Are Today’s Keys to CM Success & Profitability the Same as 2001?

Originally published by the following source: SBC MagazineDecember 2, 2019
by Kirk Grundahl, with contributions by SBCA staff

   

In August 2001, I wrote an article entitled "Understanding Change by Understanding the Market Structure." which can also be accessed at the bottom of this article. The key “critical thinking concepts” brought forward were essentially:

An August 2001 description of the Component Industry Market Structure. Click to enlarge.

  1. Component manufacturers (CMs) and distributors are responsible for the way our industry markets components to builders/contractors/framers to meet their specific needs.
  2. The approach or approaches taken by CMs to build their businesses and their brands will determine whether components will, in fact, be the exclusive future of framing.
  3. CMs that thoroughly understand industry technical issues and provide solutions to these technical pain points, from a business development standpoint, will be business winners.

A reasonable question is: What did this mean in the context of 2001?

From what I recall, the key issues we were discussing then are very similar to today, including but not limited to:

  1. CMs that interact often with their builder/GC customers and installers will find ways to make components valuable to them and create long-term relationships.
  2. CMs that educate and develop relationships with market gatekeepers such as specifiers, building officials, and city officials will become THE well-known “go to” company in the market, particularly if you are known as the problem solver, helping each constituent with an easier path to structural framing solutions.
    1. Plans, specifications and dimensional accuracy were even worse than they are today. This was because most plans were hand drawn, which led to far greater human error. Today’s software makes creating plans and specs faster, yet the plans and specs still seem to be subject to many errors. Computerized means faster, not necessarily better. Unfortunately, if plans can be done faster for the same money, one can make money as the commoditization of architecture and engineering (A&E) continues.
  3. No profit means problem plans are pushed onto CMs and framers to fix at their cost not the A&E cost. Are CMs and framers getting value for all the solutions they are providing?

The 2001 article goes on to say that “...ours is a highly technical business. Only when we achieve this understanding can our industry begin to take advantage of all the opportunities technological change can present to us over time. Our goal must be to wrap practical technical work around business issues and provide simple, reliable and economically sound framing solutions for our customers.”

construction workflow diagram

A November 2019 description of the Component Industry Market Structure. What has changed? 

“Builders' (and general contractors) needs will continue to be focused on the following business attributes:

  • Lowest in-place cost possible, in which everyone in the stream of commerce profits.
  • Cost stability.
  • Reductions in construction cycle time.
  • Improvements in labor efficiency.
  • Finding more labor or labor replacements.
  • Durability and quality—no calls backs.
  • Companies that figure out how to deliver on one or more of these attributes, in the context of our business model model (see either graphic), stand to either grow market share and/or increase profitability far in excess of industry averages.”

There are a few enduring truths to reflect on:

  1. In 1995, Don Hershey had a bell alongside his manufacturing lines. The bell rang every 30 seconds. The manufacturing goal was to make a complete truss every 30 seconds. With the set-up types back then this was easier. The result was an easy 10,000 sq. ft. of roof area completed each hour. A key question for today is: What is the disruptive change that can be made to improve on roller press production efficiency?
  2. Market structures will change so that best economic solutions are provided. Competitive advantages are gained by assessing where there is economic inefficiency and exploiting that for profit.
  3. There will always be suppliers and customers, even if this boils down to two parties. Listening to and serving customers well is always wise.
  4. What business are CMs in today? Thoughts include, but are not limited to:
    1. Being a just-in-time supplier. In other words, getting the right product to the right place at the right time. This really is “industrialized structural framing logistics.”
    2. Who processes digital information the best? Who corrects plans and specs? Who knows if the dimensions are accurate and all the roof planes work?
    3. Who can do a precise bill of materials take-off?
    4. Who can organize the building material supply plan and then help with the installation plan. Are framing customers good planners? Do pre-cut packages help make the installation plan easier?
    5. Are CM’s getting full value for the expertise they are providing in solving structural framing problems before they exist in the field?
  5. Change is inevitable; look at the difference between Sears and Amazon. Those who embrace and facilitate change are usually called leaders at the end of their careers.

Since 2001 the material changes that have occurred include the internet, the speed with which digital information can be shared, the vast amount of information readily available to create key performance indicators, enterprise resource planning systems, and customer relationship management systems. All buzz words of today.

As we discussed in 2001, change really means opportunity. The best way to do this is to first self-assess all aspects of your business and ask what are the key business fundamentals that your are really good at. Then ask customers what you do well and what items cause customers undue stress. Then take this relational information and consider doing the hard work of educating your market about your business and the value that you and your business have to your customer’s growth and profitability. If there is no mutual benefit, there is no business foundation to build upon.

It seems the best day possible is when customers believe you are a key team member and specifiers, building officials, builders, GCs and framers all come to you because you have both the technical and business knowledge to provide reliable solutions to their problems. In other words, you are “the industrialized framing solution whisperer.”

Does this mitigate the fear of so-called market disrupters?

Can you grow your market and profits from a common sense approach to business? I think when you properly assess your market and your business, this is your market to disrupt and profit from through simple hard work. The key is to not rely on anyone else, but be motivated to just do it and have no fear!

For additional information, read the article from 2001, "Understanding Change by Understanding the Market Structure" and take a look at the Construction Industry Workflow Initiative webpage.

 

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