With strong sales and a firm foundation with new-home builders, Universal Supply Co. could simply sit back and float on the wave of current market opportunities. Instead, the New Jersey–based building materials distributor is looking around and looking ahead, determined not only to upgrade and expand its operations, but also to aggressively pursue the remodeling sector by committing more space and thought to the display of its inventory, leveraging its millwork expertise, and honing its marketing efforts.
Over the past five years, Universal increased its revenue at an average annual rate of 15 percent. Much of that growth can be pegged to the surge in home building that's occurred in the markets Universal serves in southern New Jersey. But the company hasn't been as successful at attracting an equally important group—remodelers and their homeowner-customers—and Jeff Umosella, Universal's president, thinks he knows why: Like most pro dealers, the showrooms at its yards have insufficient space to display windows, doors, and siding in ways that help owners visualize how those products might look installed on their homes.
Umosella plans to rectify that shortcoming next year, when Universal is scheduled to open a 7,500-square-foot design center near one of its two yards in its headquarters city, Hammonton. Umosella says that center should have ample room to set up large vignettes and cutaway house displays for all of the company's main product categories—roofing, siding, decking, railing, windows, and doors. More important, remodelers that buy from Universal will have access to the center 24/7 to use as a place to meet with their clients at their convenience.
Capturing more business from remodelers is central to Universal's ambitious three-year strategic plan that calls for its revenue to increase to $200 million in 2007, from a conservative estimate of $142.5 million this year, according to John Umosella, Jeff's twin brother and Universal's vice president of quality and business development. To achieve that goal, and to sustain profitability in what Jeff admits is a “margin-challenged” selling environment, Universal also is leaning heavily on technology-enhanced customer service. “I guarantee that we're spending more on our facilities than any of our competitors,” says Jeff. “And their size doesn't concern me. We can make changes more rapidly than most.”
Customers Come First Universal has been a fixture in southern New Jersey for four decades, but it still has to stay sharp to win business in a highly competitive market that now extends into Pennsylvania and Delaware and includes independent pro dealers such as Peter Lumber and DuBell Lumber, as well as giants such as Bradco, Stock Building Supply, and Builders FirstSource. In November, Universal opened its eighth location, in Lakewood, N.J., where it had already done business with some pros. John says the company has bid on another location that, if acquired, would be Universal's first yard with a rail siding (Universal currently brings in lumber from a reload in Winslow, N.J.).
Hammonton, which refers to itself as “The Blueberry Capital of the World,” may be a backwater town in the shadow of Atlantic City, but Universal's yards are strategically located within a 15-minute drive of nearly all of the area's population centers. Universal has benefited from homeowners in many shore communities who have been tearing down weather-beaten bungalows and split levels and replacing them with palatial homes on the same lots. The dealer is also thriving as a building materials feeder for large production builders such as Toll Bros., Beazer USA, and Centex Homes, according to Joe Umosella III, Jeff and John's brother and Universal's vice president of operations.
Last year, Universal put itself in better position to become a more important supplier to builders by launching an installation program for windows and doors that, in 2005, will generate an additional $6 million in sales. Part of that installed package includes a program from MI Windows & Doors called “Lock and Slide,” in which MI has one of its field technicians inspect the work throughout the entire installation process. Universal got involved with that program last year when it took on MI's Capitol Windows line, a brand Jeff says is much in demand across his selling region.
“The way they interact with suppliers is truly a partnership,” says Matt DeSoto, vice president of business development for MI, which has been selling to Universal for four years and currently ships three truckloads of mill-work per week to the distributor. “They are always looking for opportunities both inbound and outbound.”
Indeed, Universal has established a solid reputation for being one of the more accommodating distributors in the area. “They have never said no to me,” says Ron Sirolli, whose Sirolli Construction, a remodeling company in Hammonton, has been doing business with Universal for 33 years and purchases around $350,000 in materials from the distributor annually. “Any problem that comes up, they fix immediately.”
Similar praise can be heard from Gary Hall, regional production manager for Ryan Homes, whose primary contact is Jeff Umosella: “He's very good about finding products for you, and [he's] very approachable.” Ryan's two divisions in New Jersey, which should close 850 homes this year, are buying roofing, siding, and some railing from Universal, which stocks suppliers like GAF and Alcoa with which Ryan Homes has national purchasing agreements.
Smooth Operators Sustaining that level of service on a consistent basis is no minor feat for a distributor with 4,000 customers and $13 million in inventory at cost. To keep up, Universal has been upgrading all aspects of its operations, an effort that really began three years ago when it moved its millwork distribution division into a 95,000-square-foot warehouse attached to its headquarters offices. The efficiency of that DC, through which all of Universal's window and door shipments for new-home construction flow, has been greatly enhanced by the installation of a computerized warehouse management system (WMS), which Universal launched in February 2002.
“It has produced tremendous results” in terms of fill rate and delivery improvements,” says John. He notes, for example, that deliveries are now “99 percent accurate,” compared to “the low 80s” before the system went live. Prior to that, Universal would have as much as $300,000 of its inventory that it couldn't account for at any given moment; the WMS, on the other hand, imposes a discipline on the distributor to stock inventory in the same place every time.
Three of Universal's yards operate on this system, which benefits the company's managers by providing real-time information. (The company no longer needs to do physical inventory.) John says three more yards will go online in 2006, and the whole company will be connected by 2007.
Additionally, the company's roofing and siding yard in Hammonton features an extensive auto-stack bin system that makes storage and loading of materials much easier. Joe and John also mention Roadnet and MobileCast—both supplied by UPS Logistics—as two programs that are helping Universal analyze and streamline the performance of its 55-truck delivery fleet. Roadnet is a delivery routing tool; MobileCast is a dispatch and tracking application. Five of Universal's yards are linked, and their delivery times, says Joe, have improved an average of 30 percent. “We're running at about 95 percent on-time now.” John adds that these systems allow Universal to prioritize orders.
Sirolli says his connection with Universal is bolstered as well by EntryNet, a Web-based application through which he can place orders and schedule delivery dates. Universal also uses Andersen Windows' IQ program, which Sirolli says he uses for estimating orders of the manufacturer's windows.
“Universal is a technology leader that's more advanced than some chains,” says MI's DeSoto. “Customers like that leave us no other choice but to keep up.”
The Human Touch With all its sophistication, Universal hasn't forgotten to bolster and support the human element that's so vital to executing its customer service objectives. Last year the company created a 10-person team that supports its 22 field territory managers. At two of its yards, it also created the new position of operations manager, which Joe says is filled with future branch managers in training.
Jeff calls his managers “the CEOs of their territories.” However, he noticed that they were spending too much time on “non-selling” activities. So in an effort to get them to strengthen their day-in, day-out relationships with suppliers and pros, he changed his sellers' compensation structure last year so that more of what they earn derives from their base salaries.
And to encourage their employees to have a personal stake in the company's success, in January 2005 the Umosellas put all 300 of Universal's associates on the same bonus plan, which is based on a formula that factors in Universal's annual balance sheet and income performance.
Universal is focusing on what Joe calls “organizational growth,” so that it has the right people in place as it expands. Its specific focus will be on improving its employees' product knowledge and “taking non-value-added steps out of the distribution process,” says Joe. Such steps would include reducing redundant paperwork and the double handling of inventory, moving higher-volume merchandise closer to docks in the warehouse for quicker picking and loading, and minimizing how much inventory gets transferred from yard to yard through direct purchases, when possible. The company also will soon hire two or three more trainers, one of whom will be a product knowledge specialist. Jeff insists that this training is essential for Universal to maintain its standing with pro customers as “a reliable, no-hassle supplier. The biggest reason we get their business is because of trust.” He also notes that customers and vendors know that if there's a problem “they can pick up the phone and reach me.”
Looking Ahead With so many operational upgrades in place and an attitude that favors process improvements, Universal is well-prepared to take on what Jeff calls its “biggest challenge,” capturing more business from remodelers, one that's created primarily because that market, unlike home building, remains so fragmented. “We're going to need a lot more shots on goal,” he says.
To familiarize remodelers with its operations, Universal this summer was preparing a DVD that it plans to distribute to new customers. Jeff also expects the design center to eventually become a “macro-marketing” instrument that will generate new leads for the company. “I'd use it,” says Sirolli, the local remodeler, who already sends his clients to Universal's yards to view products. “That would be one less thing I'd have to carry on my own.”
Vendors, too, are enthusiastic about current and future changes at Universal, and already are anticipating a boost in their business through the company as Universal hones its facilities, operations, and staff to continue serving new home builders while better targeting the remodeling market. For example, most of Therma-Tru's sales through these yards are to builders, and territory manager Dave Rutherford expects his company's share of remodelers' spending to take “a big jump.”
MI's DeSoto says that in the four years his company has sold through Universal, it's seen double-digit sales growth, and is projecting annual increases of 15 to 25 percent over the next few years. “When we're with the right distributor, they are going to take us along with them,” he says. —John Caulfield is a contributing editor for PROSALES.
Company: Universal Supply Co.
Year founded: 1965
Headquarters: Hammonton, N.J.
Number of locations: 8
Number of employees: 300
2004 gross sales: $121 million
Pro sales percentage: 98 percent
Custom Designs Universal Supply is striving to become a primary destination for pros' millwork needs by enhancing its product categories and refining its production capacities.
While most of its attention of late has focused on upgrading its operations, Universal Supply Co. also has made subtle changes in its product mix and services to better help its various customer bases.
With the exception of drywall, which it doesn't stock, Universal offers what its president, Jeff Umosella, describes as “a fairly broad range” of building products. A warehouse management system installed three years ago has allowed Universal to get a much better handle on product movement and margins, and last year the company divided its product lines into groups of “A” items (like high-end siding or composite decking) and “B” items (like lumber) based on the respective profitability.
Windows and doors, which vice president of operations Joe Umosella says typically fall into the “B” group, are nonetheless two categories that Jeff is convinced will drive a lot of Universal's future business. The distributor has some history with these categories, as the Umosellas at one time owned Patriot Windows, which they sold to MW Windows in 1999. Its kitchen division draws commissions from sales generated by 1,500 square feet of showroom space it leases to a cabinet supplier and installer located in a building down the road from headquarters.
Universal's millwork distribution division features several millwork brands, including Andersen Windows, its largest supplier in terms of sales. And Jeff says he wants to add a line of interior doors, from which he sees “good potential.”
“They do a fabulous job selling our products,” says Dave Rutherford, territory manager for Therma-Tru. “They're also smart enough to see trends before they happen.”
One such trend that company officials are trying to capitalize on is higher-margin custom millwork. Universal has made a significant investment in equipment for a millwork shop that opened at its window and siding yard 18 months ago. That shop receives polyvinyl trim in sheets by the truckload and can create columns, window heads, casings, or any other custom order. Jeff holds up the mold for a “Universal Supply Company” sign that the shop's machinery precision-cut and that might be used at its new Lakewood store. “If an architect can draw it, we can manufacture it,” he says. Universal also recently started marketing a private-label trim brand called “Xboard.”
The company so far has invested around $350,000 in cutting, bending, and routing equipment, and is budgeted to invest another $500,000 in its custom millwork shop in 2006, says Joe.