BMHC absorbs SelectBuild, closes locations: Company seeks better inventory management, buying power

When BMHC launched its SelectBuild division in June 2006, the San Francisco-based pro dealer was coming off a quarter where revenues from contractor services totaled $560 million, double the previous year’s figures. Under the BMC Construction banner, the company had acquired a number of local installation companies and could provide builders with estimating and engineering services, framing, electrical, plumbing, concrete and stucco work.

“We had various [installers] working on job sites, all wearing different shirts,” said Mike Mahre, SelectBuild president and CEO, in a 2006 interview with Home Channel News. Unlike traditional lumberyards that offer installation, SelectBuild operated like a general contractor. “We are product neutral,” Mahre explained. “We’ll install anyone’s product.”

In another break with convention, SelectBuild handled its own distribution, procurement and manufacturing needs, separate from BMC West. It served 17 of the nation’s top 25 production builders, and when their fortunes fell, so did SelectBuild’s. By the first quarter of 2007, sales were down 43 percent. An activist shareholder named Robert Chapman began lobbying to sell off the SelectBuild division.

BMHC resisted Chapman’s demands—including one that urged chairman and CEO Robert Mell or to resign—but began a series of layoffs at SelectBuild, including a 2,700 head count reduction in the last quarter of 2007. But even that was not enough. SelectBuild ended the year with a loss of $335,279.

By May 1, Mike Mahre had left the company. On May 12, BMHC announced that it was integrating SelectBuild and BMC West into one entity, streamlining operations and realigning divisions. The company plans to consolidate back-office functions like IT support, accounting, payroll and human relations. Instead of 13 divisions covering 22 markets, BMHC is moving forward with seven geographic regions.

BMHC executives say they are sifting through all their locations to determine which ones to keep open, close or consolidate. The company did estimate, however, a loss of 2,000 employees and $555 million in annual sales from units identified for potential closure or consolidation.

Although no formal announcement was made, BMHC is pulling out of the Mid-Atlantic region, where SelectBuild provided framing services for home builders in Delaware, Maryland and Virginia. BMHC entered the market in 2003 with the purchase of ANM Carpentry in Stafford, Va. The company did announce its intention to shut down its framing and concrete services in Tucson, Ariz., and close its lumberyards and millwork facilities in Merced and Bakersfield, Calif.

For BMHC, the new consolidated platform provides an opportunity to cross-sell customers and maximize their buying power.

“[We’ll] be able to go to our major customers throughout the country and offer them a unified sales program,” said company president and chief operating officer Stan Wilson, speaking to investors on May 12. “Whether it be some pricing things [or] some service things, [we can] really tie ourselves together as a single strategy.”

Mellor, the company’s CEO talked about the advantages of having all of SelectBuild’s and BMC West’s distribution centers in one supply chain, available to BMHC’s customers. Mellor also discussed the “philosophical difference” between BMC West and SelectBuild when it came to inventory management.

“We will develop a sharper focus on SelectBuild’s inventory management to create a more fluid system with higher turnover, modeled on the proven inventory management systems and procedures used at BMC West,” Mellor said. “Our SelectBuild field operations will be able to focus more fully on operations and customer service.”