Real Issues. Real Answers: Managing Evolving Inventories
“Evolve or die.” That jarring little sentence from an LBM Journal reader packs a powerful punch, and in today’s LBM industry, it is more relevant than ever. Not only is it relevant when discussing customer-centric initiatives like e-commerce and installation services, it is just as true when it comes to the products we carry, and how we manage them.
This month’s question came from a dealer in the Northeastern U.S., who wrote: “Our business is so much different than it was before the downturn, but we’re still operating like our old company before the crash. While our business is up 40% since then, we’re carrying different products, our special order business has doubled, and our inventory is much bigger. We need better controls on our sales team, receiving, stocking and shipping—to maximize turns and minimize shrink. How are other dealers handling this?”
As we do with each month’s Real Issues survey, we used this question as a jumping off point in a brief survey emailed to LBM Journal subscribers who have opted in to receive our email communications. A big thank you to 116 subscribers who took time from their businesses to respond with their insights. If you’d like to be included in future Real Issues survey emails, visit lbmjournal.com/subscribe to sign up, or just drop me a note at Rick@LBMJournal.com, and I’ll make sure you’re added to our list.
“How do your current product inventories differ from a decade ago?”
The responses to this question made clear that many readers wrestle with this issue. As the graph shows, the dominant trends shaping LBM inventories a decade after the Great Recession show that business is up, and customers demand deeper, broader inventories.
This is clear in the top three answers: “More SKUs” (54.7%); “Much different product mix” (35.8%) and; “On average, greater quantities of each SKU” (34.9%). Just over 14% of respondents selected “Other.” Below are some representative responses.
“We replaced all #2 dimensional lumber with Select Structural or MSR 1650 lumber, and we make sure our yard workers keep stacks neat and level. Before, we had 10- 20% shrink. Our shrink is now almost zero.”
“In the last 10 years, we’ve doubled sales, moved into a larger facility with sales and showroom, added an installed sales division, added a door shop, and added new grades and species of dimensional lumber.”
“Evolving product mix due to market trends.”
“Close to 40% of our business is in special order. Millwork, windows, doors, siding, roofing. Too many options!”
“We have fewer lines of items, but for the lines we stock, we have the whole breadth of the line.”
“New product lines. Removed obsolete items.”
“Moved to higher quality lumber.”
“Far fewer hardware items. Fewer choices of hardwood. Fewer custom size doors.”
“Upgraded our dimensional lumber to #2 premium, premium studs and more composite materials. Opened a Stihl dealership, added heavily to our hand and power tool offerings. We did get out of paint. Market-driven decision on that product line.”
“Our business is so much different than it was before the downturn, but we’re still operating like our old company before the crash. While our business is up 40% since then, we’re carrying different products, our special order business has doubled, and our inventory is much bigger. We need better controls on our sales team, receiving, stocking and shipping—to maximize turns and minimize shrink. How are other dealers handling this?”