Source Choose the suppliers that will deliver the goods and services you need; develop a set of pricing, delivery, and payment processes to create metrics for monitoring and improving the relationship.
Like most independent dealers, even those with multiple locations and manufacturing capacity, forging loyal relationships with upstream suppliers is a cornerstone of Big C Lumber, a 15-location, family-owned operation based in Granger, Ind. “We let them know that it’s their business to lose,” says vice president of operations Bill Wallace.
Still, Big C facilitates annual, individual vendor meetings to align its strategic approach to the market—based on feedback from the field, comparison shopping of the local competition, and various sales and inventory reports—with what its distributors have in the pipeline. “We challenge their programs every year to make sure they have the best we can offer our customers,” says Wallace. “We expect them to let us in on a new product that is selling well in another market and help us gauge interest and develop a program for it.”
With its dramatic growth, Vassar Building Center now comes to the vendor table with a bit more clout, enabling the dealer to negotiate better pricing, lead times, and delivery options that result in improved inventory management and achieving on-time deliveries to jobsites.
Like Big C Lumber, Raymond Building Supply also conducts annual vendor reviews with its two-step partners. In addition to negotiating pricing (though with a mutual understanding and respect for decent profit margins for both parties), the partners discuss issues such as improving quality control and reducing back orders. “We want to make sure we’re not part of the problem,” says Babb.
Kellick-Grubbs sees tremendous opportunities for dealers and their supplier partners to drive costs out of the supply chain. Special orders, she’s noticed, are often a cost cow that can be thinned considerably by shortening lead times—especially in light of the big boxes promising delivery dates that are a fraction of what most dealers offer. “It may be a lot of perception,” she says of the big box challenge, especially given their scaled-down special order categories, “but if you can find local suppliers for those items, you’ll cut down on the cycle time to get special orders filled.”
In addition, she likes to see dealer-vendor conversations that move beyond issues of lead times and delivery specs and into gathering and sharing forecast information with distributors. “Those that are doing it are ahead of the curve in this industry,” she says, because discussions often result not only in more reliable information, but also in a culture that attracts better suppliers. “The problem is that distributors have lost faith in dealers to get that information from builders, so they go around them,” to the source, she says.
Builders, especially large-volume operations, are also forging their own manufacturing and supply capabilities to serve their own needs, a process Kellick-Grubbs calls backward integration. “Even though it’s not necessarily a smart strategy, it indicates a high level of discontent with the supply chain,” she says.
By streamlining sources and sharing forecasting information along the entire chain, she says, dealers can combat that perception and solidify their place in the channel.
