LBM's Next Industrial Revolution Is About to Start. Here's How to Take Part in It
Updated: Apr 15, 2019
"All construction starts in one of two ways," my first publisher at ProSales told me a dozen years ago. "You start out with either a product or a customer, and that makes all the difference." Begin with a product and you quickly start to focus on cost control, constant marketing to newcomers, and standardized, repeatable processes. Think of tract builders, or a fast-food restaurant. Starting with a customer leads you toward variable pricing, deep and personal relationships, and creative, individualized solutions. Think of high-end custom builders and tiny bistros with Michelin-star chefs.
Over the last 50 years--and particularly since the rise of Lowe's and The Home Depot--most pro-oriented construction supply dealers have focused on the customer. The notion that LBM is a relationship business rings true partly because dealers chose to make it true: They picked a business model that plays to their strengths of personal service, product knowledge, and flexible pricing. The model has made sense for catering to a construction industry that's, even with recent consolidation, remains far more diverse than the food, auto, aviation or other industries.
You can keep pursuing this strategy for years to come. But it's time to shift tactics.
I believe your future success will rely increasingly on how well you can borrow from concepts long practiced by the product-first companies, then turbo-charge them by embracing tech advances that are finally making sense for modestly sized LBM operations. You're about to enter a revolution as big as when forklift trucks and product codes first arrived.
Boarding the lean bandwagon is a good way to start. I'm seeing dealers increasingly ask themselves how their yards can perform operations better so that they'll save time, money, and people. Dealers with component factories are some of the first places you'll see this, but the idea is expanding to other areas, such as whether the ideas used in NASCAR pit stops can be employed to speed up truck turnarounds. A few are finally diving into the volumes of data produced by their ERP systems to reach sophisticated conclusions regarding when they really make money.
Lean techniques also can help prepare you to take advantage of the next big wave of automation. A recent Brookings Institution report predicts that roughly 36 million jobs (one quarter of the entire U.S. labor force) will face "high exposure to automation" over the coming decades. Brookings defines high exposure as being in a job in which at least 70% of what you do can be automated--and you no longer will be needed.
What will be automated? Think about the routine tasks you and your team perform every day; most likely there's a lot of pulling, assembling, packing, driving, and delivering going on, along with in-office chores like order-taking, billing, check-cutting, and timecard-keeping. Which of those tasks are performed more or less the same way every time? Which need to be done exactly the same way to assure product quality? You've just named the jobs that could be better done by a machine.
Embracing lean sets you on a path to breaking down all the tasks and processes in your company and then asking how you can do them better. As you do this, there will be times when installing machines will be the right way to go, while at other times a (well-trained) human is vital. In sales, for instance, machines can process orders, but it takes a real person to establish the initial sales relationship and then nurture it.
The same holds true for deliveries. A McKinsey report last December predicted that driverless trucks will reach the point where, by 2025, the only reason you'll need to have a "driver" in the vehicle is to load and unload goods. Hours of service rules would become obsolete as the truck's occupant sleeps during the drive to the jobsite or warehouse, waking up only when the truck arrives. With trucks doing most of the work, requirements to get commercial driver's licenses could drop dramatically. Or the CDL might become obsolete.
Federal Express came out earlier this year with videos showing a self-driving robot delivering medicine to a customer. It's not far removed from autonomous delivery vans that fastener companies are investigating. Meanwhile, news comes this month from Australia report that a unit of Google's parent company, Alphabet, won approval to deliver packages with drones launched from airplanes. Among the first things those drones carried were burritos, but imagine how a drone or the FedEx bot might do taking a worker's place on a hot run.
When researchers in the U.S. studied the same drone technology recently at Virginia Tech, they were close to the Lowe's where VT's mechanical engineering department tested a vest-like device that, when worn, can help people lift heavy objects without strain. Ford Motor Co. is doing similar research, much of it based on devices created to help wounded warriors from the Afghan and Iraqi wars.
Put it all together and it's clear that better ways of doing things at LBM facilities will come from many sources.
So ... what should come first: products or customers? It's most likely that you currently are taking the people-first route, and that is likely to the best route to take for years to come. But this shouldn't stop you from looking over and borrowing ideas you see used by folks on the adjacent path.