But instead of a song and dance, suppliers were surprised when they met with Pence and other Keith Brown executives over the course of summer and fall 2002. “They hid nothing from us,” says Bechel. “What impressed the vendors was Brad’s openness: He answered any question, and he opened his books to all of us. That’s not the norm when companies are in trouble. When companies are in trouble they usually try to hide it from you. Because of that, GP and then BlueLinx were willing to stick their neck out and continue to support them and make sure that they could get product to survive.”
Openness and honesty aside, the pro dealer had also hammered out a plan to recoup its losses and prepare for a comeback. “Even though we went through some difficult times, I always thought that there was a real future for us,” Pence says. “You have to be honest, but you also have to be conscientious and have a plan outlined—that’s what your suppliers, your banks, and your customers are looking for. If you have the attitude that ‘I don’t know what we’re going to do,’ you’re probably already done.”
Keith Brown’s plan involved some hard decisions, including shuttering under-performing yards and consolidating locations (primarily in California) where units were cannibalizing each other’s sales and duplicating overhead such as fleets and IT systems. In all, 13 locations were eliminated, leaving Keith Brown with its current 12-unit count split evenly between the Oregon and San Joaquin markets. With the downsizing also came an inevitable reduction in force, and no one was immune; even the corporate headquarters saw layoffs and attrition reductions that went as high as the CFO’s office. But it was the yards that felt it the most. “In this area, we closed two stores, and that hits close to home—obviously those are people that you’ve worked with for quite a few years,” says Medford, Ore., branch manager Gerry Greer. “Some tough choices had to be made. We had to make some serious cuts. It was tough for awhile, but it really had to be done, and I do believe that in the end my location is much stronger for it.”
Once leaner, Keith Brown’s reorganization plan turned to getting meaner as well, taking a hard look at inventory turns and overdue accounts. “The entire company had obsolete or slow-moving inventory of over $1.5 million,” says vice president of operations Phil Cox. “So we identified and eliminated products that did not fit our core customer needs, and the best example is plumbing and electrical items, where we typically had a full [SKU] range, but found our customers only wanted select items.” Other departments that felt the cost-cutting ax were lawn and garden, automotive, and paint, according to Cox. Slow-moving inventory has since been reduced to $300,000.
On the A/R front, lagging payments from customers had Keith Brown scrounging to meet monthly prompt-pay discounts from vendors. “Our collections have always been good, but the gap [between A/P and A/R balances] was one of the primary strains on our cash flow,” Cox says. “So we adapted a couple of programs to help reduce this time lag.” For customers who liked to pay per invoice, the company offered daily and weekly billing rather than forcing them to wait for monthly itemized statements. “We also found that mailing statements to all of our customers every two weeks expedited payments,” Cox says, adding that changes in both the invoice and statement procedures are still successfully in place at the company.
Customer Bonds As cash flow improved, Keith Brown began pulling itself back into the action. In addition to adopting open-book philosophies with vendors and becoming better operationally, the company’s rebound benefited from a blazing hot construction supply economy. “Let’s be real honest before we pat ourselves on the back,” explains Greer. “It is a pretty good boom time right now and that was a major driving force behind us. If you’re in the building material business and not succeeding in this market right now, there’s something wrong. Not to play down what happened with us, but this market is huge.”
Although keeping customer service levels high during the company’s difficulties was a challenge, Pence says that most managers and salespeople were successful in keeping the back-office turmoil far from contractor customers in the yard and on the jobsite. George Mueller, owner of Portland-based Mueller General Contracting and a Keith Brown and Copeland customer for nearly 40 years, agrees. “I did not even notice a transition [from Copeland to Keith Brown],” Mueller says. “It flowed perfectly and they continued to bend over backward for their customers. The contractors that deal with them and consider them their primary supplier, we get first-class treatment.”
According to Mueller, first-class treatment among Oregon custom home contractors and remodelers involves more than just the standard “What we want, when we want it, where we want it” mantra. In particular, Mueller cites hassle-free returns, product knowledge and research, and labor assistance as constants that keep him from straying to the competition. “If they don’t carry the product, they’ll get it. If I don’t have enough bodies on the job, they’ll send an extra man to help unload and stage material for me,” he says. “That’s what keeps me there.”
Mueller’s supplier bond with the company runs so deep that he even has the last Copeland sales ticket and the first post-acquisition Keith Brown sales ticket, which he’s preparing to have mounted and framed. “When another contractor asks me ‘Where would you go?’” Mueller adds, “I say, ‘Keith Brown is the place.’”
Rediscovered Growth Opportunities That’s precisely the contractor loyalty that Keith Brown wants to see right now as the company shoots for its aggressive growth goals. Continuously high service levels notwithstanding, Keith Brown undeniably suffered while incorporating the Copeland yards, and overdue reinvestment in facilities, fleets, technology, and the outside sales force is now job No. 1 as the company settles into its rediscovered profitability. “We have some catching up to do, but we feel fired up,” explains Pence. “It was challenging but very rewarding to do what we have done, and I want to see it keep going. Our greatest opportunity is to increase market share by improving our facilities and improving our delivery systems, from fleet to dispatch to personnel to training. Our greatest opportunity right now is to continue to improve ourselves.”
