In January,Stone World published its annual fabricator market forecast for 2014. This report is an excellent macro view and highlighted that fabricator optimism is at an all-time high since before the recession. Similarly, the Marble Institute of America (MIA) surveyed fabricators in November and December 2013 and found optimism within the North American fabrication community. A total of 92% of the survey participants expressed optimism about countertop sales increasing in 2014. The annual growth in both natural and engineered stone was forecasted in the 16 to 17% range.

For equipment and tooling suppliers, the MIA survey mirrored the Stone World report. Planned 2014 purchases included:

• 14% plan a bridge saw purchase

• 24% plan an auto edge polisher purchase

• 29% plan a CNC purchase

• 20% plan a sawjet purchase

• 13% plan a waterjet purchase

The MIA study, which was funded in part by Cosentino NA and Kohler, was a collaborative effort by many in the stone industry. Both the International Surface Fabricators Association (ISFA) and Stone Fabricators Alliance (SFA) encouraged their members to participate. Additionally, over 20 equipment and tooling suppliers promoted the importance of the MIA study to
their customers.

Why is stone industry bench marking important?

Let’s relate the importance to the sports arena. Statistics are kept on every possible nuance of each player. This is important so that we can more easily compare each player with his peers. The same comment applies to business; if we do not benchmark against our peers in the industry how do we know how well we are doing? A positive bottom line is good, but not enough to make an informed judgment. It is only by comparing an athlete with another athlete in the SAME sport, that one can judge the better athlete. Similarly, judging one fabrication shop with another of COMPARABLE size makes sense.

Stone companies urged to use data

So, now to work: using the MIA statistics, check how your shop compares to the averages shown. How do you rate in probably the most important category - sales per employee? (See Chart 1.) If you are ahead of the average, that’s good, but now look at the shops with larger sales and see how you rate then.

In the current market where many fabricators are beginning to manage growth again, the data showed some interesting facts about sales growth per employee:

• Average annual sales per employee doubles when company sales grow from $269K to $757K (approximately $500K in sales growth)

• Average annual sales per employee grows 21% when company sales grow from $757K to $1,357K

• Average annual sales per employee grows 10% when company sales grow from $1,357K to $3,167K

You can also draw some comparisons about your own operation and the type of work being done by fabricator peers in the industry. Chart 2 provides a breakdown by sales volume.

The statistics show, without question, that the larger shops generally have important cost advantages compared with their smaller brethren. To name a few:

• Labor

• Tooling costs

• Utility costs

• Space costs

• Possibly lower stone costs

Small versus large — the impact of automation

If we take a moment to look at the data from a micro standpoint, the statistics show quite clearly the cost advantages that come with size. Yes, tooling costs are influenced largely by manual versus automation. A muscular edge polisher will increase the pressure between tool/stone, while a CNC removes a precise volume of stone, thus extending tool life considerably. Comparing utility costs starts from the fact that most manual shops have heavy, relatively inefficient, compressors to drive air-tools, while the automated shops do not need to convert power into air, but use it direct. This approach is much more efficient, and cheaper.

The comparison with space cost show that a smaller shop uses perhaps 7,000 square feet to support $500K in sales, while a larger shop might require 34,000 square feet to support in excess of $5 million in sales. Simple arithmetic shows $70K per 1,000 square feet on the one hand and $150 K per 1,000 square feet on the other. However, it gets worse, as smaller spaces generally carry a higher rent per square foot, frequently as much as double. So the net result is possibly of the order of four times as much rent, small versus large.

Recognizing that many countertop fabricators will want to differentiate between manual and automated facilities, the MIA study also broke down those metrics. A manual shop was defined as any operation utilizing a bridge saw and variety of hand tools. Chart 3 shows the participants who indicated they are doing 50+% residential work.

Specific to the type of work being done, automated shops are more heavily involved in commercial and new construction.

Chart 4: Breakdown of sales by construction type of a manual versus automated shop.

As noted, a manual shop was defined as any operation utilizing a bridge saw and variety of hand tools. The automated shop category number included a number of equipment combinations. The attached chart shows the type of work being done by those shops.

Chart 5: Breakdown of sales by construction type in automated shops.

Finally, stone. As with almost everything else, volume brings discounts. A smaller shop buying perhaps $200,000 in slabs annually is going to pay a higher price than another shop buying $2,000,000 annually. Just what the difference might be is something that requires further review.

As expected, the study showcases the cost per square foot as a percentage of sales volume is less for automated facilities processing natural stone. Future studies will further elaborate on this metric.

What is next?

So back to the beginning. Use these statistics to compare your shop to the league within which you may be playing. Using these numbers, see if you are perhaps overpopulated or, if manual, consider moving to automation. If automated, think about the machines that could be added to fill a void. It is only by doing the comparisons that you can see your strengths and weaknesses, thereby improving your business and your bottom line. This is important for you, your family and your employees, as a financially strong well-run company is a benefit to all.

The Executive Summary for the MIA survey is posted on MIA’s newly revised Stone Industry Statistical Data webpage at: www.marble-inst

“We are collecting industry trends from a number of sources and posting them on one webpage to provide the industry with easy access,” said MIA’s Executive Vice President Jim Hieb. “The current webpage is just the start of what will evolve into a relevant resource for stone companies wanting to stay on top of trends.”