Renegade Ideas
While most pro dealers will claim their success has been knocking out contractor-customers with superior service, Zaslove maintains that there are competitors in the Bay Area that have been out-executing Golden State on the service end and that the company’s success thus far has been from focusing instead on being a solutions provider for its customer base. “We are problem solvers—we were solutions guys back before the industry knew what solutions were,” he says. “We have helped our builders with market conditions and strategy since inception, and that has established a trust factor that has enabled us to outperform the market.”
For example, Zaslove recently sat in on a conference call with KB Home and his lumber buyers in Beaverton, Ore., to work out a program enabling the big builder to save money by making wood purchases on the down end of the market. “The whole concept of ‘sell it on the high market and buy it on the low market’ is a given in this industry, and it might seem strange to some yards that we would help a customer buy better if the market dips,” he says. “I don’t want a huge margin on one order. We’d rather take a lower margin and leverage that trust to keep a customer for life. Is contractor trust worth a couple of extra points? You’re [darn] right it is.”
Golden State also bucked the norm when San Francisco–based BMHC purchased Knipp Bros. Inc. (KBI), a large Northern California framing contractor, in May 1999. Not wanting to do business with a possible competitor, many dealers shut the doors on KBI, but Golden State continued—and continues to this day—to sell the framing contractor the majority of its wood. “They are one of our best customers,” Zaslove says. “[Construction services] is BMHC’s business model, and they are having an impact on the industry. But that impact is happening regardless of whether or not we hold on to KBI as a customer.”
In addition to these aggressive market moves, Golden State is further streamlining operations with unique programs to integrate the sales efforts of all locations, provide more timely and accurate delivery and dispatch logistics, and reduce and account for inventories. Sales integration between the four yards and Golden State’s sales office in American Canyon is benefiting from a new Delivery and Dispatch software program that the company has helped to develop in partnership with Austin, Texas–based Activant Solutions. In short, the program processes customer orders and can determine which of Golden State’s locations is best suited to make the most timely delivery. The system additionally accounts for the status of all deliveries either staged, on the road, or already delivered for real-time logistics information that salespeople can convey to their customers.
Not content to rely on technology alone, Golden State also has created a “transfer agent” position at each yard whose sole responsibility is to facilitate the movement of product between company branches. Two times a day a “loop truck” drives the Golden State market perimeter, stopping at each location to either drop off or pick up product destined for other branches. In addition to enabling locations to share resources, loop trucks and transfer agents keep product in motion and further reduce the inventory drag and overhead on individual yards.
“Inventory reduction is something we have been working on for several years,” says Jessica Nobmann, a key player in leveraging the capabilities of Activant’s ECS Pro POS software to develop “perpetual inventory,” where managers and staff can access real-time inventory counts via a PC. “Overall we have reduced inventory in the company by 14 percent, and the Sierra Point yard has reduced their inventory by 50 percent.” Not an easy task for a location that sells to a client roster of San Francisco commercial, multifamily, and custom home builders that requires Golden State to have both Chinese- and Spanish-speaking salespeople and yard personnel, but Nobmann has nonetheless helped double profitability at the yard during her year-long tenure.
Thinning down inventory has required Golden State to become even closer to its primary vendor partners as the company seeks to keep product off the shelves but still be able to respond quickly with the right materials at the right time. For example, Golden State is participating in just-in-time inventory programs with lumber suppliers and is further consolidating purchasing with primary vendors like Huttig rather than playing the market to shave points off margin.
For suppliers like Federal Way, Wash.–based Weyerhaeuser, intensified upstream team building is a capstone on what has already been an immensely successful distribution partnership. “Golden State is part of our key dealer program for Structurwood [OSB],” explains Weyerhaeuser structural panel sales manager Mark Carlson, who covers six Western states for the forest products distributor. “Key dealers typically buy railcars of product on a weekly basis, but volume alone does not translate into an effective partnership. As we move toward just-intime delivery, it is important for builders, dealers, and suppliers to share the same philosophical mind-set. Golden State’s service levels and their delivery capabilities enable us to service preferred national builders. They have been critical to our success.”
Investing in the Future
Critical to Golden State’s own success as it attempts to become more integrated will be the strategic investment in more service-related facilities and facility upgrades, according to Zaslove. With the success of the company’s first wall panel plant in Stockton, Golden State will add roof truss manufacturing capabilities—scheduled to be completed by May of this year—into the mix of value-added services offered to customers. And like the panel plant, the roof truss facility is slated to feature the latest in saws and material handling equipment.
Moreover, at the Newark location, Minton is overseeing the final construction stages of Golden State’s first design center. Scheduled for completion this spring, eventually it will encompass 12,000 square feet showcasing multiple lines of windows, doors, hardware, siding, and molding and millwork. In addition, an adjacent theater used by previous property occupant Peterbilt Trucks to showcase the latest diesels is being gutted and revamped into an 80-seat state-of-the-art training and conference facility. While the improvements will drastically improve the bottom line for Golden State’s fastest-growing yard (Newark sales leaped from $12 million in 2002 to $35 million in 2005), the design center and training facilities also will be used by employees and customers across Golden State’s Bay Area markets.
The prospect of a design center is great news for custom contractor Warren Anderson, whose company, Anderson Construction, closed on 46 units in 2005 and is anticipating tripling that volume in 2006. “Because of the facilities that they have and all of the different aspects of their company, they allow me to look at larger projects,” Anderson says. “I’m looking at 100-unit and 56-unit projects now. The ability to be a small guy and think about taking on something larger is critical to our industry, and if I did not have the support of a company like Golden State, I could never do it myself.”
For the first time, Golden State is also entering into the installed sales arena via participation in Guardian Building Products’ installed insulation program. “It’s a great way for us to become more in tune with installed sales,” says Zaslove. “Guardian is the perfect program because they handle the installation side, and we are left to develop the relationship with the customer and become more adept at looking at installation as a cost center on the back end.” Zaslove senses that installation will become a larger part of Golden State’s service portfolio in the near future, and the dealer is carefully monitoring the Guardian program as the company looks at central vac, garage door, and after-paint opportunities to add to the install mix.
The amicable November departure of president Wayne Withers—who joined KBI to head up that company’s California operations—along with a Dec. 8 federal court settlement on four-year-old IRS charges against owner Lee Nobmann that will further remove him from operations, are creating opportunities at Golden State for others to assume leadership positions. As Zaslove takes the helm as president, Sierra Point general manager Jessica Nobmann becomes vice president of the overall company, which remains resilient and successful under even the most challenging circumstances. “It’s a coming out for both of them,” the elder Nobmann says. “The performance of Jesse at Sierra Point speaks for itself, and having Rick continue as a longtime employee and leader is extremely valuable to the future of this company.”
That future, according to Zaslove, will be one where Golden State’s employees will become even more adept at the business of supplying building materials as the initiatives of today come full circle to further streamline delivery and sales processes, add to the dealer’s suite of contractor services and manufacturing capabilities, and pull greater efficiency out of what is already one of the industry’s most well-oiled sales machines. “We’ll finally be the total package,” he says. “I see us selling the entire house, I see us adding more value on the labor end, I see us continuing to increase sales and increase the value for every single one of our customers, because they are all number one.”
In a final tip of the hat to his team, Zaslove cannot help but fall back on the pro dealer altruism that has equated to success for so many in the industry, and for Golden State especially: “Let us never kid ourselves,” he says. “None of this was born from Lee, from Wayne, from myself, or from Jessica. It’s the staff that has always made us look good, and all the credit in the world goes back to them, not us.”
Vital Statistics
- Company: Golden State Lumber
- Year founded: 1954
- Headquarters: Petaluma, Calif.
- Number of locations: 6
- Number of employees: 500
- 2005 estimated gross sales: $460 million
- Pro sales percentage: 100 percent
