For as long as there's been a supply chain that connects those who make products with those who use them, there have been factions within the home-improvement and home-building sectors that have regarded two-step distributors as one link too many. Weyerhaeuser's recent decision to sell all 16 of its distribution centers in Canada to a Los Angeles?based private equity firm, and to seek buyers for 10 of its 50 DCs in the U.S., gave industry watchers another reason to wonder if the conventional two-step model–when all that mattered was getting Product A to End User Z quickly and cheaply–was losing traction in a consolidating market where major dealers had grown large enough to take over functions they once delegated to distributors, from inventory management to rapid delivery.
But what most dealers still aren't great at–and where distributors say they remain vitally important–is creating demand, especially in a soft housing market where builders, contractors, and even dealers are scaling back what and how much they purchase. "Dealers are no longer marketers; they are fulfillment companies for contractors," observes Tom
Le Vere, senior vice president for the Midwest division of Portland, Ore.?based North Pacific Group (NPG), which has 40 distribution points around the country.
Le Vere says a distributor's role must extend to getting end users excited about new products, and he explains how this works to his company's advantage: NPG's salespeople will make sales calls to five builders that a dealer selects, to explain the benefits and applications of, say, composite trimboard. Once those builders are convinced to take on the product, NPG goes back to the dealer, evidence of demand in hand, to encourage the retailer to take on a stocking program.
Parksite Plunkett-Webster (PPW), a Batavia, Ill.?based distributor with nine DCs, creates demand through specialists who recommend certain building products to decision-makers such as architects, engineers, and specifiers. Brian Schell, PPW's senior product manager, says the company has been doing this since the 1980s, when it first worked with DuPont to stimulate interest in that supplier's Tyvek housewrap. PPW also has helped create buyer demand for Trex decking, AZEK trimboards, and, more recently, Quiet Solution sound-deadening drywall and Nichiha fiber-cement panels.
"Wholesalers can become the selling arms of their dealers to builders," says Jon Vrabely, president of St. Louis?based Huttig Building Products, whose 175 outside salespeople in 45 states make regular jobsite visits to contractors and conduct product-knowledge seminars. And for the past several years, Russin Lumber in New York has been proving Vrabely's point by marketing rail and fence products to contractors via two "mobile showrooms" (see "On the Road Again," left).
Dealers, though, get nervous when suppliers get too cozy with their customers. To allay those concerns, distributors often buddy up with dealers to meet with pros. Such "team selling" is becoming more common for Weyerhaeuser's 600-plus salespeople, whose goal is "to get the right product to builders," says Carlos Guilherme, vice president of sales for Federal Way, Wash.?based iLevel by Weyerhaeuser. And BlueLinx Holdings' 1,000-person sales force includes a group it calls "The Builder Connection" whose primary purpose is to reach out–often with dealers–to builders, either through sales calls or by sponsoring builder-related events.
Through its ProSource program, Orgill, a Memphis, Tenn.?based hardlines distributor, has its salespeople collaborate with pro dealers–which contributed 27% of Orgill's $1.03 billion in revenue last year–on coming up with product combinations for builders and contractors. At its recent dealer show, Orgill displayed a 5,000-square-foot ProSource merchandise setup, whereas two years ago it was 3,000 square feet. "Our salespeople are developing solutions for their customers, not just selling 'stuff,'" says Brett Hammers, Orgill's vice president of marketing.
Despite their efforts on behalf of dealers and manufacturers, some distributors say they still must counter the perception that they are extraneous. "A lot of people don't understand why the two-step model is critical to home building," says Steve Macadam, CEO of Atlanta-based BlueLinx, whose 70-plus DCs generated $4.9 billion in 2006. Macadam points out the inefficiencies of trying to move high volumes of building products from one manufacturing point to literally thousands of end-user points "without at least two inventory holding points."
While distribution is still fundamentally about getting products from one place to another efficiently, many companies are recasting themselves as, in Le Vere's words, "value distributors." BlueLinx's internal motto is "Going Beyond Distribution," which Macadam explains is shorthand for its mission "to expand the scope of how customers view us." One example, which BlueLinx launched in mid-2005, is its Master Dealer program, where it takes over a dealer's inventory management via electronic data interchange. About a dozen dealers participate in this program and another 15 are testing it.
Weyerhaeuser's Guilherme also speaks of his company's "differentiated package of solutions," which includes dealer access to its 200-plus designers and draftspeople who work on solutions for "strategic structural products" that are Weyerhaeuser's bread and butter.
Anyone who wants to understand the lengths that distributors are going to these days to keep customers in the fold should travel to Bedford, N.H., where Coastal Forest Products has become a jack of all trades. Each month, Coastal primes or topcoats between 1.5 million and 2 million feet of wood products like rails and decking, a service that significantly reduces the hassle of installing these products. For the past two years, Coastal has been conducting full-day "Wood 101" product-knowledge seminars from a mobile "classroom" that's equipped with its own food concession stand. Dealers in certain metro markets get five-day-a-week delivery from Coastal, whose 117-truck fleet delivers 90% of what it sells. And the distributor makes life easier for contractors by shrink-wrapping all job-lot orders.
These services appear to be paying dividends, as Coastal has needed to increase its inside and outside sales force by 40%, to 24 people, over the past four years, says marketing and training manager John Moskowitz. Coastal's inside guys handle anywhere from 4,700 to 5,000 calls per week, and the distributor generated more than of $100 million in revenue last year.