FIVE QUESTIONS WITH: Jon Vrabely, CEO, Huttig Building Products, Inc.
|Jon Vrabely has been Huttig’s president, chief executive officer, and a member of the Board of Directors since January 1, 2007. Since joining Huttig in 1999, he has served in several executive management positions, including vice president and chief operating officer from 2005 to 2006, vice president, operations from 2004 to 2005, as well as vice president, product management from 2003 to 2004.|
With housing on a solid growth curve in most markets, what would you define as the clearest opportunity— as well as the biggest challenge—facing LBM dealers?
The changing and growing market environment itself creates the clearest opportunity for all companies in the housing market supply channel. The real opportunity in this environment extends beyond our natural instinct to focus on market growth and maximizing profitability. The environment today has created the opportunity to fundamentally redefine, plan, and execute the required change that will establish the organization’s future value proposition, strategic priorities, and financial model.
We all currently face the same day-to-day labor shortage, transportation, health care, regulatory, operational, and general business challenges, but the biggest challenge the growing market environment creates is the belief that the hard work is behind us and a false sense of security that everything is “back to normal.” Our industry, like other industries, the economy, and the world in general, is much more volatile today and I do not see that changing. The new “normal” has yet to be defined and we all have to push through the natural inclination to grow our business with the old playbook.
There has been a tremendous amount of consolidation in the building products industry, especially among LBM dealers and manufacturers. What do you see as the impact of consolidation on the LBM distribution channel?
To varying degrees, some of the manufacturer and LBM dealer consolidation has impacted brand alignment and local market share, but the channel remains highly fragmented and I do not see that fundamentally changing in the near future. Our industry is arguably the most fragmented of all commodity-type distribution channels, and they all remain highly fragmented. Market share is won and lost locally, so consolidation can actually create opportunities on a local market basis for independent dealers.
From your perspective, how would you describe the future of the independent LBM dealer?
I believe our collective mission in the LBM distribution channel is to create the most effective and cost-efficient distribution model possible. Our industry is constantly changing and we are all challenged on a daily basis to prove our value in the channel. The wide-ranging diversity and vast number of products used in residential home construction are incredibly broad and complex, which creates opportunities for value-add distribution services that make the channel more efficient. I believe the future belongs to LBM dealers that relentlessly challenge the status quo, consistently seek out new opportunities to make the channel more efficient, and focus on total value creation as opposed to cost. These dealers will continue to thrive regardless of the market environment.
Huttig implemented a LEAN program in 2008 to “cut the fat and improve delivery times, service and quality.” From your experience, are there elements of LEAN that dealers can use to improve their operations?
We learned a great deal and made significant improvements in our customer service metrics, speed to market (lead-times) and overall productivity through our LEAN initiative. Combined with other strategic initiatives, this program allowed us to avoid the financial troubles that caused many other companies to restructure their balance sheets during the downturn.
LEAN is a formal, data-driven continuous improvement program that focuses on documenting a current process, ripping that process apart to eliminate non-value activities, defining and implementing a new process, and measuring improvement. The entire organization must engage in the process from the CEO to front-line personnel.
In business now for 130 years and counting, Huttig Building Products has a rich history serving the LBM industry. What do you see as the key business challenges moving forward?
As a result of the tough, but necessary decisions we made during the downturn and the dedication of all of our associates, our performance over the past several years has been very good. We have access to capital and are focused on accelerating growth and positioning the company for the future to maximize value. In the immediate-to-long term our key business challenges includes change management. The business environment has significantly changed over the past several years creating the opportunity for us to turn Huttig into what we want it to be, not just what it can be by riding the current rising tide. The skill set required to plan and execute an accelerated growth strategy is substantially different than the skill set required to manage through a down cycle. Our entire management team must focus on identifying, quantifying, and planning future growth opportunities that maximizes our value and mitigates our exposure to market volatility.