Mass crrstomizatton ofthe backyafrd

By Martin Grohman Correct Buildine Products

fN THE time-honored words of lPeter Drucker. "lf an economic trend is going to bring value to the consumer, it is going to happen whether we like it or not."

A successful distributor or manufacturer must be aware of such evolving trends and be able to evolve right along with them. For those of us in the decking and railing industry, that evolution is toward high-end decks, starting to be seen as an outdoor extension of the house. Today's educated customers want a customized relaxation area personalized to suit their tastes and to blend in (and occasionally to stand out) with the aesthetic of the neighborhood.

Subtle design cues in the railing integrate the deck with the house, look inviting from the street, and add value to the project. For example, if the railing matches the house trim, then the deck and railing look "of a piece." In fact, when you consider the best way to customize a deck, the railing is probably the best place to start. This building system is vital to providing safety and security, yet at the same time offers an opportunity to be creative and unique with less labor, less effort, and similar product cost.

It's interesting-when customizing or personalizing their space, it would be very unusual for decking customers to mix brands of decking. Would you mix ip6 with composite, or CorrectDeck with Trex, for example? But there is no such barrier when it comes to mixing brands in railings; many of our customers mix as many as four brands within one railing section. In many cases, post caps, balusters, posts and handrails each come from different manufacturers.

As a manufacturer, we would like to maximize revenue per deck. If people are choosing to buy their balusters from somebody else, we're leaving some money on the table, plus we're making it harder for the customer than it has to be. So the question is, could a manufacturer, in partnership with a distributor, really provide a custompersonalized railing for every deck? Can we really deliver that? If so, mass customization may be the answer.

Mass customization refers to the development of a meaningful number of consumer options, within a well defined space in which said options can be quickly delivered. As a result, the costs and delivery time are controlled, yet a large number of options within that well defined space are available. Customers are able to combine options in a variety of ways that suit their personal taste yet stay within the realm the manufacturer and distributor have defined.

Confused yet? Well, think about the menu at Starbucks. How many choices do you think you have? It feels like you can get anything you want. And that's how you're supposed to feel. But actually, you can only get about six combinations of items. Coffee (three types) x milk x flavor shots (five types) plus steam = a feeling of hundreds of choices and limitless options-yet the provider has the possibility to deliver your choice quickly and efficiently. The options list is "deep and narrow," but has been designed in such a way that you feel the depth, but not the narrowness. It is, essentially, a system by which a large number of options within a targeted market segment can be chosen by the consumer and costeffectively delivered by the provider.

This means some interesting things for the supply chain. We all know no dealer wants to deal with the hassle of maintaining a product line with a large number of SKUs and a huge amount of stock. They have challenges of their own, and keeping low inventory is one of the ways they address risk in their business. Often, dealers have multiple product lines vying for space in a single inadequate warehouse. They don't have the space, the pure acreage that most distributors have, since to be successful they have to be located in a high-traffic area where space is expensive.

For dealers, the risk of dead-end inventory is real. They'll say, "I don't want to tie up $20,000 in railing parts." Old building products don't spoil like food, but they might as well. They get dirty, they get fork stabs, they take up rack space, they go out of style, and they end up as writeoffs at the bargain barn. A dealer would rather not so throueh all this for a product that has too many options and could be a dead-ender. So a mass-custornized railing program would make sense for today's retail dealer, who would just have to keep a few popular kits in stock and possibly a large display or even an electronic kiosk.

At Correct, we are going to offer individually boxed pick-and-pack railing systems. The flow is as simple as this: a dealer first takes a display that shows all of our options. We then will receive the orders, and pick, pack and ship them, direct to the desired point in the channel.

This, of course, is not our idea, or even a new idea, but we think it is the right idea! A real innovator in mass customization has been Maine Ornamental Woodworkers. At a given retailer, very few post caps are in stock; but the display has an order form on it. The customer checks boxes on the order form, gives it to the dealer, pays for it, and the product is shipped via UPS direct to the jobsite.

Another good example is Universal Forest Products' Xpress Ship boxed railing program, which is similar to ours. Any item that is marked on the distributor's price list with the Xpress Ship logo can be shipped and individually boxed, within 48 hours.

WLat role cern a distributor play in all this?

Firstly, for mass customization to work, the consumer has to have awareness-people have to know the options exist. The selling model that exists today may not be well suited for a mass customized railing package. Better would be more of a design center or showroom sales model, where people can see products firsthand and envision how they're going to look on their home. Some two-step specialty forest products distributors have opened showrooms in easily accessible mini-malls, where contractors can host potential clients and review options. Contractors, who often do not have offices appropriate for hosting client meetings, especially appreciate a conference room they can reserve.

The trend toward customized, personalized spaces actually adds value to distributing, because distributors are the experts on where to source items. And distributors can train counter help on what options are available and how to sell them, tightening relationships through the channel. Outdoor living is not sold the same way as plain old decking. The approach should be more like a kitchen design center, with many options presented and represented, and available via distribution to order.

A customer can also be educated on the customizable features of a product through interactive virtual design tools on a product manufacturer or distributor's website. Many companies, including RDI, have a "style generator" or "drag and drop" feature on their websites to allow a customer to create and visualize the style of product they want, all in the privacy of their own home. Often, this type of interaction eases the anxiety of getting started on a project by allowing the customer to become more familiar with product choices.

Is this trend being driven by China?

Certainly many of the products that have led the railing design revolution are made in China. For the most part, the decking itself isn't made in China, but many, if not most, of the balusters and post caps that we sell into the channel are. People think China is cheap, but what it mostly is, is fast. New products are readied for the marketplace at unheard-of speeds.

All the factories are in one placea microchip company right next to an injection molding company right next to a steel company right next to a tooling shop. If you have the right contacts and existing relationships and you want a market-ready prototype in one week, it can be done. And the cost of tooling is so low that you can commercialize with little risk, meaning you can take some fliers with your designs.

One might think that the success of China is attributed to automation, yet this is not always the case. Automation is the enemy of flexibility, and Chinese producers use it sparingly, and only when very high precision is needed. If you have a factory where all you do is push a button to start it up and it runs itself, it doesn't really matter where in the world it is; close to the market would be best. If you want to have a large measure of flexibility and desire to reconfigure production lines daily to make small custom orders, that's China both culturally and economically. There's a culture of putting instructions at the job station, a distinctly un-American willingness to perform rote tasks, and, of course, there's low-cost labor. But my point is, there's a lot more to China than just low cost-it's high speed.

Chinese companies aren't big brand names, like in Japan or Korea. There isno Sony, Mitsubishi, Samsung or Daihatsu. There are hundreds of small companies. It's very entrepreneurial, but it's also very hard to work with. There are very few Chinese brands, and those that we know, like Lenovo, were purchased from American companies. This provides opportunity for an American company that has good distribution, market sense, and branding expertise.

I am not trying to imply that a manufacturer or distributor needs to import all its materials from China, but if you need that solar cup holder to complete your product line, I submit that you should consider going to China yourself, sourcing it, making sure it meets your expectations and those of your customers, and introducing it to your distribution network under your brand. Customers tend to be extremely brand-loyal, and a distributor fares much better with recognized, branded products. It's one more thing you can bring to bear on the mass customization of the backyard- sourcing targeted accessories and tools that make sense for your regional deck market.

Does nrix tnt match railine cause code problems?

Oddly, the approach generally doesn't cause code problems. Inspectors tend to review single manufacturers' systems closely, but if multiple manufacturers are represented, particularly if the shapes involved are conventional lumber shapes, they let it go. So the answer is that code approval does not seem to be an issue, although in my opinion it probably should be.

So what does dl this mea^n?

I think it means different things for different points in the channel. Distributors should look at opportunities within their marketplace for those products that are perhaps regionally important, focus on their own product development, and, instead of asking, "Why doesn't somebody make the product I need?," collect their own resources and work to develop the product themselves. Manufacturers should refine their product offerings to represent a desirable array of railing product choices that can be integrated into a program that can be shipped easily and delivered quickly.

Retailers should consider the selling model for railings and be flexible with their approach.

In summary, my premise is that you should increase the number of SKUs you carry. Don't you wish you had more? No? Well, I say, give me 1,000 SKUs if they turn and earn. I think mass customization of a railing program can provide that, if properly planned and managed. The sales opportunities are real, and the trend can be managed into something positive for your business. Outdoor living is not sold the same way as decking. Today's consumer wants choices and knows that in this market, what one company can not provide, another will. We as an industry can take advantage of and benefit from the trend towards personalized outdoor living spaces.

- Martin Grohman is president of Correct Building Products, Biddeford, Me. He can be reached at mgrohman@ correctbp.com. Assistance with this article was provided by contractor Dave Lombardo, American Deck; Dick Gauthier, Universal Forest Products; Pat Burns, Trex; Carol Lyn Groce, Railing Dynamics, Inc., and www.mass-customization.de.

Beyond the Slump, Dealers Look Outside

Looking beyond the current housing downturn, dealers may find that outside will be the in thing for remodelers over the next 10 years, according to Gopal Ahluwalia, NAHB's v.p. for research.

Ahluwalia based his findings on preferences among new home buyers. "What comes in new homes eventually trickles down to the existing stock, where most of remodeling actually is," he said.

Survey research focused on designers, architects, marketers and builders, for both average and upscale homes.

Among the outside features that are expected to increase new-home sales over the coming decade and increasingly generate remodeling projects:

. Barbecue grills and outdoor kitchens are important features for l87o of average home buyers and 7l%o for upscale homes.

Outdoor fireplaces are of critical importance in only 9Va of average homes, but in 65Vo of more luxurious homes.

Asked about outside kitchen features, l5Vo said sinks are important for average home buyers, but a requirement for 76Vo of larger homes. Other needs for average and upscale homes, respectively, were: refrigerators, l3%o and 60Vo; cooking islands, l2%o and 587o, and beer dispensers/wine coolers, 6Vo and 4TVo.While there is a large difference between demand for these outdoor features among average and luxury buyers, "demand for outside livine and kitchens will be huge," Ahluwalia predicted.

On demand for outside room features, those surveyed reported several that are a veritable must for upper market buyers while registering some importance among more typical buyers. The findings, reported for average and upscale homes, respectively, were: decking/patio covers/ enclosures, 287o and 78Vo; outdoor lighting,267o and 74Vo; pools/spas, lTVo and 73Vo: outdoor audio/TV equipment, 167o and TOVo; decontive water features, lOVo and 577o; portable patio heating,6Vo and 317o, and built-in patio heating, 3Vo and 27 Vo.

Demand for standard outdoor features was strong, with minimal difference between the two groups of buyers. A front porch was desired in 7O7o of average homes and 79Vo of upscale homes; a patio by 61Vo andT6Vo; a deck, 427o and 6lVo, and a rear porch, 24Vo and '797o. Cunently, only 467o of new homes have decks, Ahluwalia said.

Three-quarters of the remodelers he surveyed reported an increase in their volume of outdoor work compared to the previous year, and 44Vo said that outdoor jobs had picked up over the past five years.

Of those who worked on outdoor remodeling projects, the most common jobs were: deck, 52Vo; porch, 35Vo; patio,2TVo; front porch, 25Vo; decking/patio covers/enclosures, 22Vo; outdoor lightirg,l3%o; outdoor kitchen, I3Vo, and outdoor fixed fireplace, lOVo

The U.S. Census Bureau reported that $2.5 billion was spent last year on decks.