John Perna operates Hamilton Building Supply Company in New Jersey, a business that serves local builders and remodelers and has experienced double-digit growth over the past year.
Like the rest of the country, New Jersey is experiencing a boiling housing market. And, also like the rest of the country, it is not without some major challenges.
“We are a growing company and we want to continue to grow,” Perna said during a panel at a recent conference for building products dealers in Washington DC. “Right now, we’re being held back by capital goods. We have two trucks on order. We waited nine months for one and a full year for the other.
The conference featured the who’s who of the National Lumber and Building Materials Dealers Association (NLBMDA), which was the host, as well as the Hardware + Building Supply Dealer media group.
Mike Reeves is the president of Espy Lumber, another building products supplier with two locations in South Carolina, and is having a similar problem. He has had vehicles on order for over a year and is now having to adapt as one of the orders was recently cancelled. When the vehicles arrive, there will be other problems to solve.
Perna has had to add delivery charges to orders because the price of fuel has risen so much in recent months.
Reeves said not a day goes by that Espy doesn’t receive another price increase from a vendor. Similar to Perna, it is also trying to figure out what to do with fuel surcharges and whether the company should absorb them or how or if it should pass them on to customers.
The NLBMDA has urged the Biden administration and Congress to prioritize supply chain disruptions and labor shortages that contribute to timber price volatility. Jonathan Paine, president and CEO of NLBMDA, says the association supports free-market solutions that will help stabilize prices, thereby improving housing affordability.
Growing workforce challenges
These are just the surface of the challenges faced by building product suppliers across the country.
Scott Yates is president of Denver Lumber and struggles to find and keep staff. He offered employees a 12% bonus just as a reward for showing up as expected, but that doesn’t do the trick. So he continues to brainstorm with his staff on alternative ways to retain staff, even offering accommodation in all considerations.
Stephen Sallah, is the President and CEO of member-owned buying group LBM Advantage, and conducts “stay talks” for employees to learn how to improve retention. Over 80% of staff completed the survey which helped leaders learn more about risks, wants, motivators and demotivators.
A key takeaway from the survey was that a majority of associates want to continue working remotely to some degree, which Sallah’s team is implementing. The investigation and quick response is part of what has made the company a better place to work in New York State in the past and also what drives its focus on serving its 1,000+ members.
With a focus on employee and customer retention, Hamilton Building Supply works to create a career path within the organization, with an emphasis on programs for truckers who are the first and the last face a customer sees on the job site.
The NLBMDA also urges Congress and the administration to prioritize policies aimed at spurring workforce development and alleviating labor shortages in the industry, including expanding skills training. , learning and training in the workplace.
Killer product lines
Resellers are arguably the most faced with the challenges of kitchen and bath products.
“The kitchen is by far the most difficult from a timeline, damage, backorder, missing parts perspective,” said Mark Hopkins, chief operating officer of Maine-based Hancock Lumber Company. “This requires a large initial contract with customers. Basically indicating that there is a high probability that something will go wrong, but we are here to support you. We try to prepare the ground for us to take care of if something does not happen.
To further resolve the issue, Hancock Lumber has hired someone specifically to handle warranty issues on kitchen cabinets and bathrooms, which the buyer is notified of as an important part of the sales process.
Perna’s company has been waiting 23 weeks for the kitchen cabinets to arrive, although it also finds engineered wood to have been just as difficult.
Brand loyalty in the industry prevents some replacements. Builders loyal to the brands they’ve been using for years can’t imagine switching to an alternative. On top of that, some replacement vendors don’t even accept new orders.
With hard-to-find products, dealers are seizing opportunities to get their fair share.
“While we normally buy two trucks, now we buy four trucks so we have what we need,” Reeves said. “Managing the down cycle is as difficult as when it comes up – it’s as difficult if not more difficult.”
Either way, most dealerships are starting to carry more inventory and breaking all the traditional inventory rotation rules that they’ve diligently followed for years.
Hopkins doesn’t like moving inventory between the company’s 11 lumberyards, but has had to do more recently to ensure delays don’t lead to chargebacks.
Since Hamilton Building Supply has only one location, Perna actually creates strategic alliances with competitors to collaborate in critical situations.
“We always balance the inventory position against cash,” Perna said. “We have to be very careful and take special orders on a case-by-case basis. We also emphasize alternative product solutions and we do two estimates with alternatives so that we can be prepared in the event of a shortage.
Michael Collins, is managing director of Chicago-based investment banking group Building Industry Advisors and works with dozens of dealerships daily. He finds that companies are starting to be proactive in reaching out to customers with ready-to-ship orders to see if the project is actually order-ready or has some flexibility in timing.
“With all the trade contractors operating at capacity and often running late, there is often a window during which a shipment of materials would sit on a job site awaiting the next stage of the project,” Collins said. “By confirming the schedule with the customer, distributors can redirect these orders to customers where the schedule need is greater and fulfill the flexible customer’s order on the next shipment. Such changes in delivery times require an extremely high level of customer confidence in the distributor, but they can go a long way in mitigating a supply chain challenge.
Reeves is also concerned that larger companies will grow bigger and compete with his two-site operation. There are many large groups that buy indies, and as they grow they could most likely take precedence over smaller indies like Espy for deliveries.
Overall, all panel members, in addition to other industry leaders, continued to reference the human element of the industry. They agree that successfully managing these issues relies on open and frequent communications based on trust and authenticity.
“It’s more of a people thing than ever,” Sallah said. “A lot of things have changed and probably permanently. We communicate more with members and advise them differently than in the past so that they have stocks. Dealerships are more conservative, no one is taking on new customers. »
Hopkins says the “great” communication helps.
“We educate our customers so they talk to their customers,” he said. “We believe our customers should be more profitable than ever. Dealerships are doing well, so our customers should be too. Hancock is also trying to be the best customer we can be for our suppliers so that they protect us and make sure they give us product as they close some small dealers. We have developed a strategy to move forward with some.
Perna says Hamilton communicates too much by publishing a newsletter twice a week because that’s how often updates come to them.
Reeves also stresses the value of being direct and honest.
“You can order a window package and you say [a customer] 16 weeks, and then the manufacturer extends it, and then you have to go back to the customer and explain again that it just went from 16 to 20 weeks,” Reeves said.
His company goes so far as to hold one-on-one meetings with clients to help them understand what’s going on in the market and give advice, including opting for cost-plus projects.
business is good
While the challenges are many, the business is also many. These smart providers are setting things up to be profitable in the future.
“Innovation is about keeping customers profitable,” Perna said. “As a dealership, we try to put in place mechanisms such as buying programs that generate more profit for our customers’ bottom line. We actually started getting more wallet shares.
Reeves agrees. His diligence and honesty are paying off. Frequent communication with his clients has allowed his team to create a closer relationship with them than ever before, leading to business on the books through 2023.
Hopkins said Hancock doesn’t take on new customers with a single order, but seeks long-term relationships. And, to strengthen this position, the company is also investing in new technologies, such as applications and e-commerce sites, to make the professionals it serves more efficient.
While technology will be at the forefront to help solve supply chain issues, Sallah advises its members to stay nimble and protect balance sheets as there are more changes ahead.