufacturing.

Veneer and Plywood

 

Furniture firms have steadily increased their utilization of
veneer and plywood. Today, 3M percent of Michigan wood expenditures
are for these materials. Among individual classes, institutional
furniture devotes M9 percent of its wood expenditures to veneer and
plywood; non-upholstered furniture, 37 percent; and upholstered fur-
niture,.five percent.

Michigan firms use over 22 million square feet of plywood and
veneer annually in a wide variety of furniture items. Plywood is
used extensively in case goods for tOps, sides, and drawer fronts
and bottoms.' Other products utilizing plywood include table tops
and drawers, wooden chair parts, desk tOps and sides, head and foot
boards for beds, kitchen cabinets, church pews, and bookcases. Al—
though upholstered chairs offer little opportunity for use of ply-
wood, some firms employ it for such purposes as joint supporters.

Plywood has been popular because of its outstanding character—
istics including a high strength-weight ratio, dimensional stability,

and bonding properties. Although wood surpasses all common materials

 

88
on a pound-for-pound basis in both tension and compression across the
grain, it is easily split along the grain. This limits the ability
of wood to resist shear loads along the grain and gives wood a pro-
pensity to split when nails or other fastenings are not prOperly
selected and placed. However, plywood gives wood strength along
the grain by supporting it with the across-grain strength of the
other bonded layers. This gives plywood a high strength-weight
ratio which is a major factor in its popularity. Designers have
found that they can obtain the same structural strength from plywood
as they obtain from lumber but use a thinner and lighter material.

Similarly, the absorption of water by wood causes it to expand
more across the grain than along the grain. However, plywood
inhibits a large proportion of the cross-grain movement by bonding
the cross-grain instability to the long-grain stability of the other
layers. As plies per inch are increased, the face of the panel be-
comes more stable.

Plywood when properly assembled also has outstanding bending
properties. It can be permanently molded into various shapes dur-
ing manufacture while maintaining its strength. Furniture manu-
facturers have found this feature highly beneficial. Also, if
bent after assembly, the piece will resume its original position
when the force causing the bending is removed.

Problems are encountered if the plywood has been improperly
formulated. Plywood is subject to grain raising and checking.

Grain raising is caused by the difference in moisture absorption

of spring and summer woods due to their densities. This is

89
especially true of fast growing woods with their wide growth rings.
Checking is caused because as panels absorb moisture and dry out
there is a tendency for the wood fibers to separate. Both grain
raising and checking can be overcome if a prime coating such as a

resin sealer is applied to the faces and edges of the panel.
Raw Veneer

Raw veneer accounts for nine percent of the wood expenditures
for all firms. Among individual product classes, veneer accounts
for 1M percent of institutional furniture wood expenditures, eight
percent of non-upholstered furniture, and three percent of upholster-
ed furniture. According to the survey, a majority of this expendi-
ture was for face veneer with a typical thickness of 1/28 inch. The
rising cost for prime veneer logs has contributed towards the trend
to thinner veneers. Walnut is the most popular species followed by
cherry, mahogany, maple, and oak. Other species include ash, elm,
and pecan. Although there are three plants in Michigan manufactur-
ing veneer, almost all firms buy some out-of-state veneer. Reasons
for this included good quantity and quality of the desired species
and favorable prices.

Listed in order of preference, the factors that influenced
Michigan firms to use raw veneer were appearance, design, and price.

These factors accounted for 60 percent of the votes cast.1 Other

 

1Each firm listed four reasons why they used the product. The
firm's first choice was given the weight of four votes; second, three
votes; third, two votes and fourth, one vote. This was also done for
hardwood and softwood plywood, particle board, and fiberboard.

9O
factors mentioned by firms included constant supply and customer
choice.

Appearance accounted for 26 percent of the votes. This is be-
cause of the wide variety of beautiful grains and colors available
in veneer. The beauty of wood can be brought to its full potential
due to the variety of ways veneers can be cut.

Furniture firms usually buy sliced veneer.1

The slicing process
was developed to reduce the waste in sawing veneer and to enhance the
beauty of the grain. First the log is cut open on a band saw to de-
termine the character of the grain and the log is converted to
flitches accordingly. Then the flitches are sliced to obtain the de-
sired grain pattern. Advantages of sliced veneer include no tendency
for it to curl back to the previous curvature, no rupture of the
fiber, and no permanent distortions. This latter factor is of spe-
cial importance when veneer is matched to create a balanced figure.
Cutting veneers by sawing, cone—cutting, and half-rounding also
produce beautiful materials. Sawn veneer is still used for such
species as oak and ebony. They are unsuitable for slicing as soft-
ening by cooking would spoil their color. Cone-cut veneer is quite
brittle but it has been used as a face veneer in elegant table t0ps.

The cone-cutting process is similar to sharpening a wooden pencil.

Half-rounding is a modification of rotary-cutting and is used for

 

1Although rotary-cut veneer accounts for 90 percent of all
veneer production, this method is used mainly where strength is the
predominant requirement.

 

 

91
producing face veneers from irregularly shaped material or quarter-
flecks.' This method allows wider sheets of veneer to be produced
than is ordinarily possible from slicing. These methods allow the
firms to select from a wide variety of material to obtain the de-
sired.grain and color.

Design was ranked second as a reason why firms use veneer.

This is because since the earliest civilizations some of the finest
designs were made possible by its utilization. Furniture found in
such Egyptian tombs as Rameses, and Iouya and Touya contained ply-
wood with styling resembling modern furniture with its long sweep—
ing lines.' The Romans developed the art of matching figured veneers
and one table purchased by Cicero cost at least $20,000. During the
Middle Ages, the art of veneering became dormant until the seven+
teenth century. In 1769, Reisner.used veneers to finish his Bureau
du Roi for Louis XV considered by some the finest piece of furniture
in existence. Also, such English masters as Chippendale, Hepple-
white, and Sheraton effectively used veneers.

Although early American craftsmen such as Duncan Phyfe used
veneers in their finest furniture, later mass production brought
this material into disrepute. As hand labor by craftsmen started
to be replaced.by machines.and mass-production techniques, veneer
was used to conceal either inferior material or workmanship.

Through time veneer construction became associated with inferior
furniture.. Unfortunately some consumers still harbor this associ-
ation. However, most Michigan furniture firms apply veneer in the

tradition of the great masters. Rather than using it to cover

92
shoddy workmanship or inferior materials, they use it to give ele-
gance to the designs of former masters. Moreover, they find that
veneer with its combination of outstanding construction character-
istics still offers design possibilities offered in no other
material.

Price was the third ranked factor why firms use veneer. At the
present time many Michigan firms have found that they can save money
by using this product. A firm can manufacture a piece of furniture
either by using solid or veneer construction but the final product
and cost structure will differ depending upon which is used. The
solid.wood piece will have a larger proportion of its cost spent on
materials relative to labor, while the veneer piece will have a
larger proportion spent on skilled labor for fabrication. As long
as skilled labor costs remain favorable, firms can save money by

using veneer.
Hardwood Plywood

Michigan firms have found that they can save additional money
by purchasing veneer already converted to plywood. Today, plywood
accounts for 25 percent of the wood expenditures. Among individual
classes, institutional furniture devotes 35 percent of its expendi-
tures to plywood; non—upholstered furniture, 29 percent; and up-
holstered furniture, two percent.

Hardwood plywood accounts for the majority of the plywood
expenditure (Table 10). Although firms use hardwood plywood for

many reasons, a few key ones can be identified. Ranked in order

93

of firms' preference they were price, appearance, and strength.
Other factors mentioned included machinability, durability, constant
supply, and customer choice.

The reason for such a wide variety of factors is that firms use
hardwood plywood both as a face and a core material. Firms using
it as a face material bought it for appearance while those using it
for core material bought it for strength. Few firms listed the
same reasons for selecting hardwood plywood, illustrating the versa—
tility of this material.

Price was the one factor consistently listed for selection of
hardwood plywood regardless of intended use. Wholesale prices for
hardwood plywood have been relatively stable for about the last
15 years (U.S. Department of Labor, Bureau of Labor Statistics)
while the cost of making plywood by furniture manufacturers has
risen. Thus, those firms making medium to low-price furniture
find they can save money by purchasing hardwood plywood with the
face material already assembled. Prestigious manufacturers,
however, still apply face veneer to a hardwood plywood core in
their own plants.

Wholesale hardwood prices have been relatively stable because
of competition from imports. Although hardwood plywood producers
in America have experienced rising costs, foreign sources have
been able to offer it for about the same price. Results are that
some American mills have closed and foreign sources continue to
gain an increasing share of the American market. Foreign sources

supplied only eight percent of the hardwood plywood used in America

9M

during 1951, by 1965 they supplied 5M percent. Nations that lead
in supplying U.S. markets are Japan, Taiwan, Korea, the Philippines,
Finland, and Canada.

The furniture industry has become an important market for
American hardwood plywood producers. In the United States there
are 193 plants producing over two billion square feet of hardwood
plywood annually. Two of these plants are located in Michigan with
a rated capacity of M.5 million square feet. Twenty—five percent
of the American production is now in the form of molded, curved, or
cut-to-size materials used in industrial applications, principally
furniture. Another specialty product being offered is prefinished
hardwood plywood. Although the major market is do-it-yourself items,
furniture firms making medium to low-price furniture have found use

for this product.
Softwood Plywood

Softwood plywood utilization has increased rapidly in the last
few years. Although softwood plywood is mainly used in non-exposed
parts such as interiors of cabinets, tables, chairs, and desks, it
now accounts for six percent of wood expenditures for Michigan firms.
Key factors why the firms use softwood plywood are price, strength,
dependable supply, machinability, and design.

Price dominates the other factors as it accounted for 31 percent
of the votes. While the price of other materials has gone up or re-
mained about the same, wholesale softwood plywood prices have de-

creased. Based on a price index of 100 for 1957 to 1959, the

95

softwood plywood wholesale price index decreased from 121.5 in 1950
to 86.8 in 1965 (U.S. Department of Labor, Bureau of Labor Statis—

tics). Furniture firms have found that while softwood plywood lacks
appearance, in interior applications its low price is becoming pro-

‘gressively more attractive.

Composition Board

 

Utilization of composition board in furniture manufacturing has
increased rapidly. Since W0r1d war II when almost no composition
board was used, it has grown until it now accounts for 11 percent
of Michigan's furniture wood expenditures. Within individual
classes, composition board accounts for 1M percent of the wood
expenditures for non-upholstered furniture, nine percent for insti-
tutional furniture, and three percent for upholstered furniture.

Basic types of composition board are hardboard, insulation
board, and particle board. While both hardboard and insulation
board are known as fiberboard, most of the fiberboard used in furni-
ture manufacturing is hardboard made from a mechanical pulp. Usu-
ally hardboard has a density ranging from 50 to 80 pounds per cubic
foot and a thickness ranging from 1/16- to l/M-inch. Particle board
is manufactured from.whole wood in the form of splinters, chips and
flakes, or shavings bound with an adhesive under pressure. Its
density is usually from 25 to 50 pounds per cubic foot with a board

thickness of l/M to 1 1/2 inches.

96

Particle Board

Although particle board is the newest of the wood panel
products, it accounts for the majority of composition board expend-
itures; nine percent of the wood material costs are for particle
board whereas fiberboard accounts for two percent. Particle board
used in furniture manufacturing differs from fiberboard in that the
particles are in larger pieces that demonstrate many of the surface
characteristics of the original wood. The particles are produced
by cutting or breaking wood by such methods as hammermilling or by
dry-grinding in an attrition mill. In contrast to fiberboard which
depends mostly on a natural ligneous bond, particle board depends
upon an adhesive additive for within board cohesiveness.

The production of particle board has increased in the United
States from 320 million square feet in 1961 to 833 million in 1965
(Sherman, 1965). In 1965 there were 38 plants manufacturing particle
board for use by furniture firms. While general manufacturing costs
for standard boards have declined, producers have created a host of
new products. These specialties include such items as new faces,
prepriming prefinishes, plastic and veneer overlays, and grain print-
ing which raise manufacturing costs but also raise product values.
But 65 percent of the Michigan firms still prefer to buy their
board in standard form.

There is one particle board plant located in Michigan. It
began production in 1965 with a rated annual capacity of M0 million

square feet, 3/M-inch basis. Raw materials used are pine, aspen,

97

and some mixed hardwoods. Production includes furniture and core
stock cut to size. This board has a mosaic surface appearance which
is water resistant. Although all firms reported that they purchased
the majority of their board outside of the state, progress was being
made by the newly opened Michigan producer.

Particle board can compete in virtually any application where
a smooth, dimensionally stable panel product is needed. Its
dimensional stability, smoothness, ease of application, and economy
is promoting particle board's wide acceptance as a core material in
all furniture having veneer or plastic overlays. The surfaces of
certain types can also be printed. In Michigan, firms use particle
board in cabinets, tables, desks, benches, and bookcases.

A wide veriety of particle boards are available to Michigan
furniture firms. Particle board can vary by the type and size of
particle, type of adhesive employed, pressing treatment, density
of material, or postmanufacturing treatments. Although all of
these differences influence the final board, the type of particle
utilized probably is the most important as it determines the basic
character and limitations. The main types of particles include
granular, random, and controlled dimensional. Processes employ-
ing the granular type particles usually utilize shavings or other
fine waste. The fiber is Obtained.by either hammermilling or dry-
grinding. Since the fibers do not have enough inherent strength
for low-density processes, the density of the board ranges from
high to medium. Random.particles are obtained from.hammermilling,

chipped slabs, or veneer waste. Particles are screened to eliminate

98
under and over-sized material and are usually classified within
board groups. Because there is no effective control over exact size
and shape of particles, the name random has been applied to the pro-
cess. Most core board operations follow this method although some
plants using this process manufacture a high-grade panel. Con-
trolled dimension particles are produced on specially designed
machines and utilize debarked slabs, pulpwood, or veneer waste. This
method allows the producer to adjust the size range of the particles
for length, width, and thickness thereby obtaining a uniform product.
The cutting action is performed along the grain of the original
piece of wood rather than across the grain as by a conventional pulp
chipper. This adds to the overall strength of the material and most
European mills follow this practice.

One problem Michigan furniture firms encounter with particle
board is selecting from the wide variety caused by differences in
fiber characteristics and other variables in manufacturing. Al-
though large firms can save money by arranging with board producers
for special sizes, shapes, thicknesses, or finishes, Michigan furni-
ture firms frequently do not qualify because they do not require
sufficient volume. They must, therefore, experiment among the vari-
ous types manufactured to find the product best suited to their
purposes. Unfortunately, some Michigan firms thought that all
particle boards are made to a general standard. This is most de-
cidedly not the case. Upon receiving shipments from other than their

established source, firms soon found many of the boards unsuitable

99
for the purpose intended. In view of their past problems with
ordering, some firms are reluctant to use particle board to its full
potential.

Listed in order of preference, the factors that influence
Michigan firms to use particle board are price, machinability,
strength, and constant supply. These factors accounted for 65 per—
cent of the votes cast for particle board. Other factors include

durability, density, uniformity, appearance, and design.
Fiberboard

Although fiberboard accounts for only two percent of Michigan's
wood expenditures, developments such as wood-graining should expand
its utilization. Hardboard, almost all of the fiberboard used, can
be utilized as core material and as a substitute for lumber in drawer
bottoms, chair backs and seats, table tops, and desks. However,
much of the substitution for lumber has occurred in the moderately-
priced line of furniture with many of the prestige firms being re-
luctant to use the material. Fuldauer (196M) estimated furniture
firms throughout the Nation utilize from 20 to 25 percent of all
hardboard production which totaled about 2.5 billion square feet
with a thickness of l/8-inch.

In 1965, there were 21 hardboard plants in the United States
with nine plants featuring grain-printed board. As with particle
board, there are many types of hardboard with different physical

properties tailored for specific end uses. One hardboard plant is

100
located in Michigan with a rated annual capacity of 26M million
square feet, 1/8-inch basis.

Furniture firms in Michigan purchase both standard and tempered
hardboard from both in-state and out-of-state sources. Firms buying
out-of-state board stressed that they bought it because the quantity
was available of the type of board needed. Few firms took advantage
of the special sizes offered as most received their board in standard
sizes and machined it themselves.

Ranked in order of firms' preference, factors influencing
manufacturers to use fiberboard were price, design, and constant
supply. These factors accounted for 6M percent of the votes cast.

Other factors included machinability, strength, and appearance.

CHAPTER 6
MARKETING OF WOOD MATERIALS

In the United States there are well over four million timber
producers. Many of these forest owners hold small parcels of land
and only sell their timber occasionally. Hence, timber markets
are poorly defined and weakly structured. Adding to the market-
ing problem is the unique requirements furniture firms place on
the materials they purchase. A variety of marketing channels
have develOped to facilitate transfer of wood materials and
achieve economies of specialization and scale.

This chapter describes the concentration and dispersion of
wood materials. First, the flow of wood materials from their
source to the furniture firms is discussed. Next, there is a
review of the activities of hardwood lumber marketing agents

and methods by which firms contact their source of materials.
Flow of Materials

A majority of Michigan furniture firms have their hardwood
and softwood lumber delivered by truck rather than by rail.
According to the survey, 65 percent of the firms, utilizing
79 percent of the lumber, had their lumber delivered by truck
from the sawmill or wholesale yard. Both in—state and out—of-
state lumber were delivered by this means.

Trucks are favored because hauling costs are frequently

cheaper from the sawmill to the furniture firm. Often this is

101

102
because one party lacks a railroad siding and a transfer of mate-
rial is required. Moreover, in many areas lumber is the backhaul
load for trucks that primarily deliver other commodities. Furni-
ture firms can also reduce costs of carrying inventories by order-
ing in truckloads rather than by carloads.

There are five market agent sources from which Michigan fur-
niture firms obtain their lumber. Ranked by number of firms using
each as their primary source, they are: (l) wholesalers, who buy
from sawmills and importers and then resell to the furniture firms,
delivery being either from the wholesale yard or directly from the
mill; (2) parts manufacturers, who pre-process the lumber obtained
either independently or with the help of the furniture firm; (3)
commission agents, who are not employees of'a wholesaler or manu-
facturer; (M) direct sales by lumber mills, either from the home
office or through traveling salesmen; and (5) own mills, located
either at the furniture plant or another location.

Vertical integration between furniture firms and sawmills
has mostly come about by sawmill firms going into the manufacture
of furniture. Rather than furniture firms integrating backwards,
as some authors suggested, lumber manufacturers have expanded
their Operations. However, only three percent of furniture firms
have such an arrangement. In only one instance was there a case
of backward integration.

The ordering changes when the sources are ranked by the volume
supplied (Table 16). Independent sawmills rank first for volume

supplied followed by wholesalers, commission agents, parts

103

Table 16. Market agent sources of lumber used by Michigan furniture
manufacturers, by primary product class, 196M

 

‘ Primary product class

 

 

Primary market fuggigure Wood Institu- All
source non- furniture tional product
UPhOlstfred, upholstered furniture ‘Classes
5(Percent of lumber-using firms)
Wholesaler 32 51 50 M3
Parts manufacturer 18 25 13 20
Commission agent 28 10 18 19
Independent sawmill 20 11 1M 15
Own.sawmill __g. __3_ __;i __3
Total 100 100 100 100
(Percent of volume)
Independent sawmill 32 2O 3O 28
Wholesaler 2M 33 16 25
Commission agent 26 27 15 2M
Parts manufacturer l7 7 17 15
Own sawmill __g; _13 _gg_ __J8
Total 100 100 100 100

 

10M
manufacturers and own sawmills. The change in order occurs be—
cause firms requiring large volumes usually purchase their lumber
directly from.sawmills. Firms utilizing a small volume of lumber
usually rely on wholesalers or premanufactured stock while those
using a moderate volume depend on commission agents.

Only 19 percent of the firms reported that they purchase
from two or more market agent sources. Fourteen percent of
these firms bought lumber from two sources, while only five
percent used three sources. Most of the interaction is between
sawmills, wholesalers or commission agents, and parts manufac-
turers. Only two percent of the firms purchase their lumber
from both wholesalers and commission agents.

There are several reasons why firms purchase lumber from
more than one source. First, when firms cannot purchase all
the desired lumber from their regular sawmill supplier, they
utilize the services of wholesalers and commission agents.
Usually this is for the purchase of foreign species such as
mahogany or for Species not found in the vicinity of estab-
lished sawmill sources such as pecan or yellow poplar. Sec-
ondly, as the lumber requirements of firms grow they tend to
establish direct contacts with a sawmill. During the transi-
tional stage, these firms continue to utilize the services of
wholesalers or commission agents for the purchase of some of
their lumber to insure a stable supply. Finally, some firms
have chosen to purchase premanufactured stock while they con-

tinue to process rough lumber. This usually occurs where firms

105
find that to take on extra business would require recruitment of
scarce skilled labor and replacement of antiquated machines. In
lieu of this alternative purchase of premanufactured stock has
been considered preferable.

The market agent source of lumber to the furniture firm
has been stable during the last five years. Only seven percent
of the firms had a significant change. A majority of the shift
involved firms switching from wholesalers to purchasing directly
from sawmills. This occurred because as firms' lumber require-
ments grew, they or the sawmill felt that it would be to their
advantage to eliminate the middleman. As one executive put it,
"We still have the same mill source but we now buy directly from
the mill. We felt both our firm and the mill would benefit by
this arrangement."

Examination of the market channels for furniture firms
reveals that parts manufacturers usually obtain their lumber
from either wholesalers or independent sawmills. Furniture
firms usually work closely with parts manufacturers and.may
even take an active part in obtaining lumber for them. A few
parts manufacturers were inadvertently sampled because of their
misleading names. Some of them reported that furniture firms
supplied them with lumber when placing an order for parts.
Although a systematic sample was not obtained for these firms,
interview results with these individuals revealed that they
obtained 67 percent of their lumber from wholesalers while

obtaining 33 percent directly from sawmills.

106

In the last five years parts manufacturers have had a signifi-
cant change in their market agent source of lumber. They reported
that they now purchase more of their lumber from wholesalers and
less from independent sawmills. Explanations given by parts manu—
facturers reflect the reasons given for the change. They have 3
found that the variety of woods offered by wholesalers meets the 1
needs of their changing lumber requirements. In addition, relia- E
bility of supply eliminates the need to carry a large inventory: i

It is difficult to ascertain the locale where all the lumber
consumed by the furniture firms originates. Wholesalers often
sort lumber from a number of sources to supply the products
needed by their various customers. However, 20 percent of the
Michigan furniture firms, utilizing 22 percent of the lumber,
reported that they obtained all their lumber within the state.

A majority of these firms make non-upholstered furniture and
purchase their lumber directly from sawmills. Moreover, many
other producers reported that they obtained a majority of their
lumber from Michigan sources. But because of the mixing of
lumber, an estimate could not be obtained of the total volume
acquired in Michigan.

Reasons given by firms for the purchase of out-of-state
lumber were quantity of supply, established supplies, price
factors, quality of supply, and technical reasons (Table 17).
Quantity of supply dominates the listing as 61 percent of the
firms using out-of-state lumber reported that this was their

primary reason for using it.

107

Table 17. Reasons given by Michigan furniture manufacturers for
using out-of-state hardwood lumber, by primary product
class, 196M

 

Primary product class

Wood
Primary reason furniture Wood Institu- All
non- furniture tional product

upholstered upholstered furniture classes

 

(Percent of firms using out-of-state lumber)

Quantity of supply 72 5M 53 61
Established supplies M 17 27 1M
Price factors M 23 7 12
Quality of supply 10 3 13 7
Technical reasons 3 3 - 3
Not ascertained __;L __;: __:_ __;1

Total 100 100 100 100

 

108

Rather than being detrimental, out—of-state lumber plays an
important role in maintaining the furniture market for Michigan
timber growers. An important factor why Michigan furniture firms
switched species was the lack of their availability throughout
the year. However, not one wood native to Michigan was substi-
tuted for this reason. Michigan furniture firms find that they
can purchase out-of—state lumber when local supplies are Sparse.
Another factor is the increasing availability of out—of—state
woods allows furniture firms to select from an expanding list
of species. Designers are thus enabled to select from a wide
variety of species with their unique properties to develop orig-
inal designs. Rather than looking to plastics or other materials,
designers can continue to find new ways to express their creativ-
ity with wood. Finally, out-of-state lumber guarantees furniture
firms a continuing supply of wood. Representatives of the plas-
tics industry often stress that their material will be abundant
in the future but wood is apt to be scarce.

The allegation of the plastics industry is not supported by
the facts. Michigan's forest resources have been on the increase
for several decades. All indicators point to further gains in
timber volumes and in quality. A detailed analysis of forest
resource trends is presented in Appendix C. The gist of the
main findings are presented here.

Currently standing in inventory is timber capable of yield-
ing more than five billion board feet of number one common and

better hardwood lumber. This is the material that is of major

109
interest to the furniture industry. The volume is 90 times more
than the present annual consumption of wood products by Michigan's
furniture industry. Among the ten leading hardwood species uti-
lized, hard maple forms 28 percent of the quality volume; elm 19
percent; soft maple, 13 percent; red oak, ten percent; yellow
birch, eight percent; beech, six percent; and aspen, two percent.

The resurgence of Michigan's forest resource is manifested
by the increased growth of sawtimber; which has more than doubled
since 1935. Because the forest is essentially young a substan-
tial prOportion of the annual growth is comprised of ingrowth.
The growing stock is still dominated by a preponderance of small-
size trees and hence continued gains in growth are likely.

Increases in sawtimber and growing stock has not occurred
evenly across the state. Lower Michigan has experienced a
greater increase in its growing stock than has the upper penin—
sula. Between 1935 and 1955, aspen and cottonwood sawtimber
volume increased lMM percent in lower Michigan, northern hard-
woods increased 55 percent, and other hardwoods increased 213
percent.

While the current growing stock and net growth figures of
Michigan are impressive, what of the future? Presently, an over-
all surplus exists between net annual growth and actual cut. Net
annual growth is about three times as large as the cut generating
an annual surplus. For hardwoods, the surplus was 233.8 million

cubic feet.

110

Foresters have created the concept of allowable cut to judge
resource trends. For most species, the allowable cut is set at
levels which are little more than half the net annual growth.
Even though the allowable cut limit was set conservatively, the
overall balance between allowable cut and actual cut was favor-
able. There was an overall 98.9 million cubic foot surplus with
about 75 percent of the surplus occurring in hardwood stands.

But there was a considerable variation in the allowable cut
actual cut sawtimber relationship throughout the state. In
southern lower Michigan 62 percent of the allowable sawtimber
cut was harvested while in upper western Michigan 120 percent of
allowable cut was harvested. However, the imbalances should favor
the furniture industry as a majority of the excess growth is being
accumulated near the center of its location.

The importance of hardwood lumber imports has grown. In
the late 1930's the United States exported twice the volume of
hardwood lumber that it imported. Today, the situation is re—
versed. Imports since world war II have tripled and now comprise
about five percent of domestic consumption. However, the rapid
increase in price of imported lumber has limited further expan-
sion of imports. The average price of foreign woods rose 50
percent between 19M7 and 1962 while domestic hardwood prices
rose 18 percent (Siegel and Row, 1965).

Canada has been the principal source of Michigan's imported f
lumber; chiefly maple, birch, and beech. Both Canadian and

American sawmills near the border often regard shipments to the 7

111

other country as routine. While the United States imported 123
million board feet from Canada in 1963, it exported 86 million
to Canada. Although there are no figures available, the flow of
Canadian hardwoods to the United States probably featured quality
lumber. While American hardwood forests have been high—graded for
years, Canadians still have forests which contain timber that will
cut out the high proportion of number one common and better favored
by the furniture industry.

Other foreign sources supply 2.M percent of the total volume
of Michigan's furniture lumber. Wholesalers handled two-thirds
of this lumber while commission agents handled the rest. Mahog-
any accounts for over 80 percent of the imported lumber with
cativo, limba, teak, ebony, and rosewood accounting for the
rest. The leading exporters of mahogany are Japan, the Phil—
ippines, Twaiwan, and Ghana. Since 195M, the Japanese have
entered the market with lumber sawn from logs of the Philippines
and North Borneo. With the develOpment of in-transit sawmilling,
Japan and other Asian countries continue to dominate the mahog-
any market. Latin America also supplies mahogany to the United
States. But as the center of Latin American sources moved north-
ward, the proportion of mahogany has declined and that of cativo
and other species has increased.

The flow of lumber from its source to Michigan's furniture
industry is shown in Figure 3. Width of the lines represents the

percent of the total lumber supplied by the various marketing

112

 
      
 

    
   
   

    
  
 

   

IMPORTS. us. a FURNITURE
EXCEPT CANADIAN FIRM
CANADA SAWMILLS SAWMILLS

    

 

COMMISSION
AGENT

 

FURNITURE
MANUFACTURER

 

 

Figure 3. Flow of Michigan's furniture lumber, 196M

113
sources. The importance of the independent sawmills, wholesalers,
and commission agents can be clearly seen.

The flow of plywood and veneer is similar to lumber. A
majority of the Michigan furniture firms have their hardwood
plywood and veneer delivered by truck rather than by rail.
Seventy—four percent of the firms, utilizing 76 percent of the
hardwood plywood and veneer, had it delivered by truck from the
mill or wholesale yard. Similarly, 82 percent of the firms,
utilizing 76 percent of the softwood plywood, had it deliVered
by truck even though it was originally manufactured in the North-
west section of the United States.

Over 90 percent of the firms bought some of their hardwood
plywood and veneer from out-of-state sources. Seventy-two per-
cent of these firms listed the quantity required as the primary
reason they purchased out-oféstate hardwood plywood and veneer;
ten percent, quality demanded; eight percent, price factors;
three percent, established supplies; and seven percent, not
ascertained.

There are three market agent sources from which Michigan
furniture firms obtain their plywood and veneer. Ranked by
number of firms using each as their primary source, they are
wholesalers, commission agents, and plywood mills. However,
the order changes when the sources are ranked by the volume
supplied (Table 18). Plywood mills rank first for volume
supplied, followed by commission agents and wholesalers.

As with lumber, the change in ordering occurs because firms

11M

Table 18. Market sources of plywood and veneer used by Michigan
furniture manufacturers, by primary product class, 196M

 

Primary product class

 

Primary market fugglgure Wood . Institu- All
source non- furniture tional product
.uphélstered uphflsterfd ‘furniture classes

(Percent of plywood-using firms)

Wholesaler M3 69 59 53

Commission agent 30 31 23 28

Plywood mill _21_ __:. _l§_ .pyg

Total 100 100 100 100

(Percent of volume)

Plywood mill 53 - 57 5M

Commission agent M1 M9 21 33

Wholesaler __§_ _51_ _gg. I;L3

Total 100

100

100 100

 

115
usually purchase their hardwood plywood directly from the mills
when they use a large volume. Firms utilizing a small volume of
hardwood plywood or veneer usually rely on wholesalers while those
using a moderate volume depend on commission agents. Softwood
plywood is generally purchased through wholesalers, but a few
firms using a large amount purchase their plywood from the dis-
tribution center of a major producer.

These results are constant with the marketing pattern for
the plywood and veneer producers. Over 80 percent of the hard-
wood plywood and veneer manufactured in Michigan and Wisconsin
is sold by firms directly to their industrial consumers (Hen-
dricks, 1966). Various schemes used by plywood and veneer firms
for selling directly to industrial consumers include company
salesmen, parent—firms, and house accounts.1

Marketing arrangements of hardwood plywood and veneer mills
are influenced by their size and products marketed (Table 19).
Small veneer mills, manufacturing less than 15 million square
feet annually, and small plywood mills, manufacturing less than
three million square feet, usually market their product through
commission agents. This is considered the least cost system for
distributing veneer for small mills. Maintaining a sales staff

can be costly if the product volume is low. Medium-sized veneer

 

1A parent—firm is a company that has a controlling interest
in a veneer or plywood firm and takes all its production. A
house account is where a firm no longer solicits its customers
but has develOped a loyalty in its customers through time.

116

Table 19. Distribution methods used in marketing hardwood veneer
and plywood by mills in Michigan and Wisconsin, 196M

 

Percent of total production by:

Specialty

 

 

 

 

 

Distribution Veneer Veneer and Plywood plywood
method mills plywood mills mills mills
Company salesman 37.9 0.2 M2.l 62.5
Parent—firm 26.5 M5.9 23.6 -
House account 17.2 39.3 15.5 29.2
Commission agents 18.M 6.1 17.7 8.3
Wholesalers - 8.5 1.1 -
Total 100.0 100.0 100.0 100.0
Estimated total
production,
million sq. ft.
surface measure M31.5 52.7 169.8 6.0

 

Source: Hendricks, 1966, p. 2.

117
mills, manufacturing 15 to 50 million square feet, and plywood
mills, manufacturing three to 35 million square feet, tend to
marketibrough company salesmen. Specialty plywood mills,
featuring curved or molded plywood for furniture parts, also
have built their program around company salesmen. But the
large integrated mills, selling both plywood and veneer,
market through parent-firm and also house account arrange—
ments. Usually they also offer other products such as soft-
wood plywood.

In future years, Michigan furniture firms are almost
certain to be buying even more of their plywood and veneer
directly from the mill. DeSpite a 20-percent tariff, foreign
producers are able to deliver finished hardwood plywood at
prices highly competitive with domestic sheets. In addition,
imports of hardwood veneer have risen steadily, reaching an
all-time high of l.M billion square feet in 1963. Faced with
intense competition, North Central hardwood plywood and veneer
firms are currently going through a phase of expansion by
acquisition in which veneer and plywood.mills are being pur-
chased by large national firms. Similarly in the production
of softwood plywood, large national firms are becoming more
predominant. With the increasing importance of the large
integrated wood product firms, furniture manufacturers cer-
tainly will be buying more directly from the large organiza-
tions and less through wholesalers and commission agents of the

independent mills.

118

Importance of Hardwood Lumber Marketing Agents

 

 

Sawmill firms in Michigan and other North Central states are,
with few exceptions, localized enterprises owned by individual
proprietors and usually have only one plant per firm.1 In 1963,
only 13 percent of the 287 active mills in Michigan employed more
than 20 individuals. Moreover, the average output of a North
Central mill was 857,000 board feet. Although three mills, all
located in Wisconsin, sawed more than ten million board feet,
they accounted for less than seven percent of the production.
This is in sharp contrast to the West Coast where California,
as an example, has about 55 percent of all its sawmills produc-
ing more than ten million board feet annually and accounting for
over 90 percent of the production.

Nearly two—thirds of the mills in the North Central states
did not sell out of their home state. Moreover, most of the re-
maining mills were limited to market outlets within the North
Central Region. The maximum distance products were shipped
averaged 172 miles. However, firms that sold predominantly
high-value products such as furniture stock reached out to more
distant markets than other firms.

A wide variety of products are manufactured by North Central
mills. Although hardwood grade, mainly number two common and better,

represents the largest volume of any product manufactured, it

 

1Data were obtained from NCM - 27 study, "Timber Products
Marketing in Selected Areas of the North Central Region."

119
accounts for only 16.8 percent of the total lumber production.
Other products manufactured included crating and blocking,
hardwood construction lumber, railroad and mine ties, and
pallets (Table 20).

Some North Central mills have problems marketing their
production because they sell their products to many diverse
customers. For example, a hardwood grade mill produces
500,000 board feet of white oak lumber annually. This mill
may sell its number one common and better to furniture firms,
number two and number 3A to flooring firms, and the poorer
grades to pallet firms. Nearly three-fourths of the mills
produce two or three different types of products.

Wholesalers can help ease marketing problems for these
sawmills. First, wholesalers can save mills the expense of a
sales staff. Because of a constantly changing mix of wood-
using firms and their changing lumber requirements, maintain-
ing a sales staff can be costly to those mills with only a
small volume to offer each type of buyer.

Secondly, wholesalers take the risk out of financing and
can expand the mill's market. Mills producing up to six million
board feet annually are generally under-financed. They need
money for their lumber right away and usually do not want to
get involved with extending credit. But if the mills sell
their production to a wholesaler, he may be able to sell it to
buyers that individual sawmills could not consider. This is

because the wholesaler is out keeping close contact with the

120

Table 20. Products manufactured by North Central sawmills, 1960

 

Proportion of

 

Product Proportion mills that made
of volume the product
IPercent) (Percent)
Hardwood grade (mainly no. 2
common and better) 16.8 M5.6
Crating and blocking 13.6 25.1
Hardwood construction lumber 12.0 31.6

Railroad ties (including

mine ties) 12.0 25.6
Pallets 11.3 12.9
Softwood construction lumber 8.2 23.7
Pallet material 7.1 17.8
Crates and boxes 6.0 6.7
Hardwood flooring stock 6.0 12.9
Other products __1;9_ 19.3

Total 100.0

 

Source: Miller, 1966, p. 112.

121

buyers and is usually in a better position to judge a buyer's
credit rating. He is also better able to wait for payment. As
an example, a wholesaler may sell lumber to a man who has a poor
credit rating according to some of the standard credit books. He
can do this because he has frequent contacts with the individual
and recognizes it may take a few months to get his money. How-
ever, he is sure that the man will eventually pay his bill. Slow
payers are often characterized as credit risks; the wholesaler
distinguishes between slow payers and real credit risks.
Thirdly, wholesalers provide sawmills the Opportunity to
increase the number and variety of market outlets for their
product. As an example, if a furniture firm in Texas needs
an occasional carload of yellow birch, it will probably rely
on a wholesaler to meet its needs. For this type of purchase,
it is easier to have a wholesaler locate the lumber than for
a firm to maintain contacts with sources 500 or more miles
away. Similarly, firms that use a wide variety of Species may
contact a wholesaler rather than maintain contacts with a large
number of mills. Many wholesalers handle foreign species as
well as a variety of domestic woods.
Wholesalers usually receive five percent of the mill price
for their services although they sometimes receive six or as

high as seven percent.1 But probably 90 to 95 percent of the

 

1Based on information from an interview with George C.
Romeiser, Executive Vice-President, Southern Lumber Manu-
facturers Association, Memphis, Tenn., 1967.

122
volume handled by the wholesaler is for a five-percent commission.
In the walnut industry wholesalers are allowed five percent up to
a maximum of about 12 dollars per thousand board feet.

The wholesaler may also buy lumber and resell it for a greater
price. For example, he may buy red oak lumber for 125 dollars on
which he is allowed a commission of five percent. Then, he may
turn around and sell it for 135 dollars. Also, wholesalers often
store lumber speculating on a rise in price. This is done with
walnut and other species.

Wholesalers may also buy lumber and sort it at their distri-
bution yards. Such yards are located, among other places, in
Grand Rapids, Detroit, Chicago, and St. Louis. While at the
yard, lumber is sorted for grade, width, and length. For exam-
ple, a carload of number two common and better red oak may be
sorted. The number one common and better can be readily sold
to furniture firms in small amounts while the number two common
is sold to manufacturers of flooring. Wholesalers may get a
markup of 50 percent or more on some of the items sold in small
quantities. But one must remember they do provide a vital ser-
vice to firms that can only use small amounts of a given product.

This is one reason why wholesalers were so pOpular with Michigan ;
I

furniture firms.

While the lumber is being sorted, the wholesaler may also
put it into a kiln-drying plant. Sometimes this is done strictly
on speculation. If the wholesaler has a good personal relation-

ship with a kiln operator, he may hold the lumber in his yard

123

for the wholesaler. In this case, the kiln operator will be act-
ing as a distributing agent for the wholesaler. However, most
kiln operators take a dim view of this practice.

Two kiln-drying operations in the Grand Rapids area are
Conway Corporation and Purdy-Ammon (National Hardwood.Magazine,
196M). Conway Corporation began its kiln-drying services in
196M for furniture manufacturers and wholesalers. Today, the
corporation services some 300 individuals throughout the United
States and is the world's largest custom kiln-drying service.
About 25 million board feet of lumber are now processed yearly
in the Conway drying kilns. About 50 percent of the lumber
processed in the plant comes from Michigan, 20 percent from
Canada, 25 percent from such states as Ohio, Indiana, Penn-
sylvania and New York, and about five percent from foreign
countries. Since 1958, this company has employed graduate
wood technologists and conducted applied research. Results
of their work include the first commercial operation for
pressure-steaming of walnut for color.

Purdy-Ammon, which opened in 196M, is a relatively new

Operation in the Grand Rapids area. Not only do they offer

—~ ”‘fl—‘f’

kiln-drying facilities, but they also offer a marketing ser-

 

vice to a large number of sawmills in Michigan. The Purdy— y
Ammon Operation in Grand Rapids has been incorporated as a
separate corporation. However, Purdy-Ammon has a lumber
warehouse located in Cincinnati with an inventory of over

one million board feet of high grade kiln-dried stock. Also

12M
they have an Operation in Terre Haute, Indiana, which features
kiln-drying and concentration yard facilities.

Commission agents can also help ameliorate marketing prob-
lems of the sawmills. They are more common in the softwood lumber
business than in hardwood. Commission agents do not involve them-
selves in credit matters but simply sell lumber for one or more
lumber manufacturers at the price set by the mill. Let us say
a sawmill has some red oak to sell and wants 130 dollars per
thouSand board feet. The commission agent will go out and find
a buyer. The lumber is shipped by the sawmill and they are also
Obligated to collect from the buyer. Although commission agents
are usually paid about five percent of the mill price, they do
save mills the expense of maintaining a sales staff. Moreover,
the mills acquire first—hand knowledge of their customers. This
would be valuable information if they decide to do business di-
rectly with these firms in the future. In contrast, wholesalers
frequently try to keep the names of their customers from the
lumber manufacturers.

But only 20 percent of the lumber volume manufactured in
the North Central region is sold through wholesalers and com-
mission agents (Table 21). This contrasts with the marketing
Of lumber in the Northeast and the West. Forty—seven percent

of the lumber in the Northeast was sold through market inter-.

--.» "

mediaries (Whitmore, et al,, 1963). On the West Coast, over y
I
half of the output was sold through wholesalers (Ho, 1963 and ‘

Teeguarden, 1965).

125

Table 21. Distribution of lumber from North Central mills, 1960

 

Sawmill size claSS
100— 500— 1000 m.
Type of buyer1 1—99 m. M99 m. 999 m. bd. ft. Total
bd. ft. bd. ft. bd. ft. or more

 

4(Percent of sales)
Manufacturer 23 38 MM M2 M1

Wholesaler and

commission agent 15 15 21 , 21 20
Industrial user ll 17 1M 2O 19
Noncommercial

final consumer 51 28 15 10 1M
Retailer _— _i _6_ _Z ___6

Total 100 100 100 100 100

 

1Manufacturers are firms which remanufacture sawmill products
into other products such as furniture. Industrial users are firms
which use sawmill products without substantially changing their
form such as building contractors.

Source: Miller, 1966, p. 133.

126

One reason North Central sawmills do not market through inter-
mediaries is firms using a lot of lumber are inclined to go directly
to sawmill operators and develop a personal relationship with them.
This enables the sawmills and firms such as furniture manufacturers
to arrive at an underStanding of what is needed and also to insure
that there will be a constant flow of materials. A few of the
national furniture firms have recently employed full-time liaison
men assigned to work with their sawmill sources.

North Central sawmills do not need to market through inter—
mediaries because of the relatively short distance between them—
selves and their customers. This proximity often leads to a close
personal relationship between the mill operator and his customers.

A very small percentage of the mills fit the classic image
of the "captive mill.". Over 90 percent of both small—scale and
large-scale mills had more than one market outlet. But beCause
of the size of most sawmill Operations, their sale accounts with
commercial buyers were limited to only two or three accounts.
Ninety percent of the small-scale firms and two-thirds of the
large-scale mills sold to less than five manufacturers. The
overall average was 3.9 commercial buyers for each hardwood
grade mill.

Sawmills selling directly to furniture firms usually sell
out of inventory. Payment for lumber is normally made on the

basis of grade tally. However, most small and medium-sized

‘ ...—«_-

sawmills do not scale their lumber but rely completely on the

buyer's tally of grade and volume. Many of these small and

127
medium—sized firms lack personnel capable of grading lumber, and
often the sales volume is too small to justify the cost of grad-
ing.

Furniture firms usually establish the price of the lumber
(Table 22). This is because most sawmill firms have inadequate
knowledge of market conditions. The use of price or stock lists
and advertising in trade publications are uncommon among all but
the largest sawmill firms. With very little knowledge of the
prices other buyers are offering or of his costs of production,
the sawmill Operator has few arguments to support his price
expectations in negotiating with a buyer. Thus he can only
reject the price if he thinks it is too low, or accept it.

Furniture firms are usually in a better position to know
the market conditions than are sawmills. Although they usually
buy from established suppliers, they are constantly beset by
salesmen. Hence, they are in a very knowledgeable position
regarding prevailing market prices.

A majority of the furniture firms do not have to contact
the mills or market intermediaries when they need lumber
(Table 23).1 Wholesalers and commission agents frequently
call at the offices of the furniture firms. If they are buy-
ing directly from a mill they are usually contacted by the

sawmill Operator who acts both as a production manager and

 

1Those furniture firms going to the mill either use a
great amount of lumber or are just starting to establish
direct contacts.

128

Table 22. Method of price determination for North Central mills,

 

 

 

1960
Average
number of “ 'MethOd of price determinatiOn
Product group commercial Buyer's Sawmill Negotiation Bid
buyers1 price price
(Percent of mills)
Hardwood grade 3.9 61 3 36 -
Flooring stock 0.8 9M - 6 -
Railroad ties 1.2 87 M 9 -
Pallet material l.M 71 8 19 2
Softwood lumber l.M 55 33 12 -
Low-grade hardwood 1.6 M3 25 3O 2
Pallets and boxes 5.6 32 2O 25 23
Other manufactured
products 55.9 30 5O 2O -
Unclassified _3,9_ g3_ g;_ §9_ _3_
All mills 3.8 57 15 25 3

 

1Manufacturers, industrial users, wholesalers, and retailers.

Source: Miller, 1966, p. 1M3.

129

Table 23. How Michigan furniture manufacturers contact their lumber
sources, by primary product class, 196M

 

Primary product class

 

Wood
Contact furniture Wood Institu— All
non- furniture tional product

upholstered upholstered furniture classes

 

(Percent of firmS)

Sawmill Operators
or salesmen call 59 60 52 57

Manufacturer contacts
mill or wholesale

yard 19 19 22 2O
Combination of the

above 20 17 21 19
Other 2 M 5 M

Total 100 100 100 100

 

130
sales manager. Only the largest mills in the North.Central
area have organized sales departments. In the course of a
year, small sawmills may only contact furniture firms from
one to four times; large mills may contact their buyers on a
weekly or monthly basis. But before a furniture firm buys from
a sawmill, it will usually investigate the mill.

Overall, the role of marketing intermediaries is not as
important in the North Central region as in other areas. Al-
though increased contacts with market intermediaries would
seem to offer sawmill firms a greater choice of potential
buyers and an efficient means of improving their knowledge
of market conditions, they generally have elected to deal
directly with local buyers. Similarly, furniture firms using
large amounts of lumber have found it to their advantage to
deal directly with local sawmill Operators even though market

intermediaries usually have a wide variety of species to offer

____- .-

and can virtually guarantee a supply.

CHAPTER 7
STABILITY OF THE MARKET

This chapter describes the factors that are likely to cause
changes in the furniture wood market in Michigan. First, who
decides on what wood materials will be used is discussed. Next,
the substitution of wood materials for non-wood products, and one
species for another are reviewed with Special emphasis given to
the factors that are likely to influence future substitution.

Finally, an evaluation of Michigan's wood market is presented.

The Selectors gf_Wood Materials

 

 

Although many individuals in a firm are involved in the
selection of wood materials, a few key ones can be identified.
The president primarily decides on what wood materials will be
used in a majority of the firms (Table 2M). Others who in—
fluence the choice of wood materials are designers, plant
managers, engineers, and develOpment departments. Among indi-
vidual product classes, the owner or president ranks first in
all classes but the ordering of the other individuals who specify
wood materials varies. Designers rank second in the non-upholstered
class, plant managers in the upholstered class, and the two are
tied for second in the institutional class.

While 82 percent of the firms where the president decides
what wood products to use employ less than 100 individuals, some

presidents select the materials in firms employing up to 600

131

132

Table 2M. Specifiers of wood materials used in Michigan furniture
manufacture, by primary product class, 196M

 

Primary product class

 

WOod
Specifier furniture Wood Institu- All
non- furniture tional product
upholstered upholstered furniture classes
(Percent of firms)
President or owner 58 67 M3 56
Designer 23 5 19 16
Pant manager 10 1M 19 1M
Engineer 3 - 10 M
Development
department 3 - 9 M
Other 3 1M — 6
Total 100 100 100 100

 

133
workers. Many of these individuals either founded or headed their
organizations for many years. The result is an organization cen-
tered on them for management decisions--small and large. Moreover,
they are usually extremely familiar with all aspects of furniture
production and sales. Thus their experiences with the various
wood products cover the gamut of operations from procurement of
raw materials to production and marketing of end products. This
has resulted in a stable utilization of wood materials. Firms
where the president selects the wood have substituted fewer non-
wood products than the other firms. These firms have also held
stronger loyalties to particular Species.

The phenomena of stability when the president selects the
wood materials is not limited to Michigan firms. Throughout the
nation, furniture executives have worked with wood for so many
years that they closely associate it with furniture manufacturing.
A North Carolina executive stated, "You can't understand the furni-
ture industry until you havejmur pockets filled with sawdust and
your mouth full of tobacco juice." (O'Hanlon, 1967, p. 1M7). This
basic approach to management has led to stable utilization patterns.

Sometimes the president delegates the responsibility of select—
ing wood materials. In MM percent of the firms they were Specified
by someone other than the chief executive. Designers were the most
important individuals followed closely by plant managers.

Although both large and small firms rely upon designers for
the selection of wood materials, the majority of firms following

this practice employ more than 100 workers. These firms manufacture

13M
a wide variety of products featuring designs from the classics to
modern but all are known for their styling. Reliance on designers
has resulted in these firms substituting non-wood products for
wood to a greater degree than other firms. Sixty-six percent of
them have made a major substitution of non-wood material for wood
in the last five years while the average for all firms is 28 per-
cent. These firms have also substituted among Species more than
other firms. Fifty-five percent made a major change in species
in the last five years while the over—all average is again 28
percent.

Firms in which plant managers select wood materials usually
specialized in a specific product line. Eighty percent of these
firms employ less than 100 individuals with the president Special-
izing in marketing and vesting production control in the plant
manager. In the large firms, he usually has the title of vice-
president in charge of production. Firms where the plant managers
are in charge of selecting wood materials have not substituted
any non-wood materials for wood but substitution among species
is about the same as the average for other firms.

Some of the large firms rely primarily on Specialists to
select their wood materials. These individuals are usually part
of a development committee or have a job within the production
department. Four percent of the firms rely on the develOpment
department to select their wood materials while four percent of
the firms rely on engineers. Firms relying on Specialists have

engaged in considerable substitution among materials. Half of

135

them have made a major shift to non—wood materials in the last five
years while the other half substituted wood materials for non—wood
materials.

Overall, there has been a stable utilization of wood where
the president or plant manager are primary selectors of materials.
These individuals decided on the materials to be used in 70 percent
of the firms. However, with the other individuals there has been
a more volatile pattern. Where designers do the selecting, there
has been more substitution of nonawood materials while reliance on

specialists has resulted in a fluctuating pattern.

substitution 9f_Materials

 

Over the last five years, 28 percent of Michigan's firms made
a major substitution of non-wood products for uses formerly served
by wood materials. Only eight percent of the firms substituted
wood materials for uses formerly served by nonawood products. In-
stitutional furniture firms made the main substitutions for wood
products followed by non—upholstered furniture firms. No uphol-
stered furniture firms made a major substitution of materials.
Non-upholstered furniture firms were the only ones substituting
wood materials for non-wood products.

Plastic laminates have been the strongest competitor of
wood products (Table 25). Sixteen percent of the furniture firms
in Michigan have substituted this material. Laminates are used

mainly for table tops by both institutional and non-upholstered

136

Table 25. Materials substituted for wood by Michigan furniture
manufacturers between 1959 and 196M, by primary product

 

 

 

class
Primary product class
Wood
Materials furniture Wood Institu— All
non- furniture tional product
upholstered upholstered furniture classes
(Percent of firms)
Pressure laminates l7 - 29 16
Metal parts 6 - 2M 9
Plastic parts 3 - 2M 8

Other non-wood parts 6 - 5 M

 

137
furniture firms. In the last five years, they have not only gained
popularity with firms featuring medium to low-priced furniture but
also with a few prestigious firms.

The pOpularity of laminates can be attributed to their ease
of fabrication, durability, and public acceptance. Although in-
creased Spindle speeds are needed for machining laminates, stan-
dard metal or wood working machinery is generally used. AS an
example, Michigan firms use standard cutting tools with carbon
blades. Moreover, firms also feel that they save money because
they do not have to refinish the laminates.

Durability is another key factor in the increasing popu-
larity of laminates. Furniture firms have found that laminated
parts last longer because of their chemical and solvent resist-
ance, surface hardness, and resistance to impact.

Public acceptance is the most important factor for the in-
creased number of firms utilizing laminates. Of the firms sub-
stituting laminates in the last five years, two-thirds listed
persistent customer demand as their reason for using this mate-
rial.

The shift to laminates does not mean a complete substitu-
tion for wood but rather substitution among materials. Rising
use of laminates has resulted in wood materials such as lumber
being replaced by particle board covered by laminates. Laminates
are multilayer sheets of laminated material and resins bonded
together with an adhesive. These sheets consist essentially of

fibrous laminating materials such as composition board, wood

138
veneer, paper, or fabrics. Most Michigan firms purchase laminates
consisting mainly of wood materials such as composition board with
a veneer face.

Although some small firms have increased their purchase of
plastic parts, only large institutional furniture firms have gone
heavily into plastics. For example, American Seating made M5,000
seats of plastic for the Houston Astrodome that formerly would have
been made of wood products. The develOpment of plastics has been
a feature of large firms primarily because the sizable investment
in equipment requires among other things, long production runs
merely to expense setting-up molds. But for products that can
be standardized for a mass market such as office furniture,
school and auditorium chairs, some firms have found plastics to
be ideal. They have such desirable prOperties as high-tensile
and impact strength, resistance to corrosion, improved weather-
ability, and a high strength-toaweight ratio.

Metal parts have not been substituted for a large volume of
wood materials. Both non-upholstered and institutional furniture
firms, however, have replaced wood materials with metal parts for
table legs, drawer slides and brackets, pew kneelers, and shelves.
The main reasons for use of metal parts are other producers offer
them and their seemingly superior strength and durability.

Partly offsetting the shift to non-wood materials has been
the substitution of wood parts by 17 percent of non—upholstered
furniture firms. These parts include table tops and chair parts

such as arms, seats, and backs. The main reason for increasing

139
use of wood parts was appearance and secondarily price and consumer
preference. Moreover, a few firms making metal household furni-
ture which were inadvertently sampled indicated they were planning
to use wood products because of their warmth.

The overall impact of Substitution of materials has not been
substantial except for a few large institutional furniture firms.
Analysis of factors contributing to substitution of other materials
for wood revealed sensitive areas that will affect future consump-
tion of wood. The key factors are public acceptance, design, price,
and appearance (Table 26).

Public acceptance probably will be most crucial. Unlike some
industries, the furniture industry possesses no attributes that
allow a firm to enjoy isolation from.market pressure. Although
Michigan firms have tried to differentiate their product by
variation in styles, quality, sales policies, and inumerable
other means, they have been unable to develOp strong loyalties
with consumers and retail buyers of furniture. When significant
technological advances are made that improve the product, furni-
ture firms must take action regardless of their own preferences.
Such advances as laminates for table tOps and plastics for public
seating made inroads in the utilization of standard wood products.

Closely tied to consumer acceptance are the qualities of
durability, strength, and appearance which make new designs pos-
sible. This was true for institutional furniture firms where the
development of new materials with these qualities allowed different

designs to be created. Future material developments could contribute

1M0

Table 26. Primary factors that influenced Michigan furniture manu—
facturers to substitute other materials for wood, by
primary product class, 196M

 

Primary product class

 

Wood
Factors furniture Wood Institu- All
non— furniture tional product

upholstered upholstered furniture classes

 

(Percent of firms making substitution)

Public acceptance 33 - 53 M3
Design, durability,

and strength 5 — 33 18
Price 22 — 1M 18
Appearance 22 - - 12
'Other 18 - _ 9

Total 100 O 100 , lOO

 

1M1
to further substitution if they lend themselves to designs which
enhance customer appeal.

Although price was not a major consideration for substitution
of any one material, firms manufacturing medium to lowepriced
products were especially price sensitive. The majority of firms
in Michigan feature high to medium-high-priced furniture and the
relative price stability of wood materials are major factors why
there was not more substitution. As this thesis was being written
wood material costs rose Sharply and if the increases are sustained,

inroads by substitute materials would certainly occur.

Substitution Among Species

 

Twenty-eight percent of the firms have made a major substi-
tution among lumber species in the last five years. Among indi-
vidual product classes, 33 percent of the non—upholstered furniture
firms have substituted species, 25 percent of the institutional
furniture firms, and 2M percent of the non-upholstered furniture
firms.

However, the overall pattern of lumber consumption has not
been substantially altered. A wide variety of Species were sub-
stituted with no one species dominating. Manufacturers increased
their use of walnut, ash, cottonwood, poplar, beech, pecan, and
limba at the expense of maple, mahogany, basswood, magnolia, and
pine. Four species had about an equal number of firms increasing
and decreasing their utilization. These woods are birch, cherry,

elm, and oak.

1M2

The only species involved in any consequential volume changes
were walnut, mahogany, and maple. The shift from mahogany to walnut
can be explained by a change in design. However, the shift away
from maple involved many factors. Not only did firms give differ-
ent reasons for replacing maple, but they substituted a wide variety
of species for it. There were dissatisfactions expressed regarding
the color of maple and the reliability of supply. Considerations
of quality and price encouraged some firms to turn to pOplar and
beech among other species.

An analysis of the factors why firms substituted Species
reveals sensitive areas that will affect future consumption. The
key factors are design and product changes, availability throughout
the year, technical advantages, and price (Table 27).

The most important factor affecting substitution of species
is design changes and new product offerings. Since furniture
firms are faced with highly competitive markets, their success
depends upon their ability to keep abreast of style trends and
offer new products where voids exist. Emphasis in styles over
the years has varied leading to changes in popularity among the
species. The rising popularity of Early American designs led to
increased use of maple and cherry at the expense of such species
as mahogany. Similarly, Mediterranean, Italian, French Provincial,
and Danish Modern styles increased the popularity of such species
as walnut and cherry. But future design changes are certain to

affect consumption patterns. As pointed out by Robert Cox in

1M3

Table 27. Primary factor causing Michigan furniture manufacturers
to change wood species, by primary product class, 196M

 

Factor

' Primary product class

 

Wood
furniture
non-.

upholstered upholstered

Wood
furniture

Institu-
tional

All
product

furniture classes

 

Design and product
changes

Availability through—
out the year

Technical advantages
Price
Other

Total

(Percent of firms making substitution)

53

2O

27

100

M2

33
17
8

100

29

1M
M3
1M

100

M3

21
21
12
__3

100

 

lMM
Furniture Production (1966), a revival of formal English styles
may start the featuring of darker woods such as mahogany.

Technical advantages will also contribute to future species
substitutions. First, as market conditions change, firms can
take advantage of the various wood qualities in adjusting their
production. As an example, one firm utilized more maple in
place of birch because their sale of painted finishes increased.
Another reason for the substitution is the awareness by some
firms of technical qualities offered by a species. Finally,
technological advances will be responsible for substitution of
Species. A present example is wood graining used to transform
a plain or light-colored wood with little or no grain pattern
into a wood with a face of walnut, mahogany, or other prestigious
species. Maple is preferred because its hard surface gives better
definition to the print while softer woods may cause some blur-
ring of the grain.

Relative price changes also will affect substitution among
the species. Those firms manufacturing medium to lowhpriced
furniture are especially concerned. The reason why price was
not mentioned by more firms substituting species was that prices
for the seven leading species hawe been relatively stable in the
last five years based on data publiShed in the National Hardwood
Magazine (Figure M). Prices are based on carload quantities f.o.b.
Chicago with a grade mixture of 60 percent number one common, 20

percent selects, and 20 percent firsts and seconds. However, if

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1M6

there is relative movement of prices among species, firms will

certainly reevaluate their purchasing policy and make adjustments.

Evaluation 9£_Michigan's Furniture Wood Market

 

 

The furniture wood market in Michigan has been stable over
the last five years and all indicators point not only to future
stability in demand for wood but probable growth. Unlike national
analyses such as Robinson (1965) which pointed to the fact that
hardwood lumbermen are losing their market for high-grade lumber,
this analysis shows that Michigan furniture firms still continue
to use quality hardwood products. However, as in any major indus-
trial sector, production changes have taken place influenced by

changing consumer preferences and technological advances.

Past Stability

Several factors have contributed to the relative stability
of Michigan's furniture wood market in the last five years. These
include Michigan firms' composition, low retooling costs, price
stability, and consumer acceptance. First, the special charac-
teristics of Michigan firms favor a traditional approach to mate—
rial utilization. They average 37 years in business and more than
30 percent have been operating for more than a half century. More-
over, although the firms average a higher value added by manufac-
turing than any other region, a majority of them still have manage-
ment organizations featuring a strong central figure. Many of

these individuals closely associate utilization of wood materials

1h7
with furniture manufacturing. But probably the most important
condition is that many firms feature a majority of their product
line in the high to medium-high price range. Rather than being
as price conscious as those featuring a low-priced furniture, they
must offer a product that has all the visible features of quality.

Another factor is the premium placed on retooling costs in
fUrniture manufacturing. Firms find it difficult to obtain large
cuttings of any one pattern because they offer a wide selection
of products with the changing emphases on different designs and
styles. But because of these conditions, wood is an ideal mate-
rial with its relatively low retooling costs.

Price stability among wood materials and lumber species has
helped to stabilize the wood.market. Unlike wood material costs
rising faster than those of competing materials between 1930 and
1955, prices up to 1965 have been stable based on the wholesale
price index. This is of prime importance to firms who specialize
in manufacturing furniture priced in the medium to low range.

Probably the most important factor for the stability of the
furniture wood market is continuing public acceptance. The Opinion
Research Corporation (1963) asked over 1,000 individuals across
the country what they-thought of the various materials suitable
for furniture. Eighty percent thought wood was the warmest and
friendliest material. Also, wood ranked first as most attractive
and always in style. For other materials, plastic ranked first
as most modern but also ranked first as a material people thought

did not last long. Plastics also ranked last as always in style.

1h8

Although.steel ranked first as a material that pe0ple thought was
most expensive, this impression should be altered by such decrees
as the one by the General Services Administration that to have a
wooden desk a government employee must have at least a 03—17 pay
rating. Rating a wooden desk will soon be as good as having a
key to the executive washroom. The combination of being warm,
friendly, attractive, prestigious, and always in style gives wood

a combination of qualities not available in any other material.

Future Consumption

Expanding technological growth in the United States should
give rise to less dependence on wood materials by furniture firms.
As in the past with lumber, the development of substitutes such
as improved plywood, composition board, and non-wood materials
gave firms a greater range of production possibilities. But
this does not mean that there will be a substantial substitu-
tion away from wood materials.

The Forest Service in Timber Trends for the United States
(1965) used two basic considerations in forecasting wood material
consumption, the furniture manufacturing firm and the consumer.
Since wood materials have a derived demand, the Forest Service
based future consumption trends on an analysis of past trends in
material substitution and possible technological changes. A
downward trend is forecasted for lumber, and plywood and veneer
per dollar of manufacturer's sales for both household and insti-

tutional furniture (Table 28). Over a h0—year period, the Forest

lh9

Table 28. Wood materials use per 1961 dollar of manufacturers'

sales projected to the year 2000.1

 

'Primary product class

 

 

 

 

. "'HouSehold2' ‘ 'InstitutiOnal
Year Lumber Plywood Lumber Plywood
. . _ . “veneer , .. _ and veneer
(30. Ft.) (Sq. Ft.73 (Bd. Ft.) ngq. Ft.)
19h8 0.977 0.238 0.318 0.1h1
1960 0.650 0.215 0.266 0.13h
1962 0.615 0.215 0.255 0.135
Projections
1970 0.500 0.210 0.220 0.125
1980 0.390 0.200 0.190 0.125
1990 0.320 0.195 0.160 0.125
2000 0.270 0.190 0.130 0.125

 

1No data for composition board.
2Combination of non-upholstered and upholstered classes.
33/8 inch basis.

Source: U.S. Department of Agriculture, Forest Service,

Timber Trends in the United States, 1965.

150
Service forecasts a decline in lumber content per sale dollar of
58 percent for household furniture and 51 percent for institutional
furniture. Plywood and veneer content is forecasted to decline 12
percent for household furniture and seven percent for institutional
furniture.

The consumer was the second basic consideration of the Forest
Service analysts in forecasting wood material consumption. Per
capita disposable income and population trends were included in
their analysis. With the added dimension of the consumer, the
Forest Service predicts a rise of total furniture lumber and
plywood and veneer consumed in manufacturing (Table 29). Over
a AO—year period, the Forest Service forecasts an increase in
lumber consumption of 38 percent for household furniture and
85 percent for institutional furniture. Plywood and veneer
consumption is forecasted to increase 181 percent for house-
hold furniture and 2h5 percent for institutional furniture.

The national trends are likely to prove conservative for
Michigan. There are a number of reasons for expecting wood
consumption by Michigan furniture manufacturers to remain
above the national norm. Thus producers of wood products in
Michigan can be optimistic about their local wood market. This
is because of such factors as structure of its local industry,

possible influence of price and the "new consumer."

151

Table 29. Wood material consumed in manufactured furniture pro—
jected to the year 2000

 

Primary product class

 

 

 

Household Institutional
Year Lumber Plywood Lumber Plywood
and veneer and veneer
(Million (Million 8 (Million (Million
bd. ft.) sq, ft.) bd. ft.) sq,ft.)
19h8 1,965 ' h78 105 51
1960 2,088 690 173 87
1962 2,555 790 182 95
Projections
1970 2,360 990 210 110
1980 2,h50 1,270 2h0 150
1990 2,620 1,590 280 220
2000 2890 2,0h0 320 300

 

Source: U.S. Department of Agriculture, Forest Service.
Timber Trends in the United States, 1965.

152

All segments of Michigan's furniture industry should grow in
the future. Locational analysis reveals a high degree of inter-
relationship between furniture employees and pOpulation. Swanson
and Jones (1961) found that when all states were ranked according
to both percentage share of population and of furniture manufac-
turing employment, the degree of association between the two
resulted in a rank correlation of 0.917. Non-upholstered furniture
ranked 0.790; upholstered furniture, 0.899; and wood office furni-
ture, 0.787. Although the correlation between population and furni-
ture manufacturing is quite strong, other factors must be considered
in assessing the locational characteristics of the industry.

One factor is the past growth of the industry in the state.
Through the years Michigan producers have maintained an excellent
reputation for quality furniture. Although Michigan producers have
surrendered their claim as the national center for furniture manu—
facturing to North Carolina, they still lead in production of qual-
ity furniture. With a sizable number of firms manufacturing medium-
priced furniture and reentry of a few firms featuring low-priced
lines, the Michigan industry has a strong nucleus on which to grow.

An insight was gained into the future structure of Michigan's
furniture industry by a regression of reported sales on number of
employees. Inasmuch as executives felt labor would be the most
important factor limiting growth of their firms, productivity of
labor as firm size increases should give an insight into future
firm size. The equation of sales volume equals a + b(employees)

+ c(emp10yees)2, a parabola, provided an excellent fit (Table 30).

153

Table.30. Regression of sales volume on number of employees for
Michigan furniture manufacturers, by primary product

class, 196A

 

' Primary productfiglass

 

 

Equations tried fugfiggure Wood Institu- A11
non- furniture tional product
upholstered upholstered furniture classes
.... . .. o . . . ..fié, .. . .. . . ,
Straight line 0.52h8 0.9603 0.7758 0.7621
Parabolal 0.6192 0.9915 0.97hh 0.9175
Hyperbola 0.3135 0.0587 0.0913 0.0277
Hyperbola + linear 0.5733 0.9636 0.807h 0.768h
Logarithm 0.5h91 0.5hh2 0.28h7 0.2152

 

1Equations for parabola are:

Non-upholstered furniture Sales = 117.5972h + 19.66852 (Employees)
- 0.03696 (Employees)2
Upholstered furniture Sales = 1h1.62917 + 9.h6379 (Employees)
+ 0.05326 (Employees)2
Institutional furniture Sales = 1502.1h868 - 10.707h2 (Employees)
+ 0.02982 (Employees)2
All product classes Sales = 930.93862 + 1.11321 (Employees)

+ 0.02191 (Employees)2

15h
Within the range of the data, parabolas for upholstered and institu-
tional furniture classes were cupped upward indicating economies
of scale for labor. But for the non-upholstered fUrniture class,
the slopes cupped downward. The first derivative for the non-
upholstered equation was obtained. And then, by setting the rate
of change at zero the point of absolute diminishing returns was
found to coincide with 266 employees. Because of the diversity
of products manufactured by firms in this group and an R2 of
0.6192, one cannot say that there are clearly diseconomies to scale
but also there is no clear relationship that favors increasing firm
size.

The ways in which the parabolas cupped have implications for
future firm structures in Michigan and the utilization of wood
materials. Lack of a clear relationship favoring increasing
returns to scale for labor in the non-upholstered class and no
evident trend towards firm consolidation suggest that firm size
probably will not undergo significant change. As firm size is
not apt to increase substantially, it will continue to be diffi-
cult to obtain large cuttings from any one pattern. Hence, wood
materials with their 10w‘retooling costs should continue to be
popular. Moreover, executives in high positions such as presi-
dent will probably continue to take an active part in the selec-
tion of wood materials. If past trends are any indication, this
should result in decisions favoring wood materials.

Increasing firm size for upholstered furniture firms should

not affect wood consumption per unit of output but institutional

155
firms probably will continue to drift away from wood materials.
Upholstered furniture firms, regardless of size, have yet to
develop a substitute for wood frames with equal qualities of
strength, durability, and favorable price. And research efforts
may well be able to fend off substitutes in this application of
wood materials indefinitely. But increasing size for institu-
tional firms should encourage use of substitute materials.
Large firms probably will find it possible to have long pat-
tern runs favoring non-wood materials. However, firms will
still find it feasible to use wood materials for items with
short production runs such as executive desks.

Possible effects of price changes should not have as severe
a ramification in Michigan as for the national industry. As
previously pointed out, the wholesale price for wood material
has been relatively stable over the last few years.‘ However,
if the price of wood material should again increase in relation
to substitute materials, wood could conceivably become a pres-
tige material confined mainly to applications for the carriage
trade. But because Michigan is the center of prestigious furni-
ture, its industry would be relatively less affected than the
national industry.

Probably the most important factor favoring the use of wood
materials is the emergence of the "new consumer." Many books and
articles have been written about creeping conformity in American
life. Our modern suburbs, supermarkets, schools, and mode of

life add to this conformity. Selection of furniture meanwhile

156
has offered a great opportunity for creative self expression.
Consumers can set themselves apart from the crowd by selecting
a distinctive pattern or combination of patterns and wood finishes
for their homes. Styling, 0010r, and accessories provide oppor-
tunities for giving each home an individual identity. These
factors favor utilization of wood materials with their wide
variety of design and style possibilities and low retooling
costs.

But "new consumers" have not particularly favored the'
Michigan furniture industry. They favor the notion that furni-
ture need not last a lifetime. This idea has militated against
the practice of buying quality furniture. Attitudes of the "new
consumers" are related to their youth and their expectations of
repetitive moving and steady improvement in economic standing.
Also, all consumers are influenced by annual changes in styles
of automdbiles, refrigerators, and television sets. Nonetheless,
increasing affluence of American consumers should once again
favor quality products even though they may be purchased later
in life. Instead of purchasing quality furniture at the start
of the family formation, it probably will be purchased when
children are nearly mature. For the near future there should
be a market growth for all price ranges with more importance
given to style and less to durability. wood.materials with
their qualities of good appearance, flexibility, and wide
design possibilities should lend themselves to the challenge

presented by the "new consumer."

157

The aged facade of most Michigan plants would suggest a pessi-
mistic outlook by management. Nevertheless, the record indicates
a growing home market for Michigan wood producers. While the Forest
Service forecasts an increasing national market for lumber and ply-
wood and veneer, Michigan wood producers have reason to believe that
they can achieve even a greater than national increase in their home
market. There was a lack of any substantial substitution away from
wood materials or any local species in the last five years. More-
over, the structure of the local industry, possible influences of
price changes, and the "new consumer" all point to an increasing

demand for wood.

CHAPTER 8

SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS

In the preceding chapters, the furniture industry in Michigan
and its utilization of wood products has been discussed. Herein,
some of the major findings of the study will be presented together
with their implications. And recommendations regarding additional

research will also be given.

Summary and Conclusions

 

Michigan continues to be a leading furniture production center.
Although Michigan has surrendered its claim.to national leadership
in furniture manufacturing to North Carolina, it still leads in pro-
duction of quality furniture. In terms of value added, Michigan
ranks first in the nation for public building furniture, fourth for
wood office furniture, and eigth for both non-upholstered and up-
holstered wood furniture. While Michigan firms decreased slightly
in number during the last few years, the value added by manufac—
turing increased in every product group.

Grand Rapids continues to be the heart of the furniture indus-
try even though firms can be found throughout the state. Fifty-two
percent of the furniture manufacturers are located within 35 miles
of Grand Rapids and they account for 77 Percent of the total fur-
niture sales. Catalysts that led to the development of the furni-
ture industry in this area were the abundant hardwood resources

and the availability of skilled craftsmen. While the national

158

159

trend toward quantity production is continuing, manufacturers of
Grand Rapids generally stress quality at the expense of volume.

The Michigan furniture industry has several special features.
First, value added by Michigan furniture establishments averaged
$605,000 in 1963, higher than any region in the Nation. Secondly,
the industry is basically mature; firms average 37 years in busi-
ness. Thirdly, the overall pattern of ownership is basically one
in which one family or a small handful of individuals controls the
firm.

The type of furniture produced further contributes to the
special nature of Michigan's furniture industry.‘ Although the
state industry is more concentrated than the national for the
various primary product groups, close within group examination
revealed that most firms succeeded in establishing their own "niche"
within the market. Rather than being in direct competition with
large—scale producers, many Michigan firms manufacture items for the
national "carriage trade." Firms that feature only medium and low-
priced furniture concentrate their marketing activities in the Mid-
west. The net effect of these business policies is to provide a
degree of isolation from competion for Michigan producers.

The present basic structure of Michigan's furniture industry
seems certain to endure. Only minor changes are likely to result
from firms opening new furniture plants outside of Michigan or
mergers between firms within the state. The interviewed executives
felt labor would be the most important factor limiting growth of

their firms. Moreover, regression analysis of reported sales on

160

number of employees revealed that there was a lack of a clear rela-
tionship favoring increasing returns to scale for labor in the non—
upholstered class. Together all factors point toward a continuing
industry structure characterized by numerous production units and
individual rather than large corporate ownership.

Continuation of the present firm structure in Michigan has
important implications for the utilization of wood materials. As
firm size is not apt to increase substantially, it will continue to
be difficult to obtain large cuttings from any one pattern. Hence,
wood materials with their low-retooling costs should continue to be
popular. Also demand for wood should be sustained as long as prin-
cipal executives continue to take an active part in the selection
of wood materials. They have favored wood materials. Moreover,
Michigan's industry is structured to be relatively insensitive to
changes in price of wood materials. Drastic price increases in
wood materials could conceivably enhance their prestige for the
"carriage trade." Inasmuch as Michigan is the center of production
for high priced furniture, wood should continue to be popular.

Material expenditures loom large in the total cost structure
of the industry. Average labor costs for Michigan firms were 29
percent of the total costs; material costs, 39 percent; and overhead,
selling, administrative and transportation costs, 32 percent. The
chief component of material costs is wood. It averaged 22 percent
of total costs and other materials, 17 percent. Wood costs are 29
percent of the total costs for non—upholstered wood furniture; 13

percent, upholstered furniture; and 23 percent, institutional

161

furniture. This reflects a decline in the use of wood over the
years. During most of the early history of furniture manufacturing,
wood was the dominant material. In recent years, there have been
substantial changes in raw material inputs with the development of
such substitute materials as new metal alloys and plastics. But
wood continues to maintain its leadership because of widespread
availability, firmly-entrenched appeal, workability, strength, and
beauty.

Average cost figures conceal the wide variation in the differ-
ent categories. One reason for this is that most Michigan firms
offer a special combination of products both in type and quality to
establish their "niche" within the market. Another reason for the
variation is that about half of the firms have elected to purchase
various quantities of preprocessedrwood.material. For these firms,
material costs are higher and labor costs lower as a considerable
amount of labor is absorbed in material costs. Because of the wide
variation in the firms' cost structures, it is difficult to concep-
tualize a typical firm.

Pricing policies followed by the firms emphasize the relative
importance of material costs. Michigan firms typically try to
follow some form of a cost-plus-varying-margin formula. But costs
in the furniture industry are not as rigidly scrutinized as in
other industries. One reason for this is that most producers sel-
dom know their actual costs for an item. Frequent changes in styles
and products contribute to the difficulty of obtaining valid unit

costs. Prices of items are set at a level that the manufacturers

162

believe will sell at a profit, but most firms are willing to adjust
their prices if market acceptance is not favorable. In practice,
this results in competitive conditions governing selling price. As
unit costs are not veryawell known, prices of materials can undergo
smallifluctuations without manufacturers changing their utilization
policy. But large changes in material prices do influence manu-
facturers.

Lumber is the most important wood material purchased. Virtu-
ally every furniture manufacturer interviewed used lumber. It
averaged 55 percent of wood material costs; hardwood plywood aver-
aged 19 percent; softwood plywood, six percent; veneer, nine per-
cent; particle board, nine percent; and fiberboard, two percent.

Of the SM million board feet of lumber purchased, non-upholstered
furniture firms purchased about half of the lumber with upholstered
and institutional furniture manufacturers sharing the remainder.
Almost all of the lumber was number one common or better making the
furniture industry the major user of high-grade hardwood lumber in
Michigan.

A wide variety of hardwood and softwood species are utilized.
The most important species are soft maple, elm, walnut, cherry,
hard maple, oak, pine, and birch. Most furniture firms utilize a
variety of species with over 60 percent utilizing three or more
species. But a comparison of species used in leading furniture
manufacturing areas revealed that most firms still generally utilize

species grown in their locale.

163

A few important reasons were identified as to why Michigan fur-
niture firms utilize lumber. Ranked in order of firms' preference,
they are appearance, price, strength, constant supply, machinability,
design, durability, moisture content, and customer choice. Few
firms listed the same four reasons why they selected lumber illus—
trating the versatility of this material. However, some trends were
discovered. First, those firms using lumber in exposed parts listed
appearance as the major reason they purchased lumber. This was es-
pecially true of firms making high—priced furniture. Those firms
making medium to low-priced furniture felt price was important and
upholstered furniture firms stressed strength. Hence, lumber has
qualities sought by manufacturers making all types and price levels
of furniture.

Although 38 percent of the firms have made a major substitu—
tion among lumber species in the last five years, the overall
pattern of lumber utilization has not been substantially altered.

A wide variety of species were substituted with no one species
dominating. Often as one firm increased its use of a given species
another firm decreased its use. Factors that may affect future
substitution of species were identified. First, design changes and
new product offerings will affect future consumption. Emphasis in
styles over the years has varied, leading to changes in popularity
among the species. Secondly, technical advantages will contribute
to future species substitutions. Finally, relative price changes

will affect substitutions among the Species.

161+

Furniture firms have steadily increased their utilization of
veneer and plywood. Today 3h percent of Michigan wood expenditures
are for these materials. Although veneer construction unfortunately
became associated with inferior furniture, many quality furniture
firms still apply veneer in the tradition of the great masters.
Rather than using it to cover shoddy workmanship or inferior mate-
rials, they use it to give elegance to their furniture.

Michigan firms have found that they can save money by purcha-
sing veneer already converted to plywood. Some use it simply for
core material and apply the face sheet themselves. This practice
was more frequent among the prestigious firms. But firms featuring
low to medium-priced furniture are now buying hardwood plywood with
the face material already assembled. They have found that Ameri-
can hardwood plywood firms are now offering custom products to them
because of pressure from foreign suppliers. Also, wholesale hard-
wood plywood prices have been stable in the last few years while
costs of assembling plywood have increased for furniture manufac-
turers. It is expected that this trend toward purchasing assem-
bled plywood will continue and the furniture industry will become
a more important marketing source for North Central plywood mills.

Softwood plywood utilization has increased rapidly in the last
few years. Although it only accounts for six percent of the wood
material expenditures, 52 percent of the manufacturers in Michigan
now use this material. Furniture manufacturers have found that it
has the desired qualities for use in interior parts and with its

low price is becoming progressively more attractive.

165

Utilization of composition board in furniture manufacturing has
also increased rapidly. Since W0rld war II when almost no compo-
sition board was used, it has grown until it now accounts for 11
percent of Michigan's wood expenditures. The major problem firms
encounter with composition board is selecting from the wide variety
offered. At present, furniture firms must experiment among the var—
ious types to find the product best suited for their purposes. Un—
fortunately, some Michigan firms thought that all boards are made to
a general standard. This most decidedly is not the case. Upon
receiving shipments from other than their established source, firms
soon found many of the boards unsuitable for the purpose intended.
In view of the past problems in ordering, composition boards will
not be used to their full potential until industry wide standards
are adopted.

The forest resources in Michigan looks promising. Michigan
now has in inventory quality timber to produce 90 times more than
the present annual requirement of its home furniture industry.
Moreover, present growth-to-cut ratios are about two to one. The
only major species that Michigan is not likely to produce in quan-
tities needed by its furniture industry are walnut and cherry. One
problem, however, is the scattered nature of much of the hardwood
resource. In Michigan there are 182,000 small forest owners who
control about half of Michigan's forest area. Many of their hold-
ings contain choice hardwoods.

To overcome the concentration and dispersion problems, a va-

riety of marketing channels have developed. The most important in

166

terms of volume is between the furniture firms and mill Operators.
This type of arrangement enables mills and furniture firms to
arrive at an understanding of what is needed and also to insure
that there will be a constant flow of materials. But this study
disclosed that the furniture firms usually dominate in the negoti-
ation of sales. In turn, mill operators usually dominate the tim-
ber producers. Hence the ultimate loser is the timber producer.
As previously proposed by other researchers, publication of market
prices might help to equalize the terms of trade.

Another key individual is the wholesaler who handles about a
quarter of the volume. The wholesaler helps furniture manufacturers
and mills in several ways. First, wholesalers save mills the ex-
pense of a sales staff and furniture firms the expense of contacting
mills. Secondly, they take over the risk of financing for North
Central mills which generally have capital problems. Thirdly,
wholesalers provide mills the opportunity to increase the number
and variety of market outlets for their product. Similarly, they
allow the furniture firms to select from an increased number of
species and buy only the materials that they need. This is impor—
tant to furniture firms requiring small amounts of special mate-
rials.

Commission agents also are an important source of materials
as they supply about a quarter of the wood materials to the furni-
ture manufacturers. These individuals are more active in softwood
marketing than hardwood, but in Michigan they supply a considerable

volume of hardwood materials. With the exception of handling credit

167

problems, these individuals perform about the same tasks as whole-
salers. Unlike wholesalers, however, they allow the mills to know
the names of their customers. This can be valuable to the mills if
they decide to deal directly with their customers in the future.
Overall, the present marketing arrangement seems adequate. Al-
though the increased involvement of marketing intermediaries could
increase flexibility in the utilization of wood materials, the
present system combines the advantages of direct contacts with the
advantages of marketing intermediaries to overcome the concentra-
tion and dispersion problems. Also, the system seems to provide
relative price stability as compared to other parts of the country.
The furniture wood market in Michigan has been stable in the
last few years and almost all indicators point not only to future
stability in demand for wood but to probable growth. Unlike
national analyses such as Robinson (1965) which pointed out that
hardwood producers are losing their market, this analysis showed
that Michigan furniture firms still continue to use quality hard-
wood products. As in any major industrial sector, production
changes have taken place influenced by changing consumer prefer-
ences and technilogical advances. The only disturbing factor is
the recent increase in wholesale hardwood prices since the field
data were collected. However, based on the data available, the

future looks promising.

168

Suggestions for Future Research

 

First, there appears to be possibilities for creation of sev-
eral modern wood processing centers to make a wide range of products
in Southern Michigan. The joint product nature of timber requires
that such centers must dispose of substantial volumes of low-grade
lumber in the form of pallets, crating, and flooring. The centers
would also have to pulp large volumes of residues or convert them
to various types of particle boards to enhance their economic
feasibility. In the final analysis, the feasibility of such cen—
ters rests on the ability to organize a sufficient acreage of small
tracts either through leasing, long-term cutting contracts, forest-
ry consultants, or through tree farm families to provide management
at a sufficient level to satisfy the land owner's need for income
and other sources of benefits that they wish to derive from wood-
lands. Any combination of these institutional arrangements could
virtually guarantee a dependable and economical source of timber
for processing centers. These centers, in turn, would provide
an economical and sustainable supply of wood materials to furniture
firms.

Secondly, the re-evaluation of present management recommenda-
tions by such individuals as Rudolph, §t_al,, (1959) and Arbogast
(1957) in the context of present—day economic environment would be
helpful. For example, this study showed that the market for soft

maple and elm has grown since their recommendations.

169

Thirdly, the establishment of a time-series-data bank on
volume usage of wood products and species, as presently available
in North Carolina, would be helpful. The data bank would enable
foresters to warn furniture firms of possible future shortages
and also would enable foresters to adjust their timber management

recommendations.

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APPENDIX A. THE SURVEY QUESTIONNAIRE

1. As you know, this project involves interviewing furniture manu-
facturers in several mid-western states. I'd like to start by
asking you what you see as the major trends in furniture design
over the last ten years?

None Don't know

(Go to Q3)

 

 

 

 

 

2. In what ways--if any-~have these trends influenced the use of
wood products in your operation?

 

 

 

3. Looking ahead a few years, what changes in the design of the
furniture produced do you anticipate?

None Don't know
(Go to 05, below)

 

 

 

 

h. In what ways--if any—~do you think these future changes will
influence the use of wood products in your Operation?

 

 

 

5. Now I have some questions about your firm. First, how many
years ago was your firm originally established?

(#YRS)

179

180

6. How many years has the firm operated in this community?
(#YRS)

7. Just approximately--and including yourself, what was the aver-
age number of full-time workers in this operation in 196A?

(#)

8. Again approximately, what was the average number of full-time
workers here in 1959? (IF OPERATION NOT ESTABLISHED IN 1959,
READ...since you started business here?)

 

 

 

(#)
9. How many other furniture or wood-using plants, if any, does
this firm Operate? (#), or
None

(Go to 010, below)

9a. What was the average number of full-time employees the
firm as a whole had in 196%, approximately?

(#)

9b. And, what was the average number of full-time employees
the firm had in 1959, approximately?

(#)

9c. What kinds of furniture or wood products are produced
in the other plants your firm Operates, and in what
state is each Of these other plants located?

 

 

KIND OF FURNITURE OR WOOD PRODUCT STATE
(.1)
(-2)
(3)
(h)
10. Under what type ownership is your Operation here in this

community. . . a single prOprietorship, a partnership, or
a corporation?

 

 

 

 

 

11.

12.

(ASK

13.

1h.

15.

181

Are all, or none of the furniture products of this operation
produced on a customsmade basis?

All
(Go to 012)

Some None

11a. In your view, is the (non-custom) product line high-
priced, medium-priced, or low-priced?

High. Med. Low
What furniture products were produced and services provided

from this location in 196A? (e.g., Chairs, tables, uphol-
stered chairs, repair, etc.)

 

 

 

 

 

 

 

 

 

PRODUCT OR PRODUCT OR PRODUCT OR
SERVICE g SERVICE Q70. ' SERVICE 2
(1) (5) ' ‘ (9)
(2) ' (6) (10)
(3) (7) (11)

 

 

 

(h) ‘ (8) (12)

 

 

100%
Q BELOW FOR EACH PRODUCT 0R SERVICE; RECORD ABOVE TO TOTAL 100%)

WOrking with approximate figures again, what percent of your
total 196% gross income was earned by ?

Over the last five years, what principal shifts have occurred--
if any--in the furniture products produced by your operation

here?

None, or

 

 

 

What factors influence the decision as to the types and designs
of furniture which this Operation will manufacture?

 

16.

182

Now I have some questions about the buyers you sell this Opera-
tion's products and services to. First, in what states are most
of your Operation's buyers located?

 

 

 

 

 

 

(1) % (h) ' % (7) %
(2) % (5) “ % (8) ' %
(3) 7: (6) ' % (9) ‘ %

 

 

 

(IF MORE THAN ONE STATE LISTED, ASK 017. RECORD %'s ABOVE)

17.

18.

What was the approximate percentage of your Operation's 196A
gross income that came from each of the states we've listed?

This card lists the various types of buyers to whom your opera—
tion may have sold its products and services in 196A. Approxi-
mately how many of each type of buyer listed here did this opera-
tion sell to last year? (SHOW CARD 1)

 

 

APPROX. % OF
NUMBER SALES $
A. Wholesalers ' ' ' %
B. Retailers ‘ %
C. Ultimate consumers %
100 %

(IF MORE THAN ONE TYPE OF BUYER LISTED, ASK 019. RECORD %'s ABOVE)

19.

20.

What was the approximate percentage of your Operation's 196M
gross income that came from each of the type of buyer's we've
listed?

Over the last five years, has there been any significant change
in the proportion Of your Operation's products which go to the
different types of buyers of your principal products?

 

No Don't know
(Go to 021)

Yes

21.

22.

23.

2h.

25.

26.

183

20a. What type of buyer do you now sell proportionately more
to, and to what type of buyer are you now selling less?

SELL MORE TO: SELL LESS TO:

 

 

20b. As you see it, what were the reasons for this change?

 

 

 

In general terms, would you describe how the prices are estab-
lished for the products made by your operation here?

 

 

 

Are your product sales captive? That is, do you sell a major
share of your Operation here to a single or few buyers who
dictate the specifications?

Yes No

Had the market been adequate in 196A, by what percentage--if
any--cou1d you have increased your production at this plant
with existing facilities?

%

What was the approximate amount of this Operation's 196M sales,
including all products and services?

$

Just as a guess, what do you think this Operation's gross sales
will be in 1969-—about five years from now?

33

In your opinion, what are the most important factors that will
limit the growth of this operation over the next five years?

(1)
(2) l

 

 

 

27.

28.

18A

This next card lists the major types of costs an Operation such
as yours could have. As well as you're able, would you tell us
what percent of total costs in 196A would be assigned to each
type Of cost listed here? (SHOW CARD 2; MAKE %'s TOTAL 100%)

 

% TOTAL
COSTS CARD 2
% A. Direct labor costs (including your labor
if appropriate)
% B Wood material costs
% C Other material costs
% D Factory overhead
% E Selling and administrative costs
% F Transportation (total for materials and
final products)
% G. Miscellaneous costs
100 %

Now I have some questions about the wood raw materials your
Operation may use. Card 3 lists six types of wood raw mate-
rials. As well as you're able, would you tell us what percent
of your 196A total costs for the wood raw materials (either
purchased or produced here) would be assigned to each type
listed? (SHOW CARD 3; MAKE %'s TOTAL 100%)

 

 

% COSTS CARD 3
% A. Lumber
% B. Hardwood plywood (veneer, particle board,

and lumber core)
% C. Softwood plywood
% D. Veneer
% E. Particle board
% F. Fiberboard
% G. Other wood (SPECIFY):
100 %

(RECORD THE THREE WOOD RAW MATERIALS LISTED ABOVE WHICH ACCOUNT FOR
THE THREE HIGHEST %'s OF TOTAL COSTS. THEN ASK Q's BELOW FOR EACH
WOOD MATERIAL YOU'VE LISTED.)

29.

30.

31.

185

THREE WOOD RAW MATERIALS WITH HIGHEST %

 

 

What was the major product or part you made out of (lst, 2nd,
3rd WOOD RAW MATERIAL LISTED)?

 

 

Ranking from one to four in order of importance, what are the
four most important factors on this next card which influenced
your decision to use (WOOD RAW MATERIAL) or make (PRODUCT LISTED
ABOVE)? (SHOW CARD h: ENTER LETTERS FROM CARD OF FOUR MOST
IMPORTANT)

(1) (1) (1)

(2) (2) (2)—

(3) (3) (3)
(A) (h) (h)

CARD h
A. Design E. Durability J. Customer
B. Strength F. Machinability choice
C Constant G. Moisture content K. Other
supply H. Grade (SPECIFY)
D. Price I. Appearance, grain, color

This next card lists some of the market agent sources of supply
of hardwood and softwood lumber. Considering the total volume
of lumber your operation used in l96h, what proportion was
obtained from each of the sources listed here? (SHOW CARD 5;
MAKE %'s TOTAL 100%)

Z. CARD 5

% A. Own sawmill
% B. Independent sawmill not owned by you
% C. Wholesaler

% D. Commission agent who is not an employee of
a wholesaler or manufacturer

% E. Other (SPECIFY):
100 %

 

32.

33.

186

Over the last five years, has there been any significant change
in the market agent sources of supply of the lumber used in your
operation here?

No Don't know
(Go to Q33)

Yes
32a. What was the nature of this change, that is, what type of
market agent do you now buy proportionately more from, and
from.what type of market agent do you now buy proportion-
ately less?
BUY MORE FROM BUY LESS FROM

32b. As you see it, what were the reasons for this change?

 

 

 

In terms of the total value of the lumber purchases this Opera-
tion made in 196A, approximately what percentage--if any--was
premanufactured dimension stock, turnings, moldings, or other
premanufactured stock which may be used to make other wood
products?

None

(Go to 03A)

or %

33a. Considering just the total value of your 196A lumber
purchases for all uses that were premanufactured, what
percentages were of dimension stock, of turnings, of
moldings, or of other types? (RECORD % FOR EACH TYPE)

% Dimension stock
% Turnings
% Moldings

% Other (SPECIFY):
100 %

 

3h.

35.

187

Was most of the softwood lumber your operation used in 196A
purchased in the form of dimension stock, in rough boards, or
in finished boards?

Used none

(Go to Q35)
Dimension stock Rough boards Finished boards Don't know

3ha. Was most of the softwood lumber you used air-dried, kiln-
‘dried, or green?

Air Kiln Green Don't know

3hb. Was most of the softwood lumber you used in 196A shipped
from the manufacturer by truck or rail?

Truck Rail DK Other:

 

3hc. was any of the softwood lumber you used originally manu—
factured outside this state?

NO Don't know
(GO to Q35)

Yes

3nd. Of the reasons listed on Card 6, which one would be the
most important one explaining your use of out-Of-state
softwood lumber? (SHOW CARD 6)

/ CARD 6

 

A. Technical reasons

B. Quantity of supply is good
C. Quality of supply is good
D. Established supplies

E. Price factors

F. Other (SPECIFY)

 

 

Was most of the hardwood lumber your operation used in l96h
purchased in the form of dimension stock, in rough boards, or
in finished boards?

Used none

(Go to 036)

Dimension stock Rough boards Finished boards Don't know

36.

35a.

35b-

350 .

35d-

188

Was most of the hardwood lumber you used air-dried, kiln-
dried, or green?

Air Kiln Green Don't know

Was most of the hardwood lumber you used in 196M shipped
from the manufacturer by truck or by rail?

Truck Rail DK Other:

 

Was any of the hardwood lumber you used originally manu—
factured outside this state?

No Don't know
(GO to Q36)

Yes

Which of the reasons on Card 6 would be the most important
one explaining your use of out-of-state lumber?

(CARD 6)

Was most of the hard board your Operation used in 196M purchased
in standard-sized sheets or to specified dimensions?

36a.

36b .

360.

Used none

(Go to Q37)
Standard Specified Don't know

Was most of the hard board you used shipped from the manu-
facturer by truck or rail?

Truck Rail DK Other:

 

Was any of the hard board you used originally manufactured
outside the state?

No Don't know

(GO to Q37)
Yes

Which of the reasons on Card 6 would be the most important
one explaining your use of out-of-state hard board?

(CARD 6)

 

I ’74.... 11

37-

38.

189

Was most of the particle board your operation used in 196M
purchased in standard—sized sheets or to specified dimensions?

Used none
(Go to 038)

Standard Specified Don't know

37a. Was most of the particle board you used shipped from the
manufacturer by truck or rail?

Truck Rail DK Other:

 

37b. Was any of the particle board you used originally manu-
factured outside this state?

No Don't know
(G0 to Q38)

Yes
370. Which of the reasons on Card 6 would be the most impor-
tant one explaining your use of out-of-state particle
board?
(CARD 6)

Was most of the softwood plywood your operation used in l96h
purchased in standard-sized sheets or to specified dimensions?

Used none

(GO to Q39)
Standard Specified Don't know

38a. Was most of the softwood plywood you used shipped from
the manufacturer by truck or by rail?

Truck Rail DK Other:

 

38b. Was any of the softwood you used originally manufactured
outside this state?

No Don't know
(Go to Q39)

Yes

380. Which of the reasons on Card 6 would be the most impor-
tant one explaining your use of out-of—state softwood
plywood?

(CARD 6)

39.

A0.

190
Was most of the hardwood plywood - veneer and lumber core — your
Operation used in l96h purchased in standard-sized sheets or to

specified dimensions?

Used none
(GO to 0&0)

Standard Specified Don't know

39a. Was most of the hardwood plywood you used shipped from
the manufacturer by truck or by rail?

Truck Rail DK Other:

 

39b. Was any of the hardwood plywood you used originally manu-
factured outside the state?

No Don't know
(Go to 0h0).

Yes

390. Which of the reasons on Card 6 would be the most impor-
tant one explaining your use of out-Of-state hardwood

plywood?
(CARD 6)

Considering the areas that supply the wood products used in

your operation...over the last five years has there been any
significant change in the supply areas that manufacture the

wood products you use? .

NO Don't know
(Go to 0A1)
Yes

hOa. What was the nature Of this change...that is, what
supply area do you now get proportionately more wood
' products from, and from what area do you now get pro-
portionately less?

GET MORE FROM: GET LESS FROM:

 

hOb. As you see it, What were the reasons for this change?

 

 

 

I .' --_

 

Al.

A2.

A3.

191

What were the five most important different species of lumber
your Operation used in 196A? (e.g., Oak, Elm, Pine, etc.)

 

 

 

 

(l) %
(2) %
(3) %
(h) %
(5) %

 

Of the total volume of lumber you used in 196A, approximately
what percent did each of.these species account for? (RECORD
ABOVE)

Over the last five years, has this Operation experienced any
significant changes in the prOportion Of the different species

of lumber you have used?

No Don't know
(Go to th)

Yes
h3a. What was the nature of this change...that is, what
species of lumber do you now use proportionately more
of, and what species do you use proportionately less of?
(RECORD BOTH MORE AND LESS)
MORE USE LESS USE
(l) (l)

(2) (2)

 

 

h3b. Why does this Operation now make proportionately more
use of (FIRST SPECIES LISTED UNDER "MORE USE" COL.)?

 

 

(IF ONLY ONE SPECIES LISTED IN "MORE USE" COL., GO TO 0AA)

M30. Why does this operation now make proportionately more
use of (SECOND SPECIES LISTED UNDER "MORE USE" COL.)?

 

 

hh.

h5.

MO.

192

Over the last five years, has your operation substituted any
wood products for uses formerly served by non-wood products?

No Don't know
(GO to QA8)

Yes
What wood products have you substituted for uses formerly

served by non—wood products? (LIST UP TO TWO TYPES OF
SUBSTITUTIONS: BE SPECIFIC)

(1)
(2)

Why was (FIRST SUBSTITUTION LISTED) made?

 

 

 

 

(IF ONLY ONE SUBSTITUTION LISTED, GO TO 0h8)

A7.

h8.

Why was (SECOND SUBSTITUTION LISTED) made?

 

 

Over the last five years, has your Operation substituted

any non-wood products for uses formerly served by wood
products?

NO Don't know
(Go to Qh9)

Yes
h8a. What nonawood products have you substituted for
uses formerly served by wood products? (LIST UP
TO TWO TYPES OF SUBSTITUTIONS: BE SPECIFIC)
(l)
(2)

h8b. Why was (FIRST SUBSTITUTION LISTED) made?

 

 

 

 

59.

50.

51.

193
(IF ONLY ONE SUBSTITUTION LISTED, GO TO 0A9)

h8c. Why was (SECOND SUBSTITUTION LISTED) made?

 

 

How do you contact the sources of materials your operation
uses? That is, do intermediaries bring you and the seller
together, do you or the seller take the initiative, or what?
(Could you tell me more about that? In what ways is that
done? Etc.)

 

 

 

Who in this operation usually decides what wood materials
such as lumber, plywood, etc., go into the products you
make?

(TITLE)

 

Are you utilizing any of your waste? No (Go to 052)
Yes
51a. Do you utilize any of your waste in your power plant?
Yes No

51b. Do you utilize any of your waste by selling chips,
shavings, or small blocks?

Yes No

51c. DO you manufacture any products which were formerly
waste?

Yes No

51d. In what other ways--if any--are this plant's wastes
utilized?

 

 

52.

53.

5h.

55.

56.

57-

58.

19h

All-in—all, would you say waste disposal is a problem for your
plant, or not?

Yes No Perhaps
DO you have a quality control department?
Yes No

Do you employ a wood technologist or a forest products engineer
here at this operation?

Yes No

Do you think you will consider hiring (more; one) of these
persons in the future?

Yes No Don't know

What kinds of marketing research—-if any--has your operation
done?

None

(Go to Q57)

01‘

 

 

56a. How was this research done...through your own marketing
research department, by outside specialists, or what?

 

 

Do you anticipate that your Operation will do any marketing
research in the future?

Yes No Depends Don't know

What kinds of products or design research-~if any-—has your
Operation done?

None, or

 

 

 

195

59. That's all the regular questions I have. Are there any
comments you would like to make about areas we haven't
covered or anything else?

 

 

 

 

 

60. So we can make sure you get the research report when it's
ready, I'd like your name and position.

NAME

 

POSITION

 

APPENDIX B.

(A) 2511-Wood household fur—

10.

11.

12.

13.

1A.

15.

16.

 

niture, except uphol-

 

 

’stered

Radio, phono, TV, hi—fi
cabinets, and combina—
tions thereof

Other wood, living room,
sunroom, and hall furni-
ture

Sewing machine cabinets
Other cabinets

Chairs and rockers

Tables (except card and
telephone)

Desks

Credenzas, bookcases,
and book shelves

Card tables and chairs
Other nonupholstered
living room furniture
(nec)*

Other wood living room,
library, sunroom, and
hall furniture (nsk)**
Wood dining, junior
dining, and kitchen
furniture

Chairs

Buffets and servers

China and corner cabinets

Other dining (nec)

196

.DEFINITIONS OF SIC CATEGORIES

17.
18.
19.

20.

21.
22.
23.
2h.
25.
26.
27.
28.

29.
30.

31.

32.
33.
3h.

35.

Breakfast sets

Other kitchen furniture
Other wood dining (nsk)
Kitchen cabinets, wood,
assembled, unassembled,
or other

Wood bedroom furniture
Beds

Headboards

Bunk beds

Dressers

Chests of drawers

Cedar chests

Chairs, rockers, benches,
chaise lounges

Other bedroom (nee)
Bedroom furniture (nsk)

Infants' and children's
wood furniture

Cribs
High chairs
Play yards and play pens

Other infants' and
children's furniture

36.

37.

38.

39-

A0.

A1.

A2.

A3.

AA.

(11)

6.

197

Other infants' and chil— 7.
dren's furniture (nsk)

Wood outdoor furniture 8.
and unpainted wood fur-

niture

Cots, folding, of wood 9.

and canvas

Chairs, rockers, benches,
chaise lounges, and
steamer and deck chairs 10.

Other wood porch, lawn,
and beach furniture 11.

Unpainted wood furniture

(furniture in the white)

including chests of 12.
drawers and other un-

painted furniture

Other nonupholstered
wood household furniture

Wood outdoor furniture 1.
and unpainted wood furni-
ture (nsk)

 

 

2.
Wood household furniture,
except upholstered (nsk)

3.
2512-Wood household furni-
ture, upholstered

h.
Upholstered wood house—
hold furniture 5.
Sofas, davenports, set-
tees, and love seats 6.
Chairs (except reclining)
Sectional sofa pieces (2)
Rockers
Reclining chairs 1.

Bedroom chairs, benches,
and chaise lounges

Other upholstered wood
household furniture
(ottomans, hassocks, etc.)

Wood household furniture,
upholstered, except dual
purpose sleep furniture
(nsk)

Furniture frames for
household furniture

Wood furniture frames
for household furni—
ture

Wood household furni—
ture (nsk)

2521-Wood office furniture

 

Chairs and stools (in—
cluding upholstered)

Sofas, couches, settees,
etc., (including uphol-
stered)

Desks, including exec-
utive, secretarial,
clerical

Cabinets and cases

Other wood office furni-
ture

Wood office furniture
(nsk)

2531-Public building and
related furniture

 

 

School furniture except
stone and concrete

10.

11.

12.

13.

1A.

15.

16.

17.

18.

198
Desk-seat combination
Chair desk
Tablet arm chair
Other single pupil units
Two or more pupil units

Chairs, all-purpose (non-
folding)

Folding tables and benches

Other school furniture
(tables, storage cabinets,
factory-built, chalk board,
etc.), except stone and
concrete

School furniture (nsk)
Public building and related
furniture except school
furniture

Seats for public convey-
ances, autos, trucks, air-
craft, and school busses
Church pews

Other church furniture
(pulpits, altars, lecterns,

etc.)

Chairs and seats for thea-
ters and auditoriums

Stadium and bleacher seats

Other (tables, benches, seats,
etc.)

Public-building furniture (nsk)

*(nec) Not elsewhere classified
**(nsk) Not specified by kind

APPENDIX C. MICHIGAN'S FOREST RESOURCE

This appendix describes the potential of Michigan's forest
resources to meet the demands of its furniture industry. First,
the forest base for timber production is discussed. Next, the
likely changes in inventories are reviewed with special emphasis
given to growth and cut relationships. Finally, an evaluation of
intra-state timber supply possibilities is presented. The data
in the first and second sections are taken from "Michigan Forest
Resource" by Findell et_al,, 1960. The basic measurements were
made between 19A6 and 1957 but all data were adjusted to a common

1955 date in compiling the statistics.

The Forest Base

 

The U.S. Forest Service estimated that the original forest
covered about 35 million acres or 97 percent of the area comprising
Michigan (Table Cl). Pine types were found on 28 percent of the
forest; northern hardwoods, 25 percent; oak-hickory, 1A percent;
spruce-fir, 13 percent; coniferous swamp, ten percent; and lowland
hardwoods, nine percent.1

After nearly two centuries of efforts to develop the State's

resources, there are still about 20 million acres of forest land in

 

1For definition of terms see Findell 21°. E., 1960.

199

200

Table C1. Forest area in Michigan, by major type, selected years

 

 

Estimated
Forest type original 1935 1955
(Million acres)

Pine 10 .0 1.0 1.6
Spruce-fir A.5 1.A .7
Coniferous swamp 3.5 1.3 1.A
Northern hardwoods 9.0 A.6 A.7
Oak-hickory 5.0 1.3 1.8
Lowland hardwoods 3.0 .7 1.0
Aspen - 5.0 A.8
Other1 __._5_ _fl .11
Total 35.5 19.1 19.7

 

1Originally this was scrub forest land; in 1935 and 1955 it
consisted of nonproductive, reserved forest land and grass-brush.

Source: Findell, et_al:, 1960, p. l.

201
Michigan. The major loss in forest area can be traced to the early
develOpment of the state. With the opening of the Erie Canal in the
early 1800's, settlers came in substantial numbers to Michigan.
They cleared extensive areas of forest for home sites and farm
land. Loggers also cut white pine and quality hardwoods for the
growing eastern lumber market. By the 1920's, desirable stands
of timber had largely been cut over. In general, prevailing log-
ging practices disregarded regeneration and uncontrolled fires were
commonplace. The magnificent stands of white pine and hardwood
were replaced by a vista of poor agricultural land or cut-over,
burned-out forest.

Some of the former forest areas have returned to wood pro-
duction. First, many farms located on the poor agricultural land
failed and logging companies abandoned their cutover land. Then
forward-looking entrepreneurs began to take a positive attitude
towards timber production. Foresters first stressed the control
of fires as a first step toward making forest investments. Tree
planting was also stressed for both public and private cut-over
land. By 1957, 1,215,000 acres of trees had been planted in
Michigan, more than any other state in the nation.

Since the 1930's there has been a relative stabilization
of the forest area. Between 1935 and 1955, Michigan's forest
area increased only three percent from 19.1 million acres to
19.7. Hardwood types account for two-thirds of the commercial
forest area, softwoods about one—fifth, and non-stocked areas

the remainder. The leading hardwood types are northern hardwoods

202
and aspen followed by oak-hickory and lowland hardwoods. Pine is
the leading softwood type followed by coniferous swamp and spruce-
fir.

Hardwood types, the major source of timber supplies for the
furniture firms, are not evenly located across the state (Table C2).
Northern Lower Michigan has 38 percent of the hardwood area;
western Upper Michigan, 27 percent; eastern Upper Michigan, 19
percent; and southern Lower Michigan, 16 percent. Northern hard-
wood and aSpen types are found mainly in the Upper and northern
Lower Peninsula. Although many of the aspen stands have an under-
story of conifers, present industrial considerations make continua-
tion of aspen stands desirable. And commercial interests are
likely to make considerable efforts to keep these stands in aspen.
In southern Michigan there are large areas of oak—hickory and
ash-elm-cottonwood types even though the land area is primarily
devoted to agriculture and urban develOpment.

Hardwood types, excluding aSpen, have only 3A percent of
their area in sawtimber stands. Aspen, because of its short life
expectancy, does not run heavily to sawtimber volume. Although
southern Lower Michigan has the smallest area devoted to hard-
woods, it has 36 percent of the state's sawtimber volume (Table C3).
In this area which is close to the center of the state's furniture
industry is 80 percent of the state's white oak sawtimber inventory,
60 percent of the elm, 60 percent of the red oak, 57 percent of the
ash, A6 percent of the soft maple, and 39 percent of the basswood.

Also located in southern Michigan are stands containing beech, hard

Table C2.

203

Location of commercial forest area in Michigan, 1955

 

 

 

 

 

Southern Northern Western Eastern
Forest type Lower Lower Upper Upper Total
Michigan Michigan Michigan Michigan
(Thousand acres)
Hardwood
Aspen—birch 357 2,218 1,122 1,102 A,799
Northern hardwood 383 1,099 2,087 1,082 h,651
Oak—hickory 717 1,035 21 16 1,789
Ash—elm—cottonwood 555 259 6A 96 27A
Total 2,012 A,611 3,29A 2,296 12,213
Softwood
Jack pine 21 639 8A 260 1,00A
Cedar 8 27A 159 AA5 886
Spruce-fir A 113 337 280 73A
Red pine 18 27A 33 107 A32
Black spruce - A7 152 189 388
White pine 13 66 51 56 186
Tamarack 15_ 36 _g§_ 53 130
Total 79 l,AA9 8A2 1,390 3,760
Nonstocked A83 l,AA8 612 605 3,1A8
All types 2.57A 7,508 A,7A8 h,291 19,121
Source: Findell, gp_al,, 1960, p. 38.

20A

 

 

 

 

 

Table C3. Location of sawtimber in Michigan, 1955
Southern Northern Western Eastern
Species Lower Lower Upper Upper Total
Michigan Michigan Michigan Michigan
(Million board feet)
Hardwoods
Hard maple 58A 320 2,283 995 A,182
Elm 1,551 733 155 159 2,598
Red oak 1,197 676 122 17 2,012
Soft maple 678 192 267 337 l,A7A
Yellow birch 7 30 752 A05 1,19A
Aspen A6 AA7 AAO 2A1 1,17A
Beech 272 251 16 A57 996
White oak 780 192 - — 972
Basswood 308 228 192 60 788
Ash 287 109 76 31 503
Paper birch 3 A2 1A8 267 A60
Cottonwood 105 30 — - 135
Other hardwoods AAl 178 A3 208 870
Total 6,259 3,A28 A,A9A 3,177 17,358
Softwoods
Hemlock 15 1A1 1,011 72A 1,891
White pine 88 310 A27 37A 1,199
Cedar 13 97 A55 AA5 1,010
Spruce - 37 390 275 702
Balsam fir 2 61 322 192 577
Red pine - 268 7A 229 571
Jack pine - 221 56 107 38A
Tamarack __§_ 6 18 35 65
Total 12A 1,1A1 2,753 2,381 6,399
All species 6,383 A.569 7,2A7 5,558 23,757

 

Source:

Findell, gp_al,, 1960, p. A0.

 

205
maple, walnut, and black cherry. Upper Peninsula forests also
contain species favored by furniture firms. In this area there are
stands containing large volumes of hard maple, birch, and aspen.

Because the furniture industry is only interested in stock
capable of producing number one common or better lumber, the
state's inventory figures must be adjusted to a more meaningful
figure. An index of quality is essential. A fairly accurate
quality estimate of the state's resource can be obtained by the
use of log-grades plus their yield. For instance, a prOperly
sawn 13 inch DIB grade one hard maple log will yield on the aver—
age 65 percent number one common or better lumber, ten percent
number two lumber, and 25 percent number three or poorer lumber
(Vaughan, et_§i,, 1966). On the other hand, the same log but Of
grade three will yield on the average 1A percent number one common
or better lumber, 26 percent number two lumber, and 60 percent
number three or poorer lumber.

Currently standing in inventory is timber capable of yielding
more than five billion board feet of number one common and better
hardwood lumber. This is 90 times more than the present annual
consumption of wood products by Michigan's furniture industry.
Among the ten leading hardwood species utilized, hard.maple forms
28 percent of the quality volume; elm 19 percent; soft maple,

13 percent; red oak, ten percent; yellow birch, eight percent;
beech, six percent; and aSpen, two percent. Walnut and cherry
which rank third and fourth respectively in volume usage are

largely supplied from other states.

 

206

The five billion feet of quality volume represents a 70-percent
adjustment downward from inventory totals. The drastic reduction
was necessary because a majority of the Species have 50 percent or
more of their logs classified as grade three (Table CA). In turn
this arises from the concentration of volume in trees in the ten
to lA-inch diameter classes, which contain 5A percent of the total
sawtimber volume. Only large diameter trees can contain number
one and number two logs. But many of the small trees growing on
the better sites are of good form and if managed will produce

quality lumber and veneer in the future.

Changing Resource Base

 

Between 1935 and 1955, the estimated net growth of all timber
five inches and larger was A92.6 million cubic feet (Table C5).1
Hardwoods made up 73 percent of this growth. The rate of annual
growth of all species was equivalent to A.6 percent of the present
growing stock. The rate of growth for hardwoods was A.A percent,
while that for softwoods was 5.2 percent.

Net annual growth of all timber includes 1,139 million board
feet of sawtimber and 3.3 million cords of poletimber. Hardwoods
make up 68 percent of the sawtimber growth and 79 percent of the
poletimber. Hardwood net annual sawtimber growth is equivalent to

four percent of the present sawtimber stock. Among individual

 

1Net growth = gross growth - mortality. Gross growth does
not include cull material, growth on cut, or growth on mortality.

207

Table CA. Volume of sawtimber in Michigan classified by log grade,

 

 

 

1955
Logpgrades
Species Number Number Number Three
One Two and tie-timber
(Percent of volume)
Hardwood
Hard maple 15 36 A9
Elm A 3A 62
Red oak 10 18 72
Soft maple 16 37 A7
Yellow birch 21 3A A5
Aspen l - 99
Beech 10 A0 50
White oak 23 28 A9
Basswood 5 26 69
Ash 2O 28 52
Other hardwoods 23 8 69
Softwood
White pine 10 22 68
Red pine 10 22 68

 

Source: Findell, et_al,, 1960, p. 11.

 

208

Table C5. Net annual growth of growing stock, sawtimber, and pole—
timber in Michigan, 1955

 

 

 

 

 

 

 

Sawtimber Poletimber Growing
stock stock

UMillion (Thousand (Million

bd. ft.) cords) cu. ft.)

Hardwood
Aspen 1A6.6 99A.6 108.5
Elm 126.2 85.5 31.1
Red oak 92.6 122.A 27.8
Soft maple 82.3 315.2 A0.8
Hard maple 81.8 AAl.6 50.8
White oak A8.3 11A.6 18.6
Basswood A2.A 69.2 13.7
Ash 30.9 10A.5 1A.3
Paper birch 26.6 192.3 20.6
Beech 23.8 A.6 -
Yellow birch 15.1 38.A 5.9
Cottonwood 2.6 .5 .A
Other hardwoods 52.0 1A6.2 21.6
Total 771.2 2,623.9 358.7
Softwood

Jack pine 88.0 161.9 32.7
Balsam fir 66.2 191.8 29.6
Cedar A9.3 179.5 2A.7
White pine A7.8 10.3 7.6
Spruce A3.l 78.6 15.6
Red pine 32.A 21.1 8.3
Hemlock 31.9 5.2 6.8
Tamarack 9.2 A8.3 5.9
Total 367.9 69A.0 133 9
All species 1,139.1 3,317.9 A92.6

 

Source: Findell, gp_al,, 1960, p. A2.

209
hardwoods, the annual sawtimber increment of soft maple before
cutting is six percent; elm, five percent; red oak, five percent;
and hard maple, two percent.

Michigan's forest is essentially a young forest and hence a
substantial prOportion of the annual growth is comprised of in-
growth. After the old—growth stands were largely eliminated in
the heyday of commercial logging, Michigan went through an era of
reforestation. Today the conservation policies that were enacted
by foresters after the period of heavy logging are starting to pay
dividends. As an example, between 1935 and 1955, pole-size timber
increased its share of the forest area from 18 percent to 32 per-
cent while seedlings and sapling area and non—stocked area
decreased.

The resurgence of Michigan's forest resource is manifested
by the increased growth of sawtimber, which has more than doubled
since 1935. In the 1930's net growth of sawtimber was low because
much of the residual inventory was in old-growth stands where
growth was largely offset by death and decay. In the following
20 years, the harvest of these stands resulted in a ten—percent
decrease in sawtimber volume. But because the young trees in the
‘ 8—, 9-, and lO-inch diameter classes were beginning to enter the
sawtimber category in great numbers, sawtimber growth had a 132—
percent increase between 1935 and 1955.

Despite the youth of the forest resource, there are still
severe losses due to insects, disease, fire, wind, and other natural

causes. The annual loss amounts to 112 million cubic feet, including

 

210
278 million board feet of sawtimber. As pointed out by the U.S.
Forest Service, it is equivalent to the total net annual growth
of the seven counties in eastern Upper Michigan. Although fire,
which.was once the leading cause of mortality, has been reduced to
less than one percent of the total, disease has increased to where
it now accounts for 31 percent of the loss. Some of the major
diseases are Hypoxylon canker of aspen, white pine blister rust,
oak wilt, and Dutch elm disease. The latter has recently caused
severe losses to the elm resource and will substantially reduce
its growing stock. Several heart rots are also important as they
severely limit the production of quality hardwood sawtimber. In-
sects account for nine percent of the loss; notable among the in—
sect pests are the jack pine budworm, EurOpean pine shoot moth,
larch sawfly, white pine weevel, and forest tent caterpillar.
Other losses are caused by windstorm, animals, and a variety of
minor causes.

Increases in sawtimber and growing stock has not occurred
evenly across the state (Table C6). Lower Michigan has experi-
enced a greater increase in its growing stock than has the Upper
Peninsula. Between 1935 and 1955, aSpen and cottonwood sawtimber
volume increased 1AA percent in Lower Michigan, northern hardwoods
increased 55 percent, and other hardwoods increased 213 percent.

While the current growing stock and net growth figures of
Michigan are impressive, what of the future? Presently, an overall
surplus exists between net annual growth and actual cut. Net annual

growth is about three times as large as the cut generating an annual

 

211

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212
surplus for all species of 315 million cubic feet (Table CY). For
hardwoods, the surplus was 233.8 million cubic feet and for soft—
woods it was 81.2 million cubic feet.

An annual surplus also exists within the sawtimber class. The
net growth for all species was 1,139 million board feet while the
cut was 5h5 million board feet. Net annual growth is about twice
as large as annual sawtimber cut for both hardwoods and softwoods.
Although there was no annual surplus for some of the important
northern hardwoods and hemlock, all other forest types had a con-
siderable surplus.

Another indicator of the probable trend in forest inventory
changes is shown by the comparison of annual allowable cut and
actual cut. Foresters have develOped normative concepts of
allowable cut to indicate the volume to remove during a period
if growing stock is to attain a specific and desirable level and
structure. Once the forest has been develOped to the standard,
all the annual growth can be removed for processing.

As used in the Michigan Survey report, allowable cut is a con-
servative concept. Allowable cut for most species is set at levels
which are little more than half of net annual growth except for
northern hardwoods and hemlock (Table C7). These latter species
have a considerable amount of their volume in old-growth stands
where net growth is negligible and heavy cutting is deemed essen-
tial to convert the stands to a young, vigorous condition. Overall,

allowable cut for all growing stock is 276.h million board feet of

 

213

Table 07. Actual cut, net growth, and allowable cut of total grow—
ing stock in Michigan, l95h

 

Actual Net Net annual Allowable Allowable
Species group cut annual. growth minus cut out minus
, growth actual out actual cut

 

(Million cubic feet)

 

 

 

 

 

Hardwoods
ASpen h3.6 108.5 6h.9 72.7 29.1
Hard maple 30.2 50.8 20.6 2h.5 -5.7
Elm 9.8 31.1 21.3 1h.6 h.8
Yellow birch 9.7 5.9 -3.8 8.7 -l.0
Red oak 8.3 27.8 19.5 12.h h.1
Soft maple 6.7 h0.8 3h.1 13.9 7.2
Beech h.8 h.6 -O.2 9.3 M.5
Basswood 2.h 13.6 11.2 5.1 2.7
Paper birch 2.M 20.6 18.2 1h.9 12.5
Ash. 1.9 1h.3 12.h h.o 2.1
White oak 1.8 18.6 16.8 5.7 3.9
Cottonwood .5 .h —o.1 1.1 .6

Other hard-

woods 2.7 21.6 18.9 11.h 8.7
Total 12h.8 358 7 233.8 198 3 73 5

Softwoods
Hemlock 15.8 6.8 —9.0 16.1 .3
Balsam fir 11.5 29.6 18.1 13.2 1.7
Spruce 8.9 15.6 6.7 10.6 1.7
Cedar 6.6 2h.7 18.1 15.1 8.5
Jack pine h.9 32.7 27.8 10.8 5.9
White pine 3.6 10.3 6.7 7.8 h.2
Tamarack .9 5.9 5.0 1.6 .7
Red pine 5 8.3 7.8 2.9 2.M
Total ' 52.7 133.9 81.2 78.1 25.h
All species 177.5 h92.6 315.0 276.u 98 9

 

 

Source: Findell, et_a1,, 1960, p. h5.

21h
sawtimber. Hardwood species comprise 72 percent of the allowable
cut from growing stock and 69 percent of that from sawtimber.

Even though the allowable cut limit was set conservatively, the
overall balance between allowable cut and actual cut was favorable.
There was an overall 98.9 million cubic foot surplus with about 75
percent of the surplus occurring in hardwood stands (Table C7).

The only species that had an unfavorable balance were hard maple
and yellow birch.

But there was a considerable variation in the allowable cut-
actual cut sawtimber relationship throughout the state (Table 08).
In southern Lower Michigan 62 percent of the allowable sawtimber
cut was harvested while in western Upper Michigan 120 percent of
allowable cut was harvested. However, the imbalances should favor
the furniture industry as most of the excess growth is being accu-
mulated near the center of its location.

The excess in growth over out should make possible even greater
yields in the future. As with a savings account in a bank, interest
left compounds into the future. Hence, present indications are that
net growth and allowable cut figures probably can be cumulated on
the assumption that the imbalances will continue to provide an

approximation of future inventories.

Evaluation 9f_Michigan's Resource

 

 

Cautions need to be observed in interpreting the inventory and

growth figures. There are possible deleterious effects on the

215

 

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216

forests from pOpulation growth. Between 1950 and 1960, Michigan's
pOpulation increased by nearly 1.5 million peOple or 22.3 percent,
mostly in southern Lower Michigan. Although the growing pOpulation
should not result in a significant loss of actual land area in
forest, it may well tend to isolate blocks of growing stock from
wood product markets. That is to say, the owners of many small
tracts may be much more interested in the amenity value of their
timber than its commercial value. If this should occur to the
extent indicated by today's owner attitudes, the availability of
future quality material around the heart of Michigan's furniture
industry may be considerably less than inventories might imply.

Another reason for caution is the level of forestry prac-
ticed by Michigan's small woodland owners. MuCh.of the growing
stock is found in small privately-owned woodlands where the
managers are, at best, passive producers of timber (Table C9).
The typical owner grows timber not because he is investing in
timber growing but because he is unwilling to spend the monies
required to convert to another land use. The state's average
size of forest ownership is only 60 acres. Moreover, 52 percent
of the state's resource is contained within farm woodlots or small
holdings. In southern Lower Michigan, the average size of forest
holding is a modest 20 acres with 9h percent of the forest area
found in farm woodlots or small holdings.

James, Yoho, Schallau, and Quinney, among others, have

examined the effects of small ownerships on the forest resource

217

Table C9. Commercial forest land in Michigan, by class of owner—
ship. 1955

 

Southern Northern Western Eastern
Ownership Lower Lower Upper Upper Total
class Michigan Michigan Michigan Michigan

 

(Thousand acres)

Private
Farm l,h28 1,615 321 h77 3,8h1
Other private

Large holdings

(over 5,000
acres) 0 279 1,727 8h5 2,851

Small holdings

(5,000 acres

 

 

and less) 1,000 3,009 1,126 98h 6,119
Federally owned
or managed 16 805 8h3 866 2,530
State 119 1,780 680 1,116 3,695
County or municipal ___JEL 20 ___21' 3 " 85
Total 2,57h 7,508 h,7h8 h,29l 19,121

 

Source: Findell, §t_al,, 1960, p. 39.

218
in Michigan.1 Results from their work show a consistent
pattern.

First, there is little evidence of woodland improvements
or tree planting by owners of small tracts. In both the Upper
Peninsula and the southern half of the Lower Peninsula, only five
to six percent of the owners indicated that they had invested in
any woodland improvement practice. Although tree planting is more
popular among the owners than timber stand improvement, only 20
percent of the southern half of the Lower Peninsula owners had
planted trees while in the Upper Peninsula about seven percent of
the owners had done so. When these individuals planted trees it
was often for reasons other than timber production. However, when
asked if they felt that their forest land needed improvement, 65
percent of the small landowners thought so. But few owners were
willing to support their convictions with time or money.

Secondly, there is little evidence of formal planning of
timber marketing activities. Only a few owners have forest man-
agement plans prepared by Cooperative Forest Management service
foresters, industrial foresters, or consultants.

Lack of a formal plan usually results in cutting practices
that do not improve the productivity of the forests. Owners without
a formal plan usually permit loggers to harvest their stands without

restrictions. This has serious implications for future production

 

1For an excellent summary of their work see Con Schallau,
l96h, Forest Owners and Timber Management in Michigan. Lake States
Forest Experiment Station Research.Paper LS - 9. St. Paul, Minn.

 

219
of quality material. If loggers are the only ones determining what
trees to cut, their economic incentive is to take out all timber
with a positive marginal value. The net result of such cutting is
degradation of growing stock. The results of this high-grading can
leave the land owner with what the Norwegians call the "Green
Delusion" and the Canadians, "Sylvan Junk."

Lack of formal planning also results in haphazard timber sales
with the owner not receiving his full monetary benefits. Few owners
had knowledge of the available markets or the prices paid for their
timber. Schallau (1961) found 55 percent of the owners who sold
timber had no real basis for Judging the prices received. Only
eight percent of the owners had professional advice, while the
rest obtained information from a friend or else compared different
buyer quotations. Moreover, few owners realized that to harvest
all merchantable growing stock often resulted in the removal of
many trees at a stage where the rate of annual value growth was
very high. Retaining trees for further growth.during this stage
of their develOpment can often result in attractive profits.

After they destroy their best timber earning opportunities, it
is no wonder that many small woodland owners feel that forestry
is an unprofitable activity.

One important contribution to lack of formal planning is the
relatively short span of years that most woodland owners hold their
prOperty compared to the length of the timber production process.
Two-thirds of the small forest holdings have been held by the

present owner 20 years or less. Often when the land changes

 

220
hands it is sold to strangers rather than retained in the family.
Before land is sold, owners often liquidate their growing stock.
Therefore, many new owners acquire nonstocked or poorly stocked
land and will never see the day when their forest supports enough
merchantable growing stock to attract timber buyers. Under these
circumstances, most land owners choose to become passive wood
producers rather than planning for improvement of their forest
areas.

Absentee ownership also seems to contribute to the lack of
formal planning. Only 38 percent of the forest area is owned by
people living at the site. Owners residing more than 100 miles
away account for 25 percent of the area. Of the owners who
lived in the Upper Peninsula, 53 percent had harvested timber
products compared with only 11 percent of the absentee owners.
Similarly, most of the owners in the southern Michigan area who
had not sold timber products and never received offers for timber
were absentee owners. These individuals had little incentive to
plan for the time when their land would yield quality material.

From the available evidence, fragmentation of the forest
land in Michigan is growing rather than decreasing. For instance,
in the Upper Peninsula there are now approximately one million
more acres of forest land owned by small land owners than in
1935. Schallau (1965) also found this trend to be present in
northern Lower Michigan. He found that the average size of

forest tracts had decreased about 12 percent from l9h6 to 1962.

221
The reduction in large forest ownership acreage accounted for 6h
percent of this difference, with medium and small prOperties
accounting for the rest.

Ownership considerations aside, caution must also be used in
interpreting the inventory of quality material. Not all quality
wood material will find its way into lumber and veneer but will
be used for other products. One merely needs to stand on a
corner near any pulpwood yard and watch the trucks hauling
hardwood roll in. Invariably one will see bolts that would
yield veneer or furniture dimension stock.

Even when the volume is adjusted downward because of urban
expansion, management practices of small owners, and under—
utilization of quality material, Michigan's wood resource is
seemingly more than adequate to meet the needs of its home
furniture industry. With the increasing growing stock and the
growing knowledge on the management of hardwoods by such indi—
viduals as Rudolph, _e_t_ _a_1__., (1959) and Arbogast (1957), Michigan

should be able to adequately meet the needs of its home industry.

 

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