Back office planning

I came across a router recently that has digital controls on the top of it. The user can input the size of the bit and the type of material being shaped (hardwood, softwood, etc.) by repeatedly pressing buttons to scroll through menus. After you do all of that, the router will decide how fast or slow it should spin. That had to be designed by a non-woodworker. There isn’t a seasoned shop hand out there who won’t just pick up the router, switch to slow for big bits or fast for small ones, and get to work. What surprised me was that there wasn’t an app that you had to download before you could program the tool.

We can’t avoid it. Software is becoming more and more integrated in the woodworking industry. There’s ERP, SCADA, CRM, MES and a host of other planning programs that integrate production with finances, employees, project management, inventory, taxes and sales. The problem is that a shop manager has to stop actually building cabinets and sit down in the office to enter all of the data. Without that input, software is useless.

Unfortunately, we’re all in the same footrace so we have to make the effort if we want to keep up with each other. If a shop doesn’t evolve and integrate technologically, it can slowly fall behind. That’s a problem for small- to medium-sized woodshops, especially when it comes to back office planning. That’s a phrase that used to mean making decisions about insurance, the best way to use a line of credit, or maybe consider what machine to update. Nowadays, all of those factors can be incorporated into an umbrella software program that tracks every possible aspect of doing business. Planning decisions are better informed if we stick the numbers into a management program. So, for the reluctant data dodgers among us, here’s a very brief overview of some software species that might make it easier to plan for 2021.

A manufacturing execution system or MES package works in real time (instant results) to tell a shop manager where he/she can improve the production process. It monitors areas such as waste levels, re-working of parts, downtime, even some aspects of inventory. Basically, it tells the shop owner where bottlenecks need to be fixed, and where costs can be cut.

A supervisory control and data acquisition (SCADA) program is a software and hardware system that lets a woodshop gain control of production, monitor and process real time events, interact with everything from machines to humans, and then record vast amounts of data that a shop manager can compress and use to help guide decision making and planning.

A more comprehensive approach is taken by enterprise resource planning software (ERP), which can be very generic for industry as a whole, or it can be keyed specifically to woodshop requirements. ERP is essentially a huge database that tracks every single aspect of a business’s activities and tells the shop manager or owner exactly what is happening. That makes it an invaluable tool for planning.

Global Shop Solutions (globalshopsolutions.com) has specific experience catering to woodshop needs. The company says that its ERP software “provides an efficient means of controlling operating costs and achieving lean manufacturing goals”. The advantages to using such software are twofold: it delivers reports and analysis that helps with back office planning, and it also identifies areas in the production cycle where improvement can happen.

EPIK Ltd. (epikltd.com) offers software called Foremost that the publisher describes as “an impressive new hybrid ERP solution”. It’s a complete suite of applications that easily integrates with accounting, payroll, reporting, business intelligence software and SQL (structural query language, which is used to manage databases). Foremost is a very flexible program that can be intimately tailored to an individual woodshop’s needs. And you don’t need to be a computer programmer to use it. The data retrieval and report generation capabilities let shop managers find answers quickly, without a programmer’s assistance. That makes it easier to use data in planning.

Eci Software (ecisolutions.com) offers a variety of software for business planning. Its M1 package is specifically designed for small- to medium-sized shops and covers the entire range of activities from quoting to shipping. There are modules for production management, purchasing, inventory, financial planning, CRM (customer relationship management, which handles everything to do with contacting clients), quality control, shipping and overall business activity monitoring.

Allmoxy is a program from RSA Solutions (rsasolutions.com) that has a dedicated Cabinet Shop unit. It includes design and rendering options along with office automation (invoicing, cut lists, customer and communications tools), sales software, and some planning aspects that include powerful reporting plus access from anywhere, so it can go to meetings with you. It also incorporates purchase orders, waste yield calculations, resource allocation and vendor comparison shopping along with the ability to track employees’ time, tasks and productivity.

Cabinetshop Maestro (cabinetshopsoftware.com ) is a cloud-based project management software for custom cabinet shops that helps managers efficiently organize jobs, orchestrate workflow and optimize results. One of its stated goals is to “monitor progress, measure the result of your process, and make improvements”.

All of these programs streamline information from various aspects of the business’s activities and deliver reports that help shop owners make more informed decisions about production and sales, But they also provide an invaluable hoard of data for decision-making about back office issues such as insurance, leasing and financing.

We’re not driving nearly as much as we did before coronavirus, and auto insurance companies have made a lot of noise lately about giving us refunds and discounts on our premiums. But commercial insurance is not experiencing the same trends.

So, woodshops may want to keep an eye on their premiums and set up a virtual meeting with an agent before the first of the year to discuss options before things become irrevocable.

Most larger insurance suppliers are ahead of the curve on this one. For example, Pennsylvania Lumbermen’s Mutual has set up an entire section on its website (plmins.com) to inform policy holders of issues dealing with the pandemic. The company is America’s premier property and casualty insurance company dedicated to serving the wood industry.

Click on most leasing company websites right now and you’ll see a host of special offers. That’s because rock-bottom interest rates have made purchasing equipment a viable option.

For example, FirstLease Inc. in Horsham, Pa. says that shops can buy the equipment they need right now and not make any payments until 2021. Ascentium Capital LLC in Kingwood, Texas (info.ascentiumcapital.com) will lease up to $250,000 with a simple application, to be used for new or used equipment. Crest Capital in Alpharetta, Ga. offers an online application for financing under $250,000 at crestcapital.com.

The lease or borrow question is never-ending, but really boils down to two concerns. First, does the woodshop have excess cash available to make a loan down payment? Or is cash scarce, in which case a lease may be a better short-term solution. However, leasing will probably cost more over the life of the financing. And second, how permanent is the machine? If it will need to be upgraded to a new model in a year or two, leasing may be more flexible. That’s especially true in these times of rapid technological advances such as software and robotics. You don’t want to own a machine you can’t sell.

One way to get help with the decision is to consult a financial player that offers both options. For example, Stearns Financial Services Inc. in St. Cloud, Minn. has long had a special relationship with woodshops, and in addition to a host of loan specialists the company also keeps more than 30 Certified Lease Finance Professionals on staff.

There are only a few weeks left to do some back office planning for 2021. The biggest factor to keep in mind is the direction of the industry as a whole. According to the U.S. Department of Commerce, housing starts in August were at a seasonally adjusted annual rate of 1,416,000. That’s 5.1 percent below July, but 2.8 percent above August a year ago. Those are ambiguous numbers – they don’t yet reveal a strong trend either way.

The supply chain bears watching – if the pandemic and increasing tension with China slow down supplies any more than they are now, costs will rise and materials options may be impacted. And major global suppliers such as India are dealing with rapid and widespread coronavirus rates which is bound to affect production and transportation levels over the next few months.

Something very strange is happening in the money markets, too. On Sept. 16, the Federal Reserve reversed itself and said that it would allow inflation to exceed its 2 percent target over the next few months. With almost zero interest rates, the agency now has no options for intervention if it needs to stimulate economic activity. In a move that would historically have been seen as very worrying, the Fed is essentially saying it won’t manipulate interest rates anymore to prevent inflation, and in fact is hoping for mild inflation so that it can regain some leverage.

A recession is defined as two straight quarters of negative GDP and we’re officially in one. If there’s no solution to coronavirus by the end of the year, we will most likely slip into a global depression. Two things cause worry – the Fed is already powerless to help, and people still see the Dow Jones as an indication of strength. Unfortunately, stock markets don’t represent the economic health of a nation, and they are usually quite bullish before a major downturn. They only tell us where wealthy people are currently gambling.

Sadly, most woodworkers are not part of that club. 

This article was originally published in the November 2020 issue.