Custom job: as dealers position component operations to service contractors with more diversified and detailed home designs, the business is getting more complicated—and more profitable

Prosales, Feb, 2003 by Rich Binsacca

As a turnkey framing operation supplying up to 95 in-house framing crews at any given time, Schuck & Sons addresses not only custom residential orders, but truss requests from a variety of pro customers, including tract builders and commercial contractors working on projects ranging from hundreds of dollars to more than $1 million. "Since we do supply all of those markets, we'll be there with whatever [components] they need," says Serpa.

Indeed, serving commercial contractors with roof and floor trusses has proved a profitable niche for Schuck & Sons, but it's a different sale than residential. "It's a one-shot job," Serpa says. "There's no experience factor or repeat plans or elevations [like you have with tract homes]."

Compared to residential jobs, he says, commercial work also requires a more precise bidding and submittal process to win jobs. "The process is more formal, beyond just the price and engineering," he says, noting that proving his crews' qualifications and having calculations reviewed by an independent engineer both are essential. "You have to watch your Ps and Qs better."

What About Walls?

While neither Naples nor Schuck & Sons has yet to get into the wall-making business to supplement their respective roof and floor truss operations, a few lumber dealers--among them San Francisco-based Building Materials Holding Corp. (BMHC)--have ventured into panelization.

Already serving its customer base with 21 truss plants, BMHC also operates some wall panel facilities to serve Phoenix and scattered markets in California. "Wall panels are a capital-intensive business and have traditionally been a tough way to be competitive," says Russ Kathrein, director of strategic accounts for BMHC.

The main barrier to profitability with panels, he says, is that many companies looking to open wall panel plants wrongly assume that profits are in supplying product for very basic home designs. "You need to remember that a simple house already has low labor costs," says Kathrein, thus discounting a key value of panelization. "There's more potential for labor savings [using panels] with a larger house of medium complexity, especially in a production [or tract] setting."

To that end, BMHC has been very selective in the markets and projects to which it supplies wall panels, and works only with its turnkey framing operation or affiliated framing crews to install the components. It also has discovered a niche in supplying panels for multifamily jobs and with selected tract builders. "When you can reduce the framing phase from 12 to three days [using panels], builders see the value," Kathrein says.

In addition to serving multifamily projects on infill lots, where the building area is too tight to drop a load of wall studs, much less a Dumpster for lumber waste and miscuts, BMHC and other panelizers are squeezing value (and profits) with other wall panel advantages. Finished wall panels not only go up faster, but also are much more difficult to carry off the jobsite than a 2x4, thus reducing the potential for theft.