Construction Supply

Brian King divides LBM executives into two camps: those who buy software to improve their operations, and those who don't. He's an avid member of the first group.

"It paid for itself in the first three months," King says of the enterprise resource planning system his company, Construction Supply, implemented in July 2006. Since then, the New Mexico company's gross margin has climbed more than four points to 29.38%. Gross margin per payroll dollar is up 11.4%, and the percentage of happy customers has risen fivefold.

Should other dealers wonder if they ought to follow King's example, he has a blunt reply: "You can't not do this."

To find this technology pacesetter, head to the New Mexico quadrant of the Four Corners region. Construction Supply is a 38-employee, three-unit, $8.5 million operation based in Farmington with two stores a dozen miles away and a service area that ranges 150 miles into Utah, Colorado, Arizona and, occasionally, the Navajo nation.

Construction Supply's latest tech step forward dates from 1998, when it began crafting a formal strategy and management plan. Its goal was "to push decision-making closer to the customer," King says. That goal was hindered by the company's existing systems, which different vendors provided, were not integrated, and ran on three different operating platforms.

Construction Supply eventually chose Progressive Solutions Inc. of Vancouver, British Columbia, because its bisTrack product could provide an integrated package including point of sale, inventory management, document imaging, dispatch and delivery, and customer relationship management. Progressive Solutions is built on the Microsoft operating system, so when Con-struction Supply filled out its software suite, it picked Microsoft Dynamics GP 10.0 for its financial management system. It also could start using mobile applications for counting stock and entering sales because the Progressive Solutions software can work on portable devices using Windows Mobile software.

King says there's lots to like–and profit–from the changes:

• Construction Supply uses the software's user-defined fields in its databases for sales orders, customers, and products and vendors to collect information that goes beyond basic financial data. It then plucks the information from those fields for its reports and dashboards.
• Special orders are easier to create, track, and manage.
• Integrated systems reduce the pain involved in linking data, such as tracking sales orders to purchase orders to inventory.
• Vendors using software as ubiquitous as Microsoft Excel can put their price changes into spreadsheets that Construction Supply can import and apply, thus eliminating what were manual tasks.
• Employing webTrack software, Construction Supply's online store lets customers access their accounts online, create orders, print invoice copies, view open orders, open quotes, and request statement copies. All those activities save staff time.
• Integration also helps the document imaging work because bisTrack permits Construction Supply to attach documents to a customer's record. And again because of integration, when Construction Supply gets the materials it needs for an order, the system notifies the salesperson and changes the order status automatically.
• Dashboards make it easier to track and respond to concerns such as orders due today, margin, total sales, and top 10 customers. "It focuses the sales effort on the customer and how the sales staff is performing," King says. In fact, he says one of his challenges regarding data management is that there's so much of it.

Implementing the software also made it easier for King to make a key non-technology move: barring sales staff from granting discounts. "We had salespeople who were giving product away," he says. "We put it in the hands of the store managers, so if there was a discount, it had to go through the approval process. The software has a nice workflow that lets us do that. It doesn't cause a lot of heartburn to get that done"

"Even though you have the technology, you have to have process change," says Ruth Kellick-Grubbs, a consultant and ProSales editorial adviser who has worked with King for years. "Technology has given [King] more capabilities, but he also has a strong focus on systems and processes that allow them to capitalize on that technology."

King is a self-described fan of technology who once wrote a computer program while in college. He holds a master's in business administration from the University of Southern California and regularly employs consultants and pollsters to help him manage the business. He also has taken part in the New Mexico Quality Award, based on the Malcolm Baldridge National Quality Award. He's connected to his stores by T-1 data lines and the small plane he uses to fly to Farmington regularly from his home.

"He really is consistent in using his own benchmark, improving over his own past performance," says Kellick-Grubbs. While many dealers "look for that magic bullet," she says, King works slowly and steadily and benchmarks against top-drawer companies in all disciplines, not just lumber.

However, during the system implementation, King discovered that not all of his workers were as excited–or skilled–as he.

"The biggest surprise for me was the level of computer savvy or skill that the group had overall," King recalls. "They had terminal emulation on their Windows desktop. I was blown away that they had no clue about anything other than opening Windows and doing the application. There was very little Windows experience.

"So, we laid out a training program. We ran it just like high school," he says. "We had a training syllabus, our human resources person was on the team, we scheduled all the training, and two or three folks within the company did all the training. They had a test at the end of each class, and we kept track of who attended."

One general manager refused to take the training and "he found a better opportunity," King recalls.

Ultimately, Construction Supply hopes its changes will make builders and remodelers conclude they have a better opportunity with the company. Surveys suggest that's the case. The company randomly samples about 30 customers every month, asking among other things how often they are satisfied with Customer Supply's service. Not long after the implementation began, roughly 10% of the customers said they were always satisfied with the company. Now more than 60% do.

What's next? King wants to focus even tighter on the customer. "Typically, we don't cost out our services," he says. "We're in the process of learning how much it costs to do a quote or make a delivery, so we can look and see who our most profitable customers are. You might think on a gross margin basis that a customer is good, but if you send a truck out three times a day, it's a problem."

Such analysis, he says, "really brings home what modern software can do for you. Gross margin is important, but net profit per customer is where it's at."