What does your mind's eye see when you imagine your dealership? Perhaps it's the big sign out front, or the neatness of the pallets, or the shine on the showroom floors. But ask someone who drives the trucks that regularly bring goods to your yard, and he's more likely to mention other things: The tightness of the turns in your facility. The width of your lanes. And how long of a wait there is in the left-turn lane before traffic relents and he can roll through the gates.
Spend time on the road with drivers, as ProSales did recently, and you'll get a new perspective on what's happening with dealers today. Haulers for building material distributors arguably see more stores, and have witnessed more changes at those dealers, than any other group in construction supply. LBM logistics managers often regard drivers as sales ambassadors, a status that many drivers relish–even to the point of trying to sell the pallets of chipboard that loaders put on their trailer in winter to help weigh it down on icy morning roads.
The drivers that ProSales accompanied on their routes this summer carried the same demeanor as ship's captains or airline pilots: They commanded that truck and its trailer full of goods, refusing to roll out until they were satisfied the rig was safe. They also see a stark connection between what they do and the fate of their company.
"If my truck is empty, my wallet is empty," declares Randy Henderson, a driver for Huttig Building Products in Washington state. "If that truck is full, I'm bringing food home."
Partners in Adversity
Half a decade ago, big builders and assorted others dismissed distributors as a needless link in the supply chain. Those were the days when carloads of goods would fly out of the yard as fast as they arrived, and dealers kept storage bins full because so many products were on allocation. Then again, not long before that, some distributors would ship out a product out only when they could fill a truck that was going your way.
Today, builder demand is so low and dealers' need to conserve cash so high that distributors have become the dealer's de facto storage yard. That has been made possible by increases in the number and consistency of routes that distributors serve, as well as the speed with which they can process a request. "The customer has to have absolute predictability and absolute quality" from its distributor in order for that company to succeed, says Paul Rust, district manager of Huttig's facilities in the Pacific Northwest.
Just-in-time product delivery adds to many services that distributors have long done for dealers. They include job-lot packaging, training sales reps, providing product knowledge sessions, drafting engineered wood floor plans, and helping sell products to pro customers. Huttig is even offering a take-off service to its Northwest customers. We've reached the point where, rather than being superfluous, distributors are so closely tied to a dealer's operations that it's getting hard to tell where one link in the supply chain ends and another begins.
At its core, though, distribution is still about the logistics of bringing building materials to your store. And while logistics might not quite be the black art that UPS hails in its ads, it's not all that simple, either.
For one thing, it's very labor-intensive: Up to 60% of the payroll at distributors goes to receiving, storing, picking, loading, and delivering goods. In an ever-shrinking time window, an army of people must sort through a mountain of goods (Do it Best's warehouses hold 67,000 SKUs) to find exactly the right products for your order, put them on a pallet, and encase the goods in shrink wrap. "There's much more emphasis now on product quality," notes Brian Nunes, director of operations at ONEtree Distribution. "Something that used to be able to be sold 10 years ago–where there's nothing really wrong with it but there's a slight dent–doesn't fly anymore."
Once the goods are bundled, the complications continue. Loaders must place pallets and unwrapped items onto a trailer in such a way that: a) the pallets for the first stops are on the outside of the trailer and the last stops are inside; b) there's slightly heavier stuff on the left side of the trailer to counteract the crown of the road; c) the goods are placed on a side where the fork lift driver in a tightly configured dealership can grab them; and d) the overall weight is balanced and legal. No wonder several people interviewed described the process as being like filling in a jigsaw puzzle–but without a picture.
Distribution mixes the old and new in several ways. People rather than machines still do the picking, but computer systems help route them efficiently through the warehouse. Likewise, computerized mapping systems assist dealers in figuring out the most efficient delivery routes, but they're not totally reliable; early versions failed to notice when a road was interrupted by the Puget Sound, for instance. Even today, they don't know which stretches of the Interstate will get backed up at certain times. That's when humans trump machines.
One thing that definitely has changed is the ever-shrinking number of hours distributors need to fulfill an order. In 2007, more than half of BlueLinx's facilities required you reach them before noon in order to get a package the next day. Now 90% of them let you call as late as 5 p.m. As a result, now more than ever, the magic that is distribution takes place after dark.
Thumps in the Night
"Workin' Man's Ph.D.," Aaron Tippin's 1993 country tune, is playing on the gas station sound system at 4:15 a.m. as I grab coffee and prepare to meet Greg Crossland at Wolf's warehouse in south central Pennsylvania. Alarm clocks set for 3 a.m. are common with drivers, who typically aim to arrive at their first stop as the dealer's gates open and before commuters start clogging the highways. Some of Crossland's counterparts already are on the road, hauling trailers to places like Fredericksburg, Va., three hours south. There, a locally based Wolf driver will hook up and haul the trailer's goods to dealers even further south–still before breakfast. Out West, some Huttig trucks leave the Seattle area bound for Yakima at close to 1 a.m., and drivers for California-based distributor BMD head into Los Angeles from Riverside County at 3 a.m.
Before he can get going, Crossland has much to do. There are forms to fill out, air hoses and electrical lines to connect, and computerized logging systems to program. Then he starts kicking things.
Thump! Thump! Thump! Crossland's boot gives a short, sharp thwack to each of the tires on his 48-foot trailer as he listens for signs of underinflation and tread problems. He also checks for leaks on the axles and tightens several dozen belts (similar to what you use on an airline seat) that hold taut the thick curtains that form the long sides of his trailer. Inside the cabin he stores his hard hat, a big jug of water, and a lunchbox containing the fruits and vegetables, tuna salad, and crackers that typically make up his lunch. He also keeps an air hose so he can use air built up in his trailer to pump up a tire should it go flat, thus saving a service call. "You always look at the money line, trying to save the company money," he says.
Huttig's Larry Almaas has the same routine, but his tire-checker of choice is a metal rod the length of a billy club, and his supplies include a pair of overalls. That's because one of Almaas' routes takes him over a trio of mountain passes to eastern Washington, which means in the winter he might have to put snow chains on five tires three different times. He has refined his snow-chain technique to where he can put on and take off a five chains in under 30 minutes. But driving on snow chains also requires a driver proceed at slower speed; generally, each use of the chains adds about a half hour to Almaas' driving time. Put it together and his route can take up to three hours longer to complete from November to March.
Randy Henderson's typical routes run in the temperate zone west of Washington's tallest peaks, so snow isn't as much of a problem as rain. But he still has the same wrestling match with the curtains on each side of the trailer, as well as the need to unlatch and retighten 56 curtain belts. It's quite a workout.
The $150 Visit
Huttig's Auburn, Wash.-based drivers regularly put in 10-hour days that stretch for as many as 450 miles and take them to up to a dozen dealers. So it is that at 11:46 a.m. this July morning, Henderson pulls into Lincoln Creek Lumber in Centralia, Wash. His entire delivery consists of one door slab–a slab that speaks volumes about the state of distribution today.
Because so many of their expenses–for warehouses, trucks, drivers, gas–are fixed or at least inflexible, distribution companies depend on both the volume and value of the goods they ship to turn a profit. Their key metric here is called Cost per Stop, and most distributors figure they need to generate roughly $150 in gross profit every time their truck pulls into a yard. It's OK to fall below that $150 standard from time to time–on ProSales' day with Crossland, at one location he dropped off only a piece of cement siding and a tube of colored caulk, and at another he carried in a handful of vinyl trim. But if such meager handoffs becomes a habit, you can expect the distributor to add a delivery charge, seek to trim the number of times per week that you get visited, or otherwise nudge you to buy more. In some cases, if it involves less than $150 profit and can go into a UPS or Federal Express box, companies like Wolf will forego a visit entirely and let the guys in brown and blue do it for them.
"It's all driven by the economics," says Bert Skarbek, logistics manager at Lumbermens Merchandising Corporation, which outsources the delivery of the products it buys on behalf of its members. "Seven years ago we were pretty much in the Wild West days. Members were taking full truckloads. Now it's 'How can I get less than a truckload, how can you get it to me, and how can you still keep the prices as close to direct mill as possible?'''
Like their customers, distributors are finding it tough even with belt-tightening. BlueLinx used to have 1,500 trucks carrying so much stuff they averaged just three stops per day. Now the company has only 600 trucks and they're making six to seven visits apiece. Its net loss for the second quarter widened to $9.8 million. Huttig–which does about half its business in distribution and half in millwork–also is showing red ink, and Boise Cascade's distribution unit reported second-quarter earnings before interest, taxes, depreciation, and amortization (EBITDA) shrank 63% compared with the same time last year. Most other distributors are private, but none interviewed for this story were boasting about their numbers.