Forget what you've heard about a recession—the overall U.S. construction supply business has been flying above any economic turbulence in the business atmosphere. According to pro dealers and builders alike attending the 10th annual PROSALES Executive Summit, held November 6 through 8 in Boca Raton, Fla., 2003 finished out as another great sales year, due in no small part to a phenomenal third quarter that catapulted many companies far into the black after a flat first half of the year. And with expectations that construction spending is headed for another record-breaking year, conference attendees also reported they are clearly bracing for mounting competitive pressures and increasingly turning to developing supply chain partnership strategies for a competitive edge.
Even in markets that are a little under the weather, such as the Denver metro area, where dealers say job layoffs in the high-tech sector continue to suffocate an already wheezing local economy, LBM suppliers are gearing up for increased business—and increased service demands—from their builder customers in 2004 and beyond. Littleton, Colo.–based Home Lumber (a subsidiary of Redmond, Wash.–based Lanoga Corp.), for example, expanded this year with a new full-service lumberyard in Colorado Springs, Colo., adding to the dealer's six lumberyards and components facilities in the greater Denver market. “We've made some solid investments in growth opportunities,” reported Home Lumber president Max Guetz. “And we will be in a great competitive position as demand begins to turn around.”
Working Together Home Lumber's proactive market strategies mirrored those of the majority of industry executives at the conference. Whether custom-focused or big builder–oriented, collaboration between suppliers and builders topped the list of key strategies discussed for competing in increasingly lucrative but service-demanding markets.
Focusing on this driving force and drawing on examples from IBM, Cisco, Microsoft, Boeing, and other industries, keynote speaker Charles Fine, Ph.D., an MIT professor, supply chain consultant, and author of “Clock Speed: Winning Industry Control in the Age of Temporary Advantage,” illustrated that communication is critical to an individual company's success as value chains evolve. “There is knowledge and information flow management in your supply chain that is just as critical as product flow management,” Fine said. “The longer the lags in supply chain information flow, the more you tend to undershoot or overshoot fulfillment.”
To better gauge overall market health, Fine urged the pro dealers in attendance to seek out impressions from customers and vendors throughout the supply chain and to not simply rely on information from their immediate working partners. “Anybody can screw [business] up and trigger unstable volatility,” Fine warned. “And if anybody in the chain chokes, the whole chain goes down. Everybody has to speak to each other.”
To that end, a panel of builders took the hot seat at the conference to provide insight on their philosophies and goals relating to improving relations with pro dealers. “Give our purchasing manager some help, give us an assigned salesperson, work in alliance with us,” advised Lee Wetherington, president and CEO of Lee Wetherington Homes, a mid-size builder in Sarasota, Fla., who shared the panel with Jeff Allgood, vice president of purchasing for big builder Jim Walter Homes in Tampa, Fla.; Tom Sattler, president of Greenwood Village, Colo.–based Sattler Homes, a high-end estate builder; and Jim Gibson, president of Gibson Builders in Washington, D.C., a custom builder specializing in infill properties.
Characterizing partnerships as an attempt to veer away from price-based decisions on purchasing, the builder panel participants were quick to note that success on the dealer side is a necessary component to teamwork. “We want to cement the relationship with our supplier,” said Sattler. “We want suppliers to be delighted to work with us. If they don't make money on our job, we have failed them.”
Wetherington added that both builders and dealers need to become more comfortable with trade partnerships. “Partnering and discussing [mutual business goals] are the keys to consistency that develop loyalty,” he said in response to a dealer questioning the ultimate loyalty of cost-driven builders. Where Wetherington has been successful in establishing deeper partnerships, he has seen cycle time improvements of approximately 25 percent. “You get that type of synergy,” he explained, “and you won't ever move away from [that] trade supplier.”
Strength From Within But synergy doesn't just happen overnight, and Executive Summit speakers and attendees both were fervent in proclaiming a strong and motivated employee corps as the paramount variable in determining pro dealers' market success and ability to build supply chain partnerships. “The single most important thing you are going to need to catapult your organization to success is finding and keeping good people,” said Jim Harris, Ph.D., a consultant, author of “Finding and Keeping Great Employees,” and former semi-custom home builder whose keynote presentation explored how to recruit and retain top-performing employees.
“Top talent wants to know the compelling reason why they should work for you.” Harris emphasized, stressing that capturing the heart of employees with open communication and embracing an employee/employer partnership culture is what drives learning and emancipates on-the-job decision-making action. He also noted that companies must take a harder look at where turnover occurs and implement strategies that will retain the top 20 percent of performers and “replace” the bottom 5 percent to 10 percent.