The flip side of offshoring

by Heather Hayes
for Virginia Business
September 2006

Victor C. Barringer II looks for profit on the flip side of economic trends. The president and CEO of Charlottesville-based Coastal Lumber Co. recognized in the early 1990s that the U.S. furniture industry eventually would move offshore. He traveled to China several times during the decade to network and put deals in place. As a result, his company is now the largest U.S. exporter of hardwood lumber to China.

“ People like to demonize China, but they are buying material from U.S. companies like ours, which are increasing sales and adding employees as a result,” says Barringer, who has added 16 employees in the U.S. and seven employees in China over the last three years.

Coastal Lumber is a 1,300-employee business that supplies raw hardwood lumber to manufacturers of furniture, flooring and cabinetry. Its sales to China have grown 50 percent annually since 2001. Exports to that country now represent 20 percent of Coastal’s total sales. The company’s largest customer base is still in the U.S., but sales to Europe have fallen behind those to China.

Coastal Lumber acquired its hardwood lumber division three years ago (the original company, owned by Barringer’s relatives, had timberland, softwood and plywood divisions). He moved his headquarters and nine senior management employees from Weldon, N.C., to Charlottesville a year ago to be closer to the company’s 18 mills, located primarily in West Virginia and Pennsylvania.

Barringer also sees growth opportunity in the current energy crisis. Beginning this year, the company will expand to focus on the lumber byproducts market using primarily sawdust. “In today’s environment, we believe that really is an untapped resource that tends to be overlooked as a profit center,” he says, noting that the waste material can be turned into wood pellets that fuel large institutional furnaces or small residential wood stoves.

Coastal Lumber continues to expand its hardwood lumber business. It sells products in 44 countries and wins customers from competitors by being a low-cost manufacturer. When the company acquired the hardwood division, Barringer immediately began a work force incentive program modeled after one at Nucor Corp. that has helped improve the steel maker’s productivity. The program requires personnel to achieve shift goals as a group in order to receive incentive pay. Barringer also runs the company as if it were publicly traded, releasing all profit and loss statements to employees and tying compensation to responsibility and performance.

“ We cut costs wherever we can, and we try to get as much out of the work force as possible,” Barringer says. “In a tough, low-margin industry, it’s the only way we’re going to stay alive.”