Viceroy Homes is dealing with the rising cost of lumber by incorporating more automation including computerized cutting into its plants.
By Paul MacDonald
Viceroy Homes is dealing with the rising cost of lumber by incorporating more automation-including computerized cutting-into its plants. By Paul MacDonald Viceroy Homes president Gaylord Lindal. Viceroy Homes president Gaylord Lindal says that Canadian companies shipping value-added wood products packages, such as homes, to the Japanese market have a strong incentive to make sure they get the order right the first time. "The classic example and one that some Canadian companies have found to their sorrow is if there is any shortage of pieces or breakage, a Japanese customer will insist that you air-freight the needed piece," explains Lindal, who heads up one of the leading pre-engineered home builders-and home exporters-in Canada. "That will cost you a minimum of $1,000 right off the bat. "At Viceroy, we literally have thousands of different components that go into a packaged home and we'd soon go broke if we had to be air freighting material to our Japanese customers." Lindal and his company have been pioneers in the Japanese market. In the company's first fiscal financial quarter this year, 63 per cent of $17 million in sales were to Japan.
As head of the company, Lindal has been leading the charge in this relatively new market. In fact, his commitment and efforts were recently recognized when he became only the fourth Canadian ever to receive the Japanese External Trade Organization (JETRO) Chairman's Award. Anticipating steady growth in the Japanese market and expected sales to new overseas markets, Viceroy recently made some significant changes on the production side, which Lindal expects will better position the company to meet growing sales. Viceroy previously had two locations in Ontario, the production facility in the town of Port Hope, an hour east of Toronto, and the engineering and administrative offices in suburban Toronto. These operations have now been combined at the 150,000 square-foot Port Hope plant, and Lindal says there will be benefits beyond the obvious cost savings. "There will also be the intangible benefits and efficiencies of having the technical and support groups working closely together with the production personnel," he says
All the buzz these days about adding value to Canadian forest products is really old hat to Lindal, who has really been adding value to Canadian lumber for more than 40 years with pre-engineered Viceroy Homes. "As the lumber business has become more competitive worldwide, producers are now looking at more ways to make money than selling their raw lumber," he notes. "As Canadians, we've been known for generations as hewers of wood and drawers of water. It's more practical now to be involved in a more advanced manufacturing process rather than just shipping sawn lumber." As a value-added producer, with no timberlands or sawmill of its own, Viceroy can find itself at the mercy of the market when it comes to lumber prices, however. The spike in lumber prices this past summer-with prices nearing $500 US per 1,000 board feet-was great news for Canadian lumber producers, but put Viceroy in a cost squeeze. "Our biggest single problem this past summer was the sharp rise in lumber prices, but they have since fallen back," says Lindal. "It's quite difficult for us to pass on price increases because the Japanese and the export market generally place a great emphasis on stability of price and they don't appreciate prices jumping around." An option the company is taking to deal with higher lumber costs is to increase automation. "One solution to the creeping rise in costs and lumber prices is to increase our productivity by buying a substantial amount of automated equipment.
This equipment can revolutionize the production process and help our employees be more productive." Automated equipment can also help eliminate the potential for human errors. "Some of it is 'mistake-proof'," says Lindal. "That's important because our export customers are especially demanding and they expect a higher degree of quality and service than we are generally used to on this side of the ocean." The latest example of this push to automation on the wood handling side are two new Mitek Cyber Saws, one installed at Port Hope and the other at the company's plant in Richmond, BC. These two units do fully computerized cutting, automatically positioning the blades to pre-set positions. "The Miteks basically eliminate the setup time for cutting our rough lumber," says Port Hope production manager Paul Lang. Previously, it would take a highly-trained worker three minutes to manually position the blades for a cut on their old equipment. "These machines can do the same positioning in eight seconds. And that's every single cut we do. It saves us hours every day." All of the high-volume wood components cutting is done on the Miteks.
Having a fast setup time delivers high production, with the units capable of cutting 60 boards a minute. The cutting information for the machines is downloaded from Viceroy's engineering department. "It's all touch screen from there for the operator," says Lang. "They choose the house that they need to cut and press a button. It knows how to set up each individual board and it has them in order. And with its speed, the operator presses 'go', and by the time they turn around and pick up the lumber to feed it in, it's positioned to cut the piece." The machines are referred to as the backbone of the front end lumber operation since every single piece at each plant operation goes through the Mitek units. To ensure-as much as possible-a reasonable price range and a supply of quality product, Viceroy also has what Lindal terms "special relationships" with several lumber producers through a subsidiary company, Cambridge Forest Products.
Their Port Hope yard has lifts of SPF lumber from companies from Quebec to British Columbia, however, illustrating they do have a variety of suppliers. Quality of product-as evidenced by Lindal's $1,000 air freight story is especially important to the Japanese market.
At one time, the company was producing packaged homes with two types of lumber-J-grade for the Japanese market and standard construction grades for all other markets. But they recently switched to supplying all customers with J-grade. "We did that for two reasons," explains Lindal. "It allows us to keep only one inventory of lumber and our Canadian and American customers are delighted to receive their home produced with this very superior lumber. Even though it costs us more to supply J-grade to the North American market, our customers place a high premium on quality and the word of mouth advertising we get through using J-grade is extremely good." Although Viceroy was affected by the downturn in the Japanese economy, Lindal says they are starting to see more life in that market. He notes that while Western style 2x4 housing construction is still a relatively small percentage of the Japanese housing market, it is still a huge market overall, with 10 times the housing starts of all of Canada. He says a key to their success is that they have essentially made Viceroy a Japanese company there, with Japanese sales and technical staff, Japanese construction manuals and design manuals. "We can say to a Japanese builder that if he communicates with us in Japanese, we will reply in Japanese. It's as easy for the builder in Osaka to do business with us as it is for a builder in the Okanagan Valley."
His advice to Canadian value-added companies interested in cracking the Japanese market is that you have to be willing to commit resources and money. "You are looking at a lot of money upfront because the Japanese are very suspicious of people who come in as 'fair-weather friends' during good markets. They want to see that you are prepared to invest your money in the Japanese mar ket before they are ready to give you any orders." Case in point: Viceroy received its first order two years after they started their Japanese program. While they have been working hard at developing the Japanese market further, Lindal also has plans to explore other markets. "We're trying to expand our export operations into other areas of the world. We're now putting quite a bit of emphasis on Europe, particularly Germany which we think has the income, population and general housing requirements which would be comparable to the Japanese market."
They have also started doing business in Chile and Argentina, setting up relationships with local builders, which is standard operating procedure for the company. They are looking for market diversification, but there is no preset amount of sales to a particular country or region, due to the varying market conditions. Servicing the markets is divided between the company's two manufacturing centres. Port Hope handles eastern North America, Europe and South America while a 100,000-square-foot Richmond, BC plant-established in 1998 with $2 million of equipment-meets the needs of western North American and Asia Pacific customers.
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