Market Instights State of the Supply Chain, a panel discussion

INDUSTRY EXPERTS WEIGH IN ON WHAT HAPPENED AND WHAT’S IN STORE. By Ken Clark

The supply chain, the reliability and efficiency of which has been much-maligned over the past two years, is improving. Says who?

Five industry professionals representing billions of dollars in home improvement sales say so.

Speaking during the Crystal Vision Award Breakfast event in Las Vegas in a panel called the “Strategies to Excel in This Challenging Environment” were:

Jeff Curler, executive vice president of purchasing for Orgill;

Zach Elkin, president, Beko Home Appliances U.S.;

Joe Barnes, executive vice president of sourcing and supply chain, Builders FirstSource;

Shawn Oldenhoff, president, Kohler, Kitchen & Bath North America; and

Jeff Kinnaird, executive vice president of merchandising, The Home Depot

The panel was moderated by Jim Inglis, a former high-ranking Home Depot executive and president of Inglis Retailing. The group described an industry rebounding from supply chain challenges, but this is no time to celebrate or prepare for smooth sailing—the operative word for the panel’s title is “challenging.”

Some of the highlights on various topics covered during the event, in the words of the participants, are presented here:

On the current supply chain reality

Joe Barnes, Builders First Source: For the most part, supply is improved signifi- cantly. I tend to stay focused on how we keep our customers and our suppliers successful. And one of the things we’ve been doing more of is the sharing of information. It's transparency.

Jeff Curler, Orgill: Our recovery in 2022 went from what was just under 75% as we went into 2022 to just over 85% in terms of fill rate lines as we came out. So that’s a big 10 or 11 point jump, but it happens slowly. And the majority of that recovery has come in the second half of the year. So we’re now operating in the mid-eighties, about 85%. And we’re getting our highest fill rates on our own private label brand. We continue to diversify, particularly in commodity products where we don’t want to have all our eggs in one basket. I’ve said we’ll get to 95 [percent fill rates] by the end of the year, but any sooner than that would be a huge bonus. So that’s where we are today. We’re optimistic about 2023, getting all the way back in terms of recovery.

Jeff Kinnaird Home Depot: from a supply chain perspective, we’re just thrilled that we’re not chartering [cargo ships] anymore. What I think is happening is we’re seeing a return to the more normalized supply chain, a more normalized product flow, and in a much larger volume. That whole just-in-time mentality so that our supply chains can function at a higher level and obviously be more and more productive in our business.

Looking back

Jeff Kinnaird , Home Depot: We grew our business at Home Depot by just over $40 billion in two years. And that is just staggering growth that nobody had planned for.

Zach Elkin, Beko: What happened in 2021 is we doubled the business. We had over a hundred percent growth and clearly we hadn’t planned on a program for a hundred percent growth.

We didn’t know that appliances were going to be the hottest COVID purchase that you could make. So it was very good for us.

But even with the best planning, we couldn’t control the supply chain, we couldn’t control the ports. So we did stumble in 2022, from a supply chain perspective.

Shawn Oldenhoff, Kohler: In the past three years I’ve experienced a 30-year career.

Jeff Curler, Orgill: This has been at the same time, the most challenging and rewarding three years that I’ve ever experienced in my career.

Pain Points

Joe Barnes, Builders FirstSource: There’s cost pressure across the entire chain: builder, distributor, manufacturer, etc. Labor costs, energy costs, those things haven’t necessarily come down. So people are still wrestling with those things.

Zach Elkin, Beko: What really caught me by surprise was parts—not finished goods, but parts is the place where we definitely struggled in 2022. As a result of that, we’ve quadrupled our parts inventory. And we brought on executive talent from the industry who knows that business inside and out.

Jeff Curler, Orgill: We still have some challenges. The three main factors are climbing prices on raw materials — that still exists, though it has certainly improved. Transportation, which has improved as well. And the third factor is labor.

On investing through the challenges

Jeff Kinnaird, Home Depot: We’ve also invested throughout the pandemic and throughout the challenge. We’ve opened, or will open, close to 150 supply chain facilities—that really is part of managing our delivery account. We’ll accomplish that with some additional work taking place in 2023 and 2024.

Shawn Oldenhoff, Kohler: We made sure we didn’t stop investing. I think that was a critical part as you’ll see us continuing our new product development, what we’re launching and what we’re excited to launch. You need to continue to build that vitality in your portfolio for the future.

Zach Elkin, Beko: We tripled our space at our main distribution center in

Chicago. We’ve added distribution centers in Florida. We’ve added distribution centers in Texas. And we expanded our New Jersey distribution center.

On what’s next

Shawn Oldenhoff, Kohler: We’re a global company. We pride ourselves in being global. We will continue to work with my global counterparts around the world, fulfilling the needs we have here in North America. But I have to keep investing in North America, because I need that shorter lead time. I need to have that stability in the marketplace. We’ll continue to invest in several plants here in North America for some of our highest volume products and some of our specialty products as well.

Joe Barnes: I’m a big fan of getting the right people in the right seats, so we tend to focus there as well. I spend probably 50% of my time just on people, and coaching and getting people on board.

Zach Elkin, Beko: we feel that healthy living is only possible on a healthy planet. So we are 100% focused on manufacturing in that particular manner.

Jim Inglis, moderator: I’ll throw my two cents in. The future is omni channel not Amazon.

Jeff Kinnaird, Home Depot: There is just an enormous opportunity we have in this industry for more growth.