Analysis: The Service Solution
Dealers turn up installed services to help conquer the skilled-labor shortage.
The National Association of Home Builders recently pledged to train 50,000 new workers over the next 5 years for a career in the construction trade.
It’s a move toward creating a greater skilled labor workforce. At the same time, the NAHB’s pledge is among the latest headlines pointing to one of the industry’s most constant issues — the labor shortage. Demand for housing is there, but the skills aren’t. A number of pro dealers are assisting in the matter through offering a variety of labor-saving services.
During this labor crunch, providing builder services has become vital in the mix of offerings to builders and contractors. At the same time, the services are providing a boost to dealer sales. BMC, for example, reported that its Ready-Frame sales were $60.1 million for the second quarter of 2018, jumping 32.7% from a year ago. Ready-Frame offers builders pre-cut, pre-labeled, full- house framing packages along with roof trusses, floor trusses, engineered wood and wall panels.
According to BMC, which reported overall second quarter sales were up 12.6% to $998.5 million, Ready-Frame resonates with its customers who remain labor constrained.
“Our customers continue to enjoy strong demand and appreciate the enhanced solutions we can provide to help them combat the tough labor environment,” BMC Stock Interim President and CEO David Keltner said during a second quarter conference call.
While some dealers backed out of the installed services game once the housing bubble burst nearly a decade ago, Ken Kucera, 84 Lumber vice president of installed sales, says his company has continued to have a hand in play. “We used installed services in the downturn as one of the things to help get us through,” Kucera told HBSDealer. Kucera has been involved in 84 Lumber’s installed sales program from the field level since 2003. “We’ve ramped it up, we saw it as a need,” he says. “The builders were getting lean and downsizing management.”
Some dealers have kept installed sales and turnkey services at a healthy distance, claiming it takes business away from their own pro customers. But 84 Lumber has viewed its installed sales program as a vehicle for helping put product in the ground while managing projects for builder customers. The company began escalating its program in 2007. It now reaches 51 major markets through 165 locations, with each of those 84 Lumber locations acting as a sales point for installed sales.
The labor shortage is more pronounced in the mechanical trades, but there is a labor shortage all over, according to Kucera. “As an industry, we need to have a two-pronged approach: one that focuses on current realities, and one that focuses on fixing labor shortages over the course of time.” In many cases, the labor exists, but the force no longer carries the same merit of skills it once had.
“Skilled carpenters aged out, retired, moved on to other things. At times, our customers are finding the framer but does that person know what to do? if we can manage that labor, then that’s a service our customers are benefiting from,” Kucera explains. “It’s a challenge, you have to have the knowledge of the people on the site.”
Framing, windows, doors, wrap, roofing, siding and interior trim in certain locations are among the collection of installed services offered by 84 Lumber. The dealer also offers a package that includes framing, roofing, windows, doors and wrap — a “dry-in” package. “We can coordinate all the trades, materials, quality and safety. We think this is a value for our customers.”
84 Lumber hires construction professionals where it conducts install. While the subcontractors are performing the labor, the company has a focus on quality, safety, and keeping on schedule.
In Knoxville, Tenn., Tindell’s Building Supply has embraced installed services. The six-unit dealer has a dedicated staff for its installed department.
“We believe the products we install are non-competitive with the services offered by our pro contractors,” says Tindell’s president and owner Johan van Tilburg.
For example, Tindell’s builder customers aren’t usually in the business of installing showers. It’s a part of the job they would typically farm out.
“We make a concerted effort to only offer the services our customers don’t provide themselves,” van Tilburg says. In Tindell’s case, shelving, mirrors, shower doors, bath hardware, insulation, garage doors and fireplaces are good examples of products that its pros customers would never do themselves.
“Adding it to our product offering makes us that much more useful in our customers eyes,” van Tilburg explains.
About 95% of Tindell’s installed sales customers are pros.
Since the program’s inception, Tindell’s has grown its business to include windows and doors based on high customer demand. It also ensures that the windows are installed properly while avoiding callbacks after framers might have done a poor job and the window supplier — Tindell’s — is blamed. This year the dealer added blinds to its repertoire.
“Installed has grown steadily the last few years as the labor shortage has become more prevalent. Also, demand has put more pressure on our customers to deliver more homes and they have turned more and more to installed services,” van Tilburg notes. Tindell’s inside outside sales force sells builder services in the same manner it sells product. A dedicated staff takes care of field measurements for customers leading to accurate quotes and taking that burden off the customers.
When it comes to the heavy lifting, Tindell’s maintains a full-time staff of 32 employees in its installed sales department. “We never outsource any of our installed services unless it’s something outside of our capabilities,” van Tilburg says. “We believe we need to have the ability to control them and tell them where to be and when rather than ask a third party to see whether they could fit a customer into their schedule.”
Despite providing part of the labor solution, the very same can have an impact on dealers as well. “It’s by far and away our biggest issue,” van Tilburg notes. “We offer very competitive pay and benefit packages but so does everybody else. All of our employees are on a production bonus and as busy as we are now and as hard as they are working it does offer a very nice compensation opportunity, much more than say a straight hourly rate. We are turning away some new opportunities just to make sure we can serve our existing customers because of labor shortages.”
At 84 Lumber, all services are run through the local store with the sales team reporting to the store manager. 84 Lumber provides the material, project management, as well as the technology to get the job done efficiently. Technology has moved to the forefront to ensure efficiency. Last year 84 Lumber hired its first ever Chief Information Officer, Paul Yater, to improve how the company conducts business with its customers.
According to Kucera, technology and refining how it fits hand in hand with project management is another key to solving labor issues. “Focused technology is really going to pay – it’s not a gimmick, it’s a core expectation,” Kucera says. “We want to provide a value that makes sense to our customers.”
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