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Component Manufacturing dverti$er
Don’t Forget! You Saw it in the
Adverti$er
March 2020 #12248 Page #51
Too Many LBM-Owned CMs are Operating at a Mediocre Rate
Todd Drummond
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n anonymous former lumberyard CEO of 17 lumberyard locations (LBM) explained to me that his two component manufacturing (CM) plants made up only 10% of his sales yet contributed 30% of his net profits. He wished he had given the CM division far more focus and resources.
As a guru for process improvement, it can be very frustrating witnessing many repeated errors by both the large and small companies. Too many (a significant portion) CMs are operating at a mediocre rate. Too often, I hear (potential) clients say that they’re “doing okay” and business is “good enough.” But, why wouldn’t you want to do better? Why wouldn’t you want to see what else is possible? The number one problem I perceive is that the leadership in these companies simply do not know any better. Here are some clear indicators that your company has room for improvement: 1. For the CM division, during these strong building markets, your net profits, or EBITA if you have high debt loads, should be in the high teens to the mid-twenties. One client of mine is operating in the low 30’s for net profits for 2019. (No B.S.) 2. Relations and communications between the CM and LBM locations can be problematic. There are often complaints of the components being priced too high, and the margins for the CM group are often sacrificed to garner more sales for the LBM division (see also: Truss & Wall Panel Manufacturing a Cash Cow Division). 3. Skilled labor (employees) seems to be always in short supply, and various groups are always needing more new hires. Manufacturing, design, and other areas are all experiencing shortages, so there never seems to be enough skilled personnel to fill all of the vacancies. Therefore, your company can never reach its full sales and net profit potential. 4. Why does the sales team have segregated project information between the CM and all other areas, such as doors and windows? Many executives are told repeatedly that their expensive POS system is supposed to be handling all of the critical need-it-right-now informa“Modern cognitive theory states that tion, yet the promise of it working someday remains vague. If you people tend to perceive reality in light of stop and think about it, you’ll probably realize how many producpre-existing expectations and will ignore tivity interruptions by salespeople are happening at your company.
large amounts of contrary data before finally changing their minds.” Psychology Studies, Author & Source Unknown PHONE: 800-289-5627
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