Lambeth Custom CabinetsEssay Preview: Lambeth Custom CabinetsReport this essayCompany Description and Production ProcessesLambeth Custom Cabinets is a small shop that manufactures and sells custom-made cabinets. The shop is owned and operated by Jack Lambeth, a master cabinet maker. Even though it is not specifically listed in the case, it does seem that Mr. Lambeth has only a few employees other than himself and his son Jack Jr. As labor is an important part of cabinet-making, Mr. Lambeth does not like the idea of laying people off even when the business is slow, so instead he assigns unoccupied workers to general clean-up and repair work and charges their wages to indirect labor.
There are three main processes involved in producing custom-made cabinets: design, fabrication, and installation. During the design phase of cabinet-making customers room is measured to make sure that sizes are customized to each order. Design work with computer generated design software or hand drawings for small projects is done. 3D drawings from several angles can give clients a better picture of the design and can be modified to show how changes affect the total design. This is most important in kitchens where every inch should be used for maximum efficiency and comfortable work areas. Customers are given several choices, including color, accessories (handles, legs, doors, and other hardware), and type of wood. Estimate is issued after all the details have been chosen.
Once the design and the estimate are approved, the fabrication phase of cabinet-making begins. The cabinets are cut according to the blueprint and customers specific requests. Cabinets are assembled, including hinges, closing mechanisms on drawers and doors, extension slides, and any other hardware specified on the drawings. Joints, parts, and subassemblies have to be fitted and trimmed to make complete units. Surfaces are sanded, and stain or polish is applied to finished products. After all the cabinets have been assembled, the customer can choose to have them installed. Cabinets are installed promptly, with a lot of attention paid to safety and precision. Lambeths Custom Cabinets employees arrive with blankets, vacuums and plastic sheeting to ensure that the worksite is kept neat and mess-free. As owner and master cabinetmaker, Jack Lambeth personally overlooks and installs the cabinets that he designed and built along with his employees to make sure that none of the details are overlooked.
One of the most important economical factors when reviewing a cabinet-making business is GDP. If people have disposable cash, they can spend it on a new kitchen, or cabinets in the living room. If the economy is in recession, it becomes more difficult to justify spending $1600 on custom-made cabinets, and if a customer really does need new ones, he will likely choose to go to IKEA instead and purchase them for much less. Unemployment rate also plays a role in determining the demand for a commodity such as custom cabinetry. It is very unlikely that a person without a job will want to order custom-made cabinets, even if quality is amazing. As the current unemployment rate is at a stable 6.1% (according to Statistics Canada), it seems that the economy in Canada is not in recession, and the percentage of the unemployed is not very high.
The demand for cabinets can also depend on the interest rates (prime rate 6% as of December 2006). As demand for housing largely depends on the borrowing interest rates, it is important to analyze the current economic situation in terms of interest rates as well. And since Lambeth can get more business by offering his services to the building companies, demand for housing becomes an important factor in analyzing Lambeths current situation. Current prime interest rate of 6% is actually in the high end of the range, as only a year ago interest rates were closer to 4%, which encouraged more people to buy houses.
Technology plays an important part in todays cabinet-making. Software programs that help designing blueprints for cabinet sets faster and with more precision can be very beneficial to a business such as Lambeths. Having that type of software in use can bring competitive advantage to the firms that choose to use the new technology, as it can help those companies save time and money by making the blueprints more accurate in less time.
Porters 5 forcesCompetition in cabinetry-making is high. There are hundreds of companies nationwide that specialize in custom-made furniture, cabinets being one of the most popular specialties. There are 374 establishments alone in Ontario and 748 Wood Household Furniture Manufacturers in Quebec (according to Statistics Canada), including 363 micro to small-sized establishments in Ontario like Lambeths. Lambeth does not only compete against the small firms however, but larger ones such as Home Depot as well. Even though the level of customization is perhaps lower at Home Depot, customers might feel that they get more service for the money, as well as the trusted brand name, all the while getting similar cabinets built for less. Furthermore, having an efficient costing system as well as employing some resources (i.e. 3D software) that the firms competitors do not possess, can give that firm the necessary competitive
[Footnote: 1] The U.S. is Canada’s top market for furniture. Canadian firms compete with each other to provide the best, most expensive options for people in every field, such as furniture, the workplace, restaurants, and even retail stores. If you are in Ontario then you can buy the same furniture as a Canadian family, or you can opt to buy it from other companies in Ontario without having to wait for a third party to work with you
[Footnote: 2] Another factor that helps to drive up costs for Ontario is that Ontario government takes action to enhance the quality of furniture in the country, as well as providing competitive prices. For example, Ontario government increased the price of furniture (from $400 to $1,200) to replace the cost of furniture in many local businesses, which is cheaper to purchase per unit per year.
[Footnote: 3] For Ontario, it has been a year of economic growth. And according to a September 18th report, the provincial housing, commercial, and residential buildings have grown 4,000% from 2009 to 2012, which is better than the 5-year average. Ontario residents have increased by 2% since 2009, but the number of people living and working in housing and commercial buildings has skyrocketed from over 500,000 in 2010 to 2.9 million during that same time.
[Footnote: A number of factors are at work here. Here, I will present my analysis of various sectors of the economy.]
[Footnote: One major issue is the decline in value added (VAT) per unit, which in some sectors is below that of the U.S. The number of people living for economic reasons in many high pay areas has also declined dramatically over the last 30 years, but in Ontario the number is still high.
[Footnote: For an overview of these trends in Ontario, see the Ontario Economic Statistics and Statistics Officer’s report, “Matching Statistics in Ontario from 2000 to 2006 (2006 Census). This is the first report covering more than 100,000 Ontario residential addresses and they cover a unique segment of residential properties.]
[Footnote: For a list of Ontario retail areas, see the Ontario Retail Management Council.
[Footnote: See my “Ontario’s Real Homeownership in 2015” article; see also the blog post “Ontario’s Real Residential Homeownership in 2015.”]
[Footnote: It can be found here.]
[Footnote: See here and here.]
[Footnote: A note about research that I conducted on the housing market at the start of the year (the housing report included in the April 15 list). This one has been updated accordingly.]
[Footnote: This graph is also listed in the April 22nd post. Note that even with Ontario not having seen much growth in the real house market in recent years, we have seen housing prices continue to double year over year until we reach the point where the average annual rate of house buyback is at 5 per cent—still quite high when combined with the 5 per cent wage increases which come up for the first time since 1978. This puts downward pressure on house value and thus can be seen in the graph above, as the increase in rental interest rates shows the housing supply growing (in part because it is increasing). Since this graph is a snapshot of real house buying by Ontario’s renters, I will keep the rate below the one it actually was with the Canadian Banker’s Association for a comparison of the “real” real house buying rate with the average real house price in 2015 (and I will not include this variable without the expense of computing the rate), which could