February, 2004

Engineering The Future

To assure your piece of the pie in the future, read how six successful dealers promote engineered wood.

By Staff Report

"In the beginning, it was tough to get a foot in the door," recalls Ken Galubinski, GM of Engineered Lumber at Williams Bros. of Duluth, Ga., who's been selling engineered wood since the mid-'80s. "People hadn't the slightest idea... Now, builders are coming to us. The turnaround is dramatic."

These days the product sells itself, he indicates. When builders hear "quality," which translates to fewer callbacks, they listen. When you add "price stability," eliminating the extreme swings and volatility of commodity lumber, they stay tuned. And when you track the evolution of home design to large, open rooms with few interior walls, the builders' customers themselves are sold.

Although I joists were developed in the '60s, their popularity is less than ten years old. "It was a boutique, cottage industry," recalls Galubinski--"highly technical, highly specialized. Few dealers knew how to use engineered lumber properly. In those days, it was related to upper-end houses. Now, it's everywhere, from $110,000 homes to the $3 million ones."

Other leading dealers have enjoyed the same growth pattern. Says Russ French, EW manager of Atlanta-based Brand Vaughan, "I've sold engineered wood for almost ten years, and it's on the upswing. We're growing the business every year." Builders like working with him on the product, Russ says, because "we're a service-oriented company and take pride in the turnaround time on layout and design; we'll design a whole-house package in 48 hours. They like our hole-cutting service in joists and our strong fill-in policy if something's short or broken. And we do a post-installation inspection to make sure it's been done correctly, or to recommend a fix."

Rick Zaslove, who handles EW for Golden State Lumber's four California locations, tells a similar tale. "I've been selling engineered wood since 1985; early on, people were skeptical." What made them believers was the Doug fir green they were using, which gave inconsistent floor depth to each unit. And shrank. And squeaked. "Builders wondered, would engineered wood really give the strength they needed? But they were paying good money to fix those squeaks, so they were ready for a more consistent product... one that wouldn't shrink."

If you ask industry pros for an EW dealer who's light years ahead of the pack, they shoot back, "Manny Pina." He's president of National Lumber Company in Newton Center, Mass., where he has aggressively sold EW for 20 years, mainly to custom builders. "For single-family homes we promote the advantages of a stronger floor system, no squeaks, plumbing cutouts, electrical knockouts, and a guaranteed floor system. We promote it to our customers because we are in the engineered lumber business; we don't just supply the product because the customer asks for it."

In the Denver area, EW is gaining in popularity "all the time," according to Max Goetz, president of Home Lumber, who's also been selling it for 20 years. "Now it's standard for I joists, replacing 2x10s. Out here, builders have a turnkey relationship with framers, who do all the buying, so framers are our largest customer. But we do not install," he declares. "That would be competing with our customers."

The Denver market doesn't allow for slouches. Says Goetz, "We have all the largest national production builders plus all the large national lumber companies, so it's very competitive. And as a result of the flat market in Denver in the past six months, there's been a double-digit decline in new starts, so builders are asking for cheaper products. "Cut costs 10 percent," they tell us, but we say, "That's not possible. We're there already. The way to save is to build more efficiently"--and we show them ways.

"We're embarking on a number of services for builders to offer more efficient utilization of EW and commodity framing. For instance, in the whole-house design process, get everyone at the same table, eliminating over-design. Typically, they'll design roof trusses and over-judge by 20 to 30 percent, which takes extra material--beams, headers, the whole ball of wax. What we need is for builders, framers, engineers, and designers to share information with each other.

"Soon there will be software available to help with that, to provide complete house design. A modeler will model an entire house within a software package, and if there are any changes, everybody will see it. (We do this manually now, using a couple of systems: Comsoft for walls, Alpine for roofs, TJ Expert for floors, some from Boise. We try to rope it into one deal a builder can take to the courthouse for permits.) We're continually looking to offer value-added."

Galubinski demonstrates to his builders that EW is a most cost-effective system. "By eliminating the callback problems of lumber, you're saving them aggravation and money. How do I convince them? It depends on the builder; some are more open to change and ready to look at new ideas which will lower cost and increase quality. But I'm starting to see even the most conservative builders at least utilize it in some form--maybe LBL heads and I joists for the bonus room above the garage. Production guys take to it more quickly. Since 1998, production builders have jumped in with both feet; today, it's almost a given. With the proven predictability and performance of EL floor systems, you get uniformity; therefore, you can build more quickly. But you've got to individualize your approach," he counsels. "With ten builders, you've got ten different problems. You've got to individually understand their needs and priorities. (But usually callbacks and price spikes are the commonality.)"

Package Deals
Cornering the whole house is clearly a win for dealers. It's their job to demonstrate to builders how they, too, win with this approach. Every EW specialist we talked to pitches the whole package. "Absolutely!" says Zaslove. "We do $20 million in EW and growing. We just took on national KD Homes, our big start; in partnership with TrusJoist, we cut a deal. (We've used TrusJoist for years. It's the market's Kleenex, the most widely accepted.)"

"Selling a package, we're able to give consistent pricing--different from the commodity problem--so we can fix costs to our builder customers; they like that. We've value- and margin-added. And in this [Atlanta] market, starts are still strong--45,000 a year.

"Most of our customers buy the whole package," echoes Pina, "because we do offer value-added with all our products, allowing for one-stop shopping. We can engineer and supply everything from the sill up, including fabricated steel to wood or steel roof trusses." Home Lumber's Goetz bruits his full-service packages, too--"wall panels, roof trusses, floor trusses, I joists, all the framing components."

Backup Assistance
"Vendors help us in the promotion of engineered lumber; they go to the large builders--they'll come in, do little seminars for their sales agents, provide literature. EW in the long run eliminates callbacks, squeaks, and humps--so for the extra money upfront, an engineered-wood floor system is a selling feature," says Brand Vaughan's French. "Our vendors have classes for a builder.s sales agents so they can stress this to the consumer."

"Trus Joist is our preferred dealer," says Goetz. "They provide numerous services, such as TJ Expert [software] staff members to help with floor layouts. We also use computer software to design, ourselves. With commodity products from Boise, they engineer floor layouts and offer training to our people."

"We do design in-house, plus have some vendor help," reports Williams' Galubinski. "We train our people to understand the builders and their problems. And software allows you to design physical systems, which we do almost 100-percent in-house, for quick turnaround to service the customer. Engineered lumber is a technical product," he points out, "so if you don't know it [yourselves], how can you correctly sell it?"

National's Pina takes advantage of vendors' training but also aggressively trains from within. "We have multiple software packages and try to utilize them to the utmost. All our designs are done in-house. We even have our own structural engineer to stamp the drawings. We try to staff our design department to give the turnaround times needed by the market, or better."

Golden State's Zaslov dreams of common standards from his vendors. "APA got involved in working toward standardization, but [vendors realized] that would turn it into a commodity, so they didn't allow that to happen. So everybody makes a different joist size. That's the number-one thing that separates everybody... no apples to apples, all different beams: similar products but with little differences.

"TrusJoist offers staff training, but we brought it in-house. Years ago," he continues, "vendors did all the [design] work; dealers didn't have the infrastructure. But we changed that to add value to the builder... created our own EW department. The first year, Weyerhaeuser shipped it all; we were the supplier. Today, we package it 100 percent, in order to make it a little more difficult for developers to make a change; it gives us a little more security.

"We sell from a monstrous inventory, $2 to $3 million. We distribute to all our four locations ourselves; we cut and package it ourselves. We keep that larger inventory as a little more buffer against them."

Availability has tightened a bit in recent months, according to Pina, "due to use of the product and transportation issues. But we usually carry a sizeable inventory to hedge against availability problems. This way, we have no problem pricing out as far as a builder wants, within reason."

French swears by GP's FastPlan software for design and layout. And when it comes to availability, by partnering with a particular vendor, "in our case, GP, if you can provide enough volume, they can take care of you. It's win-win. This way we can guarantee our prices for at least a month, and usually quarterly."

Galubinski found that supply was tight last summer and fall "but is starting to loosen up now. We keep inventory for six locations, so if price is critical to a builder, we can take the necessary steps to help achieve price stability."

Goetz feels the supply is "coming back. Capacity is up as mills come on line in response to demand, so we do not keep a big inventory. We're in a price-lock scenario with our large, production builders."

Engineering Growth
"The future looks great for the product, with less old-growth timber and more and more promotion of EW, better floor systems, and the design for wide, open spaces that require it," says Pina. "Of course, as EW becomes more and more the norm, margins will come down. But as there are more technical people around to sell and design it, customers should become more aware of its advantages and use the product, which will decrease overhead."

Zaslove concurs. "We buy very well, based on our volume, so we're looking at lower unit cost and tighter margins. Now that we have the infrastructure, the staff and the inventory to service our customers, we're doing $20 million, and we'll grow that to $30 million in the next few years. It's 10 percent of our total business."

"The future is incredibly strong," agrees Galubinski. "If you consider the number of units framed in the country, the majority is still without engineered lumber. Nationally, we've reached only 30 to 40 percent, so the market potential is staggering."

"It looks good," assents French. "We'll sell more and more. And with lumber prices so high, even the hesitant will try it, and some of them will stay when lumber drops. In our area [of Atlanta], all the big builders use engineered lumber, so the smaller guys are thinking, .Is there some trick? It costs more, so why?" And then they try it. More and more give it a try every year..

Sidebar:
It's All About Performance
Baltimore-based Louis Grasmick Lumber Company made hay out of snow. When the city's historic landmark B&O roundhouse collapsed a year ago under the weight of a 28-inch snowfall, Grasmick won the job of supplying all the engineered wood required to fabricate a new roof.

A natural choice: The company had been the supplier for Baltimore's National Aquarium, World Trade Center and Oriole Park, as well as the Chicago stadium and Dulles Airport, MCI Sports Arena and Smithsonian Museum in Washington, D.C. Why Grasmick? It's all about who you know (and how you've delivered for them in the past). "The architect chose the product and then picked the contractor capable of installing the complicated, 22-sided polygon roof. The installer we'd recommended got the job, so he didn't go anywhere else for product," says Grasmick's EW salesman Tim Walsh.

Okay, but why Chicago? D.C.? "I've got to be honest: People come to us, based on relationships. They've maybe worked here, then moved to another state. It helps us that they like us; we find that frequently."

To sweeten the deal even more, the company's supplier, American Forest Products, does the grunt work. "We don't do any engineering or take-offs. They have an engineering staff, so we don't need to; they do the work--and keep the inventory, so a big headache is removed. Availability is excellent and prices are pretty stable. They ship direct to our out-of-state clients by the truckload. We simply act as broker; we never see it."

For the B&O, product performance came into play. The city's goal was to repair the structure as authentically as possible, but using the original roof's 30-foot Eastern white pine was insane--"half the strength of Southern yellow pine, less than engineered wood. And the [EW] price was almost comparable to big timber. They chose the right product, and engineered wood was the first choice. Clients like its strength, the span availability, and uniformity is big--plus none of timber's splitting. Better quality."