As an industry veteran who has attended BCMC for many decades, I’m very pleased to be presenting an educational session on Tuesday, September 19th at 1:00 pm — Component Manufacturing Should Not Be Operated as an LBM Supplier.
In this session, I will call upon my 20 years of consulting services experience to share how component manufacturers can increase their profitability by correctly relating their operations to work minutes. In addition, I’ll address overall workforce development and how to attract, retain, and incentivize today’s employee pool.
Did you realize how different Lumber Building Material Supplier (LBM) and Wood Component Manufacturer (CM) operations are and that they should not be managed by the same methods? The management of the personnel, accounting, and other processes of CM operation is not and should not be managed with the same methodologies as an LBM. Regardless of whether a CM operation is tied to an LBM, too many CM operations operate as if they are an LBM, such as manufacturing and selling the wood trusses like lumber units. There is a considerable difference between selling a unit of lumber and manufactured wood trusses.
Food for thought:
- Independently owned CM locations average 10 net profit points more than LBM-owned CM locations.
- LBM operators often will state that they will sacrifice a few net profit points to capture additional sales of an entire project. However, their actual loss of what they perceive as a few points is inaccurate and is typically far higher than what they supposedly gained.
- Approximately 50% of CM operations owned by LBM companies have an abysmal and contested relationship between the LBM sales personnel and the CM operations, even after many years of operations.
Quote by a former owner of seventeen LBM locations with two CM locations:
“The CM comprised only 10% of the overall sales yet contributed about 30% of overall net profits. What the heck were we thinking about for our resources for the most bang for the buck? We were far too focused on what we were comfortable with, which were lumber sales, not the more profitable component manufacturing sales.” Mark Manis, former owner of Wheelers in GA
Some interesting statistics:
- CM operations with a high employee turnover are operating at about 60% of their capacity.
- High turnover translates to having approximately 1/3rd of employees with 3 years or more experience, 1/3rd having 1 to 3 years, and the last 1/3rd is continuous turnover.
- High turnover will result in the loss of sales and net profits. Too many believe that more equipment is needed to solve all other ills that are actually a result of poorly trained and understaffed personnel.
- CM operations with poor employee practices are usually 10 net profit points below the prevailing market industry net profit averages, and those with the best employee practices are 10 net profit points above the general market industry net profit averages.
During this presentation, we will discuss what should be industry norms but are not. If your group is willing to walk down this path to information that may be new to you, then you may see your business in a whole new light.
Work Minutes — When work minutes offer better pricing, scheduling, and effective incentive programs, why would you want to use other measurement units that are so inaccurate and provide a false measurement for wood trusses?
Employee Demographics — Why are employee issues so different, and what can or must be done differently?
Additional Considerations — Related topics will be included, such as why Just-In-Time is the number one lean tool that is misunderstood and misapplied.
Q&A Session — Time permitting, we’ll conclude with Q&A, including what is new in the industry that people should know.
I hope to see you and your group this year at the BCMC show in Indianapolis, IN, on the 19th at 1:00 pm. And once you are on the exhibitor show floor, please drop by booth #905.
If you and your team wish to achieve more in less time, then there is no one better at providing your team with proven results for process improvement of employee practices, pricing, truss labor estimation, and so many other best-in-class practices. TDC’s tailored solutions are for the client’s specific needs. Go beyond the typical software and equipment vendor recommendations for your operations and do what many have dared to do. Embrace the Drummond Method, and your company can experience cost savings, and net profit gains that usually take months or years can be accomplished in weeks or months, resulting in an average of 3 to 6-point net profit gains for CMs. All areas are addressed, not just the manufacturing. Please do not take my word for TDC’s services, though. Read the public testimonials many current and past clients with decades of expertise and experience have been willing to give: https://todd-drummond.com/testimonials/.
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