Distribution will hit golden age

By Hawk Furman President Furman Lumber, Inc

E OREST products distribution

I- will hit its golden age in the 1990s. The lumber industry was radically altered between November 1979 and October 1982 as a result of high interest rates, oversupply, transportation deregulation, transfer of inventory carry back from the retailer to the dis- tributor and m an u factu rer, and consolidation among manufacturers. distributors and retailers. These events led to a restructuring in our industry that places the stocking distributor in a very strategic role.

In the oversupplied global economy of the 1990s, the successful lumber and panel products distributor will be a low cost operator, provide quality products and unsurpassed service and work on a lesser gross margin than today. This will be made possible through size, buying clout, maximum utilization of information technology, transportation expertise, better internal communications, staying closer to the customer, training and leaner management teams more fully immersed in fine tuning every aspect of the distribution process.

During the 1990s the auction market in forest products will continue to fade as partnership arrangements between distributor and manufacturer and distributor and retailer provide more efl'iciency, lower costs and better returns for all in the distribution channel.

The old rules that worked for manufacturers in an undersupplied market are changing dramatically in an oversupplied marketplace. More manufacturers like Weyerhaeuser will pull out of distribution and go back to their core businesses. Vertically integrated firms will find it harder and harder to compete against pure distribution companies. Egos will take a backseat to financial results.

More retailers are realizing that buying direct in all cases may be good for the ego but not necessarily best for their bottom lines. Retail companies like Home Depot will continue to set up partnership arrangements with distributors and gain the benefits of freeing up inventory dollars, assuring themselves of no stock outs, lessening pilferage, saving on transportation, warehouse, and people costs while achieving a higher GM ROI.

The stocking distributor is playing a more stategic role in the distribution channel and his role will become more important in the 1990s. Manufacturers will be fighting for warehouse space in distribution yards while retailers will keep pushing the burden of purchasing and merchandising back on distributors. The stocking distributor of the 1990s will be providing more value added services at a lesser cost to both the manufacturers and retailers.

Story at a Glance

Stocking distributor in strategic role auction market will fade .. manufacturers will pull out of distribution... value added services will cost retailer less.

Soviets Tour Lowe's Operation

Questions asked by 25 Soviet management officials visiting the Lowe's Companies store and warehouse in North Wilkesboro. N.C.. could have come from any U.S. retailer.

What are the price differences between wholesale and retail goods? How do you attract customers? How do you handle employee miscon- duct? How do you maintain quality? How do you keep enough items in stock?

Lee McConnell, store manager; Ron Perry, v.p. of distribution, and Clarissa Felts, manager of industrial research, provided answers to the group which is in the U.S. through a program at Wake Forest University's Babcock Graduate School of Management.