Tom Ryan: Money Matters

Photos of seven grandchildren line the top of Tom Ryan’s desk, a sign that he’s quite familiar dealing with inexperienced, free-spirited youth. Work life probably doesn’t seem much different for the soft-spoken CFO, who evokes a grandfatherly style for a job that requires a lot of teaching, cajoling, and occasionally laying down the law.

When this veteran of big operations such as Allied Waste Industries and Federal Mogul Corp. came to Denver in June 2007, he was familiar with the challenges of collecting numbers from far-flung operations. But constantly growing ProBuild–it has made a dozen acquisitions since his arrival–wasn’t going to make it easy. The major units were running their accounts payables on four different systems.

“If the Oracle [ProEdge] system didn’t exist, I’d have to invent it,” he says. “You can’t run an enterprise-wide system without it.”

Perhaps second to Seay’s IT department, Ryan’s 26-person financial staff is the biggest example of corporate consolidation. Denver now handles all treasury management, tax issues, financial planning and analysis, risk management, and credit management. Top executives also set standards for companywide benefits, such as the 401(k) plan and holidays. All other services, such as payroll and accounts receivables, are handled at regional level or below.

Ryan says ProBuild will benefit from this tiered approach. Putting all divisions on the ProEdge system “is worth several hundred people” he says. That should provide significant savings at a time in which ProBuild, like all other LBM operations, is struggling to maintain margins and keep lenders happy. ProBuild secured a covenant-free, $1.5 billion credit line in August 2007 at terms that give the company a competitive advantage. Ryan is eager to ensure things stay that way.

Paul Dodge: Refining the Product Mix

Paul Dodge had worked in just about all parts of the supply chain before coming to Denver–from Weyerhaeuser to Builder Marts of America to Centex Homes. Now, as a senior vice president for the supply chain, he’s working to bring ProBuild more benefit from fewer suppliers. He’s doing this by leading a process that focuses on a limited number of companies that ProBuild will buy from, with the expectation that the increased business will lead the suppliers to offer better services (such as vendor-managed inventories) and prices.

“We’re putting programs into effect that I’d never have anticipated in my 35 years [in the business],” he says. “These programs and relationships are going to hold water in good times and bad.”

It’s often a case of less equaling more. ProBuild’s various yards used to buy windows from 67 different suppliers. It has whittled that list down to just 11–three of them to be sold nationally and eight regionally. There will be four interior door suppliers, and for insulation, there’ll be just one. ProBuild reviewed eight major product lines this past year and will have three to four this year.

Who within ProBuild will buy the products varies. In the past, various ProBuild branches might call the same mill on the same day. Going forward, it’ll be just a single ProBuild employee, usually in Denver, who dials the mill. But that’s only for products with wide appeal; Dodge says he could see a regional or local staffer buying a more localized product, such as Eastern White Pine. “There’s always a fine balance,” he says. “You want to preserve that autonomy and that local business knowledge.”

ProBuild’s 1,700 sales reps won’t be handcuffed; pricing will be determined locally. “We’re not going to each market and say ‘Here’s the product mix you need,'” he says. “If we don’t execute in that market, for that builder, on that jobsite, then we’ve failed.”

Dodge also is using ProBuild’s data capabilities to turn the supply chain into a conduit, in which a builder’s order gets transferred through the dealer to the distributor, manufacturer, and raw material supplier.

Lonnie Bernardoni: Making it (Better)

One could argue that, in a company where manufacturing operations occupy 10% of its facilities and provide up to 15% of its revenues, ProBuild already knows a good bit about how to create components. But COO Myrick wanted more.

“I thought, ‘Either we’re going to build trusses as we already have, or we can find somebody who can revolutionize the industry,'” Myrick says. That led to the arrival in January 2008 of Lonnie Bernardoni–a native of central Illinois who had spent 18 years at Motorola operations in Florida, Brazil, and Illinois–as senior vice president for manufacturing. He came in already an expert in manufacturing processes but was a rookie on housing components, so he spent his first week on the job learning to build trusses and followed it up this year by learning how to build doors. But at the same time, he’s doing some teaching of his own.

“One of the key values I bring is a higher expectation,” he says. “We do a ton of good things across the board, and a lot of what I do is broker info across the board.” But that information doesn’t flow as freely as it did at Motorola. “In the environment I came from, there were conference calls day and night,” he says. “When I got here and set up a conference call for one hour, you’d think that we took their weekend away.”

Bernardoni took the worst-performing plant, instituted best practices there, and doubled its productivity. Now a dozen other plants are incorporating those same practices. Next up: LED displays above every line, showing its performance in real time. “In the last year, we’ve gone from not knowing what our qualitative performance was, not knowing our cost structure,” he says. “We’re coming up the curve.” You could say that’s true for all of ProBuild.