To plan for the future, skip crystal balls or palm reading and look to technology.
For millennia us humans have looked for ways to predict the future, and we’ve tried some pretty bizarre methods. Gelomancy, for example, involves carefully listening to hysterical laughter for hints about the future. Those who practiced felidomancy professed to know the future by observing cats. And those who adhered to phrenology believed that bumps on people’s skulls could accurately predict not only a person’s personality but indeed their future.
Turns out, we’re not that different from those who came before us. Like them, we look for methods, tools, and practices that can help guide us through tumultuous times. And if ever times were tumultuous, the past year has certainly left its mark in the history books. Market volitility brought on by the global pandemic along with radically increased demand for product has created an environment for the LBM distributor that is, in short, hard to predict.
“Overall, we’re seeing a lot of the same trends as in years past, but at a much more accelerated rate,” says Jason Parchomchuk, product manager at Epicor Software. “Both customers and dealers have come to expect e-commerce solutions. In the past 12 months—and even before—the industry is experiencing the Amazon effect, where customers are expecting a seamless, more self-service experience. And with labor shortages, dealers need to find ways to do more with less.”
That’s where technology comes in. Far better than a crystal ball or a deck of arcane cards, the right tech tools can provide solutions that help the savvy LBM dealer see what’s down the road and plan strategically for it. “With supply chain constraints over the past year, advanced business reporting has been critical for LBM professionals to keep a pulse on their operations and the broader industry’s health,” points out John Maiuri, president of the LBMH Division at ECI Software Solutions. “Solutions that offer real-time data dashboards and reports can help business owners make more strategic decisions based on sales, inventory on hand, scheduled shipments and special orders.”
Change is the new normal
Historically speaking, the LBM industry has not been the quickest to adapt to new technologies, nor have they been ones to set aside “paper and pencil” methods of managing their businesses in favor of new technology-driven methodologies. The days of doing things as they’ve always been done, however, are fading away as tech advisors look at the challenges of the past twelve months.
“Maintaining consistent communication with customers and sustaining an efficient, cost-effective operation became even more critical for hardware retailers and LBM businesses over that last twelve months,” explains Maiuri. “Additionally, with forced closures and social distancing guidelines limiting store foot traffic, it has become essential for those businesses to create more convenient online retailing experiences to support sales. Omni-channel retailing solutions became very popular over the last 12 months to allow LBM professionals to remain connected to their customers through e-commerce tools and customer portal capabilities.”
LBM retailers are realizing their technology infrastructure is outdated when it comes to maintaining both customer connection and data management. “We are seeing a lot of dealers who want to upgrade their software solution to support a work model where data is at their fingertips, wherever they happen to be working,” says Jordan Lynch, sales representative for DMSi Software. “We’re also seeing an increased demand in technology that helps to alleviate the supply chain challenges dealers are facing. Amidst so much global disruption, dealers are struggling to track and fulfill orders, lead times are being pushed out, and parts and products are less readily available. Having the ability to project orders and accurately track inventory and lead time allocations has become top priority. Beyond communication and data reporting, the past year saw LBM dealers desperately striving to implement solutions that allowed for an on-site materials handling environment that was more in line with what was being provided by the big box stores, especially considering the increased demand for materials. “LBM dealers were caught flat footed as they were underinvested in technology that allowed them to transact with customers digitally,” says Steve Yates, president, North America, of Buildxact. “On the other hand, home centers such as Home Depot and Lowes were better prepared with existing e-commerce solutions, curbside pick-up and greater buying power on the supply side. LBM dealers lost market share to home centers who accumulated a disproportionate share of the additional sales from COVID-19.”
Caleb Gieseke, manager of operations, estimating/drafting for Paradigm, agrees. “Maximizing efficiencies around building materials has become more important than ever,” he stresses. “With high demand for materials, combined with the industry’s supply chain challenges, technology that helps LBM dealers dial in and optimize material estimates and material usage is seeing greater acceptance. That includes solutions for material takeoffs and estimates, as well as material usage on jobsites. We’re also seeing more technology that’s giving the building industry more control over what’s being delivered to the site and how delivery is timed. In the end, builders want their LBM partners to ship the least amount of material to get the job done without waste.”
E-commerce is here to stay
As DMSi Software’s Lynch points out, the prevalence of apps and the ability to access information and instantly make decisions from anywhere is vital. “Everybody is now using their phone for everything,” he says. “The Amazon effect is also finally reaching LBM dealers with e-commerce emerging in the market. Being able to track and view open orders, quotes, inventory levels, and deliveries is becoming business as usual. People used to pick up the phone and call their rep. Nowadays it’s more of a self-serve model.”
Lynch goes on to explain how, with an e-commerce platform, contractors can expect to be able to service their customers and allow them 24/7 access to their business. “This industry continues to struggle with labor shortages and in response, dealers have had to offer more services in-house,” he explains. “When it comes to tech tools, an installed sales platform has become a priority because managing in-house installed sales or third-party relationships with contractors adds complication to a business. Simplifying complication is a key component to great customer service and technology can help with that.”
ECI Software Solutions’ Maiuri agrees with the importance of seamless shopping experiences. “It has become even more critical that LBM businesses offer optimal convenience online and in-store,” he explains. “Integrated omni-channel systems allow any employee to instantly obtain information to help a customer, including account information, inventory data, sales history or even delivery status. This can all be done without the need to search through filing cabinets or waiting for another department to provide the information needed. A professional web presence is now expected from businesses of all sizes, and without it, independent dealers could risk attrition. Online shopping and in-store pickup options have become the norm across industries, and the right technology can help independents build loyalty and capture greater wallet share from their customer base.”
It’s slow progress, however, as Matt Meyers, founder and CEO of Yesler points out. While logic would dictate that an LBM dealer would move more towards connectivity, some head in the opposite direction, and it’s a trend that needs to be worked against. “There is an accelerating divergence among lumberyards in tech exploration and adoption,” he says. “The divergence is often exposed by one key event: a buyer retiring. The choices an owner/president makes when replacing a retiring buyer sets the tone for the future. Do they fill the role as is, or do they choose to modernize both the buying process and the technology? At Yesler, we have seen progressive buyers retire to be replaced by a traditional buyer, which halts the lumberyard’s progress in modernizing processes and tools. It’s an endorsement of status quo—notepads, phone calls, lagging operational and market data, and opacity within the organization to the inner workings of buying. Conversely, we have lumberyard presidents who hire people specifically for a modernized buying process. They endorse speed, transparency, and data-driven analysis to make the best buying decisions.”
Efficiency drives all
Whether it’s with e-commerce, managing pricing, scheduling labor, or dealing with inventory, what’s at the core for the LBM distributor is improving efficiency so that they can focus on day-to-day operations. “A big driver should be efficiency—in managing pricing, labor, overhead costs, and inventory management,” says Epicor’s Parchomchuk. “As labor shortages continue, dealers should be focused on what is going to save them time and money in the day to day.”
Braven Blackwell, president of Seljax, agrees. “LBM dealers should be investing in an estimating software that’s simple to use, precise, and profitable. An estimating software increases sales while saving time and reducing expenses. It also provides a unique experience for the customer to be part of the design and receive a full detailed estimate presentation.”
It’s not just efficiency for the distributor; providing efficiency for the customer is just as important. “Any technology that allows LBM dealers to offer a more efficient, value-added experience to their customers will enable them to compete better in the market,” points out Steven Kalnitzky, product lead at Trimble MAPS. “This includes fleet routing and scheduling software that can provide optimized route plans and driver schedules based on customer constraints such as delivery time windows and specialized vehicle or equipment needs. These tools can reduce manual planning efforts and should also help fix organizational inefficiencies that often result from a lack of internal visibility on the status of orders, assets, and people.”
And let’s not forget efficiency of use. LBM dealers don’t want to be mired down in lengthy software installations, upgrades, or anything that is disruptive to their day-to-day operations. “Key benefits of tech solutions should be to save time and save money,” says Yesler’s Meyers. “The paradigm of massive, disruptive software installations and deployments is counter to these benefits, especially in a busy, rapidly changing market environment. The new paradigm we see is ‘login and go’ technology, whereby LBM users can immediately begin using a new technology solution, very quickly saving time and money.”
By increasing efficiencies, LBM dealers can experience other benefits that may not be immediately evident. For example, by freeing up time from the day-to-day operations, distributors can invest more resources into relationship development that prevents market share erosion. “New customers are looking for technology that reduces transaction friction and will go to those suppliers who are most ‘easy’ to buy from,” says Buildxact’s Yates. “LBM dealers will need to invest in customer facing technology to grow market share.”
Finding the right technology solutions
While it’s tempting to think that there’s a simple technology solution to all this, that by investing in “X” you’ll automatically get “Y,” nothing could be further from the truth. There’s no single right answer that fits every LBM dealer. “It’s a tough question to answer from an industry level perspective, as it really depends on where the dealer is at this moment in time,” explains Epicor’s Parchomchuk. “If a company does not have an e-commerce presence, the most important thing is focusing on getting a functional and effective website customers can view inventory and purchase through. If a company has an e-commerce platform, but is struggling to effectively fulfill, warehouse management solutions are the place to focus. A great place to start is by looking at what you expect as a customer; assess where your business has gaps compared to your own customer expectations and do your best to solve for those gaps in their business.”
So, if it’s not a “one size fits all” answer, what solutions are out there? The answer, in short, is a lot. Epicor Software, for example, provides customized solutions for LBM distributors and continues to optimize its BisTrack platform, provide tools for responsive business intelligence, and support the ability accept payments both online and in stores.
Likewise, Buildxact provides take offs, estimating, and project management in an all-in-one interface. “Other construction management software providers provide one or two of the three features, and you can get to the same functionality as Buildxact by purchasing additional modules or by using a linked ‘ecosystem partner’,” explains Yates, “but this comes with greater cost and complexity.”
In the case of Paradigm, it delivers estimating tools that integrate with quoting and configuration software. “Integrating Paradigm Estimate and Paradigm Omni allows users to take advantage of the industry’s most powerful quoting and configuration software and seamlessly go from takeoff to final quote,” says Gieseke. “The integration gives users the option to evaluate project data and information needed to make recommendations based on demographics, square footage, zip code, and more.”
Trimble MAPS’ tools are designed to solve the problems of dispatchers and drivers. “Our route calendar planning application is a digital version of the white boards we’ve seen in most dispatch offices,” says Kalnitzky. “Every stakeholder—including dispatchers, salespeople, and customer service representatives—can see which assets are available. Sales can reserve a truck for a priority customer; dispatchers can reduce call time with drivers; and customer service can monitor route and order status. Additionally, dealers can lasso select a number of stops on a map or drag and drop calendar entries to simplify and streamline the planning process.”
According to Yesler’s founder, Matt Meyers, its offerings organize the chaotic buying process to save time, reduce risk, and maximize profit for the operation. “We do that by first compiling critical operational data from any ERP into intuitive, intelligent views focusing buyers on the most important priorities. Second, we provide the tools needed to organize buying by engaging all existing and new suppliers in one communications platform for the buyer to negotiate and confirm orders. Third, all orders can be viewed in one calendar with POs, confirmations, and the conversation history with suppliers visible with a single click.”
And DMSi Software offers point-of-sale systems in Agility along with inventory and accounting software, giving LBM dealers the ability to service customers both online and in the retail environments. “Customers can get in and out of the store,” says Lynch, “and we pair that up with an e-commerce online portal to allow off-hour availability in quotes, inventory, and pricing.”
While technology can leave the LBM dealer feeling overwhelmed, take solace. Many industries are facing similar challenges, and technology developers stand ready to assist in any way possible. But it’s the successful distributor who doesn’t allow the fear of change to paralyze them. As ECI Software Solutions’ John Maiuri puts it, “LBM dealers MUST have integrated technology in order to thrive. Disparate systems or working out of spreadsheets will not allow for growth nor provide the customer experience required today. Independent dealers have the industry expertise to better serve their key accounts, but they must leverage technology to run the business based on facts vs. gut instinct.”
Michael Berger is the former managing editor for HANDY Magazine and has been writing about home improvement and construction for the past 20 years.