-- Value Added --
Home & Garden
Vancouver Island reman operator Fantax International is rising up the value-added chain, manufacturing home and garden furniture.
By Paul MacDonald
While lumber may be trading at reasonable price levels these days, the kind of prices that specialty remanufacturing operations achieve would leave a high-production mill salivating and wondering how it can get some of that market action. Unfortunately, the big mills usually cant get into what are generally very specialized markets, which sometimes see prices of $10,000 a thousand board feet and up.
Custom reman and added-value operations cut for a very small part of the market, and are often cutting extremely short-run orders. Neither a small market nor small orders usually fits well with the strategy and production of the large sawmills.
The flip side of this is the smaller reman operations are often even more subject to the swings and whims of the marketplace than larger operations. If lumber markets are sick, that might give the larger sawmills a cold, but the smaller operations can come down with a full-blown flu or even life-threatening pneumonia. The collapse of Asian lumber markets has had a severe impact on this segment of the industry in British Columbia.
Vancouver Island reman operation Fantax International Holdings is hoping to stay off the sick list, however, with a bold new move into woodworking as part of a strategy to diversify the companys sales.
Based in the mid-Island community of Parksville, BC, Fantax was set up in 1990 by the Chen Family who emigrated to Canada from Taiwan via South America. The company specializes in cutting yellow cedar, and a small amount of western red cedar and Douglas fir, for the Japanese and Taiwanese markets. A large part of their production is high-end window and door stock for these markets. Company president Jeff Chen recalls receiving an order for yellow cedar for Japanese temple components that delivered $13,000 per thousand board feet, but on average, they receive $3,500 to $4,000 per thousand board feet.
Those particular markets arent as healthy as they were even two years ago, due to the drop in the Asian economies, and Fantax has made the decision to get into woodworking, offering a line of home and garden furniture. While some might envision garden furniture as nylon-webbed chairs and plastic planters and garden gnomes, there is also a premium market for well-built, solid-wood garden furniture, from planters to so-called Muskoka chairs. And it is not a market to sneeze at. Chen cites figures showing the US market for garden furniture is $100 million a yearthats US dollars, by the way.
The woodworking side of the business actually complements the component side of Fantax, since it involves using the "shorts" left over from producing components. They set up a finger-jointing operation that works with the leftover wood. "It was really an effort to diversify," explains Chen. "We wanted to produce something other than the high-end component lumber and get into other markets."
The Chen Family used their contacts in Taiwan to source both the primary breakdown equipment and the finger-jointing equipment for Fantax. The operation has two Shin-Yuan band-saws, one 48 inches and the other 42 inches, two Kuang-Yang straight-line resaws which they use as the edgers, and two Kuang-Ying chop saws. "One of the reasons why we are using Taiwanese equipment is because the way they cut wood in Taiwan is how we cut wood here, cutting slow but making the right high-value product," explains Chen.
Integral to the woodworking side of the business is associate Fred Hsu, an inventor and designer. Hsu talks to customers about what they are looking for in garden or home furniture. He then translates it into a design which both meets the expectations of the customer and which can be produced in an efficient manner at the Fantax mill. He develops a production approach that calls for the minimum number of different sizes of lumberin standard sizes, if possible and the most efficient use of labour.
"You could say that we supply the raw material in terms of the yellow cedar and Fred takes it from there and handles the woodworking part of the operation," says Chen. "He directs production in the most efficient manner possible, but is also able to customize the product for the customer."
When it comes to marketing the garden and home furniture, Chen admits they had to approach an entirely different market. "We tried developing the home furniture side of the business with our existing lumber customers, but were talking about two very distinct markets the lumber market and the furniture market. We have had to set up a whole different supplier line with the furniture side."
In the medium term, say over the next two years, they are hoping the woodworking business will develop and sales will eventually be split 50-50 between the yellow cedar lumber and the wood-working side.
"I think we are going in the right direction," says Chen. "The idea is to utilize more of the fibre. That seems to be a logical way to go."
Fantax has seen tough times before, says Chen. He noted that the company faced several very challenging years in the early 1990s, when it started operations. It took them a while to get established, with the first few contracts with Japanese trading houses done on a trial basis. Some solid business relationships were built, however, with a small number of customers taking pretty well all the yellow cedar Fantax could cut. Customers placed their orders for the year ahead and the company had some healthy times when Asian markets were strong.
Things changed quickly in 1997, however, when the Asian market fell out of bed. These days, their Japanese customers place orders on a month-by-month basis. There are lengthy price negotiations and customers are looking for "just in time" deliveries. Production is down, and Fantax has had to trim its workforce.
While Chen has started to see improvements in the Japanese markets this year, he believes it will certainly be 2000 before any kind of substantial recovery is under way. In the meantime, the company has set up a business strategywith the wood-working operationwhich will leave it less dependent on the yellow cedar lumber market, and which will open up new value-added markets in the US and Asia.
While there are some moves that the provincial government could make that would help Fantax, Jeff Chen is looking to an improvement in the markets as the key to the companys future, rather than any kind of government program.
"Our taxes could be lower and there could be less red tape," he says. "But we dont expect to run a business and get a lot of help from the government. We dont want the government as our partner. We want to be able to make decisions and were willing to bear the consequences of those decisions." He noted the company did receive some government funding that assisted them in exhibiting at garden and furniture trade shows in the US and Japan.
It gave them the opportunity to talk first- hand with potential customers and get a better idea of what customers are looking for in furniture.
"It was interesting," says Chen. "They like yellow cedar and it is a very nice wood. But we have to be careful about design. We want our furniture to be different from that produced by other companies. But you dont want a strange design, where the customer looks at it and goes what is this? Its kind of a fine line that you have to tread to be distinctive."
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