Hello, everyone. My name is Sam Meyer, and I work in operations for an architectural millwork firm that specializes in the manufacturing of custom case goods and wood products for various commercial, industrial, and institutional industries. We are a family-run business that has been in operation for over 30 years.
In recent years we have been facing increases from various areas of our business, and the threat of higher and increased charges continues to roll in. This is coming from the provincial and federal levels, and encompasses everything from material surcharges, hydroelectricity, minimum wage and vacation time increases, to CPP and payroll taxes. It is becoming a lot more expensive to operate a business in the province of Ontario, and the opportunities to recoup these costs are diminishing.
On the material purchasing side, we have faced various increases from different levels. We have started to see carbon charge lines as well as delivery surcharges on almost all orders we receive. This was not prevalent in years past, and it is becoming harder to predict the shipping and supply costs of the various materials we bring in.
The millwork industry is dealing with varying quality, availability, and cost issues with a lot of our materials and supplies. With the latest anti-dumping ruling, brought in on imported Chinese plywood, all imported materials are slated to increase in the near future. These are unforeseen costs and not allowed for in our original quotations. We are not able to request a change for the increase in material costs.
For some of our projects, green building credits are being pursued by architects and designers through material specifications that include low or formaldehyde-free boards and certified lumber and panels. Suppliers who can supply these materials are becoming more difficult to find, especially for small orders. For example, just this past week, we required 50 sheets of material for a small part of a project and our suppliers came back stating we must order many times that amount. They said we needed a minimum order of 300-plus sheets, which is about six lifts. This not only throws the project material cost way up, but reduces our revenue, and above all, it is wasteful, given the fact that we might not be able to use this material again for other projects and must either dispose of the 250 extra sheets that aren't needed, or tie up needed square footage to store this material in the hopes that we can use it in the future.
Millwork product specifications are generally established and reused by designers and architects, some of whom have limited knowledge of wood properties, gluing, finishing, etc. This situation is problematic as we have noticed that designer specs are often of poor quality or are outdated. Unrealistic specifications force millwork companies to redesign the products ordered and then finish the technical details of designs. This additional work translates into unforeseen additional costs. All architectural millwork companies should be required to follow the strict guidelines set out by the Architectural Woodwork Manufacturers Association of Canada, or AWMAC for short. This would help to eliminate outdated and redundant specifications, allow for fairer pricing, and give the end-user a better quality product.
As we are members, we feel this would bring up all quality levels to realistic expectations, and projects would be quoted on the same level by competent competitors. This would result in fairer pricing for a better product.
On the operational expenses side, we have seen increases from various sectors and areas. The cost of hydroelectricity has just been reduced as a provincial rollout program to assist with this expense. However, we have already seen increased charges, and received letters stating further biannual increases are slated for the near future. We are being forced to use hydro as our main source of power, and penalized for that, as there are currently no cost-effective alternatives for our high-voltage industrial power needs.
We would appreciate being able to contribute to a healthy environment. However, we are lacking the resources to be able to do our part as a small business.
Recently, we received notice that the minimum wage is increasing. It has gone from $11.40 in May of this year to $11.60 this past October, and will increase to $14.00 an hour as of January 1, 2018. This is a large increase in a short time, as we sometimes quote our work upwards of a year in advance, using the current labour rates. All our contracts are binding, and we do not have grounds for increases once contracts have been signed. This is now a bottom-line hit that cannot be recovered.
This also causes a trickle-up effect. Everyone higher up in the company has said they feel entitled to a pay increase, no matter what their current pay rate is. Also, as of May this year, there were additional mandates for vacation time pay, as well as paid emergency days off. Vacation time pays are increasing from two to three weeks, and emergency days are now an additional mandatory paid two days off.
We are all for the fair treatment of our employees. However, as previously mentioned, this is another bottom line hit that cannot be recouped.
The millwork industry is currently dealing with a shortage of labour. Part of the problem results from the fact that jobs in this sector tend to be low-paying. Apprenticeship programs do exist but most training is still done in-house. There seems to be an increasing threat to the trades as a whole, as our high school system continues to push students away from attending trade schools and colleges, and gears them towards universities and professional degrees. There's a disconnect between what our schools are teaching and what we as companies can offer.
Our schooling system promises high dollar payouts. The reality is much different. On a recent visit to another local kitchen cabinet manufacturer, there was a presentation by a professor from the local college in that area and he stated a case where students can expect to earn upwards of $35 an hour, with a pension and full benefits, just for finishing their program. This reality is grossly overstated, as a qualified cabinet-maker of equal skills can expect to earn about a half of this amount, just out of school.
In conclusion, I would like to thank you all for your time, for allowing us to share our challenges and experiences operating as a business in the wood manufacturing sector in Ontario. We are positive and hopeful that we can resolve some of the challenges I've outlined and work together towards a better and stronger country from all sides.