BlueLinx opens a new chapter
With a blockbuster merger settling into shape, CEO Mitch Lewis sat down with HBSDealer.
Atlanta-based BlueLinx Holdings makes its living by moving bulky building materials across long distances. It knows logistics. It knows building products. It knows trucking. And these days for Mitch Lewis, the CEO who orchestrated the acquisition of Cedar Creek to create one of the largest wholesale distributors of LBM products in the industry, there’s another skill that’s been elevated to mission critical.
That skill is communication.
Since the deal hit the books in April, the company began what it expects to be an 18-month process of merging and integrating two large building products distributors. With more than 70 locations in 40 states, the combined company reached about $3.2 billion in 2017 sales.
Last month, the company announced its decision to move ahead under a single brand — BlueLinx. Many more decisions remain.
“For an acquisition of this nature, one of the things you do, in my experience, is you over communicate,” Lewis told HBSDealer during a recent interview that covered a wide range of industry topics. Here are some of the highlights.
On the first steps toward integration of BlueLinx and Cedar Creek:
“One of the early moves we made= — and we think it was the right thing to do — was split up and hit every facility in overlapping markets. [COO] Alex Averitt [Chief Transformation Officer] Shyam Reddy, [Vice-Chairman of Operating Companies] D. Wayne Trousdale and I in one week developed that sense of community early. We told our team what we could tell them. We told them what we didn’t know. And we told them when we could tell them what we didn’t know. And I think that communication helped reinforce our culture of honesty and transparency.”
On the vision behind the acquisition:
“One of the things we said from the outset may be counter-intuitive from a synergy perspective. The goal here is to grow the business, not to shrink the business. The number one benefit is the sales growth opportunity.”
On the legacy strengths of the company:
“Cedar Creek had a tremendous entrepreneurial spirit, and they had experience acquiring companies – both of those factors will serve the consolidated company and make us better. As for the legacy BlueLinx business, it had incredible knowledge as it relates to products and analytics. And from a logistics standpoint, BlueLinx is state of the art.
“What may have surprised me most is how the core values of the organizations were very similar. For both companies, the customer centric orientation at the local level were dead on.”
On the branding decision to unify under the BlueLinx name:
“Generally, our customer base understands who we are. And most importantly, they want to talk to the same people that they’ve talked to in the past. They want to know that they’re going to get great service, competitive pricing and someone who is knowledgeable from a product standpoint. The name does matter to customers. But we’ve verified that the branding isn’t as important to our customers as quality service and quality products.”
On the growth challenges facing the industry:
“Labor right now is problematic. It’s challenging. And it probably puts a restriction in the short-term on the highest level of accelerated growth. We see manufacturers trying to develop solutions and products that enable cost savings and reduce hours at the job site.
“Meanwhile, tariffs are challenging in that they create uncertainty. I don’t think anyone knows exactly what the tariffs are going to look like, a month from now or a year from now. And uncertainty in business is never good — especially in housing.”
On Amazon and industry disruption:
“Most of our products are flatbed friendly. If you deal with products that can be picked up by a drone, then you’re definitely more at risk – much more so than a company that ships 20 2x4s that are 16 feet long.
“Another point to make about Amazon; they have so much access to capital, if they decided they wanted to go after a space, they would be a formidable competitor. However, when a disrupter comes into a market, they typically aim for a space where they feel they have a lot of margin opportunity. Would you chase the pharmacy industry, the retail electronics industry or the local dealer industry selling lumber? The chances are your margins are going to be better in pharmacy and electronics than they are here.”
On the importance of variable contribution margin:
“A lot of times, you’ll run into this view that if you move a lot more volume, you make a lot more money. And that’s not necessarily the case. Recognizing the importance of variable contribution margins has played a significant role in our revival. It helps us track how much incremental profit we make on each incremental dollar we sell. So, if you send out one more unit, how much do you make on that? Obviously, if you send a truck one mile or 200 miles, then your profitability differs dramatically. So, understanding the variable contribution margin is really important.”
On the importance of relationships in the LBM industry:
“Relationships really matter, everywhere. The way it moves from theoretical to real is when you have a sales person leave and take a lot of business with them. If that happens a few times, it certainly makes it feel like we’re in a relationship business.”
On innovation at BlueLinx:
“For us, innovation is primarily tied to one of our core competencies: logistics. We also try to leverage technology and have put tablets in the hands of our sales force, so our team can order from the road and customers can better understand the inventory and products we have. We’re on the forefront of some of the things being done in logistics. We’re always thinking about ways to lower the costs in the supply chain. But developing the next iPhone? That’s not us.”
Do it Best names national logistics manager
Do it Best Corp. announced the promotion of co-op veteran Steve Rose to national logistics manager.
Rose has served as safety director since joining Do it Best Corp. in 2011. In that role, Rose was responsible for the safety of the co-op’s 1,500-plus employees across its 10 locations, managing its safety program, worker’s compensation and other related initiatives. He also contributed to initiatives that improved loss prevention and reduced waste in the distribution process while consistently enhancing supply chain effectiveness.
“I’m incredibly honored to join the outstanding Logistics team at Do it Best,” said Rose. “I’m excited to return to logistics. It’s where my career began and developed. Technology is bringing about rapid and important changes, as well as opportunities for us to build on our already industry-leading distribution excellence and continue to deliver results for our members.”
Prior to joining Do it Best Corp., Rose worked for 10 years in operations for Wal-Mart distribution. During that time, he focused on enhancing operational efficiency, project management, strategic planning, safety initiatives, and staff training and teambuilding.
“With his extensive experience in distribution, safety and strong institutional knowledge, Steve is the perfect individual for this senior leadership role,” said Tim Miller, VP of logistics for Do it Best Corp. “The effort and energy he’s put into building relationships with our logistics team members will serve him very well as we work to continue enhancing our distribution and supply chain excellence.”
House-Hasson heats up at summer market
Here’s a sign that things were heating up at the recent House-Hasson Hardware summer dealer market. Orders for water heaters crossed the 10,000 mark.
“After every one of these markets we have trucks lined up for a month bringing water heaters to the warehouse and trucks going out loaded to the gills with water heaters,” said Don Hasson, president of House-Hasson Hardware. “It’s why we always ask after a market, ‘How many water heaters were sold?”
Also at the summer market, dealer sign-ups for the company marketing department’s Digital Deals free digital advertising program brought to more than 400 the number of dealers since January taking advantage of the free service offered by House-Hasson.
House-Hasson Hardware, which claims the distinction of “nation’s largest independent regional hardware distributor,” conducted its Summer Dealer Market took in mid-June at the Sevierville Events Center in Sevierville, Tenn., just outside the Great Smoky Mountains National Park.
Water heaters are something people tend to buy in local hardware stores, Hasson said.
“It’s not new construction driving total sales, but homeowners who don’t like to take cold showers. They get in their cars and go to the hardware store to buy a water heater. It’s not necessarily scientific, but it seems to be a barometer,” Hasson said.
Building wire, commonly bought in 100 rolls, is another market success baseline measure.
“This wire is used to hook up electrical outlets, lights, and to wire houses,” Hasson said. “Our vendors offering wire did very well, as we’ve learned from talking with them. Overall, in terms of attendance and sales, it was a successful market, and we’re very pleased.”
Digital Deals is taking off with dealers since its January introduction, said Taylor Hasson, the company’s VP of marketing. “Dealers are recognizing the importance of getting their names and products in front of customers in every way possible,” Taylor Hasson said.
Through Digital Deals, House-Hasson creates digital ads for dealers, ads usable on the internet, Facebook, other sites, and email marketing. Dealers get special pricing on the products advertised and they can easily make custom ads from the items given at special pricing. Dealers see the ads in advance and by ordering early can take advantage of special dating.
When an ad is created dealers can post it themselves on sites of their choice, such as Facebook and Twitter, or they can e-mail it to their customer base.
“If they need help posting on social media we’ll help them to do that and even build Facebook and Twitter pages for them,” Taylor Hasson said. “Digital Deals doesn’t eliminate print flyers; print is still important to many dealers. However, as time passes there will be more who decide to combine print and digital, or use digital exclusively.”
Dealers can use etoolbox, House-Hasson’s online ordering tool, to place advertising orders.
House-Hasson Hardware points to a network fo 2.500 independent hardware store and lumberyard dealer customers in 22 states and the Caribbean.