If it ain't broke, break it

Home Channel News, Jan 10, 2000 by Jack Nunn

Rethinking old habits and methods might increase profitability and productivity, not to mention the likelihood of survival

Recently, I read an article of the above title and realized how appropriate this expression may be to our industry of independent lumber dealers. Given the dynamic change and rapid consolidation in our industry, not to mention a mediocre median pretax profit of less than 3 percent, perhaps it's time to break some old habits and methods, even though they may have served us somewhat well in the past.

Are you staying abreast of change, or will you be consumed by it? Are you challenging conventional wisdom or relying upon past practices to carry you into a somewhat uncertain future? What we don't know may prove to be more important than what we do know.

We may be required to break what "ain't broke" to become more productive and more profitable and perhaps just to survive and remain competitive with the results of consolidation.

What will these emerging contractor-focused giants look like in the future? What products and services will they offer? Will public funding provide them with advantages? Along with Home Depot, Lowe's and others, what portion of the available wood supply will they consume? Will they buy better? Will their resources enable them to become so operationally efficient as to greatly impact our profitability and, potentially, our existence?

And what about the builder side? Will the tract builders continue their growth, perhaps at the expense of custom homebuilders? Will the mega-contractor lumber dealers dominate the tract builder market through operational efficiencies, truss and wall panel plants? Undoubtedly these and other questions should challenge us to rethink current systems and approaches. We may even find that some things that we think "ain't broke," in fact really are.

What about customer service? Outrageous service may be very descriptive of some of the unprofitable things that we do for customers, or allow them to do to us. What do low margins, excessive deliveries, excessive pick-ups and credits, late payments and repeatedly absorbing customer mistakes have to do with good service?

You could make a good case that we are a pursuit-of-volume industry. Time and time again, I have listened to independent dealers attribute mediocre performance to lack of volume. Yet the small minority that has focused on profit, rather than volume, are the stellar performers. Not afraid to fire customers, or raise margins to turn unprofitable customers into profitable ones, many of these profit minded dealers are approaching, and some have reached, double-digit pre-tax profits.

What about yard and delivery productivity and employee retention? Do you have the right equipment? Do you have the right people? Are you paying them enough? Do you share financial results? Do you pay incentives for above target performance? Do you even have targets? Have you established job performance standards?

Would you be an order puller for $7.50 per hour? Have you set your employment standards too low for your yard and delivery personnel, who by the way provide 90 percent of your customer satisfaction? Do UPS and Federal Express know something that we don't know? Could you attract any of their drivers with your wage scale and benefits package?

Are you meeting your customers' basic expectations? On-time deliveries, back-orders, responsiveness to pick-ups and credits, getting the order right the first time and special order errors are among the top contractor customer complaints. Are you measuring your performance in these areas? Are you attempting to improve? Do you offer any performance guarantees?

Are you satisfied with your sales performance? How many $6 million producers do you have on your sales staff? Are your sales people order-takers or do they have professional selling skills? Have you considered annuities or other means of retaining top producers? Have you considered team selling or sales specialists in the areas of truss, millwork, roofing and the like?

Are you focused as a company? Can you serve tract builders, custom homebuilders and retail customers from the same wagon? The higher cost of serving retail customers, and even custom homebuilders, is not consistent with the margin level required to secure the business of tract builders. Their service requirements are also quite dissimilar.

Do you have the systems and expertise to compete with specialty distributors? Can you solve problems expeditiously, or must you rely upon your somewhat less responsive distributor? Do you have repair crews and can you resolve warranty problems promptly and without resorting most frequently to the improper application excuse? If not, you may be vulnerable,

Jack Nunn is a professional trainer and consultant with 32 years of sales and sales management experience, including 17 years as owner and manager of his own lumberyard. He is past president of the Georgia-Alabama Building Material Association and author of the book, "Managing for Profits."