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Lumber Sales Conditions Changing 



The general manager of one of the largest concerns in the lumber 

 business recently completed a long trip to most of the leading 

 markets in the North and East. His trip was not primarily for the 

 purpose of selling lumber, but rather to enable liim to feel out 

 conditions atl'ecting consuming industries, and to get a line on the 

 probable business to be handled during 1914. Incidentally, it 

 may be added that his trip has made him an optimist of the rea- 

 son-why type. But the most important result of his investigation, 

 as summarized in his own words, was as follows: 



"We have been familiar with a tendency on the part of a 

 good many consumers, during the past few years, to buy closer 

 to their current needs than previously. A few years ago the 

 consumer was accustomed to carry immense stocks of lumber on 

 his yard; but while he has been reducing his stocks gradually 

 for some time, it is only now, in my opinion, that the plan has 

 become generally used, and has been carried to the point where the 

 lumberman is expected to deliver material on a sufficiently exact 

 schedule to enable the consumer to unload lumber from the car 

 into the kiln, making a continuous movement through the factory 

 and into a car at the other end as the finished product." 



The fact that this tendency has been gradually developing, 

 especially since the panic of 1907, has been commented upon 

 many times; but it may be worth while to consider some of its 

 effects on the business, especially as regards the selling department. 

 One of the things which undoubtedly will come about will be 

 that contract business will be more important, both as to volume 

 and as to the number of concerns using this system. Heretofore 

 the bulk of the trade has been carlot orders. The consumer has 

 picked up a car here and a car there, both according to his require- 

 ments and according to the opportunity to get a special value. lu 

 other words, he has been inclined to shop, and to buy in excess 

 of present needs, in order to pick up a bunch of lumber that 

 looked like a particularly good value. 



Under the new regime, assuming that the consumer has really 

 decided to eliminate carrying stocks as far as it is physically 

 possible to do so, the vital thing will be to have the lumber coming 

 forward all the time in just about the right quantities to keep 

 the kilns loaded up and the factory supplied. This being the case, 

 the value of having a permanent connection, which has definite 

 shipping orders and is in a position to carry them out, will be 

 emphasized, and the consumer will need to be assured that his 

 material is coming forward just as he requires it. 



This will give added value to the stability and reliability of 

 a lumber concern, and a buying connection, from this angle, will 

 be just as much worth while as a selling connection, from the 

 lumberman 's standpoint. 



A close analogy may be developed to the methods used in the 

 iron and steel business. With the exception of pig iron, which is 

 usually bought for immediate delivery, the consumer of iron or 

 steel usually contracts for his season "s requirements, and then 

 merely specifies against his contract. This is a good deal simpler 

 for the consumer, and certainly easier for the seller of the goods. 

 since one sale closes up the business for the entire year. 



The disadvantages of contract business have been referred to a 

 good many times, but it must be conceded, in the last analysis, 

 that the proposition depends largely on the character of the people 

 at each end of the contract. If the buyer is the right sort, and 

 the seller makes his agreements to keep them, not to break them, 

 contract business is the best kind one may book. It is only when 

 the consumer or the seller is the sort likely to be influenced in 

 carrying out his contract by the conditions of the market, that a 

 contractual relationship becomes undesirable. And, of course, it 

 goes without saying that no business house which aspires to stand- 

 ing would decline to carry out a contract for the sale or purchase 

 of lumber, made in good faith by both parties. 



Such things are largely a matter of trade custom, of course. 



—20— 



One may venture the assertion that in the steel business the house 

 which attempted to wriggle out of a contract for sheets, in order 

 to take advantage of a temporary decline in the market, might have 

 difficulty getting material later on, not because of any general 

 agreement, but because it would be recognized that that type of 

 buyer is undesirable from the standpoint of the manufacturer 

 of the material. 



"Contract business has always been the most desirable kind we 

 have had on our books," said a hardwood man who has grown 

 gray in the business. "We make contracts only with houses 

 which we think will keep their part of the agreement, and we 

 try to live up to the spirit as well as the letter of our end of the 

 matter. The elimination of selling expense, to a large extent; the 

 knowledge that the production of the mill is sold ahead for some 

 time to come, and the ease with which bookkeeping accounts with 

 a comparatively limited number of large buyers can be handled, 

 all argue for contracts, when properly made." 



Contracts, as a matter of fact, should specify a maximum and 

 a minimum amount. One of the loop-holes used by the unscrupulous 

 buyer, often, is that afforded by a contract covering merely "re- 

 quirements," instead of a stated amount. But with a definite 

 agreement limiting the amount of lumber to be delivered on the 

 contract, both as to the smallest and greatest amount to be 

 delivered at the contract price, both sides are protected, and the 

 loop-hole is plugged up tight. 



It is often said that the buyer usually insists on having a 

 contract for a season 's supply made at the price prevailing at the 

 time the contract is signed. This is not always the ease, however. 

 Quoting the lumberman referred to at the opening of this article, 

 "The buyer who studies the situation knows that today, for in- 

 stance, plain oak is selling below the price it will be sold at six 

 months from now. He would not ask you to sell him enough for 

 an entire year's consumption at the current price, but would 

 willingly agree, for the sake of being protected against possible 

 advances of moment, to pay an increase covering the lumber to 

 be delivered throughout the year. ' ' 



A big advantage growing out of the new system of buying lum- 

 ber, according to those who have studied the situation, is that 

 the lumberman will of necessity have his finger on the pulse of 

 conditions in consuming industries more frequently than under 

 the old sj'Stem or even during the period of transition which has 

 been on for several years. When the consumer has a year's supply 

 or more on his yard, his purchases were not indicative of the way 

 things were going with his trade. This put the lumberman at a 

 disadvantage, to the extent that he could not prepare for the 

 future with the intelligent understanding which the manufacturer 

 in every line should be able to supply. 



If the consumer buys for immediate use, however, his purchases, 

 or his specifications against his contract, will give a constant and 

 dependable index of the state of the trade in that particular 

 industry, and the lumberman could guide his own operations accord- 

 ingly. He would, in fact, be closer to the market, a condition 

 which has always been devoutly wished by the lumberman, who 

 has bemoaned the fact that the period involved in bringing ma- 

 terial from the stump to the factory is excessively long. 



"I am convinced," said a big manufacturer, "that business 

 under the new conditions will be much more satisfactory. Busi- 

 ness will be more worth while, and can be taken care of to better 

 advantage all around. Competition can be opposed more success- 

 fully, since service to one 's customers and ability to deliver the 

 goods at all times and under all conditions will be more important, 

 in the eyes of the lumber buyer, than price, which is the all-im- 

 portant matter now." 



The advantage of having modern drying equipment, which will 

 enable the sawmill man to cut down the time that lumber will have 

 to remain on his yard, will be emphasized under the conditions 



