Peter T. de Kok

Special Contributor

Benchmarking and FabricationThe stone industry in the USA, and in fact the industrialized world, used to consist of monuments, major construction, residential work, landscaping and crushed stone. 

Many stone companies did a little bit of all of the above to make ends meet, but in the 1990’s granite kitchen countertops started to replace Corian and a new branch of working stone emerged, aided and abetted by the growing use of engineered stone. The advent of granite kitchen countertops has doubled the size of the industry in both dollars and employee count and it is difficult to believe that this happened in such a short space of time, given that this development started only in the late eighties/early nineties. Granite and engineered stone kitchen countertop fabricators are more focused on this segment of the business than traditional companies, which enables benchmarking to have more relevance.

Benchmarking in its simplest sense is a tool to compare the efficiencies of two companies, doing essentially the same thing, as there is no value in comparing a stone working company with a plumbing concern since, although both are involved in building, their skills, and therefore their efficiency, are totally unrelated. So now we have one countertop fabricator employing seven people and producing $1 million in sales and another employing ten people with the same sales. Which is more efficient? Clearly the first. This is benchmarking at its most primitive.

All restaurant businesses have costing similarities in that, simplistically put, their costs are: 30% labor, 30% food, 30% all other costs including rent, insurance, leaving 10% for profit. In the counter top fab business the MIA benchmarking survey shows: 35% labor, 35% all consumables including stone and tools, 20% all other costs, 10% profit.

Now for the subtlety: As the fab shops grow bigger, the percentages change.

Labor cost is reduced as the shop becomes more automated. Tooling costs are cut in half. Stone costs are substantially reduced since a plant requiring $250,000 stone per year versus one requiring $2,500,000 will pay more for the material. Rent and utility costs go down as the plant is more automated and space efficiency for the bigger facilities is clearly shown.

Talking about labor cost, the survey shows AVERAGE WAGES in different parts of the country: are you paying too much or underpaying your staff? Checking with the survey will tell you where you stand on this and the other points raised above.

The quickest and easiest way to find out how efficiently YOU are performing is to get the MIA Benchmarking Survey. Compare yourself to the industry average either by number of employees or sales. The MIA survey shows average sales per employee, which you can figure out for your company, and you can see immediately if you are more or less efficient than the average. From spending a little more time on your actuals versus the industry average, you can see where your efficiency or your deficiency lies.

Benchmarking is more geared towards the MACRO aspect of running a business: there is therefore also the MICRO perspective. Just one very quick example: assume that from studying the MIA Benchmarking Survey you have decided that in your market area there is room for growth and you have therefore decided to automate your fab shop. Now comes the question of what machines are suitable for you? The machinery suppliers are only too anxious to supply you with whatever you request: but is that right?

A  simple suggestion: keep a record over a six months’ period of all the edge profiles you have supplied. Predominantly Ogee, Full Bull, Half Bull? Well then a CNC might be appropriate. If mostly flat polished edge with beveled arras, an edge polisher might be more suitable. If you cut mostly thin stone and require quirk-mitered detail, a really good saw might be the right machine for you. It all involves record keeping.

One question left out of the survey relates to stone waste. The survey says the average kitchen uses 60 square feet. We all know that the average granite or ES slab is 50 sq. ft. Thus the average kitchen requires two slabs or, put another way, 100 sq. ft. Therefore, 40 sq.ft. are left over. Some companies cost as if they had used both slabs completely, thus these 40 ft. are paid for. Some companies charge only for the sq. ft. used, and thus the remnant remains in inventory. Some companies take an estimated average of 25% waste factor across the board. Others differentiate on exotic stones or common material such as Ubatuba: in this plan the company would cost an exotic slab in full, BUT only charge for that which is used in the common material, as they carry huge inventory of the common stock.

So clearly there are many variables. Which factor you calculate can make the difference between running a profitable operation or losing money. The waste factor question will be part of a later survey as the industry needs to try and reconcile what is proper practice.

Using the bench marking survey can help you in another direction: borrowing money. If you intend to automate, you will need to pay for the equipment. That probably means bank money. At best guess, a city of 5,000,000 inhabitants will install approx. 35,000 tops per year. The survey says the average top sells for $3,000. Thus the market potential in dollars is $100 Million. If you know the population of your market area (you can get this information from your local chamber of commerce), you can figure out YOUR total market potential in number of tops OR dollars by simple math. List all your competitors by name and employee count. By using the MIA survey you can figure out their sales the same way as you figured your own. 

With the total potential calculated as above, you then know where you stand in YOUR market and what your potential could be.

When you apply to the bank for your loan take all the above information with you, INCLUDING the MIA survey, and your loan request will float to the top of the pile because you will prove to the bank manager that you have done your homework, as supported by the survey.

It might be of interest that improved record keeping is becoming ever more important to all industry, small or large. Daimler Benz just put out an article in The Wall Street Journal listing their sales, profits and employee count, comparing 2013 to 2014. Their sales improved by 10% but their profit by 47%, accomplished by adding only three percent to their employee count. Why not do the same thing: automate, adding a few employees but increasing your sales from an average of 250 tops per year to 1,250 tops per year, as shown in the MIA Benchmarking survey?

Interestingly enough, this benchmarking/data research is becoming a worldwide phenomenon. The last issue of Naturstein, the German trade magazine, included a request to the monument industry to complete a survey form so that they could make comparisons between companies. The Australian stone trade is considering using the MIA to conduct a survey for them. The Italian stone industry has been doing this for years, perhaps centuries?

Work on it: using benchmarking will make you more efficient for the good of your company and the good of your industry. If you are not a member of the MIA, think about joining, as this is the only association that gives you this benefit, as well as many others, for a very nominal cost.