Wilson Lumber Company

Wilson Lumber Company

1. Describe briefly the lumber business and what you think are the key factors to be successful in it.  

The Lumber business consists of the distribution of products such as plywood, moldings, sash and doors for construction or repair purposes.

The key factors to be successful in it are:

• first of all, the price of its product is usually the major factor as basic wooden product can easily be associated with some kind of commodity product. “Sales volume had been built up largely on the basis of successful price competition”.
• Secondly, the transport/delivery which is usually an issue for large wooden products because of their size as well as their weight. But is seems that the company is tackling well this issue given its location: “The company owned land with access to a railroad siding”
• Moreover, the firm should always have sufficient stock in order to respond quickly to the customers’ demand (no stock shortage) + being on the time in deliveries (so that the construction/repair project is not delayed) → Easy access to Lumber products
• Finally, having a good and long relationship with customers. The business has no sales representatives, orders are made on the phone.

1. How well is the Wilson Lumber Company doing from an operational (as opposed to financial) standpoint?

From an operational standpoint, the Wilson Lumber business is performing well. Sales have been increasing by double digit numbers (by 19% in 1983 and 34% in 1984) and are expected to reach $2.5 million in 1985, which represents a 33% increase compared to 1984. Moreover, the general economic downturn does not have an impact on sales because the business has 2 main targets: construction and repair projects. Even though new housing construction projects have slowed down, the repair business’ sales make up for it.  Furthermore, the company owned land with access to a railroad siding, which enable them to easily deliver its product to its customers. Finall, its owner seems to be very qualified to run the company on an operational point of view “He has personal control over every feature of his business, and he possesses sound judgment and a willingness to work harder than anyone I have ever known.” Mr Wilson’s assistant is also “well qualified” to run the business, which remove any future operational problem that could not be solve because of the absence of Mr. wilson. 

1. Describe briefly Wilson’s financial policy over the past few years.

The company offers discount prices when products are bought in large quantities and credit terms of 30 days.

In 1982, Wilson took out a mortgage of $50,000 in order to buy his partner’s share in the company. This led to a fund shortage which made the business heavily dependent on trade credit/payables.

When the business makes a purchase, the payment can be made within 30 days. However, with this fund shortage and the need to get an additional loan, the company is extending the payment after 30 days.