Finding the handcrafted fireplace door or $2,000 glass bath lav their customers crave is no big deal for many pro dealers' purchasing departments that, out of competitive necessity, have become adroit at locating special orders. But the real search can begin when those unique items enter dealers' inventory bloodstreams, however briefly.
That's because special orders are “exceptions,” for the most part, to the merchandise dealers stock every day, and are bought, received, and shipped separately. Dealers that handle the bulk of their special orders through their yards or warehouses say that keeping these items segregated or at least specifically labeled is imperative to their smooth distribution. That tracking must also extend to the jobsite or the home to ensure that what gets ordered actually gets delivered.
Some dealers use software programs to help them keep tabs on special orders as they travel through this pipeline; however, supply chain management for special orders, dealers say, must also include better training of their personnel and closer communications with contractors to reduce errors in ordering or measurement that cost dealers and customers time and money. These snafus can lead to disputes about who's responsible for orphaned products that are typically one-of-a-kind items that homeowners don't want, manufacturers are reluctant (and will charge) to take back, builders or remodelers often can't reuse, and dealers can't resell at anywhere near full price.
Small Orders, Big Business Visit Andersen Windows'Web site and you'll find that this millwork supplier claims it offers 600,000 different products and styles. No doubt, as this example shows, the proliferation of items available in almost every home improvement category has been staggering, thanks mainly to the demand created by homeowners' access to product information via the Internet. The Joint Center for Housing Studies at Harvard University's recent distribution study, Residential Supply Chain in Transition, found large pro dealers provided 50 percent more SKUs in 2002 than they did in 1997. Not surprisingly, the report also found that between 60 percent and 90 percent of the participants' window sales were special orders.
Most dealers don't object to special orders because they don't have to stock the products for any length of time, they can charge more for them (margins generally fall within the 40 percent range or higher), and they enhance their standing with customers. “Once you help someone out by milling or finding something special, you have a friend for life,” says Tony Popowitz, an inside salesman for West Elizabeth Lumber in Pennsylvania.
Special orders accounted for 16.2 percent of Tindell's revenue in 2004, and this Knoxville, Tenn.–based dealer begins every year “with the idea of increasing our special order sales,” says vice president of operations Ed Mahaffey. That segment of business has grown even larger for other dealers: Truitt & White in Berkeley, Calif., for example, gets 40 percent of it sales from special orders; and Everglades Design Center, a 9,000-square-foot showroom that Miami-based Century Everglades Lumber opened in October 2003, generated 80 percent of its first-year sales from special orders.
While confident that they can retrieve anything customers demand, the pro dealers interviewed herein say they are typically asked to fill special orders for millwork and trim products, plumbing fixtures, builders hardware, and engineered wood products. Case in point: high-end entry doors ranging from $4,000 to $8,000 are the most-requested items at Edward Hines Lumber, the Buffalo Grove, Ill.–based dealer with 12 yards, says general manager John Drake. “There's nothing really ‘special' about special order,” adds Bryan Jaeger, vice president with Union, N.J.–based Jaeger Lumber, which gets one-third of its sales from them. “It's just how we procure products.”
Outside of asking for upfront deposits of 25 percent to 50 percent, special ordering is pretty rudimentary for most dealers, thanks to tracking software. Jaeger Lumber's system, for instance, assigns these products their own SKUs, vendor IDs, and line order numbers.
Receiving these goods, however, is another matter entirely. “Receiving is so difficult because these aren't ‘repetitive' products, so it's harder to spot irregularities,” explains Mahaffey. So when this dealer sends a special-order invoice to its receiving department, it prints out labels with the same nomenclature as the order. The receiving manager physically attaches that label to the product when it comes in, so it's easier to pull when delivery time arrives. Zeeland Lumber in Michigan has its receiving crews submit paperwork that includes their names, the date, and where they've placed the product in the yard, says Zeeland's purchasing manager, Mark Vanden Bosch.
Keeping Tabs Receiving and warehousing are pivotal stages in the special-order process because that's where mishandled products get damaged or broken, and where inventory can end up forgotten and collecting dust in the corner of the yard because it hasn't been shipped. Jaeger notes that builders sometimes order items in advance of construction, and then expect dealers to warehouse these products indefinitely. And every dealer has at least one bad memory of customers who chose another style or color mid-project, and then tried to leave dealers holding the bag on unwanted merchandise. “Special orders require constant police work,” says Mike Gillespie, general manager of Hope Lumber & Supply's yard in College Station, Texas, which gets about 15 percent of its sales from these orders. “You need to walk through your inventory at least once a month to make sure you're not getting stuck” with undelivered merchandise.