September, 2005

Home Lumber, Houston, Texas

What’s the secret to your company’s success? Most dealers say service sets them apart, but few can quantify that claim. Here’s the story of one who can.

By Craig A. Shutt

Home Lumber in Houston, Texas rose from the ashes and remade itself into a lumberyard catering to professional contractors following a devastating fire in 1985. Now, the company is looking to build on the success it’s achieved since then to add at least one new yard in the coming months. That expansion will be based on customer response to its high level of service—service that is refined by quantifiable measurements and formal feedback processes.

"We supply great service, but everyone does that, or at least they say they do,” says Steve Harms, vice president and general manager of the 74-year-old company. "As a commodity yard, there’s only one way to be successful: be efficient and organized and have great people. We try to take that further by creating processes so our customers can count on us to do exactly what we say we will do.” That focus has kept the $65-million yard from expanding before now, he notes, because executives feared long-distance customers would stretch resources beyond the company’s service capabilities. But that’s about to change.

The three-generation dealer began as a family hardware store, but shifted direction when rebuilding after the fire nearly wiped out the business. Founder G.B. Leaman’s son, Dean, and his grandson, Lee, saw that more potential lay in serving builders. "We changed direction and tried to expand to serve production builders, and stubbed our toes in the process,” says Harms. The company wasn’t prepared for the sheer volume those customers required, and it required a fast learning process to recover. Today, Home Lumber is a subsidiary of Leaman Building Materials, along with Allied Concrete and Branch Concrete Pumping.

The current expansion plans benefited from that misstep, ensuring the people and systems would be in place before any commitment was made. Harms was brought in two years ago from BMC West’s Denver operation to run Home’s lumber division and lead their plans for growth.

To achieve that, Harms has created a 10-year plan of how he hopes to expand the company’s prospects. It is expected to start this fall with a new branch location on the north side of the city, to expand the company’s service reach.

"We’ve got a built-in customer base and some sales people who could fill in on that part of the city and help us right away,” he says. "I expect our expansion is going to be imminent. That will help us, because one of our strengths has been that we haven’t tried to go places we can’t serve, and we tell our customers that. But if we have another location, we could expand our customer reach without hurting our service.”

Key Customers Offer Feedback

Home Lumber has honed its customer-service strengths in two key ways. First, Harms created a Customer Consulting Group composed of six key customers. They meet twice a year, sending him agenda items they wish to discuss about the dealer’s performance. From those meetings, Harms creates a to-do list of items on which to focus to improve customer satisfaction. "It’s a good group of people, who have various roles in their companies,” he says. "It gives me good feedback and a good outside perspective that I can turn into strategic moves.”

An example of the impact the group has had can be seen in Home’s approach to returns and providing credits. "Too often, returns weren’t being handled quickly, they were being put aside to focus on orders,” he explains. "Now, we track our returns and we’ve trained our personnel to treat them as a priority, just as they would deliveries. That solved that problem.”

The group also helped Home determine how to focus on improving its Web site. Currently, the site (www.lbmlp.com) is a "postcard” site with a brief company history, vendor listing and contact information. But that will change shortly, as Home is about to roll out an expanded site focused on giving customers 24-hour access to their account information.

"I asked my Customer Group how they used the Web and what we should provide,” he explains. "They told me they go to the manufacturers’ sites for specs and sizes; they don’t need us to provide that information.” Instead, they asked for a way to review their own financial statement so they didn’t need to call during business hours to review updates, charges and credits. Home executives focused on that service, and several customers now are testing a blind site prior to a rollout this fall. "They told us all they needed from us was an accounting function, so that’s what we’re providing first.”

Tracking Performance

Home verifies its service capabilities by tracking performance levels in every way possible to ensure they don’t fall off. "We measure everything,” he says. That includes delivery efficiency, on-time rate, pick-up times, receiving accuracy and every other factor they can find a way to measure effectively. These are added to the typical financial measures that give an economic bearing on the company.

Harms also slices up the sales data to review profitability of each customer and each sales person. "That way we can tweak how we deal with the customers to help improve their product mix or to determine where our sales people can focus their time.” Those analyses add up to give the company a better review of its total profitability. "We work on fixing things that don’t look right when we do the analysis.”

The company operates a millwork plant that services a wider market range, as the focus on next-day deliveries and same-day fill-in service isn’t as critical. The 90,000-square-foot facility has been open five years, and it adds to Home’s product mix—and overall sales. "There’s no question that we feed off of each other to improve overall sales,” he says. Window buyers often need additional products, and those who are buying commodities and framing pieces often come back for windows. Another location will expand the potential for the millwork shop to boost its own sales, too.

Home currently two-steps trusses when needed, and adding a truss-manufacturing facility is a consideration for the future as well. But the Houston market has resisted engineered trusses for residential work, which surprised Harms after seeing them embraced in Denver. "In Colorado, everyone uses trusses, but they’re not accepted here. They’re really not difficult to use, but the building codes don’t encourage it. So it may take legislative changes to the code to expand their use. Even so, a truss plant is definitely a possibility for us as we grow.”

Because of its ability to analyze needs and respond to specific customer service suggestions, the company’s capabilities and service levels aren’t holding Home Lumber back from expanding immediately. Rather, the key obstacle is the need to find a good piece of real estate with railway access. "We’re a commodity yard, so we don’t need a great location, but we do need rail access, and we’re having a problem finding a spur that the railroads feel comfortable reactivating. So we can’t create a strict timetable when we’ll be opening a new yard.”

After that location is established, Harms has his sights set on other opportunities. "There are parts of the market where I think we can thrive, possibly in the out lying areas or even in other cities,” he says. "We’ll have to see where the opportunity exists when we’re ready.”

When that happens, it’s fairly certain that Home will know its strengths and have talked with its local customers about how to ensure the expanded services hit the mark in fulfilling contractor needs.

Craig Shutt is a freelance writer based in Chicago, Ill.