October 7, 1996

Dear Barry,

For the third year in a row our production has not met the demand for Clark Foam. All our valued customers have experienced some degree of shortages. Since 1996 has had some unusually high periods of demand I feel we should disclose our future production plans. That is the main purpose of this letter.

I will also discuss some of the things that have been happening at Clark Foam, several issues regarding government regulations affecting our industry, and my view of the changes to our industry caused by the newer generations of shaping machines. As a part of the analysis of the impact of shaping machines I will include some recommendations, a history, and some predictions regarding emerging technologies.

First I will go into a little of the background of our production. There have been two distinct periods of rapid growth in surfboard demand. One during the 1960's, and the other in the early and mid 1980's. The last three years, at least for Clark Foam, does not represent the percentage growth of the two prior periods but does represent a significant growth in numbers of blanks sold.

There is also a significant change in the type of blank we make in the 1990's. The majority of the blanks we produce are now "close tolerance", the (new) superlight, blue, and green densities are all popular, we have a larger than ever number of active molds, and last, but most important, there are very few universally used rockers. These changes have taken away one of the production tools we have used in the past which was to produce glued blanks during slow periods and store them for seasonal increases in demand.

To supply our customers with the type of blank used in the 1990's we must increase our production during periods of higher demand. Now our main bottleneck is the foam molding shop. This requires the hiring and training of more skilled workers and, as an extreme measure, changing our production process to produce more blanks per hour. These changes are expensive. One of the most troubling parts of increasing production is the extensive training required of qualified people when we are unsure of being able to maintain a permanent job for them should the demand collapse.

Prior to investing in increased production capacity we look carefully at three things: (1) what will be the overall demand for surfboards, (2) exactly whom will we be expanding for, and (3) the effect of the expansion on our quality.

Below is a review of what we have done and what we intend to do in 1997:

This summer everyone at Clark Foam got together and hammered out a training program and seven day a week, twenty four hour day mold shop schedule. This took a real team effort and I was probably the only one who was not really involved! We went on a seven day week schedule on July 22 (which was too late) and held production at the full time level for seven weeks. This was an experiment and it worked. I would note that if we had implemented this schedule early this year we should have had great delivery of our full line of blanks throughout the year for our regular customers.

For 1997 we will implement the seven day week schedule. At this time we are running a training program for next year. The main trick will be to start in a timely manner and make sure inventories are as high as possible at the beginning of the year.

At this time there are some pretty strong indications there is either an oversupply of unsold boards or a weakening of demand. The next few months should sort this out.

As a final note on this subject, we do not plan to implement any changes to our production process to increase hourly production. We would only consider this if there are some clear indications that the demand for surfboards will increase very significantly in 1997 or beyond for our regular customers.

In April of this year Clark Foam was the first company in Orange County, California to have their Risk Management Prevention Plan (RMPP) approved. This makes us one of the few facilities in California that have completed this process. California, and a couple of other states, have made RMPP's a requirement by law. California has by far the most difficult compliance laws with Orange County probably leading the way. The federal Environmental Protection Agency (EPA) has announced they will eventually require an RMPP for all facilities using acutely hazardous materials. The federal regulation will probably not exceed the California regulation. In fact there is talk of scrapping some of the more restrictive regulation as both California and the entire United States is losing business as firms wisely relocate or expand to less regulated areas.

The reason Clark Foam was required to submit an RMPP is that we use toluene diisocyanate (TDI) which is classified by the EPA as an acutely hazardous material. (About 50% of a blank is TDI. It is, however, converted to a urethane or urea polymer in the finished blank so is effectively inert.) To put this in perspective three quarters of a billion pounds of TDI are made and used in the United States per year and capacity is slated to increase to a billion pounds per year in the next few years. It would be nice if all of this was going into surfboards but in reality surfboard use is not even recognized as a market by the producers of TDI. Little TDI is used in California much less Orange County. Therefore we found ourselves, as I have often commented regarding the unfairness of government regulation methods, in the wrong place at the wrong time.

This process started in 1992. At the same time our Fire Department abruptly changed management methods and we have been required to comply with a lot of the current Fire Code as well as some rules made up under the authority of the local Fire Chief. I expect the final cost of this process to be between $300,000.00 and $400,000.00. The majority of the cost is in paperwork and administrative rules. There have been few physical changes to our facility as a result of the RMPP.

What can we expect from the future? For a long time we have been OK with OSHA. ,In fact we invite them to visit us every year or so just to avoid surprises. Also, since the start of this process and after the election of the Republican Congress we have noted a softening of California's strict policies. Simply put too many business have been leaving California rather than be subjected to expensive and unpredictable regulation. There is even a lot of talk on the federal level of the loss of jobs to other countries due to excessive regulation. Therefore I am optimistic that the worst is over. Furthermore, I would note that the way our government has been implementing regulation is very inefficient and I would hope this will change in the future. If it does not change the United States is in big trouble. The RMPP we were hit with is something that I feel many small businesses could not survive.

For the surfboard manufacturing industry there appears to be some good regulatory news. Acetone has been moved down a notch in air pollution classification or Volatile Organic Compound (VOC) classification. Evidently earlier acetone research was flawed. Until further research proves otherwise the heat may be off on acetone. Also there is a lot of research in process regarding the control of styrene emissions both going into the atmosphere and for worker safety. This is good news for there may be some approved equipment or a clearer path to compliance. One bad point is that OSHA will not back off on qualifying respirators as an approved way of controlling the breathing of styrene fumes. They are still illegal for surfboard production as there are mechanical methods of removing the fumes. One potential pitfall of the styrene related research is that the outcome may determine what is called a "Maximum Achievable Control Technology Standard" which could be required by all polyester fabricators.

The EPA is also coming out with a clearer rule which allows the polymerization of waste to be an accepted method of hazardous waste disposal. This has more or less always been allowed for polyester resins but the new rule should make the practice clearly OK. What we are all trying to avoid is being classified as a hazardous waste generator. This is a real hassle. (At Clark Foam we have completely avoided this requirement despite several assaults by regulators. We do this by having zero spills, no waste in our process, and polymerizing everything we bring on the premises. With TDI this has been tough.)

There is one change for the worse, which is the Storm Water Permit (SWP) requirement of the federal Clean Water Act. Basically the law is that "every industrial facility which has storm water that runs into the waters of the United States must have a SWP". Initially the EPA tried to avoid site by site analysis by classifying sites by the type of use or category. For example all sheet metal shops would be treated the same. Evidently the environmentalists took the EPA to court and won. Now there is a site by site requirement. In the case of our facility we not only have the permit but have been required to take storm water runoff samples as the water exits our property and have them tested. The EPA is also geared up to do this type of sampling. My suggestion is to carefully look at your facility. If storm water is going to carry dust or any other articles off your property you had better fix the problem now. Whether of not you choose to get a SWP you should take these steps. There may be some changes to this legislation due to complaints about the current law but it would be safer to expect stiff fines and other problems if caught dumping waste into storm water. One warning is that when one looks carefully at a facility there are a lot of hidden sources of dust and other items which will be washed away by a storm. From my observations some shaping and glassing facilities would be in for serious fines if they were inspected.

I will again offer some of our plant safety technology to you. We have totally mastered the water based acetone substitute. Using this brush cleaner avoids the requirement of buying an acetone recycle unit or recycling. It is not combustible so completely removes the fire safety problem. Our sand floor method draws rave reviews from our Fire Department and is very proven. We now have full Fire Department approval of our resin dispensing system which is a plumbed system pumped directly from a 55 gallon drum using air powered pumps. Besides being safer, it and the weighing technique we use, has cut our resin waste to about as close to zero as one can et. For any glass shop with even moderate volume this type dispensing and weighing system would have a very rapid pay back. (Taking some lessons from larger businesses I would demand these systems be installed by my sub contractors to control glassing costs.) We have also passed the OSHA airborne styrene workplace requirements but since this is site specific our technology would be of little value. In all of the above matters the people at our facility who implemented the above processes are available to you for consultation.

To repeat my prior warnings a clean and orderly factory normally passes inspections with a lot less trouble than a messy factory with a high amount of combustible material on the premises.

For the balance of this letter, I will offer my views on the impact on the custom surfboard industry of the latest generations of shaping machines and forthcoming advances in technology. I will include in my views some history and recommendations.

In my judgment there are four fundamental issues worthy of discussion: (1) who is using the newer generation machines, (2) the effect of the newer generation machines on blank availability and overall surfboard industry inventories, (3) overshaping, and (4) the copying of other manufacturer's designs using the newer generation shaping machines. I will not discuss manufacturing cost, quality control of shaping, or board riding performance related issues. These issues are controversial plus I want to avoid comment, in part, because I do not feel that qualified.

So far, my initial prediction that eventually the latest generation of shaping machines would be used primarily by novice shapers has proven to be wrong. I will stick by my prediction but add that eventually the technology being developed wilt be used by designers who do not know how to shape!

My analysis has the current shaping machine users broken down into roughly three classes.

First is what I call the FULL TIME user. These manufacturers do almost everything on the machine. Most of them started using the machines early and are no longer geared up to do much hand shaping. They normally specialize in a few models or type of surfboard.

The second class I call OVERFLOW users. These are manufacturers who will hand shape all their production until they get a significant backlog and then will switch some of their production to a shaping machine. Whether or not these shapers return to 100% hand shaping when things slow down is questionable. They might be tempted to go on an extended surfing trip and stay on the machine. Economics will probably determine this decision. This class of shaping machine user has recently produced some very rapid growth manufacturers, some which just recently began building boards.

The last category I will call, for lack of a better name, PART TIME SHAPERS. This class normally represents shapers who have been around for a long time, some of them decades, who have a reputation and some degree of following. They have been shaping on a part time or intermittent basis and some have even dropped out of the industry for very significant periods of time. They have discovered they can continue their part time status but dramatically Lip their production with great quality control using a shaping machine service. They normally produce a few models and market through a few dealers. I would suspect this type of builder often has some form of outside financing and is often motivated by dealers or sales reps.

They really have come out during the recent boom in sales and with expanded shaping machine services.

Why mention the above? Primarily because it has an effect on the supply of blanks as well as on the overall inventories in the surfboard industry.

In analyzing the demand for your surfboards or surfboards in general, one has to recognize that the overall sales demand comes in waves. Sometimes the demand increases or decreases are specific to certain areas; such as Hawaii, California, Europe, etc. Since most of us are only concerned with our own demand we tend to ignore the overall trends. The truth is, however, that we are all linked to some degree to current overall sales trends.

What appears to be happening is that the OVERFLOW and PART TIME SHAPERS described earlier order their blanks for the shaping machines primarily during times of high demand. Some of the FULL TIME users may also increase their production rapidly during the same period. What this does, in effect, is to both rapidly increase the demand for blanks and increase the inventory of blanks sitting around between the sale of the blank and the glassing process.

As the use of the shaping machines increases, the periodic demand for blanks seem to be increasing both in frequency and intensity. The demand increases do not really last that long for eventually the glass shops become overloaded and the demand slows until they get caught up. Prior to this situation all Clark Foam had to do was to increase production enough to overwhelm all the industry's hand shapers with work. This was fairly easy to do for our capacity normally exceeded the capacity of all the hand shapers.

The sum of this problem is that we are being temporarily overwhelmed with orders during periodic surges in demand, but our orders often exceed the capacity of the industry to glass the blanks. This frustrates not only us but our customers as well. The worst part is that we also appear to have rapid slow down periods after a surge in orders. We believe this clearly happened in 1996 for Our orders seemed to come in overwhelming waves followed by slack periods.

There is a far more serious side to this problem which affects the entire surfboard industry. During periods of high demand there appears to be so much work in process, especially considering the OVERFLOW and often out of touch PART TIME SHAPERS, that when the overall demand for finished surfboards slows production will fail to slow down. This would make inventories of finished boards go to historically high levels. This appears to be happening at this time. One thing to remember is that hand shapers get tired after long periods of high production and want vacations or time off. Machines do not get tired!

The real disaster for the surfboard industry, as we know it, caused by the machines is overshaping. One of the great features of the contemporary close tolerance, very light, molded polyurethane blank/polyester surfboard is the high density layer of foam on the deck side and the lower density inner core. When properly used this feature makes our overall strength to weight ratio very high and Clark Foam extremely competitive technology from the strength to weight ratio point of view. In the last ten years our strength to weight ratio has increased dramatically in part due to the closer tolerance blank along with our extensive rocker program. Overshaping, especially on the deck, takes away this advantage very rapidly and our product really can be blown away by a number of other emerging surfboard construction technologies as well as some foams that do not have our physical properties. Furthermore, many end customers become very frustrated with collapsed decks, shrinking boards, and the short life of their boards. (If the board is really light they might tolerate a weak board but overshaping actually produces a heavier, weaker board.)

Overshaping is a controversial subject and was around even before shaping machines. As a matter of fact blank manufacturers contribute to this problem by having obsolete or poorly designed molds, poor rocker programs, bad glue ups, and shortages which require manufacturers to use oversize blanks. There also have been some hand shapers who pay no attention to our warnings and overshape on a regular basis.

I would note that machines are used very extensively for the blanks which are imported from Australia and made by other manufacturers who do not necessarily have close tolerance blanks and gluing. This clearly results in overshaping. (In fact, machine development has been very extensive in Australia, where there are few mold sizes and many sizes are obsolete.)

Some people involved with machines, whom I really respect and have every reason to believe, have told me that using our rocker program and very close tolerance blanks they take less foam off the deck of the blank than a hand shaper. Looking at their orders and their very advanced rocker development program their claims are probably very true.

On the other hand some of the shaping machine services are clearly using obsolete or oversized blanks as well as universal rockers. Reports of taking a half inch or more off decks is common. Some of the shaping machine owners are not even trying to change and their customers are evidently exerting no pressure on them to change.

My summation is that at this time the overwhelming majority of overshaping is being done on the machines and this is bad news for the custom surfboard industry.

Now and then one of our customers takes a peek at some of the other board construction technologies or cheap boards coming out of China and panics. Some are found to be stronger, lighter, cheaper, etc. Overshal2ing is the fastest way to bring in these technologies and 12ut all of Lis out of a job. Overshaping also totally screws over our current customers. What our industry does not need at this time is weak foam or weak boards! We have the best product - don't screw it up by overshaping!

The next change to our industry caused by shaping machines is the precision copying of designs. The rumors and complaints are increasing as shapers see essentially their exact designs being produced on machines for competitors.

From the early use of the computer controlled shaping machines we have noticed this practice through our "secret" rocker program. Clones of the "secret" rockers were submitted and machines were using the same rockers for different customers.

Another word for a shaping machine has always been "copying machine". Anyone who is naive enough to think that someone cannot borrow or buy a finished board, measure it for a machine, clean up the bumps with the computer, and start production is living in a dream world. Another copying method is to simply make a few minor modifications in the computer data for a popular shape and start production.

Even if one machine operation takes a strong ethical position their competitor will quickly copy their customer's popular design for their own customers.

The fiberglass boat industry had similar problems where a competitor would simply buy a new boat and make a mold from the boat. I understand that at one time this was stopped by the courts. We have had people buy a blank from us and make a mold off the blank. For surfboards I doubt there will ever be court relief.

My feeling is that as this technology progresses we might see the newest design by a top California shaper be sent to China, Australia, or Europe by phone lines and a copy being made hours after the new design is first available for sale in California. Remember it now takes only six tenths of a second to transfer information to any place in the world!

I will take a stand on this subject on the side of the shaping machine owners. I do not think they are at all to blame for the problem. The technology exists and some surfboard manufacturers embraced the technology thus creating a demand for machines. The machines can copy so they will be used to copy. Everyone has to live with this fact and as time goes on and more machines come on line the copying problem will get worse. The copies will be not only perfect but the bumps will even be taken out by the machine software. An era is ending and a new era is beginning!

At this point I believe a history of shaping machines and a review of newer technology would give some insight as to what else to expect in the future, and what steps the custom surfboard industry should take to keep this technology from destroying the custom surfboard industry.

I consider the first shaping machine to be the jigs used about sixty years ago by Pacific Redwood Homes/General Veneer to shape redwood balsa planks. This was not really a successful venture as the "backyard builders" (said jokingly) wiped them out as many surfers built their own boards and there were quite a few small builders. I would also note that from my understanding of their equipment many very productive, contemporary hand shapers not only use similar techniques but many have more advanced techniques.

From that point little was done until 1954 when Hobie built a balsa shaping machine. Hobie's design is still used to this day on virtually all shaping machines that are not mechanical copying machines or computer driven. About 1967 Hansen built the first serious mechanical production copying machine which used a finished board as a template. Walker Foam, Bahne, and a few others also had significant machine development in this period. Hot wire use was started sometime in this period for polystyrene foam but essentially used a limited version of the Hobie design plus the original Hobie blank factory used hot wire technology.

During the 1960's there was a huge expansion of surfboard sales. There was a shortage of shapers. Therefore there was a lot of interest in shaping machines. During the 1970's sales dropped way off and most of the large manufactures down sized or went out of business. There were more shapers than there was work so naturally there was little or no interest in splitting limited income with a machine. There was hardly any machine development or use.

In the 1980's improved commercial versions of the old Hobie design re-appeared along with some similar machines built by individuals. A lot of this was associated with the booming custom sailboard market but also surfboard sales were in a period of rapid growth. Sometime during this period copying machines appeared in Australia. Again the machines were being built due to a lack of qualified shapers more than anything else. (Some would argue that bad molds, bad glue Lips, and higher quality were the reason for these machines. Furthermore I am sure there was some healthy greed involved for the promise of saving money always attracts many of us.) All of the above, other than possibly the Australian machines, really had little impact and the vast majority of the machines were junked.

The big change to the latest generation machines came in 1980 when Michel Barland in France built the first computer controlled shaping machine. His machine also, as will probably be found in the final versions of computer controlled shaping machines, had the capability of designing boards with computer software rather than by measuring shaped boards.

As an interesting side note the first commercially available software for actually designing surfboards was developed in Australia. When I ran across it Hi Tech Sailboards in Maui was using it for designs and to transfer their shapes to a European molded board or "pop out" manufacturer. It's biggest use ever started in 1985 when I bought a copy and we use it to this day to produce our blank catalog.

This software was slated to be hooked up to a machine but the project died and I believe Clark Foam is now the only surfboard related user.

The Barland Machine, like the Hobie Machine and Hansen Machine, is the prototype which will be copied until there is a radical change in technology. Recently, however, there has been dramatic improvement in technology developed for designers, robots, and automation which can be directly applied to shaping machines. Below are some examples:

  1. The latest generation of personal computers have enough power to run many cutting heads at the same time and do computations far exceeding the need of any surfboard shaping, machine or surfboard designer.
  2. Multiple axis, add on computer boards with some built in software are not only readily available but the cost has dropped to the point of being almost negligible. (A shaping machine has three or more axis depending on the complexity of the machine.)
  3. There are a large number of high quality precision positioning devices and high resolution sensors available as off the shelf items at a relatively low cost.
  4. Advances in computer software and the methodology of object oriented programming are resulting in the development of incredibly powerful and versatile software at reasonable costs.

In sum, with the exception of custom holding devices, specialized cutters, and software specifically for surfboards, the components of a shaping machine are now not only readily available but they are really good products. In the past few years the availability of these products and firms specializing in integrating these products into machines has been growing rapidly.

I feel the computer software written specifically for surfboards, or adaptable to surfboards, will probably be the last technology to be fully developed as a part of this generation of shaping machines. I have no idea how far it is along at this time, but feel that in the final versions, the entire board can be designed by the computer and the shaper will no longer be required. It will also be very fast and the data bases will be smarter than all the great shapers the world has seen to this date.

One point that might indicate how far the software has gone is the fact that the top sailboard molded boards or "pop out" builders hired the top custom board shapers to do their designs for several years, but now have dumped most of them and do their designs by computer. They also use the equivalent of very high tech "shaping machines" to build their molds. In both their surfboards and sailboards I have heard reports that they are rapidly changing shapes. I would not be surprised if they are using the highly developed technology of the "mold shaping machines."

I have discussed the above issues with several board builders. Some have brought up the possibilities of doing molded boards themselves or having them built for them by others. They cited some of the low tech "pop outs" being developed or produced in the U.S., Australia, China, etc. This dream has been going on since the 1950's when Robertson-Sweet, Hobie, Foss, and others tried low cost "pop outs" to " take over the surfboard market". With my background in plastics and surfboard construction I think it is a waste of time to watch these developments. They do not have either the technology, required processing equipment, or the quality controls. Watch people like Bic who not only dominates sailboards, but also has more money to invest than the entire world's custom surfboard industry combined. Firms like Bic will not be interested in being your subcontractor, in making your boards, or buying your designs! Furthermore, they are not interested in any "low cost" processes that we can copy with a small investment. They also do not want just a market share, they eventually need it all to support the large investment required to support their research, marketing, and facilities. They have read the best business management books which clearly say the way to go is to retain total control of trade names. Unlike a few years ago, today they can copy your shapes using computers.

What firms like Bic want that we now have is the very top surfer's endorsements and our customers! They can quickly buy your team riders. (As proven in sailboards they can also buy the magazines.) To get our customers, however, is really tough.

As long as we keep the cost of custom boards at a reasonable level and the strength to weight ratio competitive, there should be no serious competition from the "pop outs". Sure, they may get lighter, cheaper, and stronger. As mentioned earlier the shaping machines may help "pop outs" a lot, if they continue overshaping, plus the similarity in technologies are sure to feed each other in many ways. For sure "pop outs" will end up with good shapes and quite possibly have a lot of shapes which are rapidly changing.

To make "pop-outs" successful, however, would require a complete change in the culture of surfing. There are simply too many surfers who want their board to be a certain way either in shape, weight, stringers, or cosmetics. There are too many types of waves and too many surfing styles. This need is just as strong today as it was sixty years ago when the first shaping machine failed to eliminate the hand shaper or produce a board that took over the market. During periods of rapid growth or high demand this need seems to disappear. However, when things slow down, and we are dealing with experienced surfers, it re-appears with a vengeance. As long as we service this need there will always be a strong custom surfboard industry.

From our statistics it is obvious that one way the demand for unique products is serviced by our industry is by having a large number of brands or styles of boards. (Even using unique materials seems to work as long as the unique materials actually work and are not a fraud as many have been in the past.) Some manufacturers complain bitterly about this and place the blame on "backyard builders" and low prices. This may not be an accurate representation of what is actually happening for in some situations we know the complaining builder is, in reality, the price cutter. The problem might just be the demand for different products.

To me the healthy way for the industry, as well as the individual manufacturer, to supply this proven demand is by better servicing custom orders. If there is one thing I would recommend to the industry it would be to not only encourage custom orders but to shorten the time between a custom order and delivery plus improve the quality control or predictability of the end product. To me this strategy solves a number of problems.

I hope parts of this letter provokes some thought. I may be off the mark on some issues and I am sure parts of this letter might seem to be coming from outer space. In reality everything enclosed has been an issue with more than one serious member of our industry. I simply chose to write it all up in one letter. Hope it helps you with your business.

Thank you for reading my letter and thanks again for your business.

Gordon Clark

RSS Oahu Surf

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    Wind is ENE 20-25.
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    Wind is ENE 10-15. SHORE BREAK
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    Wind is ENE 10-15. CANOES
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    Swell direction from the NNW. Wind is ENE 10-15.
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    Swell direction from the SSW. Swell period is 15 seconds. Wind is ENE 12-14. COR
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