Why a Wholesaler?

The moke-sense story of why o wholesqler con be q retqiler's best business friend

Buy direct or through a wholesaler ?

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a wholesaler, why?

And which one?

Lumber retailers in the West, close to numerous sources of lumber production, have traditionally leaned heavily on mills for direct supply. Despite this, some of the nation's most successful wholesale lumber organizations florish in this region. And as technical requirements tighten for the use of all building materials-including lumber-the wholesaler becomes more important to Western retailers than ever before.

The decisions on which lumber sources are chosen are basic , most often price is the dictating factor. But as specifications become more demandine and as the use of products ,becomm more qgqplcx, mey want to re-evaluate just what makes a "good prics'?. the lowest one, or the one that buys the most satisfactory product and service over the long range.

To help retailers in this analysis, the National-American Wholesale Lumber Association (NAWLA) has outlined descriptions of the basic oofunctions" of the lumber wholesaler. Most wholesale firms perform most of t]le functions. Some stress certain functions more heavily than others. In any case, each function performed by the whole. saler is usually one which the retailer would have to perform anyway at measurable costs in time, people and market knowledge.

Seeking Sources

As lumber requirements become more specific, it becomes more difficult for retailers by themselves to sustain inventories based on past contacts. Variations in species, in proprietary wood products, in grade requirements all mean a broader list of sources of supply than ever before.

The typical wholesaler maintains contact - and working knowledge of a well-rounded supplier corps, mills in the South, the West, the North-wherbver an ideal source for a product which has a demand in his market area. An inquiry from a retailer means the wholesaler can provide an answer in one of several ways: l. He can quote the retailer a price right at the time of first inquiry, knowing at the moment he can furnish the stock though he may not necessarily know the exact mill from which it will come. But backed by his knowl"dgu of supply and price, the whole- saler is willing to enter into a binding contract (as such a quotation is) with the retailer-

2. The wholesaler may, under some circumstances, decide nol to quote immediately on price and time of shipment. This applies especially on products not normally available, or in periods of heavy demands. The wholesaler takes the inquiry and searches his sources until he can fill the order, then with a firm mill ofrer in hand he can return to the retailer with a quotation.

3. Upon receiving the inquiry from the retailer, the wholesaler may find the desired stock available on mill lists -stocks on hand at the mill or being t$pprd o'in trsnsitl' ,wit| tf.q,r,qilrogd car acting as a warelhdusa while 'tlie lumber awaits sale. As such, the wholesaler can make a quotation on stock and delivery based upon whether the listed items are still available.

Most retailer's lumber requirements are extremely diversified-ranging across a wide list of structural and finished products, and on into many specialty items. The number of manufacturers who can supply more than a limited portion of these needs on a direct basis is small. while a single wholesaler may have at his finger. tips a broad assortment of sources with virtually unlimited volumes. With such a resource available to him, the wholesaler is able to pass on to the retailer benefits of better service, price and cooperation, benefits which are limited by direct dealermanufacturer transactions.

Risks

Risk.relief "by the carload" is what a lumber-wholesaler offers to buying customers. When the wholesaler takes title to a shipment from a mill, he becomes a complete partner in the transaction between all three parties, assuming a great share of the risks involved in the marketine of the product.

Among these risks are:

I. That the retail yard purchasing the shipment can and will pay for it.

2. That the quality of the stock will be satisfactory.

3. That the mill will ship on time.

4. That the correct lumber sizes and grades will be loaded.

5. That the mill will perform completely according to the order.

6. That extra requests from the retailer can be met.

Organized to assume such risks, the wholesaler has to allow for them in his everyday doing of business. By his position, he is able to make allowances retailers would find difrcult to duplicate. One of his best protections is his flexibility-if a mill fails to perform, he can transfer his order to another one or several of them. In the end. the retailer still receives the order he placed, oftea without realizing the complex transactions which preceded its delivery.

Finoncing

, Natimal.Aueriesr' Vholeale l,umber Association members carried more than $13I million in accounts receivable on any given day during 1962. Their ability and willingness to finance the tremendous lumber distribution system has been a powerful but unsung prop in lumber's fight to hold its place in the modern building materials field.

The retail yard pays the wholesaler after the shipment is safely received. The period between ordering and reaching the market, sometimes lengthy because of complexities in production and transportation, is financially bridged by the wholesaler who commonly borrows capital to support the huge dollar requirements involved. If a retail yard needs extra time to pay, the wholesaler will sometimes go along after thorough investigation of the extended risk. This gives the dealer access to financing not available through banks and other institutions.

Wholesaler financing in lumber, perhaps one of the most important functions, has been likened to "applying oil to the wheels of distribution." With this financial bridge removed, the wheels certainly would squeak loudly and often and in many cases might not turn at all.

Credit

By its nature, lumber remains one of the most o'personal" of all America's industrial institutions. And when personal aspects enter business operations, values applied differ from those used where hard business facts and figures dictate every move. This is especially true when credit is involved.

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