By Andrew Hunt
October 27, 2006—Economic indicators suggest that the recent boom in the building industry is definitely over. During a roundtable discussion at the Pro Dealer Conference in Farmington, Pa., in September, builders and building-product distributors gathered to discuss current industry challenges, including the ongoing issue of industry consolidation and how a slowdown in new-home starts affects builder-distributor relationships.
Paul Hylbert, chairman and COO of Lanoga Corporation and director of Pro-Build Holdings, sees how a drop in demand for new homes puts pressure on building materials suppliers and distributors. "These types of downturns in the building market provide challenges to everyone," said Hylbert. "Builders are looking to cut costs and will look at their suppliers to do that."
"Dealers have to provide more to the builders. If you are in a market where a big builder operates, you can't stay in this business anymore just selling sticks. Reinvesting in our company has helped us grow with the big builders who have been coming into our market," said Charlie Babb, president of Raymond Building Supply in Fort Myers, Fla.
Another area of concern for distributors and dealers of building products is the ongoing consolidation of home-building companies and their suppliers. Local distributors are faced with national chains opening in their markets and with large production home builders leveraging national contracts with their suppliers.
Tighter focus
Herk Vanden Bosch, president of Zeeland Lumber and Supply, has 100 employees and operates two facilities to serve builders in the Grand Rapids, Mich., market. Vanden Bosch believes that even in a tight economy, small distributors can still thrive.
"The most critical thing is to narrow your focus," said Vanden Bosch. "Big builders will dictate which products to carry, whereas with small builders it's the homebuyer that dictates the products. A national chain is only as good as its local branch. You can be nimble as a small dealer."
"You have to do more things for your builder customers. Go deeper with things like engineered products. We try to create an alliance to be the one source supply for the builders. We create specialists within our own company to give the builder what they need."
According to Bill Justus, vice president of supply chain services for David Weekley Homes, creating the alliance between the national builder and distributor takes effort from both parties.
"It is the role of the big builder to guide the relationships with dealers. The builder owns the relationship and has to take the lead." said Justus. "It is all about how you effect change within the supply chain. You have to be honest with your trading partners and create value for them to help the dealer succeed in local markets. You also have to develop relationships within your own company to help promote the idea that national purchasing doesn't mean every deal has to be national in scope."
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