Millwork Manufacturing Done Well Generates Big Profits. Are You Able to Take Advantage of This Opportunity?

By: Tony Misura

Conversations with industry leaders across the U.S. have a similar vibe: lumber framing pack sales are down 20% year over year while millwork sales are up over 20%. That's a 40% spread - Why? Scarcity is one factor. Our Misura Group team can identify entire states that don't have a single solid, reliable millwork business. Millwork done well is broadly undersupplied in single-family and multifamily housing markets. Any dealers looking for more renovation and remodel sales, every homeowner is a candidate for new doors, windows, trim, interior wood finishes, mantels, and stairs.

Given those factors, getting into millwork manufacturing can generate value-added revenues and profits that will propel growth for years to come. But here's the challenge for many dealers: You must raise your game first.

We see seven qualities top millwork operations possess that you don't always see at lumberyards:

Aesthetic Expectations: Great millwork companies understand they're responsible for a home's curb appeal, starting with the entrance doors and windows. Everyone will scrutinize the brushed bronze lockset and the main entrance door's feel and fit as you open the door. A scratch on one door finish or one nail splitting the doorstop will delay a closing by weeks.

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Manufacturing Processes: Millwork shop leaders think long and hard about warehouse layouts, production lines, specialty teams, and quality control. Multiple moving parts and people must all be in sync. It's a production factory, not a pick-and-load operation.?Doing my research, the Regional President, one of the top three LBM Dealers ($9 Billion company) told me, "I recently traveled to inspect a new $800,000 Kval doorline added to a typical lumberyard location." I asked the general manager why they decided to install the door line in the center of the warehouse. The GM responded, "The new door line is so shiny and new; we wanted it to be the centerpiece of the warehouse to show it off to our customers." The President commented, "Continuous Flow Manufacturing (CFM) was not even in this General Manager's vocabulary. We can laugh – but it's not his fault. When will our company learn? Millwork requires professionals who think differently than lumber guys."????

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Capital Investment: Door plants require temperature-controlled industrial space and loading docks, the larger the better to maximize labor efficiencies. A Kval door line can cost $800,000, while running electrical and HVAC can cost $50,000-plus. Building the sales team, estimating, and high Q/C manufacturing and delivery systems does not happen overnight. The LBM President commented, "I can lease property and delivery trucks, make a lumber buy, and be in the lumber business in a few weeks. Millwork is a completely different mindset that impacts everyone from the owner to the delivery professional and all points in between."?

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Sales Obstinance: Most lumber OSRs refuse to sell millwork. As one leader told me: "With lumber, you can sit in your basement, in your pajamas, sending out estimates and dumping lumber deliveries, and your customers love you. With millwork, you must walk every home." Actually, some millwork salespeople walk every home twice, once to make measurements for the order and then a second time looking for installation flaws and mistakes. Many LBM Dealers are millwork dabblers and never committed to the journey of being great at millwork. Every Lumber OSR has a horror story about losing a key customer over millwork. The root cause is usually somewhere between an owner dabbling in millwork and Lumber OSR lacking the attention to detail and proactive nature to be excellent at Millwork Sales. Regardless, the word "millwork" creates this perpetual PTSD around most Lumber OSRs when asked, "Why are you not selling millwork?"

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Pricing: Lumber people don't understand how to price millwork. Given the risks around shrinkage and misordering, manufacturing labor, and high shipping costs, you must charge 40% plus margins to support a consistent service offering. Great millwork companies know their success is tied to retaining high-quality labor. Typical lumberyard turnover crushes any millwork business.??

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Estimators: Product science combined with detailed estimating skills can take several years to develop. That makes top-tier millwork estimators "the diva wide-receivers of our industry," as one President put it. The nature of special orders and custom-made inventory makes every bid a boom or bust opportunity. We are excited about how technology is swiftly alleviating the estimating point of constriction and speeding up the training and development of inexperienced estimators. Paradigm should be on your shortlist to explore.

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Logistics: Millwork is fragile, so scratched doors and broken glass are everyday events. Box or curtain-side truck delivery is mandatory; you don't want rain or rocks on the road to damage all that was done in the factory.

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We talk regularly with executives of top LBM dealers, including those who have gotten deep into millwork manufacturing. They get frustrated by these challenges. "There are no sledgehammer solutions with millwork like the lumber space," one leader told us. "It's more hand-to-hand combat. It's a place where team-building leaders and strategic thinking owners thrive."

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"Consistency is tough," another executive told us. "It's not a national buy-side program solution. You have to have the leaders in the local markets to execute."

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In short, a millwork business requires a culture different from that of a lumber operation to be effective. Some of the best dealers with both millwork and lumber know separate cultures are a must, adding different buildings, even different addresses.

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How significant is the millwork opportunity nationally? Specialty Building Products (US Lumber), Boise Cascade, and BMD combined are generating nearly $2B in prehung door and trim millwork sales. Historically they were commodity lumber wholesale companies, who leaped into millwork for the first time just in the past 3 yrs. Wholesalers are thriving in the space, taking EBITDA market share that easily could be in the LBM Dealers' pocket.

?What are the best practices to make that happen?

• Executive leadership provides capital and sets a broader strategy with manufacturing ROI metrics.?

• Experienced millwork operating and sales leaders are hired and then given dedicated responsibility and authority to execute the plan.

• The company provides the space and resources for a Specialty Manufacturing Culture to thrive.

• Market opportunities are defined and then defended, promoting the company's unique value. Single-family, multifamily, and remodeling all have ripe geography and customers for the taking.?

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"Tony, I'm not sure I am happy about this article," one millwork manufacturing executive told me. "LBM dealers have been asleep at the wheel. If you wake them, I won't be shooting fish in a barrel anymore."

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That sure sounds like a market opportunity to me.

In a rapidly evolving landscape, Misura Group stands ready to help industry leaders navigate the complexities of millwork manufacturing and seize lucrative opportunities. By leveraging our expertise, we can assist dealers in hiring the right talent and building a culture that drives growth, ultimately transforming their operations into profitable millwork powerhouses.

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Tony Misura