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consignment lumber opportunity

Started by 3Dog, January 15, 2013, 04:59:17 PM

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3Dog

I have an opportunity to display and (hopefully) sell my lumber at a small plywood dealer. The owner is very pleased to be able to provide lumber to complement his primary revenue streams of plywood and door and drawer fronts.

I have been looking for an opportunity like this for a while. I mill part time and my hours vary. I also don't live in the same location as my mill so my "retail" sales were far from frequent and small purchases of a couple of boards didn't cover my time, diesel etc.

I see this as a perfect fit for both parties. They can have a more rounded inventory with the addition of lumber. I have a retail location that people can shop for my lumber (much of my product is municipal sourced) conveniently in a clean heated environment.  This will also serve as an advertising location for milling and kiln drying, other lumber, odd items such as slab tops that will not be standard items at the store.

My question is regarding anyone's experience with lumber sales by consignment-

What advice do you have regarding items that should be spelled out in a written agreement beyond pricing and payment?

In regards to the pricing, is the pricing based on a percentage of sales? Is this percentage constant for all products? And the biggie... what is a realistic percentage ratio for these product?

Any feedback or personal experiences would be greatly appreciated.
I apologize for the somewhat choppy wording, it is awfully difficult typing on this tiny phone keyboard.
2002 Woodmizer LT40DSuper Remote Accuset 2, 1952 Allis Chalmers CA, 2001 John Deere 240 skidsteer, Nyle L200, Ebac 800,  and a fulltime job.
Citywood Treecycling

mesquite buckeye

Sounds great, in theory. Somehow you have to account for the actual lumber and not just reported sales.
Lots of places that do consignment do 60/40 for other materials, for high value items like guns, I've heard as high as 85/15. I think fair for you should be somewhere between 50/50 and 75/25 (in your favor).
8) 8) 8) 8) 8) 8) 8) 8) 8)
Manage 80 acre tree farm in central Missouri and Mesquite timber and about a gozillion saguaros in Arizona.

3Dog

thank you.

I was thinking about some sort of inventory system that would have a number on each board. However, I realize the difficult task of checking each piece of wood on a monthly basis isn't realistic.
2002 Woodmizer LT40DSuper Remote Accuset 2, 1952 Allis Chalmers CA, 2001 John Deere 240 skidsteer, Nyle L200, Ebac 800,  and a fulltime job.
Citywood Treecycling

flyboy16101

Not sure if it will fit your application but I would try something a long the lines of a constant inventory. for example: the store always has 10 oak 2x4s, 10 pine 1x6s, etc. you show the initial inventory drop off then simply bill the store for each board when you replace them. hope this helps.
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Sawdust Lover

I was selling on consignment for a while. I would keep track of how many board ft I was left with each month. I was leaving 300 bf of whatever wood and each month whatever was missing they owed me for. The only problem was I was having to sell cheap so the store could make there money. I was selling walnut for $2.00 a bf so the store could sell it for $5.00. Didn't work out for me.

mesquite buckeye

Quote from: Sawdust Lover on January 15, 2013, 06:39:19 PM
I was selling on consignment for a while. I would keep track of how many board ft I was left with each month. I was leaving 300 bf of whatever wood and each month whatever was missing they owed me for. The only problem was I was having to sell cheap so the store could make there money. I was selling walnut for $2.00 a bf so the store could sell it for $5.00. Didn't work out for me.

For that markup, they should have paid you upon delivery. What a ripoff! You take the risk and they get the bulk of the sale $$$$
Manage 80 acre tree farm in central Missouri and Mesquite timber and about a gozillion saguaros in Arizona.

Brad_S.

My experience was negative as well. Keeping track of what you sent them to sell, what is now gone off the shelves and actually getting paid my share of the proceeds became a huge and time consuming task. It was easier to just walk away and let him have the wood than to try and straighten it all out.
Because I had to match or beat what he could get lumber for wholesale, I could get just as much or more selling it on Craigslist.
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thecfarm

I think most want 30%,in my little world. Wife wanted to sell her pot holders and aprons,but the 30% just did not work.
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3Dog

Thanks for all of the responses.  I will take all of this into account and hopefully, some level of success will follow.

We are not talking a whole lot of lumber to start, just some common specie stuff.  I guess I can start slow and get the general feel of whether this will continue, or just be a learning experience. 

Nothing ventured....nothing gained.
thanks again
2002 Woodmizer LT40DSuper Remote Accuset 2, 1952 Allis Chalmers CA, 2001 John Deere 240 skidsteer, Nyle L200, Ebac 800,  and a fulltime job.
Citywood Treecycling

mesquite buckeye

Quote from: 3Dog on January 15, 2013, 09:13:37 PM
Thanks for all of the responses.  I will take all of this into account and hopefully, some level of success will follow.

We are not talking a whole lot of lumber to start, just some common specie stuff.  I guess I can start slow and get the general feel of whether this will continue, or just be a learning experience. 

Nothing ventured....nothing gained.
thanks again


Best of luck. :)
Manage 80 acre tree farm in central Missouri and Mesquite timber and about a gozillion saguaros in Arizona.

YellowHammer

Buying and selling on consignment has a lot of risk on your part, including all the things folks have mentioned.  You might consider not dealing on a risky percentage consignment basis,  but instead possibly negotiate to have him buy a small load of your lumber outright at your set price and let him mark it up to whatever he can sell it for.  When that's sold he can buy another load from you, or whatever he needs to fill an order.  I tell people I don't care what they resell my lumber for, as long as they have paid me my price first.  Main thing is to set your price and stick to your guns. What's  the sense of him making money while you lose money?

Or you get him a few sample boards to show customers, and if they bite,  he places an order to you.  He then pays you what you have agreed upon up front, you deliver him the wood, and he gets his markup from the costumer.  You have control over your inventory, not him. 

Whatever you do, good luck!

YH
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red oaks lumber

give it a whirl, it might lead to some thing very worthwhile! like you say its not alot of wood. if your relationship with the other fella is good i really dont see anything wrong with trying it.
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mesquite buckeye

Quote from: YellowHammer on January 16, 2013, 12:42:21 AM
Buying and selling on consignment has a lot of risk on your part, including all the things folks have mentioned.  You might consider not dealing on a risky percentage consignment basis,  but instead possibly negotiate to have him buy a small load of your lumber outright at your set price and let him mark it up to whatever he can sell it for.  When that's sold he can buy another load from you, or whatever he needs to fill an order.  I tell people I don't care what they resell my lumber for, as long as they have paid me my price first.  Main thing is to set your price and stick to your guns. What's  the sense of him making money while you lose money?

Or you get him a few sample boards to show customers, and if they bite,  he places an order to you.  He then pays you what you have agreed upon up front, you deliver him the wood, and he gets his markup from the costumer.  You have control over your inventory, not him. 

Whatever you do, good luck!

YH

I think this makes the most sense. Simple, clean, no hassles trying to figure out what did or didn't sell. ;D

Manage 80 acre tree farm in central Missouri and Mesquite timber and about a gozillion saguaros in Arizona.

drobertson

I had a saw job a few years back, it totaled real close to 50k bdft. All syp, I was cutting ties from the pine and keeping the 1" and 2x's  It did finially sell, the big sellers were the 2X4's and 1X8's.  I kept the lumber in seperated stacks from 1x4's  up.   good luck with this,   david
only have a few chain saws I'm not suppose to use, but will at times, one dog Dolly, pretty good dog, just not sure what for yet,  working on getting the gardening back in order, and kinda thinking on maybe a small bbq bizz,  thinking about it,

rooster 58

     That's it! Slow and steady! Test the waters and, if it works out you can wade in as far as you like ;)

beenthere

Quotelumber to complement his primary revenue streams of plywood and door and drawer fronts.


Would your plan be to supply dry lumber to include hardwood species and boards for trimming out cabinets and case goods? Maybe selecting some clears and also some figured woods?

Seems if the store owner is looking for having additional material to have for sale, he'd maybe give it a try for just 15-20% of the sale. Would be up to you to stock the inventory with some sort of inventory system to know what sold and replace inventory at your leisure. Maybe just a carbon receipt of the sale separate from the stores cash register receipts. Have your business name and contact info in case a customer is looking for a bigger purchase. Include the store owner with a small percentage if such sales develop.

Sounds like worth a try and won't know unless you do.  8)
south central Wisconsin
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3Dog

Thank you all for the guidance and past experience. We are meeting tomorrow morning to continue discussion of the "what", "how" details.

I hope to start out with both parties having the respect and honesty mutual.  It will be time and tallys that will keep it.

thanks again!
2002 Woodmizer LT40DSuper Remote Accuset 2, 1952 Allis Chalmers CA, 2001 John Deere 240 skidsteer, Nyle L200, Ebac 800,  and a fulltime job.
Citywood Treecycling

Ernie

Good luck 3dog.  Please keep us posted with as many details as possible.  We aren't very keen on having people drop in.  There is a certain element in society that I just don't want on my bit of dirt and would love a way to dispose of excess product.
A very wise man once told me . Grand children are great, we should have had them first

3Dog

Well I met with the store owner this morning to continue our talks. I will have about 120 feet of floor space to start. I have 3 vertical lumber racks that came out of a lumber yard so far. I will start with basic oak, cherry, walnut, ash etc. I anticipate since the store is geared toward cabinet makers most wood will be higher quality.  I will also have a space to display some odds and ends like some crotch wood, slabs, turning blanks to name a few. I also will have general mill information explaining my custom sawing/kiln drying posted by the lumber and counter.

We agreed that all lumber etc would be 75_25 (my favor).  To address the inventory tracking we opted to start with a board count for each specie category.  At the end of the month (sooner if we restocked) we would again count boards.  What ever the difference was in numbers, would be considered a sale.  The number should balance with sale receipts that would detail species and board footage.  I will be paid monthly.

If I have missed something give me a shout.
Again now for the advice.
2002 Woodmizer LT40DSuper Remote Accuset 2, 1952 Allis Chalmers CA, 2001 John Deere 240 skidsteer, Nyle L200, Ebac 800,  and a fulltime job.
Citywood Treecycling

3Dog

That last sentence should read THANKS FOR THE ADVICE.  my bad
2002 Woodmizer LT40DSuper Remote Accuset 2, 1952 Allis Chalmers CA, 2001 John Deere 240 skidsteer, Nyle L200, Ebac 800,  and a fulltime job.
Citywood Treecycling

Shotgun

Quote from: 3Dog on January 17, 2013, 02:35:51 PM
That last sentence should read THANKS FOR THE ADVICE.  my bad

3Dog,  Just so that you know, you can edit your own posts.  Go to your original post and look for "modify".  Follow your nose from there.
Joined The Forestry Forum 5 days before 9/11.

mesquite buckeye

Quote from: 3Dog on January 17, 2013, 02:34:14 PM
Well I met with the store owner this morning to continue our talks. I will have about 120 feet of floor space to start. I have 3 vertical lumber racks that came out of a lumber yard so far. I will start with basic oak, cherry, walnut, ash etc. I anticipate since the store is geared toward cabinet makers most wood will be higher quality.  I will also have a space to display some odds and ends like some crotch wood, slabs, turning blanks to name a few. I also will have general mill information explaining my custom sawing/kiln drying posted by the lumber and counter.

We agreed that all lumber etc would be 75_25 (my favor).  To address the inventory tracking we opted to start with a board count for each specie category.  At the end of the month (sooner if we restocked) we would again count boards.  What ever the difference was in numbers, would be considered a sale.  The number should balance with sale receipts that would detail species and board footage.  I will be paid monthly.

If I have missed something give me a shout.
Again now for the advice.

Sounds OK. Good luck. :) :) :)
Manage 80 acre tree farm in central Missouri and Mesquite timber and about a gozillion saguaros in Arizona.

Nomad

     It doesn't sound like a bad deal to me.  Just make sure he does keep track of board feet and not just boards.  The odd stuff (slabs, crotches, turning blanks) should be done on an individual basis you both agree to, without regard to bf.
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