For some time now, the popular belief has been that national accounts would prove as catastrophic to LBM dealers as a giant meteor was to the dinosaurs. Now, however, it appears that purchasing agreements between manufacturers and large-volume home builders won't destroy your world. But they are changing the environment so much that you'll end up just as dead if you don't evolve.
PROSALES talked with builders and manufacturers this fall and found both groups stressing the vital role dealers play in national accounts. However, their idea of a valued dealer is this: a business that provides expertise and assistance in helping fulfill the local objectives of companies that have to operate across a wide swath of territory. The local assistance they prize puts heavy priority on dealers connecting constantly and extensively with the national partners. To use the popular metaphor, these kinds of dealers are a vital link in the supply chain. Dealers that kink up the chain are links best removed.
"It's fashionable for builders to talk about removing links in the supply chain," says Bill Justus, vice president of supply chain services for David Weekley Homes of Houston, which closed more than 4,600 units in 2005 and has national agreements with about 150 suppliers. "The reality is, removing a link takes away from the core competency of someone else in the chain and creates a disruptive business model" in which the national partners have to find someone else to hold inventory, deliver product to the jobsite, service the installation, and do other jobs that dealers traditionally have done well.
Clopay Building Products closed a deal recently to supply its garage doors to Pulte Homes, the second-largest builder in the country, largely based on Clopay's national network of sales, installation, and service representatives, including its LBM dealer network. "That was one of the key qualifications Pulte sought when it went looking for a partner in this category," says Steve Lynch, vice president of marketing for the Mason, Ohio–based manufacturer. "We can make all the deals we want [on a corporate level], but if those deals aren't executed on a local level, they don't work."
A 2005 study conducted for BIG BUILDER magazine (a sister publication of PROSALES) among 700 of the largest-volume builders indicated that dealers are not only a local source of materials but also agents to negotiate prices and deliver services locally within the scope of national agreements.
In fact, the No. 1 criteria for a purchasing decision among the builders surveyed for the BIG BUILDER study is a manufacturer's ability to handle supply chain logistics, followed closely by a track record of reliable delivery and a dependable warranty—all of which typically require the skills and commitment of a local representative. It's a role that logically falls to dealers already established in their markets and organized to provide such services to builders.
Louisiana Pacific recognized that need by redesigning its approach to national accounts so that they more deeply involve dealers. "Our role is to market value-added products to builders," says Mike Sims, vice president of specialty product sales at LP, which is based in Nashville, Tenn. "We line up our good supply chain partners to manage these programs, and they negotiate the actual sales and transactions with the builders.
"It's hard when you only use the corporate office as a touch point to get things implemented," Sims adds. "When you include regional resources and wire it up with key pro dealers, the ability to successfully execute a program goes up dramatically."