A rule of thumb

As appeared in Modern Woodworking in February 2008
By Brooke Baldwin Wisdom

Commercial cabinetry manufacturer assesses returns on investments for equipment and facility expansions

Paul Hogan, owner of Contemporary Cabinetry East in Cincinnati, Ohio, has his own strategy when it comes to purchasing new equipment. “My rule of thumb concerning a return on investment is two-fold,” he says. “If we buy a machine that we are going to use occasionally and it is less than $15,000 to $20,000, we just go ahead and buy it and use it when it will help us out. It’s usually a strategic machine that does something very well that we can use occasionally, especially if it is going to last a long time like a case clamp, vertical panel saw, widebelt sander or line finisher.

“On the other hand, when I’m going to spend $50,000 to $75,000 or $100,000 to $150,000, I make sure that piece of equipment is going to run all day long and half the night, too, so I know I’ll get a return on my investment. Then, that machine doesn’t cost us money, it makes us money.”

And paying attention to a return on investment goes for expanding his facility, too. Contemporary Cabinetry East has been housing its 45 employees in a 15,000-sq.-ft-building and a 5,000-sq.-ft building since 1991, but has just completed the first phase of an expansion.

Manufacturing in two buildings had resulted in some inefficiencies for the manufacturer of commercial cabinetry and millwork, so a shipping and receiving connector has been built between the two buildings. The first phase of a two-phase manufacturing expansion area also will be moving into that new space whereupon the old 5,000-sq.-ft. building will be torn down. When the second phase of the expansion is completed, the entire production process will be on one contiguous floor space of 30,000 sq. ft.

“We are going to have much better access to raw material and storage in our new addition,” explains Hogan. “In our old building we have one dock, and in the second building there is one dock. When our expanded facility is finished, there will be five docks and much, much better raw material storage. The organization of the raw material currently is a bottleneck, which this is addressing. This addition will make a huge difference for that and also our finishing department, which is currently another bottleneck. The new spray department will have much greater square footage, allowing a more flexible process.

“In 1984, the business did $600,000 in sales,” says Hogan. “By the time we moved into this facility in 1991 we were at $1.7 million in sales. Since then we have grown to $5.5 million,” notes Hogan. “That was through a combination of adding more people, better machinery and better software. We also added a six-man second shift, which was key. We run most of our larger equipment typically 60 to 70 hours a week with the two shifts. Most of our second shift people can run more than one machine – they can build different areas of production – so they’re like a flex crew. They’ll do whatever needs the most amount of attention.

“We used to use our own builders to do installations, but we now employ carpenters who do not work at our facility. That way it’s easy for me to add another carpentry crew and not worry about a place to put them. I just need to generate the material to keep them busy. We had one truck driver then, now we have three. We’ve grown steadily just by trying to provide a better than average level of quality and a much better level of customer service at a reasonable price.”

The CNC realization

Only table saws and hand tools were on hand when Contemporary Cabinetry East first began. A year later, an SCM panel saw and Holz-Her edgebander were implemented. “When we realized what could be done with that type of production equipment, we knew we could never go back to the old ways,” says Hogan. “We have continued to grow our equipment arsenal, and SCM is putting in a new Gabbiani Galaxy saw this month. We also have a Morbidelli 503 CNC machining center from SCM, two SCM edgebanders that sit side by side and a 36” Sandya widebelt sander from SCM. When we complete our addition, we will be upgrading our CNC capabilities again for sure. We will have a point-to-point machine of some type that will be doing all of our drilling as well as some routing. Then we’ll probably go down to IWF and pick out a CNC router that will go back to back next to the point-to-point.

“I used to think we didn’t need CNC because we just did boxes; we didn’t need to rout any unusual geometric shapes. We straight line cut on a beam saw, we had straight line boring machines to drill our holes, and we had an edgebander to put it all together. About 10 years ago, I finally realized how many holes per year we were hand drilling. It was millions. We needed a CNC just to drill all those holes for us. I had never thought about it that way. That’s when we went CNC shopping and bought the Morbidelli. If I tried to do an analysis on what it costs, what it costs to run it and what it has saved us in labor, it’s obvious to me that it makes us a lot of money.

“Planit Solutions’s Cabinet Vision came out with a new product called Solid about the time we bought our machine, and the whole seamless linking of our design and our manufacturing software allows us to benefit to the extent that we do with our CNC. It was more cumbersome back in the 90s. It’s one thing if you are going to do 1,000 of one kind, but we are so custom. We build an enormous number of prototypes and one-of-a-kinds. So what’s really nice is the ease with which our engineers can use our design software and the ease with which it seamlessly integrates into our manufacturing.”

Hogan says commercial construction in his part of the country is still quite strong and has been for several years. “If every year we set a record for new sales and profits that’s great, but if I ever take the philosophy that we can coast now and take it easy, that’s when we’ll roll down hill,” he says. “We need to continuously assess what our weaknesses are and address them. We get feedback from our employees. We have a plethora of Excel sheets that we use to track everything from purchasing to various production items, and we have a tab on our job tracking production schedule that is simply a little work sheet. Whenever there’s any type of bust or problem we make a recording of it. It’s specifically designed not to isolate any individual person, but rather only to recognize for the record that something went wrong. The reason we do that is that we can study this from time to time and look for patterns. If there is a recurring pattern of something going wrong, then we need to fix it.”

How does Hogan choose which projects to take on? “We’re pretty diverse with our output,” he says. “We have the ability to do any commercial job that involves casework or millwork. For instance a medical office building – that’s a fairly easy job -- lots of rooms with lots of cabinets. It’s very straightforward. When we get into other projects that are much more complicated or if the scope gets unusual, the prices go up dramatically with the way labor continues to go up in price. Labor is our most limited asset, and we have to make sure that we charge enough for it so that we don’t get bogged down doing complicated work that’s not profitable.”

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