Builder & lumberyard collaboration

Lumberyards are critical suppliers to the home-building industry. With escalating building material prices and labor shortages, builders are looking for more collaboration with their lumberyards. I recently had an opportunity to speak on a panel with executive management from two lumberyards. The audience of home builders was genuinely interested in collaboration.

Lumberyards are critical suppliers to the home-building industry. With escalating building material prices and labor shortages, builders are looking for more collaboration with their lumberyards. I recently had an opportunity to speak on a panel with executive management from two lumberyards. The audience of home builders was genuinely interested in collaboration.



True collaboration is working together to minimize each other’s cost and maximize opportunities for both parties. It is a working relationship based on trust. I once had a full-time employee from a lumberyard embedded in my architectural team. Each time we designed a new plan or revised an existing one, the team member would assist us in value engineering the plan. He would provide us with feedback on how the plan could be designed differently to minimize costs as it related to panels, trusses and lumber efficiency. I was not solely focused on the price of a 2x4. Sure, that is important, but minimizing the amount of scrap 2x4s left over from a job was also important — as was cycle time, warranty expenses and jobsite efficiency.



Collaboration between builders and lumberyards must focus on cost instead of price. Price is what you pay for something, and cost is the price plus everything else associated with the decision to purchase a given product from a particular supplier.



Consider scenario A: A builder purchases a framing pack from the lowest of three unqualified bids. The delivery is late, quantities are short, material quality is poor, and the lumberyard popped the curb with its delivery truck at the community entrance, leaving considerable damage to the sod and sprinkler system.



In this example, the cost would be the price of the framing package plus the variance cost for the framing crew (to sort through poor quality lumber and return to the jobsite to finish the job), cost to repair the community entrance and other indirect costs.



Now consider scenario B: Key members of a builder’s management team sit down at a meeting with members of the lumberyard’s management team. The builder shares projected starts at a community level with the lumberyard. They review goals to further reduce fill-in deliveries. The lumberyard compliments the builder on the progress made and agrees to share in the efficiency savings. They review the most recent Random Lengths report and agree on next month’s lumber price. The lumberyard shares what it sees coming down the pike in manufacturing price increases. The builder commits to and the lumberyard agrees to stock a forward buy of material in advance of the increase. The builder shares how its estimator quit, leaving them shorthanded. The lumberyard gives the builder the contact information for the firm that it uses to outsource other builder’s material takeoff requests. The meeting is completed by a review of new products and alternative products that will help the builder, who needs to reduce costs to stimulate sales.



There are many ways in which home builders can collaborate with their lumberyards. But as Van Isley, chairman and CEO at Professional Builders Supply, put it, “Collaboration starts with a change in mind-set.” Isley further stated that, “Both parties have to go from adversarial to cooperative.” Builders can keep their costs down by paying within terms, making sure the jobsite is ready for the delivery, minimizing “hotshot” deliveries and fill-in orders, and other strategies. However, these are not the mainstream methodologies. Lumberyards need to help builders understand the value of a collaborative approach.



Tony Callahan is managing partner of Callahan Consulting Group in Kennesaw, Georgia. Visit callahanconsultinggroup.com. His email address is [email protected].