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The Players Our supply chain forecast panel:

Kermit Baker, Senior Research Fellow, Joint Center for Housing Studies at Harvard University, Cambridge, Mass.

Jim Harmon, President, Amber Homes, Aurora, Colo.

Paul Hylbert, COO, Pro-Build Holdings, Redmond, Wash.

Jerry Johnson, Retired President, HD Supply Lumber and Building Materials (formerly Williams Bros. Lumber Co.), Duluth, Ga.

George R. Judd, President and COO, BlueLinx Corp., Atlanta

Donna Sanders, Vice President of Options, Pardee Homes, Los Angeles

Look past the reams of housing data coming out these days and focus instead on just one number: 2010. What will the LBM world be like in that year? ProSales sought to answer that question by talking to a half-dozen of the smartest minds in the business, including representatives from leading home builders, dealers, and distributors. They forecast that within three years we'll see a much more streamlined supply chain, increased demands on dealers to deliver more and charge less, and a lot more integration of information technology into the process. Here's what they had to say.

Q What is driving changes in the LBM supply chain through 2010, and what will dealers do to adapt to those changes? George R. Judd, BlueLinx: Manufacturers will continue to move to areas outside of the United States that welcome manufacturing facilities and that have an abundance of natural resources and affordable labor. As the manufacturing facilities move farther from end markets, improving the supply chain and logistics becomes more valuable and necessary.

Paul Hylbert, Pro-Build: As traditional and large housing markets get more competitive, [high-volume] builders will continue to consolidate and seek out secondary markets to grow their businesses. The supply chain needs to be and to go where our customers are going, filling in the footprint through our distribution capabilities and value-added services, such as component manufacturing, door shops, and installed sales.

Jim Harmon, Amber Homes: The federal government can't seem to put together a coherent policy on softwood imports, the Asian markets continue to use up supplies of steel and other commodities, and oil prices continue to fluctuate—all of which impacts the ability to achieve an efficient, affordable, and reliable supply of materials. I think we will continue to see an extremely volatile supply chain for the foreseeable future.

Jerry Johnson, HD Supply Lumber & Building Materials: With the economic changes we are experiencing today, both residential and commercial builders need to align with suppliers that have a strong supply chain that ensures product breadth and availability.

Kermit Baker, Harvard's Joint Center for Housing Studies: Now that the housing industry is catching its breath and builders aren't making huge margins, they'll have to pay more attention to their operations and managing an efficient supply chain, and working with their subcontractors and suppliers both on- and off-site, to be successful. Big builders will have a lot more leverage to implement new programs and relationships [with suppliers] across their organizations [and] will be at the door of their suppliers saying, “We need this to happen.”

Hylbert: We're also seeing more centralization among the largest builders [a change from the past] to develop common best practices and procedures and consistency in how they do things and what they offer, as well as a commitment to customer [homeowner] satisfaction that drives the quality process.

Q How will those changes alter the role of the pro dealer, if at all? Baker: The supply chain comes down to two things: [price] negotiations and logistics. The builders we talked to are putting almost all of their energies into logistics issues with their suppliers—such as value-added services, having products in stock, getting them to the jobsite on time, and installing them—instead of just selling materials. Builders will also expect dealers to help them improve customer satisfaction and will increasingly integrate their suppliers into that effort.

Donna Sanders, Pardee Homes: We're asking more of our suppliers to handle sales and customer relations [with regards to their products] instead of our staff because they can sell options better than we can and improve customer service and satisfaction. But it's a challenge to find the right partner in every market we build.

Judd: Pro-oriented dealers will be critical participants in the supply chain by adding value logistically, continuing to expand into the construction portion of the job, managing labor, producing more components, running installation teams, and managing just-in-time deliveries to the jobsites.