Lyman Lumber's customers in its home market of Minneapolis-St. Paul include nine large home builders, each with a different way that it wants pro dealers to match up with its operations. Some builders demand electronic invoices; others let suppliers log into their systems for scheduling. When it comes to processing transactions with these customers, “no one size fits all,” observes John Waldron, Lyman's senior vice president of operations.
As growth-minded big builders sweep into more markets, they are ushering a new level of supply chain complexity into the pro side of the business, a side that at this point, “is multiple years behind the rest of the world” when it comes to computerization, according to Michael Lupo, CEO of Huttig Building Products, a St. Louis–based millwork distributor with 43 facilities. “The industry is way behind the curve of other retailers, manufacturers, and distributors,” adds Mark Seigle, president of Elgin, Ill.–based Seigle's Home & Building Centers, whose four yards and eight plants and distribution centers distribute, and in some cases install, millwork, lumber, trusses, and cabinets. “Some organizations are uncomfortable with the power of information technology, and remain creatures of habit.”
Bob Myers III, president of John H. Myers & Son, a York, Pa.–based dealer with six yards, recalls a recent visit he made to a jobsite where “we were figuring out on a napkin what length of beam we needed.” But Myers says there's little advantage for his yards to try to inject technological sophistication into their customer relationships when computers are only integral to the operations of a “very small percentage” of their 1,500-plus builder and contractor accounts.
The situation that Myers describes is hardly isolated, as dealers and even some builders observe that small to midsize builders can be old-fashioned in the way they leverage technology to buy materials and schedule construction. At a recent builder conference in Las Vegas, for example, Paul Dodge, vice president of purchasing and distribution for Dallas-based Centex Homes, the country's fourth-largest home builder, chastened his industry for being at least five years behind pro dealers and distributors in its application of computerized supply chain management.
As a result, dealers and distributors that embrace technology as an essential supply chain instrument now often find themselves stuck between a rock and a hard place, with stubbornly low-tech small builders and contractors pushing on one side and more demanding, technologically adept large, multidivisional builders running on a variety of operating systems pushing on the other. So far, attempts to introduce standardized disciplines to the distribution process—in the form of Internet-enabled purchasing exchanges and labor-scheduling service providers—have failed for lack of demand, enthusiasm, financing, or a combination of the three. And no one entity—like Wal-Mart in the apparel industry—has emerged yet that's powerful enough to impose its will on construction- and remodeling-oriented manufacturers, distributors, and end-users. In fact, most pro dealers remain unconvinced that even The Home Depot's increasing interest in serving builders and contractors will inevitably lead to greater uniformity in item descriptions (which still causes bottlenecks in the supply chain on the pro side) or raise the technology bar for this industry sector.
This issue of business-to-business connectivity, however, is still a hot button for pro dealers that have expanded aggressively into installation and component manufacturing. Those services are very much in demand by high-powered builders “that want to do less today than ever [before],” and are pushing more supply and construction responsibilities onto their trading partners, says Jon Grabley, Huttig's vice president of operations. But to make those services efficient and profitable, dealers insist they must have clearer insight into builders' long-range materials needs, and that tapping into those customers' data banks would go a long way toward unlocking that information.
Once armed with this reconnaissance, dealers say they'd be better equipped—in the higher-velocity selling environment that big builders help create—to execute what Kevin O'Meara, COO for Dallas-based Builders FirstSource, refers to as “basic blocking and tackling. The key to greater market penetration will be to do what you say you're going to do. And any time you have more visibility into [a builder's] production schedule, it lets you plan your capacity.”
Basic Training Getting to the point that O'Meara described, however, is not necessarily where the entire industry wants to be headed. Indeed, many smaller dealers and builders still see electronic interchange as a poor substitute for one-on-one contact between business partners. “We've made great strides on the IT side, but as far as the builders are concerned, [Dodge's] statement sounds correct,” says Rick McKie, director of marketing for Springfield, Mo.–based Meek's, whose 30 yards sell mostly to builders that produce between two and 25 homes annually. In Oklahoma, Mike Kennedy, president of Rogers Lumber, says that communication between his company's 31 yards and their builders and vendors is almost all on paper.
But that does not mean that dealers don't want to get on the IT bandwagon. Huttig recently conducted a conference in Connecticut where it polled pro dealers in attendance about their information technology needs. “Many were interested in being able to transmit documents back and forth [electronically],” says Hank Krey, Huttig's vice president and CIO. He also noted that dealers want some kind of “electronic configuration,” which provides them with component-by-component breakdowns of major product lines.
If anything, the meeting crystallized how most independent dealers are still in basic training when it comes to employing technology for supply chain management. In a fragmented market where smaller local builders have been the dominant species, dealers and distributors could view supply functions simply: receive a paper order, ship the product, service the account, end of story. But in an era of consolidation, large builders operating in multiple markets with jaw-dropping production goals are in control. As more of these builders enter their markets, pro dealers must adapt their services and accounting practices to the specifications of builders whose enterprise resource planning (ERP) systems can be as distinct and far-flung as the companies themselves.
