Dealer's sales climb with new site, methods

The profit squeeze, caused by rapid growth, tight money, and changing customer markets, has caused many western lumber dealers to reassess the directions their companies are heading.

One such home center undergoing reassessment is Central Valley Builders Supply, St. Helena, Ca. Started in 1953, in the heart of the Napa Valley wine country, Central Valley has long maintained a reputation of aggressive marketing and management approaches to problems related to the building supply industry.

When the company was purchased in 1955 by Robert Patterson, Sr., it consisted of one rented 600 sq. ft. building on about one-half acre of property. Like many small yards of that era, Central Valley followed a natural growth progression that necessitated additional store, yard, and warehouse space being added through the years. It wasn't long, however, before Central Valley management could foresee that a combination of changing markets and an inefficient worn-out store would necessitate a new location and operation.

"The opportunity of completely redesigning the physical location of our business led us into an in-depth evaluation of our procedures and methods of doing business," said Bob Patterson, Jr., now president of Central Valley. "We wanted the physical plant to allow as many built-in efficiencies as possible."

In March of 1978, with plans for the new location well underway, the management attended a computer seminar sponsored by the Lumber Merchants Association of Northern California. The seminar offered the participants an opportunity to compare the advantages and disadvantages of nearly every company offering a computer system to the building supply market. This opportunity culminated a two year search for a new data processing system.

In May of that year Central Valley ordered a computer system, both hardware and software, from the Dataline Corporation, a company based in Wilton, Ct., with offices in San Francisco and Los Angeles.

"We were very enthusiastic about Dataline's system," said Patterson. "Not until we saw that system in action did we realize we weren't even asking the right questions! We visited other dealers with volumes ranging from under two million to over thirty million and we saw the flexibility of the Dataline system. We knew it would work well for us."

Story at a Glance

Profit squeeze brings reassessment of direction... a dealer's new store and yard with built-in efficiencies such as data processing ups sales 507o, gross margin 37o.

The decision paid off because just 60 days later, in July, construction was started on the new store and the Dataline system was fully operational in the old store's back office. The system was invoicing, printing statements, running profit and loss reports, and doing payroll.

In March of 1979 Central Valley closed down its old location on a Friday afternoon and opened its new location Monday morning with a fully operational Dataline Point-of-Sale System. Since computer cable was installed during construction, it was just a matter of adding the additional cash register style terminals at the check out counters.

The company's new store is located on four acres (with two additional acres for expansion). The store is 18,000 sq. ft. with a 22,W sq. ft. main warehouse.

Some additional warehousing is located in the yard with offices bn a mezzanine overlooking the store. The new store also contains a more diversified inventory which was not available in the old "lumber yard."

Patterson is enthusiastic about his new operation. "Our sales are up 5090 since the move and, of course, that's attributable to the store, but our gross margin is up three 9o and I think most of that is attributable to the computer. It gives us instant access to information I either never had before or waited for until the end of the month."

"Three times a day I get a report that tells me exactly how many invoices have been run, our total sales, and the exact margin on those sales. Since each tag is costed, gross margin discrepancies are easily located. Since the computer keeps average inventory costs and I can change prices in a matter of seconds, we can be very aggressive in our price changes. I think that ability and our being on top of pricing errors are probably worth one 9o on our gross margin."

Mike Micheli, the store manager, is enthusiastic about the computer also. "I have all of my department managers on sales quotas and an open to buy," said Micheli. "Since I get a detailed sales report every day showing both sales and gross margins, we can really be on top of the situation and react to trends quickly."

Bob Jessell, controller, was not with Central Valley when it purchased the computer. In fact, he was the banker who set up the loan portfolio that allowed the new store to proceed. As controller, he oversees the running, updating, and processing of all reports. Under

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