[Editor’s Note: This is Part 3 of a four-part feature on digital dexterity in the LBM industry. View Part 1 on dispatch and delivery systems here and Part 2 on e-commerce solutions here.]
Artificial Intelligence
One of the hottest enterprise technologies covered by consultants and the business press is artificial intelligence (AI). These solutions can monitor existing products, data, and environments to automate next-best actions based on changes that the system detects.
According to a report last year from McKinsey & Co., “Artificial Intelligence: Construction Technology’s Next Frontier,” the top three industries adopting AI are high-tech and telecommunications, automotive and assembly, and financial services.
But just because the construction and LBM industries aren’t leading the AI charge doesn’t mean these industries aren’t adopting the technology. Georgia-Pacific’s new lumber production plant in Talladega, Ala., for example, uses sensors to identify when some of its machinery could be in need of repair before it breaks down, enabling the plant to schedule preventative maintenance to avoid unplanned downtime. “Digital technology is really changing the landscape of how people do business,” says Fritz Mason, president of Georgia-Pacific Lumber.
Many of the leading LBM dealers are already utilizing AI, although, perhaps unwittingly. The GPS applications that their drivers use rely on AI to assess traffic conditions to optimize routes. Beyond this, though, use cases are limited because AI technology is still in its infancy, but there is a lot of potential for future applications to significantly help the industry.
The aforementioned McKinsey report states that dealers can benefit from retail supply chain optimization and inventory management developments. AI has already been able to significantly reduce manufacturing downtime and oversupply, and increase predictability of shipments for retailers, which could benefit dealer stores and prefabrication facilities.
The LBM industry could also learn from AI developments in the pharmaceutical industry. For example, pharmaceutical companies leverage AI to forecast medical trial outcomes to lower research and development costs. This approach could be applied to forecast project risks, constructability, and the structural stability of various solutions. Additionally, these applications could be utilized to test various materials, limiting downtime of structures during inspections, the McKinsey report states.
Additionally, AI has the potential to increase talent retention and development, according to the McKinsey report. By leveraging machine learning algorithms to segment employees based on their likelihood of attrition, AI could potentially be used to develop targeted plans to retain them. It could also someday identify potential candidate pools and tailor recruiting strategies to attract the right talent. Because the AI industry so young, there are no clear-cut industry leaders, yet. However, as more AI solutions surface in the coming years, so will the leaders that develop them.
Digital Transformation
Each of these technologies could have a significant impact on LBM dealers’ businesses for years to come. However, despite the large dealers’ investments and interest in them, their average technology spending as a percentage of overall revenue is still quite low at less than 1%. In fact, 63% of the ProSales 100 dealers who responded to the survey don’t spend more than 0.51% of their overall revenue on IT. These percentages pale in comparison to the average for all industries, which is 3.28%, according to the 2016–2017 Deloitte CIO survey. If LBM dealers want to commit to the success of their digital transformation, they’ll likely have to invest more in IT moving forward.
[Editor’s Note: For a Q&A with Liz Irish, VP of information systems at Curtis Lumber, on managing growth with mobile devices, click here.]
