Transcript: Lumberyard of the Future panel
The “Lumberyard of the Future” panel discussion during the 2014 ProDealer Industry Summit in San Diego, California brought together three lumberyard executives to look ahead to the year 2025.
• Randy Aardema, US LBM, Executive VP supply chain
• Sam Collins, S.W. Collins Company, President; and
• Joel Russell, Millard Lumber, VP and COO
[On the physical makeup of the Lumberyard of the Year 2025.]
Aardema: Our CEO LT Gibson is pretty good at motivating us to think beyond where we are at today. He said: “I want you to envision a lumberyard that has no inventory and no trucks. “ And he’s serious.
So, our job is to try to figure out what the heck he means number one, and then how do we get there.
I think then he stretches us to think that far, it stretches us beyond thinking in terms of the current confines of a lumberyard.
We look at supply chain for example. With vendors on one side, and customers on the other and pro dealers in the middle. The value and services that we bring are all in the middle. So, if we can make that process more efficient, less wasteful, then that’s what LT is trying to drive us toward.
It’s relatively easy to envision a lumberyard with no inventory. At least not on the books. We can deliver our products, get them from vendors, and get them to the job site and install in less than payment terms, say 30 days, and then, in essence, we have no inventory.
On the truck side, I have no idea. For the most part we’re going to be stuck with trucks for a long while.
Collins: I think every market is a little different. In Northern Maine our role is different.
I think there will be opportunity in the future to have less inventory and take friction out of the process. And if we’re not adding value, then we don’t have a place in the market place.
With credit or the knowledge to educate the builder or homeowner. If we’re just being an intermediary – or broker per se – then what value are we really bringing to the process?”
There is opportunity in engineered or lumber, but we need to add an element of expertise to that process to make sue the end user is getting the product they need. If we can’t do that we don’t belong in the chain.
Another story. We lost business to a homeowner who got a couple thousand board feet from the West Coast. That product was bought from the Internet and shipped. They were able to somehow deliver a couple thousand feet of product for a competitive price. I think we do have to expand our ideas regarding what we sell to the end user, and whether we’re adding value or not. And we constantly have to add value.
Russell: I agree that the goal is to get to no inventory as much as we possibly can. We’re probably going to be as much of a third party logistics provider as a standard lumberyard in the future. We’ll sell our own products, and warehouse and deliver our own products. But we are increasingly warehousing and delivering products that are not ours. In our facilities.
In some way, I don’t really care who’s product is in my warehouse in 2025, just as long as I’m the value add in the chain to get that product from one point to another.
[On the impact of the Internet on the physical makeup of the lumberyard of the future.]
Collins: The Internet is increasingly having more of an influence on how we bring products to the market.
What we’re seeing now is oftentimes the consumer has more knowledge than the builder. And sometimes they’re driving choices that we need to sell. We have to be tuned to all the choices and educated to all the choices so we can bring value to the consumer, as we weigh in on what the choices might be.
It’s interesting to note that dealing with a customer in our market place, that they chose to buy windows from Germany. Highly efficient and a window of choice for them. We were unaware of the product, but they were aware of it because of the research they could do online. It is adding an element that wasn’t present 5 or 10 years ago. And it adds a whole plethora of choices that we may or may not be aware of.
Russell: Obviously consumers are coming in with a lot more information than they have in the past. And that can be a bad thing or a good thing, depending on the way you play it.
On the bad side, it opens you up to competition from a bunch of other sources that didn’t exist in the past. On the good side, the customer comes in with a lot of knowledge, but they want the hand holding to make sure that they have the product right and the process right and the information is correct.
And if you have the right people that can reconfirm and close the loop, it actually accelerates the sale significantly. It might have taken a month to make the sale in the past, but it may just take an hour now.
I think that’s going to be a trend in pretty much everything we’re talking about the lumberyard of the future, the acceleration of speed, people making decisions and even using billing-information modeling systems to take all the guess work out of the design of the house and deliver the product and make the whole chain more efficient.
Aardema: E-commerce is something coming our way quickly.
I’ve done quite a bit of LEAN work in aerospace and automotive and when I look at our industry, there’s a lot of space for the elimination of waste in the process and the supply chain.
If we look at customers coming into the stores and our yard, they go to the job site, they see what they need, they drive through our yard pick up a couple of boards, and go back to the job site. To me that’s waste.
If there’s a better way for us to deliver more quickly. If the remodeler or contractor can pick on his iPhone what he needs right now and we could deliver it, it eliminates waste of back and forth travel, it speeds up the process, and I think that’s heading our way very quickly.
Russell: The other thing that we need to do is be sure we’re out in front of the customers. They may be able to buy some decking product or something from the west coast, but what happens if they’re short a board? Or what happens if there is some damage? There is no easy solution to correcting that.
Our advantage is, we can tell the customer that if there is something wrong, it’s a long way to ship it back. And we can tell the customer that we can provide that help quickly.
[On the products and services of the lumberyard of the future.]
Russell: A lot of the products are going to manufactured goods to accelerate the cycle in the field, or unique, things that we’re not even selling today — like panelized foundation systems, for instance.
From a service standpoint, we install a lot of the things we sell. And in the future I see the lumberyard being more important, almost as a labor broker to get the process going. Contractors have a very hard time finding labor in the field to get the project done. And so stepping into that role and helping the builder connect different framing crews to allow the builder to focus on their customers is something I think we will do increasingly going forward.
Collins: I see our role continuing to change and evolve. You have to teach. That’s something we totally we agree with.
Not only do we have to teach our employees to sell products and provide customer service, I feel that we are going to have to fill a role in the future in how to guide and teach and provide the services to the technicians out in the field.
So often we see carpenters and contractors that have great technical skills but don’t have good business skills. And I see us increasingly having to fill that role, either by teaching, or providing those services. Billing, payroll, I think our role is changing. Estimating services. We are increasingly putting more resources to outside sales and getting closer to contractors and builders and to understand their specific needs.
Also, I can see us protecting margin, by following that path.
Aardema: I look at the future and ask what’s going to drive the change? I think there are four drivers that are gong to drive change affecting products and services. One is the shortage of labor at the job site. And labor for drivers and delivery trucks. Another driver is LEAN technologies. And another driver is technology, that’s going to drive a lot of change. And the last is leadership.
Products and services, from those perspectives, the use of virtual technology to design a house — looking at textures for instance on the inside and outside — I think that’s going to happen very soon. From a shortage of labor standpoint, that’s going to move value add operations up stream, toward the dealer, maybe things like sub assemblies, floors, for instance.
[On killer aps for the lumberyard of today and the future, including US LBM’s app that provides product information, scheduling and communication between the dealer and the customer.]
Aardema: We developed our app about a year ago. We have half a dozen of our 14 divisions and running now with the app. We have 1,000 active users using the app every day. And we found the active users access it about five times a day. So we think it is a pretty valuable tool to let them know exactly the status of their job.
Collins: Currently our staff in the sales field has iPads. It’s a great tool, and gives them and our customers access to product catalogs, troubleshooting and other functions.
Russell: We have an app that allows our customers to see real time access to see where the trucks are, pictures of the orders. Each of those helps create efficiency in the channel.
Those active users are obviously calling into the inside desk less often. They don’t need to waste 30 minutes to call the sales person. The cycle time of the information goes to instantaneous from what might have been 30 minutes to an hour before.
The sales people out in the field, have access to the information. They can give an immediate response to their customers, which is a competitive advantage. We can offer an extremely short period of time to give information, where it may take our competitors 30 or 40 minutes; and by that time, most builders are frustrated and have gotten into the pick up track and went to pick something up.
It has done a lot to eliminate errors, also. If a builder calls and says a delivery is missing, then we can just e-mail the photo showing where it is, or where it was. So that helps a lot with our returns and our return trips to the site.
[On the move towards a paperless workplace.]
Aardema: We’re not there yet. It’s the direction I see that we are going toward as another example of increased efficiency.
Collins: We certainly progressed but we have a long way to go.
We’ve come from the nail-pin delivery system, where you have the block of wood and a nail, and the orders were written up manually. You put the written order on the pin and when you finish the delivery, then you turn it over and put it on another pin.
We’ve progressed a long ways from that. But certainly we’re not to a paperless point.
Russell: We actually are paperless in our warehouse from a receiving and a picking standpoint.
We use a warehouse management system that has eliminated all the paper that used to flow between the yard to the dispatch office to determine what has been ordered and delivered. So it’s pretty much an instantaneous system for us. When the sales order is put in, and based on the priority of that sales order, it is automatically sent out to a handheld scan gun. That person in the yard doesn’t necessarily need to know anything about the product that they are picking. They are told where to go, what to pick, and they confirm based on a scan gun what was picked. Then they package it and a barcode tells the computer system where it is.
It has really, really increased the cycle time that were able to get things done in the warehouse. And from the receiving standpoint, that product is received on a dock instantly and put in the warehouse, the salesman knows immediately when the product is in.
There’s still a lot of tweaking and things we can learn, but from a training standpoint, with the difficulty of getting labor in our marketplace, it’s really great to be able to get somebody up to speed on a picking system in, let’s say, a week, That used to take six months of product knowledge training.
I’m not worried about them going and picking cedar instead of SPF, and accidentally sending it out to the job site. The system guides them to pick exactly what they are meant to pick.
[On the skill sets that lumberyards of the future will look for in their employees.]
Russell: We’re not going to be able to hire sales people who can’t work a computer or an iPad. They’ll have a high-level background in technology or the ability to learn it very quickly.
Also, I’m not sure we’ll have a traditional outside consultant in 10 years. It might be that we’ll have a design consultant that helps lead the home owner or the builder through the process in our showroom. And then we’ll make sure everything happens in a scripted manner, as it’s supposed to.
It may be that we’re moving toward more of a plan designer and a consultant on the front side, and then the project manager on the back side, as opposed to just an order taker and outside sales person.
Collins: I think he’s right on. Employees are going to increasingly have to be more technologically savvy. But I also think employees are going to have good interpersonal skills and be good critical thinkers at all levels.
[On the shifting demographics, changing culture and language and its future impact on lumberyards.]
Aardema. It’s already here. A number of our locations are primarily Spanish-speaking operations. Increasingly, everything needs to be multilingual. It’s going to continue.
Collins: In Caribou, Maine, French is prevalent. Having bilingual sales force is helpful. It would be helpful if we had someone who was trilingual, actually.
Russell: We do have a decent sized Spanish-speaking work force today, we probably aren’t where we need to be in terms of communications on multi-lingual basis.
[On hiring the next generation of lumberyard workers and leaders.]
Collins: That is certainly a challenge. I believe our industry as a whole understands that challenge, but it’s not just our industry. There a lot of industries with aging work forces that need to recruit younger people. We have to make it appealing to the younger worker and figure out how to do that.
We don’t necessarily look for someone who is experience, we look for someone who has aptitude and attitude.
We are also being more actively engaged with the community colleges and university system to try to find potential employees.
Russell: We need to reach out beyond the traditional bounds. Aptitude is the most important thing, not necessarily industry knowledge.
For example, we’ve hired a couple people recently who were pharmaceutical industry sales reps. They turned out to be really great sales people.
Aardema: This is a marvelous industry, and I think people are going to gravitate toward this business. All the new things happening are going to attract them.
Russell: It may be that we’re not the sexiest industry out there, but we need to be the sexiest company in our industry to come work for. You have to understand what you stand for and your mission better than your competition, and you can attract the best.
[On the trend toward female-friendly lumberyards.]
Collins: We have strong retail market, and we’re very much focused on having more females on the sales floor. We evolved from a traditional lumberyard, where most of our customer base is males, to one now where we have as many females as males.
Our effort is to find females in all the departments that are critical, certainly in paint, and our kitchen-and-bath center is predominately all females. But we also need females on the sales floor in general. And we’re focused on trying to find more females.
Russell: I know who drives most of the big purchase decisions in my household, and it’s not me.
So we are increasingly seeing that across our customer base. Just this week, we saw a large custom house going up, and the decisions were being made by the female homeowner more than the contractor. So, we definitely have to be female friendly in the store to be able to bridge that gap between the contractor and the homeowner, who is ultimately making those decisions.
Aardema: I think it’s happening in our industry. Molding and millwork, for instance, is now called Metrie, as one example. And design considerations are becoming the overall orientation of our industry. It definitely is changing and its taking place today.
Collins: We certainly are in an ever changing and evolving industry, and we can’t move fast enough. I think we have to be focused on the future and be sensitive to what consumers want, and I think that will drive our decisions.
Orgill rolls out specials in Chicago
Chicago — Orgill’s 2014 Fall Dealer Market kicked off Thursday morning here at McCormick Place with showcase categories, model stores and deep-discount "Door Busters."
The three-day event runs through Saturday.
On the show floor, four product areas are designated as showcase categories — hand and power tools, winter and wild bird assortments, spring products and maintenance and repair.
Many of those products and others were organized in a real-world environment in the event’s model stores. One of those models — called OneStop Hardware — featured 4,720 sq. ft. of retail space packed with the typical SKU count of an 8,000-sq.-ft. store.
Also on the market floor, Memphis-based Orgill displayed and promoted business-boosting programs. Among them is Hardware 101, a new program designed to identify the core assortment deemed as must-haves. The program identifies both SKUs missing from an assortment, and also categories that might be missing from a business.
The two-year-in-the-making program — free to Orgill customers — factors in brands and type of retailer when analyzing a store’s merchandise mix. Demand for the program is already strong said Phillip Walker, Orgill’s VP of marketing. "Within our first 10 hours, we had just under 1,000 retailers ask us to analyzie their stores," he said.
The markets Hand & Power Tool Showcase displayed an impressive 12,500 skus. "The purpose of our showcase is to expose our customers visually to the offering, and give them merchandising ideas," Walker said.
Attendance was estimated in excess of 20,000, with representatives from more than 1,000 retail customers of Orgill.
The Chicago event also saw a merchandising focus on MRO–maintenance, repair and operations. Janitorial supplies and other MRO-type products help retailers serve lucrative businesses — municipalities, facilities, resorts and schools, for example. WIth the MRO Showcase, Walker said the idea is to help Orgill customers "get into this niche." Substantial discounts and favorable dating are a big part of that story at the market.
Also here in Chicago, Orgill unveiled its new outdoor brand: "Seasonal Trends," which appeared on a variety of lawn furniture and other items in Orgill’s spring products area.