Tech, Trends, and Opportunities: 7 Takeaways from the LBM CEO Summit
- Craig Webb
- 17 hours ago
- 6 min read
Updated: 3 minutes ago
By Craig Webb
Some of the nation’s biggest and most successful construction supply operations gathered in New York Jan. 27-28 for the second annual LBM CEO Summit, sponsored by HBSDealer and The Misura Group. Here are key snippets of what was said.
LBM Tech Leaders Focus on the Basics
Three high-ranking technology executives at Builders FirstSource, Kodiak Building Partners, and US LBM all said their companies were actively boosting their tech capabilities, but in different ways.
For Gayatri Narayan, BFS’ President for Technology and Digital Solutions, a big focus has been uniting the vast company’s myriad of computer systems to empower the sales process, reveal sales opportunities, and boost on-time deliveries. At Kodiak, Chad Finnigan, the VP of IT and Cybersecurity, talked about fending off 10,000 cyberthreats every week while moving operations onto the same ERP platform. And Jonathan Green, Chief Digital and Technology Officer at US LBM, said his work is all about “How do we start to bring together businesses we have and then generate synergy while letting the businesses flourish locally.”
Narayan spoke up for programs that can alert BFS to potential problems before they have a chance to occur. Green said his team has spent much of the past two years focused on how to have the right supply chain organization to match inventory in a market with potential demand.
Artificial Intelligence didn’t come up often. Narayan said AI has helped BFS systematize data across the company’s disparate systems. AI can "provide a layer of translation so we don’t always have to build harmonious systems” from scratch, she said.
Finnigan said “there’s a lot of AI FOMO” in which people are trying to incorporate artificial intelligence programs “without quite realizing what they actually want to solve.“ Automate your systems first, he said. Then, maybe AI makes sense later.
Greene also pointed out that customers increasingly have their own tech stacks that they like to use, so it’s incumbent on US LBM to “design capabilities that fits into the way their customer is running their business. … My portal needs to be capable of supporting what the customer wants.”
‘It’s a Tale of Two Geographies,’ Both Weak
Home prices nationally will be flat, with some regional differences, Ivy Zelman of Zelman Associates said. Areas under pricing pressure include markets in Florida, Texas, Colorado, and Nevada that had lots of builder activity and big price hikes since 2019, she said. In contrast, quieter markets like Syracuse, NY, are in better shape price-wise. A slow reduction in mortgage rates will help all areas.
“Housing is in a bit of a grind for the next few years barring any major action” by the federal over ment, she said. Government programs proposed to date, such as barring institutions from buying houses, will have little impact. One exception would be to cap interest rates because so many consumers are falling behind on credit card, student loan, and auto payments. Housing today “is a balance sheet problem as well as an affordability problem,” Zelman said.
Chris Beard of John Burns Research and Consulting, whose end-of-summit presentation bookended Zelman’s start, also predicted challenging times ahead. It will be tough for President Trump to reduce construction costs that help new homeowners while simultaneously managing to keep current owners from feeling their home’s value has declined.
Beard, JBREC’s VP for Building Products Research, said he believes we’ll see growth in 2026 primarily through remodeling, as lending rates for home equity lines of credit drop and thus make it easier to tap the HELOC for improvements.
Modest Goals for Industrialized Construction
The Director for Innovation at Meritage Homes believes heartily that people need to change the way they build homes, but his opening goal is merely to bring in better practices at a price that’s no higher than the status quo. “I am trying to get to cost parity,” Brett Welch told the group.
Welch noted that construction crews will build the same version of Meritage’s starter home again and again in a development, and yet the process they use for that construction seems to vary with every house. Why can’t they be using the same set processes every time? he asked.
Jeff Hopfenbeck agrees. “It doesn’t matter if the work is performed on site or in a factory. It should be about making the work efficient and repeatable,” said Hopfenbeck, CEO and Co-Founder of Simple Homes, a company based in Denver., “It’s about a more industrialized way of building.”
“If we want to make any kind of lasting impact, we need to challenge the work itself,” Welch said., “There’s no 'Easy Button' here.”
An Alternative to Random Lengths?
Random Lengths’ role as the lumber industry’s de facto pricing service looks likely to be challenged this year, Sherwood Lumber COO Kyle Little suggested.
“I think change is coming,” Little said. “Competition is already here, and it’s going to be transformational with regard to the information.”
Random Lengths’ critics dislike how its numbers are based largely on calls to mills for spot prices. They also are protesting increases in subscription costs. Little noted that Forest Economic Advisors has launched PricePulse (https://fearpricepulse.co) based on real transactional data. "That difference alone should dramatically increase transparency into what are the real prices people pay,”Little said. PricePulse began with Southern yellow pine, but since has expanded to SPF and Western U.S. lumber species, along with plywood. Next up will be delivered prices and OSB prices.
How—and How Much—Should You Pay an Executive?
There’s no one right way to pay executives in your company, but every company’s directors should come up with a philosophy that guides the decisions it makes, a compensation consultant advises.
Bonnie Schindler, a partner at Compensation Advisory Partners, said that philosophy should articulate the company’s views about pay levels, incentives, profit-sharing, equity awards, how long it should take to get the goodies, and whether the company wants its compensation package to be comparable with peers.
She said one common problem at family businesses crops up when the family member running the company has been paid far less than average. Sticker shock often occurs when the company realizes what it will need to pay to attract a competent outsider. And if that outsider gets what he or she is worth, problems could break out when other family members—who also are paid less than the industry standard—begin to protest.
Invest Like a Leader
Getting a good return on capital is one of Kodiak Building Partners’ most important investment metrics, CEO Steve Swinney said. “We’ve always approached the business in terms of thinking hard about being super productive with capital,” he said. He noted that an investor (a private equity fund) owns 70% of Kodiak, and it logically wants good returns.
Kodiak strives to empower people locally, so they’re involved in deciding on capital investments, Swinney said. At the start of each year, the operating companies’ leaders write detailed plans, ranging from staffing levels to capital expenditures.
“Because it’s robust, when we leave that room in early January we’re now executing to a plan we already agreed on,” Swinney said. “So, when you have questions like ‘should we buy that forklift?’ well, we’ve already discussed that.” Those plans might adjust later in the year based on circumstances, he added.
Typically, Kodiak spends about 1% of its sales revenue on Capex, Swinney said. Proposed outlays get challenge. For instance, if repair and maintenance for a piece of equipment are far lower than replacing the equipment, Kodiak won’t spend the money to get something new.
What if you’re a $50 million independent, don’t want to start manufacturing (as Kodiak does) but do want to grow, moderator Ruth Kellick-Grubbs asked. What should you do?
“The next five years will be better than the last three,” Swinney replied. “I would ask if I’m prepared to meet the additional demand from customers and additional demand from my growing the market.”
Going into Installed Sales? Be Sure to Profit Two Ways
Two men whose construction supply companies evolved into installed sales operations promoted the benefits of the move—provided you remember to price your work properly.
“When we first started doing installation, we though of it as a value add to help sell materials,” said Ben Rosen, President and CEO of the Norfolk Companies. Gross margins were around 24%. Then he began to realize people were willing to spend money on installation services even if they tried to cut back on materials. Rosen changed his targets to get gross margins of 40% on both the materials and labor. Now the overall GM% is around 42%, and “we didn’t lose any business.”
“You have to charge enough money to make money on the install, given all the risks,” said Mac Hines, CEO of Hines Industrial Group. “Installation is a 40% margin business that will cost you 25% and leave you 15%.”
Hines, scion of the family that ran Chicago’ famed Hines Lumber, remembered when he was young and his father would critique his business mistakes. “My dad would say, ‘Your biggest mistake was signing the contract,’ and second ‘You didn’t charge enough,’” Hines recalled. “If you pursue the right customers, you don’t have to land every fish on the line.”