Margin Call
While commodities remain the core of many distributors’ inventory, several companies are taking on more branded products that differentiate them from competitors and throw off more profit. Since mid-2005, Huttig–which recently hired its first procurement manager–has been adding what contractors identify as their first or second choices in several categories, such as Therma-Tru exterior doors, Masonite interior doors, Typar housewrap, and HB&G architectural columns.
Last year alone, BlueLinx’s private-label assortment added PVC trimboard called Tanza, fasteners called Steel Links, and a cabinet line for the manufactured housing market called American Elegance. This April, North Pacific launched its own hardwood flooring line called Spring Creek Flooring. It’s part of a larger move to bring in product lines that are less volatile, like hardwood decking, treated lumber, and, for its markets in the eastern U.S., BluWood, an insect-resistant chemical treatment for framing lumber and panels.
Le Vere says NPG wants to get away from commodities where the risk isn’t shared equally across the supply chain. He points to OSB as one product where the inventory risk falls “disproportionately” on the two-stepper. But when the housing market rebounds and demand for commodities returns to something like normal, someone has got to fill that demand for dealers and builders, which is one reason why Weyerhaeuser remains committed to being a leader in structural products. Forest City, which gets 85% of its business from lumber and panel sales, also believes that it can fill a void in commodities distribution from which some competitors are walking away. “There’s so much production out there right now,” says Johnston about the abundance of wood-products inventory in the pipeline, “and we have to get it to market somehow.”
–John Caulfield is a contributing editor for ProSales.
