October, 2006

R&K Building Supplies, Gilbert, Arizona

R&K prides itself on its stability and one-store location. But its systematic addition of services and functionshas created solid and continuing growth through the years.

By Craig A. Shutt

Since opening its doors in 1974, R&K Building Supplies in Gilbert, Ariz., has maintained its focus on fast delivery, reliability and high quality. That combination, which is simple to offer but difficult to routinely achieve, has helped the company thrive despite its resistance to opening more stores to expand its customer base. Operating from one location hasn’t kept it from expanding its services and sales, however, and in 2007 the company anticipates it will literally go the extra distance with a new site.

The company now operates five divisions from its one location, focusing on lumber, trusses, doors, windows and insulation. It offers installation for most of them, and it is looking to expand the product offering in some areas. R&K also opened a new window showroom on adjacent property earlier this year, and it continues to grow a satellite office that opened in 1999 in Scottsdale. The six-person office serves custom homebuilders in the area, which then receive deliveries from the Gilbert headquarters.

"What makes us unique is that we offer products in five different departments, and they create a one-stop purchase opportunity for many of our customers,” explains Chad Coons, president. "Not all of our customers buy from all five departments, but that grouping gives them the potential to work with the same supplier for many portions of the building’s shell, and that’s an advantage that they like.” Those services are supported by a comprehensive computerized financial system that is on its third evolution since being installed in 1979.

Founders Instilled Philosophy

The company’s founders, Ross Farnsworth and Kemp Turley, taught the R&K team the value of reliability and strong product knowledge, says Coons. Maintaining that focus has become second nature for the company through Farnsworth, who remains chairman today, and Coons, who joined the company shortly after it incorporated as a building supply operation.

Farnsworth, a developer of retirement communities, began the company in 1974 with his vice president of construction, Kemp Turley. To offer better control and quality for their projects, they opened a cabinet-making shop and quickly added pre-hung doors. The company soon gained a reputation for high-quality products and began supplying custom homebuilders in the area.

After about 1 1/2 years of operation, the two decided to expand and bought Frontier Lumber, transforming it into their own building supply business. R&K incorporated in 1976, and Coons joined in August of that year as assistant general manager under Turley, who served as his mentor. Coons’ financial degree from Brigham Young University and his experience working with his father, a remodeler, made him a good choice for the position, even if it hadn’t been his plan to enter the building supply business.

"I learned a lot from Kemp, which was critical, because the area was in a real boom and we could grow quickly,” says Coons. His job was to go into the field and find new customers by stressing the company’s high quality and reliability. The approach worked. Aided by the booming market, the company grew from $1.5 million in sales during that first year to $11 million only three years later. Today, the company does about $60 million in sales per year.

With that much growth coming quickly, many companies would diversify and open new stores to expand their reach. But R&K stayed put. "We watched our competitors put in new sites, but it was apparent that they often ended up competing internally,” Coons explains, "whereas we felt more confident maintaining one site and focusing on contractors. That helped solidify our control and service.”

It also ensured the company never overstretched its bounds, which was critical for a company that sold itself on delivering quickly and on time. "That could offset many advantages that other competitors might have,” he says. Today, the company delivers throughout the state but mainly in the metro Phoenix area.

Adding New Divisions

Remaining in one location didn’t mean the company stood still—far from it. In 1979, as sales were growing quickly, R&K opened a roof truss manufacturing division. "We thought those products had a promising future,” Coons said. That assessment proved accurate, and those products soon were supplemented by floor trusses.

The company also began to focus more attention on windows and doors, particularly after the market downturn in the early 1980s. "We learned a great lesson in that period about never being overleveraged,” Coons says. When another recession hit at the end of the decade, the company sold off its cabinet facility to focus on its growing business in windows and doors. "We realized we were going to have to retool for new European cabinet styles, so we decided to invest in our core businesses.”

Today, those businesses include insulation; the company became a Guardian insulation reseller and installer in 1999. "They wanted a presence in the West, and we saw the potential for insulation to fit with our other products. It has steadily built into a nice business for us.” The division grows about 10 to 15% a year, he notes. As the synergy grew among the various products—lumber, trusses, doors, windows and insulation—so did new services. In 1997, R&K started a separate subcontracting business, Sunland Installation, to provide installation of its doors to homebuilders. It expanded the service to include windows in 2003.

"By creating our own company, we retain control of the program and can ensure its quality and follow-up,” Coons explains. "It started out as a little operation, but it has been building nicely for us. It particularly helps us get our foot in the door with large properties and tract builders. They see the benefit to buying products installed.”

Showroom Opens in 2006

The company has expanded its presence and services further with the opening of a 14,000 sq.-ft. window showroom on property adjacent to its yard. Ironically, the company originally owned the parcel but sold it to a developer, who created an office park in which R&K now leases space for its 2,000 sq.-ft. showroom plus 12,000 sq.-ft. for warehouse storage. It displays products from Andersen, Milgard, International and Superior, offering options in aluminum, vinyl and wood windows and patio doors. It also showcases unusual products, such as an automated, slide-away 20- by 10-ft. window wall.

"By moving into this showroom, we opened up space on our site to expand our truss and door operations,” Coons explains. Thus the showroom not only provides a better presentation for windows but expands opportunities for other lines as well. The divisions are supervised by Coons along with Bob Heap, the assistant general manager and vice president.

All of the operations are overseen and enhanced by the company’s order-processing system, which has been computerized since 1979. In the mid-1980s, the company upgraded to CSD software from Triad (now Activant Solutions Inc.), and in November 2003, it upgraded again to Falcon software, the latest ERP system from Activant. "We have a good relationship with the company,” Coons says. "They provide us with a nice range of technologies for data entry and integrated, centralized accounting operations for all of our receivables and inventory control.” The system also coordinates with the central invoicing and collections department to keep cash flow moving smoothly.

"The system can interact with most millwork and building supply vendors and gives us a huge advantage in time and labor savings for processing orders,” Coons says. "Our response time has improved 50-fold. Where we used to spend a full day or more at the end of the month sending out invoices, we now can send them out within a few hours of receiving the order.”

Expansion Planned

That control remains critical, as the company has its eye on further expansion now that its window showroom is up and running. It is looking to expand its truss-building program in a dramatic way that will require another location— a significant step for this adamantly one-store company.

The plan is to break ground in January on a new property that has been purchased more than 50 miles away (outside of its current delivery radius). It will be used to develop a structural-panel-assembly operation that will allow the company to add onto its roof and floor systems to encompass the home’s entire framing. By mid year, the company will be receiving lumber on its rail spur and making truss systems. It then hopes to expand to offer insulation services from the site, too. "Our ability to oversee everything and develop it well and reliably has led to our growth,” Coons says.

This new operation, and the addition of the window showroom, is spurred by the great opportunities developing in this region, he explains. "We are seeing a large migration into the area from other states, and current forecasts say that in the next 20 years, we’ll have as many as 250,000 new housing starts in the area.” By putting new programs into place and expanding now, the company hopes to be ready for the boom.

"We are on a mission to provide the highest quality service and product possible,” he says. "The window showroom allows us to more efficiently meet the needs of our customers with a more spacious atmosphere, with more displays and highly trained, focused staff.” That expansion, in turn, will help feed the requirements for the new panel plant further out—which will help expand R&K’s service in a reliable and timely way, just as it always has done.

CRAIG A. SHUTT, senior contributing editor of the magazine, has more than 27 years experience covering the LBM industry.