Date: 2011-03-08
Wood products distributors are adjusting to the slow market by trying to serve manufacturers different.
Timber Products reported changes it has seen in industrial distribution.
The economic downturn has affected all parts of the wood products industry, including industrial distribution. Timber Products Co., identified some of these issues in its recent newsletter, and described how many distributors have changed their business models in order to stay in business. According to Timber Products, these are the major trends in the distribution marketplace:
Low inventory levels. Industrial distributors have reduced their inventories to the lowest possible level while meeting the needs of their customer base. These companies are trying to preserve cash while maximizing inventory turns.
According to Timber Products, when an order is received from a distributor it typically means that they are close to being out of stock on some items. There is a greater sense of urgency to get customer orders shipped in the time frame required.
Focus on quality. Quality has taken on a new meeting. Wood product manufacturers are not as busy as they were a few years ago, so they have time to carefully inspect all raw materials that come in. With lower profit margins, manufacturers are unable to process raw materials that are not to spec. Likewise, distributors don’t have any tolerance for off-grade materials.
Mixed loads. With lower inventories, distributors are placing orders from materials suppliers that can be mixed on a truck or rail car. Receiving mixed loads has gone from being a good option to being a necessity for many distributors. Lower sales volume has also led to distributors ordering less than full loads.
Credit issues. Timber Products reports that distributors around the country are spending more time collecting money from their customers and in managing the credit portion of their business. There are more bad debts. Distributors are balancing sales goals with selling to customers that may not have good credit or are slow to pay.
New distributor entrants. In the current economy, new companies have entered the wood products market. These distributors may have focused on hardware, laminates or accessories and have sought to add wood products to offset sales declines in their primary product area. Those companies that have taken the time to learn about wood products and recognize the differences in product area are the ones that have done the best.
Partnerships and attitude. Distributors that are truly committed to partnering with their end-use customers are the ones that have the advantage in the market today. The quality and value of partnerships is tested these days. According to Timber Products’ observations, many of the distributors that are doing relatively well today (a number of their distributors have sales that are up) are the ones that have a positive attitude, whether that means making an extra sales call or going the extra distance for a customer.
Updated: Sep 11, 2011