A presentation recently by ProSales editor Craig Webb on the "New Normal" in the building material business set me thinking. One issue that Craig raised was: "What would you be if you were a startup?" I translated that into a related question: "What if I had a blank slate? How would I start designing the Perfect LBM Dealer?"
Here's my answer: As a starting point, the Perfect LBM would have only one employee and zero inventory.
From there on, every employee added would have to pass the "Can I outsource this?" question. Likewise, every product or market niche added would have to pass the "Why can't my supplier handle this for me?" test. That test needs to be tough, because every employee and every product group added moves me farther from perfection and closer to waste and inefficiencies.
Every new position must be a value-creating one. Every person hired must have the capacity to fill a value-creating position. Why? Because technology is making it possible for everyone in the supply chain to gain access to the industry's knowledge resources. This is leading us away from setting prices based on production cost and toward creating a cost structure in which is based on the value of our goods. Perfect knowledge is the death of easy profits.
To the customer, we only provide three services that add value to our product: the product knowledge part of sales; delivery; and credit. Any job that doesn't deliver such added value should be targeted for elimination or outsourcing. Some jobs ripe for elimination–typically through the use of technology–include accounts payable and the paperwork side of receiving. Those that can be outsourced include positions in information technology, accounting, and human resources.
As for products, my Perfect LBM would have one or more Perfect Supply Partners. Such a partner would be able to take my customer's orders from me by 5 p.m. and deliver the material, sorted by customer order, to me by 10 a.m. the next day–without any paperwork passing between us, of course.
One goal here is to move from a transactional to a partnership relationship, with an eye toward getting the supplier to provide several services. Those services could include inspecting our inventory each evening and delivering any needed materials; building framing loads; and, in some situations, delivering product to the jobsite.
This may sound radical, but in 1999 I held a strategic thinking conference for my consulting clients. I had some industry people attend, among them the head of a major lumber producer. During one of the brainstorming sessions, this fellow asked: "What if you sent me your orders every night and I pulled them and delivered them all to you the next day. Would that be of value?" Every mouth in the room dropped open.
That was just 10 years ago, and yet it's common among suppliers today to promise overnight delivery. We're one step closer to creating the Perfect LBM.
Jim Enter is an LBM consultant who manages more than 25 industry roundtables. He founded the American Association of Roundtables. Contact him at [email protected].
