March 10. lUlS 



HARDWOOD RECORD 



22a 



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Il's Time to Know Your Costs! 



A movement lias 

 been put on foot 

 through the office of 

 Frank K. Gadd, as- 

 sistant to the presi- 

 dent of the Hard- 

 wood Manufacturers' 

 Association of the 

 United States, to 

 bring to the hard- 

 wood lumber manu- 

 facturing trade of 

 the country au under- 

 standing and appreci- 

 ation of how impor- 

 tant it is in these days 

 of changes and up- 

 heavals, of uncertain- 

 ties and world con- 

 flict, to know the 

 basic cost of its com- 

 modity so that prices 

 may be intelligently 

 aligned and regulated 

 in conformity with 

 value. 



The open letter re- 

 ferred to in the sub- 

 heading comes to 

 Hardwood Eecord 



with a letter from Mr. 

 Gadd in which he 

 sounds the warning 

 and to show his desire 

 for national discus- 

 sion of the question 

 as a concrete issue of 

 today and not as an 

 abstract matter of 

 theory for solution at 

 some indefinite future 

 date, he makes the 

 following statement: 



A copy of this letter 

 Is going to the Ameri- 

 can Hardwood Manu- 

 facturers' Association 

 and to the other trade 

 associations, as It will 

 do little good for the 

 members of this associa- 

 tion to discuss the sub- 

 ject unless we can get 

 all the manufacturers of 

 the country talking 

 about It. 



The open letter is 

 shown in the panel in 

 the center of this 

 page and is given 

 prominence because it 

 represents a concrete 



Manufacturers' Association Seeks with Open Letter to 

 Bring the Necessity Home 



TO -ALL MEMBERS: 



Lumber and building materials have been least affected by the Influences which havo 

 caused the price of all other commodities to soar to unheard of heights during the last 

 three years, according to a document which has just been issued by the Bureau of Labor 

 Statistics of the United States Department of Labor. 



The publication Is lornicd "Wholesale Prices 1890-1916" and includes 2S5 pages of figures, 

 facts and charts, which clearly trace the course of the wholesale price of practically every 

 article sulci in America. The compilation goes further and groups different commodities into 

 classes, such as farm products, food, clothing, fuel and lighting, metals, etc., and then com- 

 pares the trend of prices in certain groups. 



Thus one chart traces the prices of three big classifications : fuel and lighting, metal and 

 metal products, lumber and building materials from January, 1913, to January, 1917. The 

 effect of the war on prices is clearly seen in this chart, Init lumber and building materials 

 suffered the least. In fact, the advance in the price of lumber during this period is almost 

 negligible. This chart shows that lumber, starting from a point indicated as 99 in January, 

 1913, dropped to 91 in August, 1915, and rose to 105 at the beginning of 1917. 



The cheapness of lumber and building materials is even more vividly illustrated In another 

 tabulation listing the advance in all commodities during the year 1910. Lumber is the low- 

 est in this list with an increase of only S% over the previous year. The average increase 

 for all commodities was 23%. It is unfortunate that this report did not show the average 

 prices obtained during the year 1917, as we are confident that these figures, when issued, 

 will also show that lumber and building materials have not advanced in price in comparison 

 with all other commodities. 



From the information obtained from this report, however, It would seem that a discussion 

 of the question of costs at our next meeting would result profitably to our members, as some 

 of them do not seem to realize that the increases in price they have received for their 

 lumber is more than offset by their increased cost of operating, the increased cost of operat- 

 ing now as compared with pre-war periods being more than the increase in the selling 

 prices. A comparison of your sales will show just what the Government report states, that 

 prices on lumber dropped after the beginning of the war, remained practically on a level 

 during 1915 and 1916, the increase not beginning until the early part of 1917. The price of 

 all other commodities and of all material entering Into the manufacture of lumber Increased 

 rapidly from 1914 on. If we would make comparisons of 1915 and 1916 sales with pre- 

 war periods decreases Instead of increases would be shown. Many manufacturers who do 

 not keep accurate costs have doubtless felt that because of the increased prices they were 

 making satisfactory profits, when in reality they were simply using up their stumpage and 

 operating at a loss. 



We have before us the figures of one of the largest of manufacturers which show that 

 for the year 191G their operating cost, including stumpage, labor, supplies, depreciation. 

 fixed charges, etc., were approximately .?24.00 per thousand feet, while for the year 1917 

 these same charges were Increased to approximately $36.00 per thousand feet or exactly 

 50%, the net increase aggregating $12.00 per thousand feet. In 1916 their average selling 

 price was near $28.00 per thousand feet, approximately what it had been for the past two 

 years, while for the year 1917 it was $38.00 per thousand feet, indicating an advance of 

 35%, or $10.00 per thousand feet, on an average. Thus it will be seen that this firm's 

 business showed a net loss of $2.00 per thousand feet as compared with the year 1916. 



That operating costs will show a marked increase in the current year over 1917 is not 

 doubted. Everyone well knows that the price advance of 35% obtained by the manufac- 

 turer, above referred to, does not compare with the price advance of other commodities. 

 For instance, steel has advanced from 300% to .500% and under Government regulations 

 shows an approximate advance of 200%. The price of coal advanced as much as 5007o 

 and under Government regulations was allowed to stand at something like 150%. The 

 price of grain, that Is, hay, corn and oats, has advanced from 50% to 100% and oats, the 

 food mostly used, showing 100% increase. 



In order to continue in the lumber business saw mill owners will have to meet the 

 advances of labor and the Increased prices of commodities they are using in connection 

 with their business that are sure to come, and at the same time they should receive what 

 they are entitled to, namely, enough Increase in the price of their product to offset increased 

 heavy production cost. If the costs of other lumber manufacturers were like the one quoted 

 above. It Is clearly evident that If they maintain the same profits that they made prior to 

 the war, their selling price must be Increa.sed $10.00 to $15.00 per thousand feet. Of course. 

 If a lumber manufacturer's cost has not increased In proportion to the ones named, then the 

 necessary Increased selling price for them would be lessened in proportion as their cost Is 

 less than the one quoted. The figures, however, we believe are largely representative and 

 they should cause every lumber manufacturer to be determined to examine more carefully 

 into bis costs to see to what extent the above increase in selling price should apply to bis 

 business. 



Look into your costs and be prepared to discuss same at our next meeting. 

 Very truly yours, 

 FRG/S. F. R. Gadd, Assistant to President. 



attempt to get definite action on the most important subject now 

 before the lumber trade. To illustrate the direct bearing which 

 accurate cost knowledge has on tlie trade, the present controversy 

 and rather unsavory dispute over selling prices for thick oak would 



probably never have 

 arisen had the lumber 

 manufacturers been 

 united and consistent 

 from the beginning 

 on their costs and 

 selling prices. There 

 is not the slightest 

 doubt that in the in- 

 vestigation which is 

 bound to come the 

 prices offered will be 

 shown as unreason- 

 ably low and unfair 

 to the lumbermen but 

 just the same had the 

 lumbermen been pre- 

 pared with a clean-cut 

 analysis in the begin- 

 ning there would 

 never have been an 

 argument. 



It won 't do to arbi- 

 trarily advance sell- 

 ing price without re- 

 gard to cost nor will 

 it be safe to sell at 

 low figures with the 

 hope that they may 

 show a profit. If you 

 think your cost is low 

 look up the figures 

 cited in the circular 

 letter. 



But the only way 

 to find costs is to dig 

 in NOW and get them 

 and forget all the 

 high-sounding and 

 general stuff that has 

 filled convention pro- 

 grams in the past. 

 Conventions can 

 NEVER solve this 

 thing — it must be 

 done by committees — 

 the best that can be 

 chosen and Hardwood 

 Eecord herewith fur- 

 thers Mr. Gadd's let- 

 ter with the sugges- 

 tion that the various 

 hardwood associations 

 appoint respective 

 committees to meet 

 all together and to 

 stay together until 

 something promising 

 immediate and unmis- . 

 takable results is 

 evolved. Uncle Sam is fast becoming the biggest buyer of hard- 

 woods and he is going to clearly state that he wants to know the 

 whyfor of prices. If he isn't shown he is going to use his own judg- 

 ment and he is too busy an individual to waste time on guesses. 



