Monday, 25 July 2016 20:44

When is the best time to purchase hardwood lumber?

If you are responsible for managing hardwood inventories for your manufacturing facility, you probably understand the importance of holding, managing and replenishing materials so you do not disrupt production.  We find this to be one of the most important issues for our customers in the hardwood lumber industry.

We are asked many times, when is the best time to purchase hardwood lumber.  Of course it depends on many specific conditions, but in general, we feel it is best to regularly be purchasing hardwood lumber.

From our experience we find customers approach their hardwood lumber purchases in one of three ways.  We would categorize them as:Baillie bundles

  • Those who buy as needed
  • Those who try to “time” the market
  • Those who purchase regularly and cost average.

For certain customers, hardwood lumber is a very small part of what they purchase.  They usually purchase in bulk and deplete in a slow, unpredictable and irregular manner.  It could take them months to work through a shipment of lumber and the material itself does not represent a significant portion of their overall product cost.  What is important for this customer is knowing that they can secure the lumber from a reputable source at a fair market value at the time they need it.

We also find that there is a segment of customers that approach hardwood lumber purchasing in a way similar to trying to “time the market”. This can be akin to a stock investor looking to buy after the stock has fallen hoping to buy low and sell high.  Although this creates the opportunity for big gains, it also creates significant purchasing risk.  In the hardwood lumber business this usually results in buyers constantly finding themselves in and out of the lumber market searching for new information and available supply.  It also results in them having to manage huge swings in their own lumber inventories and additional it adds complexities by having to manager several different hardwood suppliers to meet their bulk demands.   It could also result in other non-lumber business impacts such as overall lending power, credit risk, accounts payable problems and manpower issues just to name a few. Ultimately, this approach usually leads to buyers having to make rash decisions just to obtain the hardwood lumber they need so not to disrupt production.

However, another approach to purchasing hardwood lumber is to buy lumber on a consistent and regular basis.  We find that customers who take this approach, which to use another stock market analogy is similar to unit cost averaging their hardwood lumber portfolio, usually benefit by reducing their overall purchasing risk, developing dependable inventory practices for their business and creating stronger supplier relationships that can help them when overall lumber demand increases.  In practice this would mean that a customer who consumes 100 loads of lumber each year would look to place an order for 10 loads every 5 weeks instead of one order for 100 loads all at once.

Of course, whatever works best for your business is the way you should purchase your lumber. Regardless of your hardwood lumber purchasing approach, we would welcome the chance to help you.  Let us know what works for you and we’ll see how we can be of service.

Tony Cimorelli
Baillie Lumber
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