Hardware & Building Supply Dealer - January 2019 by ensembleiq

JANUARY 2019

Vol. 45 No. 1

Taylor Baker Foothills Hardware & Builders Supply North Carolina

“Orgill offers a full selection of high-quality products, which makes it easy to provide my customers with exactly what they need.”

All The Products We Need Orgill’s Inventory Selection Keeps Our Shelves Fully Stocked!

Why We We Like Working With With Orgill: Orgill: • Strong vendor partnerships partnerships • Broad product selection selection • Strong retail programs that help us improve our store

Watch the video to learn about the partnership between Orgill and Foothills Hardware!

1-800-347-2860 1-800-347-2860 ext. ext. 5373 5373 •• information@orgill.com information@orgill.com •• www.orgill.com www.orgill.com

HBSDEALER HARDWARE + BUILDING SUPPLY

invests in 9 Lowe’s direct fulfillment.

NEWS & ANALYSIS 9 Lowe’s and the speed of logistics 10 Fighting fire with a farm bill 12 News Map: Openings, closings and acquisitions

COVER STORY TEAM BUILDING AT BMC An in-depth look at the culture and the playbook of a market leader.

14 Building a Dream Team 16 Letter from the CEO 18 A culture provides an edge 20 Q&A with a “servant”

salesman

MARKET INSIGHTS 32 Addressing and avoiding sexual

harassment: notes from the CEO of the Network of Executive Women.

34 Quikrete Industry Dashboard. Most stocks on the Roundup finished the year lower. Some finished much lower. A J.C. LICHT 30 INSIDE EXPERIMENT

The commercial paint specialist seizes a retail opportunity in Chicago.

22 Experience meets innovation

24 Postcard from Pacific Northwest

26 BMC’s blueprint for growth head start on the 2019 28 Aoutdoor living season. Shown here, the Yard Force pressure washer

FROM THE EDITOR 8 Highlights from the

cutting-room floor

Hardware + Building Supply Dealer (ISSN 2376-5852) is published monthly, except for July/August and November/December, which are double issues, by EnsembleIQ, 8550 W. Bryn Mawr Ave., Suite 200, Chicago, IL 60631. Subscription rate: $119 per year in the United States; $139 in Canada and Mexico; $279 in all other countries (air mail only). Periodical postage paid at Chicago,IL, and additional mailing offices. POSTMASTER: Please send address changes to HBSD, Circulation Fulfillment Director, P.O. Box 3200, Northbrook, IL 60065-3200. Subscription changes also may be emailed to hbsdealer@omeda.com, or call 847-564-1468. Canada Post: Publications Mail Agreement #40612608. Canada Returns to be sent to Bleuchip International, P.O. Box 25542, London, ON N6C 6B2. For change of address, six weeks notice to Hardware+Building Supply Dealer, P.O. Box 3200, Northbrook, IL 60065-3200 is requested. Give old and new address and zip code. If possible, enclose address portion from cover on previous issue. Vol. 45, No. 1, January 2019. Copyright © 2018 by EnsembleIQ. All rights reserved.

JANUARY 2019 HARDWARE + BUILDING SUPPLY DEALER

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BRANDS YOU KNOW PRODUCTS YOU TRUST SOLUTIONS THAT PERFORM MiTek structural connection brands and building software are designed, engineered and manufactured to help you waste less time, labor, material and money. Our better technology products and solutions will help control your construction process, reduce framing labor costs and speed up cycle times.

HERE’S WHAT’S ONLINE

People in the News

It’s a people business. That’s why HBSDealer tracks all the leadership moves in the hardware and building supply industry. Recent headlines include the following changes: Joe Covert, formerly with Restoration Hardware, joined Petaluma, Calif.based Friedman’s as VP of merchandising.

Product Central, Delivered Daily HBSDealer’s Daily Newsletter continues to feature a mini-roundup of the latest time-saving, margin-boosting or trafficgenerating products — including those shown here. New this year: Product Central is brought to you by the National Hardware Show, coming to Las Vegas May 7-9, 2019. Visit nationalhardwareshow.com for more. SPONSORED BY

San Marcos, Texasbased McCoy’s Building Supply promoted Megan McCoy Jones to president and COO.

Masonite’s Fred Lynch will retire as president and CEO by the end of the second quarter of 2019. He held the position for 12 years.

Mike Ter Molen, a 17-year veteran with Do it Best Corp., was named director of LBM operations for the Fort Wayne, Ind.-based co-op.

For more details on these and other executive moves, visit HBSdealer.com.

Calling All All-Stars Fifty retailers — one from each state — will again be recognized in the upcoming annual All Star Issue of HBSDealer. If you know a hardware or building supply dealer that performs like an All Star, let us know at kclark@ensembleiq.com. And check out the class of 2018 in our digital issue archives, May 2018.

HBSDealer Daily Newsletter: Features Every Day The HBSDealer Daily Newsletter, the industry’s leading news source, features news, analysis, videos and commentary — plus these regular, weekly features. Sign up to receive your daily news at hbsdealer.com.

Monday

Tuesday

Wednesday

Thursday

Friday

Quikrete Industry Dashboard

HBSDealer Poll Question

RISI Crow’s Market Recap

Throwback Thursday

Eye on Retail

Participate in a new poll question each week on HBSDealer.com

JANUARY 2019 HARDWARE + BUILDING SUPPLY DEALER

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FROM THE EDITOR

The Right Stuff When there’s good material on the cutting-room floor, that’s a sign that you’ve got something fit to print. Consider our BMC Special Report and cover story. HBSDealer made the most of our unprecedented access to the people who run this market leader. But for the sake of space and getto-the-point continuity, we couldn’t include everything. Here’s a highlight reel of edited material: • We had to cut this quote about health-care benefits: “We felt very strongly that we wanted to give back to our associates wherever possible, and we put our money where our mouth is,” said Senior VP of Human Resources Mike Farmer. While conventional wisdom holds that American workers are paying more for less, BMC turned that equation on its head in 2018. The company reduced its deductibles and improved its plans. “As a company, we decided even though our benefits were already close to best in class, we wanted to continue to ensure that our associates have good health care programs and benefits to take care of their families.” • Here’s another wellness-related quote that didn’t make it into the main section: “Our safety incidents are down over 30% on a year-over-year basis,” said COO Mike McGaugh. “That’s 200 fewer people hurt and that’s because the trash is taken out, stuff is labeled, and the work place looks fantastic.” • Then there’s the story of BMC’s relationship with the Leukemia & Lym-

phoma Society. More than 1,000 BMC associates participated in LLS “Light the Night Walk” fundraisers last year. Thousands more made donations to the cause. BMC helped raise $661,950 on behalf of LLS in 2018, and has helped raise more than $3 million since 2011. Many in the company have seen team mates fall to cancer, and BMC has embraced the LLS as a rallying point. “It’s a passion point for people who have been in the company for a long time,” said CEO David Flitman. “They take it seriously.”

More than 1,000 BMC associates participated in LLS Light the Night Walk fundraisers last year. • Also absent from the final report are details about one executive’s motorsports odyssey. BMC National VP of Millwork Paul Evans’ passion for racing brought him to an island off the Western coast of Africa in the Gulf of Guinea. That’s where he had high hopes of finishing in the money in a rally up and down the side of a volcano. “When I got there, I learned I had to drive a car with right-hand drive,” he said, in a quote that didn’t make the final cut. “That means I had to shift with my left hand.” (Evans finished a respectable, but disappointing,14th-place.) And that’s just some of the stuff that didn’t make it. The stuff that made it begins on page 14.

HBSDEALER HARDWARE + BUILDING SUPPLY

Hardware + Building Supply Dealer An EnsembleIQ Publication 8550 W. Bryn Mawr Ave., Suite 200, Chicago, IL 60631 hbsdealer.com HBSDealer On The Web • HBSDealer Info Services SENIOR VICE PRESIDENT (HBSDealer, Drug Store News, Chain Store Age) John Kenlon, jkenlon@ensembleiq.com, 212-756-5238 EDITOR IN CHIEF Ken Clark kclark@ensembleiq.com, 212-756-5139 LBM EDITOR Andy Carlo acarlo@ensembleiq.com, 845-891-5108 CONTRIBUTING EDITOR Ken Ryan ryankgr@aol.com, 516-567-3034 Editorial Inquiries: Direct questions to Editor in Chief Ken Clark. ADVERTISING SALES

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Ken Clark Editor in Chief

JANUARY 2019 HARDWARE + BUILDING SUPPLY DEALER

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NEWS + ANALYSIS

Picking up the Pace of Packages One small package for a customer sent out last month from Lowe’s new direct fulfillment center is being described as a significant leap forward for Lowe’s distribution network. Lowe’s CEO Marvin Ellison and the company’s new executive VP Supply Chain Don Frieson were on hand at the opening of the Coopertown, Tenn., direct fulfillment center, and even posed with the package — destined for a customer in Ohio, and the first to roll out of the 1.1 million square foot facility. Lowe’s opened its new direct fulfillment center last month in Coopertown, Tenn., a facility that represents a $150 million investment, the company said. “This is the most technologically advanced supply chain facility that Lowe’s has ever operated,” Frieson told HBSDealer in an e-mail. “It uses state-of-the-art automation. The technology and processes in this facility, along with its central location,

enable us to operate more efficiently, ship faster to our customers and stores, and be more responsive. It allows us to offer customer more delivery options and more products online.” Part of the special abilities of the DFC is the goods-to-person picking technology that reduces the walking time for the facility’s employees through highly automated moving conveyors and totes. Such high-efficiency systems are increasingly important in today’s fast-paced retail environment, he said. The facility has the ability to efficiently ship parcel packages directly to customers, and also service stores and regional distribution centers. “Our success both today and in the future depends on our ability to get product in the hands of customers quickly,” he said. “Every minute counts once a customer places an order. Our focus with this facility and across our fulfillment channels is to continue to improve delivery and serve customers faster and more efficiently.” It will be a few years before the facility reaches peak efficiency. It currently employs 200 people. That number is expected to swell to 600 by 2023, when the DFC becomes fully Frieson, left, and Ellison made their mark on Coopertown, Tenn. operational.

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US LBM’s Maine Event U.S. LBM Holdings now has 5 locations throughout Maine, thanks to the acquisition of three-unit Deering Lumber based in Biddeford, Maine. Founded in 1866, Deering Lumber serves custom home builders and remodelers across southern and coastal regions of the state along with the neighboring New Hampshire coastline. It will continue to be led by President C.D. Armstrong. In 2014, US LBM acquired Wallboard Supply Company, which operates two locations in Maine, and three others in nearby states. “A strong customer base, diverse product offering and team focused on customer relationships make Deering Lumber an ideal addition to our family of companies,” said U.S. LBM President and CEO L.T. Gibson. “By adding a market leader in Deering Lumber, we’re expanding our reach and customer base in the coastal New England residential construction and renovation market.” Based in Buffalo Grove, Ill., U.S. LBM operates more than 240 locations nationally and had sales of $3.1 billion last year.

HARDWARE + BUILDING SUPPLY DEALER JANUARY 2019

NEWS + ANALYSIS

Fighting Fire with a Farm Bill Devastating California wild fires in 2018 put the heat on reform measures and spur the industry to lend a helping hand. By Andy Carlo The passing of a new farm bill — the Agriculture Improvement Act — might be an important step toward deterring future massive wildfires that have plagued California in recent years. But a key to the effectiveness of the legislation could be how thoroughly the reformation is actually carried out. Approved by both the House and Senate, and signed into law by President Donald Trump in December, the legislation primarily provides $867 billion in aid to U.S. farmers. Priorities for the LBM industry are included as well, including the reform of federal forest management practices. Promoting mass timber construction and ensuring fairness in the federal purchasing of forest building products are also included. The legislation extends Good Neighbor Authority by allowing the U.S. Forest Service to enter into agreements with county governments. Under prior law, only state governments could enter into agreements to perform forest management services on National Forest System lands. Experts within the state have argued that California has been negligent in its forest practices, allowing them to become overgrown, unkept, and easily susceptible to the spreading of fires. The untamed growth, along with dead trees, branches and brush act as a natural fuel for spreading wildfires. In fact, according to the United States Forest Service, California reached a

record level of 129 million dead trees in 2017 across 8.9 million acres. The most recent estimate from CoreLogic, the provider of residential and commercial real estate information, value total losses from the Camp Fire in Northern California between $11 billion and $13 billion, while loses from the Woolsey Fire in Southern California are an additional $4 billion to $6 billion. A late December estimate from the California Insurance Commissioner’s Office places the damage at $9 billion and includes the Hill Fire that burned more than 4,500 acres in Ventura County. The office said the estimate was based on more than 28,000 claims filed. “The devastating wildfires of 2018

JANUARY 2019 HARDWARE + BUILDING SUPPLY DEALER

were the deadliest and most destructive wildfire catastrophes in California’s history,” said Insurance Commissioner Dave Jones. “The tragic deaths of 88 people and over $9 billion in insured losses to date are shocking numbers — behind the insured loss numbers are thousands of people who’ve been traumatized by unfathomable loss.” Some within the industry have pointed to the practices of Sierra Pacific Industries (SPI) as a model for how forestry can be properly conducted in California. The privately-held company is the second-largest U.S. lumber producer and oversees nearly 2 million acres of timberland. SPI is also the largest private landowner in California. While the company declined to

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discuss proposed forestry reform with HBSDealer, it has a strong view on managing its own land. “Fires are a part of the forest ecosystem. Plants and animals have evolved in the presence of fires but after decades of fire suppression and ‘hands-off’ management policies, public land has unnaturally dense forests, which are prone to catastrophic wildfires. These crowded forests contribute to fires that race through the crowns of the trees making them nearly impossible to fight, worsen the soil due to the higher than normal heat intensity, and unnecessarily put human lives, animal habitats and water quality at risk,” the company’s website states. “At Sierra Pacific Industries (SPI), we use modern forest management techniques to reduce the risk of wildfire without damaging the health of the forest. The key to effective fire prevention is removal of dry brush and careful thinning of overgrown forests.” The devastation from 2018’s fires prompted quick response within the LBM Industry, particularly from the West Coast Lumber & Building Material Association (WCLBMA). Through its “Lumber Helping Lumber”

“The key to effective fire prevention is removal of dry brush and careful thinning of overgrown forests.” — Sierra Pacific Industries

program, the Sacramento, Calif.-based association raised more than $40,000, including a sizeable contribution from Weyerhaeuser. Funds were raised from more than 50 companies and individuals across the state and nation with contributions coming from as far as the East Coast and Texas. According to Ken Dunham, executive director of WCLBMA, checks were distributed to 38 families and persons in need. “It’s heartwarming what this industry does,” Dunham told HBSDealer. “I’m hearing every day about someone who has a need.” Dunham noted that there are no restrictions on how the funds are spent. “This is something to help take a little of the pressure off,” he said. Roughly 90 miles north, 9 employees

from the Meek’s Lumber location in Chico lost their homes. The neighboring town of Paradise was all but completely destroyed when the fires hit with about 27,000 people forced to evacuate. “They lost everything,” says Lance Johnson, director of training for Meek’s Lumber. Through a GoFundMe page initiated by Johnson, along with donations from vendors, customers, and fellow employees, a campaign was able to raise $52,000 for displaced employees of Meek’s. In some cases, the employees have yet to find permanent housing. “My goal is to continue raising money throughout the year to help employees with the transition,” Johnson says. “One of the biggest challenges right now is that we have employees paying for rent in Chico and also paying for their mortgage on their property, so their living expenses have doubled.” There are also employees whose insurance carriers have gone bankrupt so they are unable to collect on their losses until the state steps in. “I just want to keep this train rolling and continue to offer assistance until they get settled,” says Johnson.

News Map: Openings, Closings & Acquisitions Illustration of stores in various stages of coming and going. For more retail news, visit HBSDealer.com.

michigan

Canton

Mans Lumber and Millwork, the metro Detroit LBM dealer, has acquired Washtenaw Door & Trim, Inc., known for custom doors, moulding, stairs and hardware, greater Ann Arbor and Ypsilanti area since 1974.

texas

Midlothian San Marcos, Texas-based McCoy’s now has 88 locations. This 18,000 sq. ft. store and drive through lumberyard is its closest location to the Dallas-Fort Worth metro market.

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connecticut OPENING

CLOSING

ACQUISITION

Stafford

Aubuchon Hardware, which will celebrate 111 years in business in February, opened its 103rd store in Stafford, in a former First Student bus company building. An O’Reilley’s Auto Parts will open soon next door.

pennsylvania

Dallas

Luzerne County store was owned by Geise family for 37 years. Trafficaltering road construction hastened the demise of this Northeastern Pennsylvania business.

HARDWARE + BUILDING SUPPLY DEALER JANUARY 2019

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COVER STORY-BMC

BMC Builds a Dream Team

A playbook for servant leadership and a winning corporate culture

Senior VP of Human Resources Mike Farmer, center, goes to bat for associates.

BMC’s impact on the LBM industry is cover-story worthy for many reasons. Let’s count them: the strategy of expansion and acquisition; the doubledigit sales growth; the business-building innovations — perhaps illustrated best by the company’s fast-growing READY-FRAME offering, a pre-cut and pre-labeled framing program that delivers time-saving solutions to the job site. Then there’s the realization of operational synergies with the BMC, Stock Building Supply merger and the hiring of a new CEO. But when asked to talk about the company, the people who run it tend to talk first about something entirely

different — the culture. And in this regard, BMC has set an extremely high bar. “We want our people to drive to work with more excitement than when they drive home,” said COO Mike McGaugh. “You can’t have a fear-driven organization and be able to accomplish that. You need to have a performancedriven organization, one that’s focused on getting a little better every day.” How does BMC encourage that kind of commute for employees? The answer’s taken several years to cultivate, but recently, the company hit a cultural milestone during their leadership meeting in March 2018. That’s when three new

JANUARY 2019 HARDWARE + BUILDING SUPPLY DEALER

major culture-related programs were formally injected into the organization. 1. The official corporate embrace of the principles of servant leadership as outlined in the bestselling book The Servant: A Simple Story About the True Essence of Leadership. Effectively, this announcement turned the management chart upside down, with the CEO on the bottom serving the employee and the employee serving the customer on the top. Asked how he felt about being on the bottom of the inverted pyramid in a culture of servant leadership, CEO David Flitman told HBSDealer that he not only liked it, it’s one of the reasons he came to BMC in the first place. “In my view, the leader’s role is to serve the organization,” he said. “It’s to remove barriers. The leader’s role is to make sure the organization is collaborating, and we’re doing what we need to do for the customer.” 2. The introduction of the BMC Dream Team, an internal program that gets leadership in a room to vote on high-performing, over-achieving individuals to be recognized throughout the organization on a weekly basis. Honorees range from Colorado Outside Sales Rep Freddy Florez, whose enthusiasm for READY-FRAME led to the solution being affectionally dubbed “Freddy Frame” at the local level, to Office Manager Yara Gomez, who earned distinction by filling in as a truss plant manager and increasing productivity by 30% during her first two days in the interim position. (See “Dream Team Profiles”) 3. Programs one and two are subsets of a larger corporate initiative: the introduction and branding of the BMC Operating System. The operating system isn’t a piece of software that can be uploaded to a computer; rather, it’s an everevolving physical guidebook focused

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on people, process and performance. It’s described as a program that uses lean principles to identify opportunities and create best practices to improve service, increase efficiencies and remove costs from the business. Human Resources Senior VP Mike Farmer looks back at the March leadership meeting and its cultural initiatives as a significant moment for the company. “That set the tone for the year and really set the tone for our culture,” Farmer said. “We reached the point where we solidified the culture. Now we plan to build on it.” “That March meeting was a big day,” said Bert Stephens, BMC’s VP of Operational Excellence and developer of the BMC Operating System. “It energized the company. Once we introduced the operating system and unveiled servant leadership, and the training, we as a company doubled down on investing in our people and giving them the tools needed to succeed.” If printed out and placed in a binder, as it often is, the BMC Operating System runs about 120 pages. A key feature of the system is its fluidity. As the company learns, the system is updated in a continuous cycle of improvement. “If it’s not a living document, then it becomes stagnant,” he said. “And if it’s stagnant, then I don’t know why we’d be wasting our time on it.”

So, what’s in it? In developing the program, Stephens, who describes himself as a “shop rat” with a career grounded in practical application of best practices to operations, says he borrowed from Lean Six Sigma and other operating systems that guide companies such as Toyota and Ingersoll Rand. “I kind of took the best of all that was out there and tailored it for BMC,” he said. Spreading the gospel of the system are 22 specially trained BMC lean leaders. An interesting and memorable character in the BMC playbook is TIM WOODS. His name is an acronym for the eight wastes to avoid when establishing a highly efficient building material organization. For instance, T stands for Transportation waste — frontline employees are trained to identify wasted or unnecessary movement of materials from place to place. (See sidebar below) Borrowing from the lean manufacturing mindset, the operating system also promotes the five S methodology: Sort, Straighten, Sweep, Standardize and Sustain. The company added the everimportant Safety as a sixth S. Before the introduction of the formal operating system, BMC was able to do many things well. But according to Stephens, what the system brings is a way to leverage operational excellence across the organization. He draws a

comparison to winning in football. “If you’re a team with a West Coast offense, and it’s fourth and one, here’s what you do,” he said. “In the same way, we use the BMC Operating System as our playbook.” BMC executives are watching the scoreboard light up. “It’s easy to see the results of the system, and the impact is dramatic,” said McGaugh. “We’re winning more with our customers. Our service levels are higher. Our safety rates and incident rates are lower. Everybody wins with this.” DREAM TEAM PROFILE

Earl Wilson DREAM TEAM SELECTION NO. 22 Position: DPS Supervisor, Triangle, Mid-Atlantic Division

Scouting report: Oversees the largest volume facility in the triangle market. The face of the Apex, N.C., location. Strong of product and process knowledge. Notes: “His professionalism and

communication stand the test of even the most stressful/confusing situations,” said Steve Million, location manager.

“TIM WOODS” ENTERS THE LINEUP

Tim Woods is well known in six sigma performance optimization circles. He is actually an acronym for the kinds of waste that are to be avoided in any efficient-minded organization. In the BMC Operating System, the letters break down like this: TRANSPORTATION: unnecessary moving of materials INVENTORY: too much or too little MOTION: bending, lifting reaching WAITING: for parts or equipment OVER PROCESSING: doing more than needed OVER PRODUCTION: too much, too soon DEFECT: Including incorrect documentation SAFETY: Self explanatory HBSDealer.com

HARDWARE + BUILDING SUPPLY DEALER JANUARY 2019

COVER STORY-BMC

Letter from the CEO By Dave Flitman, BMC President and CEO

Dave Flitman

Culture and strategy. That’s what brought me to BMC. Culturally, I wanted to be part of a team focused on serving its associates by going out of its way to develop them. From my experience, an organization that does everything it can to value its people produces a far more engaged, productive team. When associates feel supported, they have the space to be creative, innovate and do their best work. The emphasis BMC places on culture naturally leads to performance. Strategically, I was drawn to BMC’s commitment to operational excellence, pursuing the right acquisitions and accelerating market penetration of value-added products to better serve existing customers and attract new customers. While the right strategy is an important driver of our business, I believe BMC’s associate-

driven, customer-centric culture is the fuel that ignites our ultimate success. As president and CEO, my job is not only to ensure BMC has a clear long-term vision, but that we also have a continuous championing of that vision throughout the company. One of the ways BMC fosters alignment between words and actions is by celebrating associates who bring our core values to life. This celebration comes in the form of the BMC Dream Team, our companywide associate recognition program. Each week, nomination forms filled out by associates pour in, recapping instances of teammates living BMC’s core values. Every Friday, a new associate is celebrated as a BMC Dream Team winner via a companywide communication campaign. And while there may only be one BMC Dream Team winner each week, I consider the hundreds of associates who have been nominated to all be members of my personal Dream Team. From our truck drivers and truss builders to our millwork artisans and sales reps, in my mind, we’ve assembled the perfect group of complementary, high-character people to accomplish our objective: to deliver industry-leading performance through customer service leadership and operational excellence. In 2019, we’re focused more than ever on executing our strategic pillars, accelerating innovation and increasing our operational agility — the speed with which we’re able to seize opportunities and sidestep threats. When you combine the above priorities with our team’s tenacity and

commitment to continuous improvement, I believe BMC has created a winning game plan, one that positions us to rewrite the rules of our industry. DREAM TEAM PROFILE

Yara Gomez DREAM TEAM SELECTION NO. 8 Position: Office manager, El Paso, Intermountain Division

Scouting report: Gets things

done. Productivity increased 30% after she stepped in for departed truss plant production manager. High integrity. Passion for safety.

Notes: “She takes on challenges

and helps the market with anything we need,” said Jesse Dominguez, HR & safety manager.

“Culture and strategy. That’s what brought me to BMC.”

JANUARY 2019 HARDWARE + BUILDING SUPPLY DEALER

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COVER STORY-BMC

Ready, Set, Frame To and from the job site, a culture of innovation provides an edge There is a good reason BMC continues to hammer home the features and benefits of its labor-saving READYFRAME solution; it continues to grow. READY-FRAME is BMC’s proprietary pre-cut, pre-labeled whole-house framing package, one of the company’s offsite manufacturing solutions designed to help builders deal with labor shortages, reduce cycle time and reduce waste at the job site. Since it was introduced in 2013, READY-FRAME has shown a compounded annual growth rate of 53% and is currently running at a sales pace of more than $220 million per year with lots of upside, according to the company. When BMC executives talk about innovation, READY-FRAME looms large in the conversation. COO Mike McGaugh describes the process this way: “Basically, we’re taking building plans and downloading that information into a computerdriven saw. That computer-driven saw determines the optimal lengths to cut the product, so you have less waste left over. The saw also tells a printer where to mark the boards, so it’s easy to assemble at the job site. It’s like a ready-to-assemble frame package that’s guaranteed in accuracy to onesixteenth of an inch.” The company believes that last bit — the accuracy guarantee — provides a strong defense against imitators and that READY-FRAME is only in the “early innings” of adoption. With more builder-friendly features in the pipeline and word steadily spreading about the solution making framing better, faster, safer and greener, the company believes accelerated growth is imminent.

And while multiple manufacturing solutions are percolating in a construction industry that many say is ripe for disruption, BMC says READYFRAME strikes an ideal balance between cutting sticks on-site and turning the process over to crane operators for complete modular assembly. McGaugh explained, “The relative advantages of READY-FRAME are numerous. It works with your existing trades and it’s friendly for the framers. The framers can actually make more money, and the builder can make more money.” Executives at BMC say their culture of innovation goes well beyond READYFRAME. For instance: Truss Automation Outside of Atlanta In Cumming, Ga., BMC’s new highly automated truss plant represents a major investment in automation that has brought significant improvements in efficiency. Developed in partnership with MiTek, perhaps its most dramatic performance metric is this: What used to be a 30-minute setup is now a 10-second setup, thanks to a paperless conveyor and auto-puck system that puts the pieces together. Overall, the Cumming facility has experienced a 33% increase in labor productivity, while improving safety and reducing training time and employee turnover. CEO David Flitman explained the power of that automation to investors during a recent presentation: “We went from six weeks of lead time with no opportunity to take on new business because that facility was operating at full capacity,” he said. “We cut that lead time to three weeks, and now

JANUARY 2019 HARDWARE + BUILDING SUPPLY DEALER

we’re out taking share in a market that’s very important to us.” Logistics Manager and Order Tracker Part of the company’s suite of eTools designed to make life easier for builder customers, the BMC Logistics Manager software allows customers complete visibility into the status of an order. And just as it sounds, the application’s Order Tracker feature offers customers instant, accurate around-the-clock answers to the question: “Where’s my order?” “Even right now, we have the same delivery tracking capability that Amazon or Zappos does as a lumber supplier,” said McGaugh.

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DREAM TEAM PROFILE

Xiu Denouden DREAM TEAM SELECTION NO. 19 Position: Inside sales support/EWP production, NorCal, West Division

Scouting report: A 25-year BMC

veteran. Skilled forklift operator. Takes on new tasks and projects without hesitation and continues to gain responsibilities within BMC.

Notes: “Always on time, kind,

respectful and an ultimate team player,” said Louie Vera, operations manager.

The key to the offering is 24/7 online access, and that includes product research, product purchasing, ordering in select markets, account management and delivery tracking on whatever device the customer prefers. Data collected from the BMC Logistics Manager program also allows the company to develop customer reports showing delivery frequency and order history, which allows BMC to collaborate with customers on ways to increase efficiencies and reduce costs. “That’s been the story for 2018 — we’ve been able to improve our service and incrementally improve our price, allowing us to create more value,” McGaugh added.

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The idea of leading the industry in innovation is something that appeals to CEO Flitman, who says the lumber and building materials industry respects tradition to a fault. He believes BMC’s culture of innovation is its biggest advantage when it comes to disrupting the market and differentiating itself from the competition. “Even if customers aren’t ready for utilization of full eCommerce, over the next decade, that’s where society is going. And BMC is going to be ready. We’re not going to force it on our customers. But when they ask for it, I want to be front and center and say, ‘Here’s what we’ve got.’ As technology evolves, BMC is primed to evolve with and ahead of it.’” HARDWARE + BUILDING SUPPLY DEALER JANUARY 2019

COVER STORY-BMC

Servant Salesmanship BMC culture sets the stage for sales strength As SVP of Sales for BMC, Keith Costello has the task of overseeing some 500 sales professionals. And sales are humming — up 12.4% over the first three quarters of 2018. How? According to Costello, a nine-yearcompany veteran who led the sales and marketing integration of Stock Building Supply and BMC, a big reason for success has been the way those 500 sales pros interact with each other and the greater BMC team. HBSDealer: What has changed since BMC became BMC Stock Holdings in late 2015? Costello: To be honest, I don’t even think about the merger anymore. We’re just doing more of what we do really well. We’re doing it better and faster. We cover more geography. We have a lot more talent and a lot more resources. What we really did is take the best of the two companies — our cultures, missions, vision and values — and combine them into one. Q: A lot of the executives here in [BMC headquarters] Raleigh, N.C., are talking about READY-FRAME [The company’s labor-saving, pre-cut lumber, whole-home solution]. Why is it such a big deal? Costello: It’s new, and it’s innovative. It’s cutting edge. It also addresses every issue the builder has as far as labor shortage and cycle time. The framers like it because it’s easier for them to assemble. It’s like putting together an erector set, and it’s just a cleaner product. The READY-FRAME solution is a complicated process for a manufacturer to undertake, which gives BMC an

advantage. Keith Costello Otherwise, everybody would be doing it. You’re not just buying a saw machine and a printer and setting it all up. Design has to be involved, along with operations, purchasing, sales and framers. You have to be one company thinking about one mission, and that’s taking care of the customer. Q: How does the BMC culture help its sales efforts? Costello: The culture just continues to get even better. One thing that really helped over the last year is we embraced the concept of servant leadership. For the executives, we’re here to serve the associates, and the associates are here to serve the customers. We’re continually fostering that concept throughout the organization. We’ve always had people who are passionate and high quality. We’ve been through tough times together, we’ve come out of them, and now we’re having our most successful year. I think a lot of our success can be attributed to the transformations we’ve experienced, transformations that’ve made us stronger and more united. Q: What are some of the synergies that you’re seeing across the company? Costello:People willing to help each other out. I think that says a lot about our culture, about our leadership and about the compassion and commitment of our people. Our people to want to win. They don’t see our markets as boundaries — ‘You’re there, I’m here, that’s not my market.” We are one company, and that’s a competitive advantage.

JANUARY 2019 HARDWARE + BUILDING SUPPLY DEALER

Q: How would you describe the challenge of selling building materials to the next generation? Costello: With the next generation coming in, you better bring solutions. It’s a different type of selling these days. There’s the old concept of being good buddies with a customer and building a relationship that way — but that’s changing. You better bring value, or that customer is going to find a new supplier. Q: Sales incentives have been a topic during recent BMC investor conferences. What’s happening? Costello: One of BMC’s four pillars of growth is focused on value-added products. The incentive plan we rolled out earlier this year is designed to reward our people for sales of value-added products, as opposed to commodity products. It rewards the right behaviors, and some people are making a lot more money than they were before. The more they make, the more BMC makes, so it works out well. Q: To what extent do your customers look to you for new products and guidance? Costello: One way we get in the door with our builder customers — especially our custom-home builders and smaller regional builders — is through new products. In several of our markets, our multi-family crew actually manages the builder’s project. Our builders rely on us to not only get the job done on a timely basis, but also for our expertise on how best to build it. They turn to us to learn about new products, new technologies and new engineering ideas that’ll make them more efficient. Q: How would you describe the company’s sustainable competitive advantage? Costello: It’s the people. It’s their willingness to win, and it’s the fact that we win together. That’s why I’m here.

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COVER STORY-BMC

Experience Meets Innovation What excites these BMC veterans? Here it is, in their words. Tim Conklin’s management career began in the grocery industry. But he didn’t find his true calling until he jumped to lumber and building materials. The BMC Triad regional market manager seems equally proud of his local BMC Selection Center showroom and his own son’s college soccer career. Paul Evans is the national VP of millwork. He is described by more than one of his BMC colleagues as “the most interesting man” they know, a status solidified by his recent adventure as a driver in a rally up and down a volcano off the west coast of Africa. “We’re a couple of 60-somethingyear-old guys, and we’re excited every day, because we get to do cool stuff that people at other places don’t,” said Evans. What kind of cool stuff? There’s the eBusiness tools, the automated takeoffs, the manufacturing strength, the design services — and the teamwork that brings it all together. Conklin believes the times are changing along with the customers’ demographics. “The younger generation is coming in,” he said. “Some of these builders are all about the latest technology. Can I order online? Can I track my orders? Can I pay my bill online? For all of these questions, we can say: ‘Yes, you can.’” On the BMC collection of eTools designed to improve communication and boost efficiency: Conklin: Once we place an order into the system, the customer can access that order and see what stage it’s in. Evans: What’s great about this is not only can the builder do all this online, just think about a few years ago, think about how many phone calls that BMC salesperson had to make to find out all

about that stuff. And now they have the ability to do it electronically. That gives our salespeople more time to be one-on-one and build their relationship with the builder. Conklin: So then, when the order is delivered to the job site, the builder is Evans, left, and Conklin in Greensboro, N.C. going to get an e-mail or text, and he’s going to get Conklin: We have one order entry photos from our guys in the field of the platform across the country. The permit box, the actual invoice ticket and interesting thing about that is some of the several pictures of the materials. major vendors — the Jeld-Wens, MiTeks, What I like about that is, number one, Marvins — we can enter their orders into the customer gets notification and can a quote tool and convert it right into our make the calls to start the job, and order entry system automatically. I can number two, he doesn’t need to get in place an MI Windows order right now his truck and leave his house to check in this location (Greensboro) and have it that the order was delivered correctly. delivered out of Houston in two weeks, BMC makes it easy. Builders tell me our way of doing things saves them time and with no glitches. saves them money. On leveraging the strength of BMC: Conklin: I think it’s the people and the On automated takeoffs and supplier innovation across the company that are integration: the strengths of BMC. We’re partnering Evans: For many years, our outside with suppliers to make building easier, sales guys have been ahead of the and we’re working together as a curve because they walk houses company to serve our customers. electronically with their tablet or tough Evans: BMC locations are comfortable book opposed to an old-fashioned notebook. As they walk with the builder, leveraging each other and pooling resources to get a job done. A perfect they hit a button and the information example is our truss design. Let’s say is digitally sent to the nearby BMC Tim has a truss design job from a builder location. Now we’re piloting a program here in Greensboro, but his local BMC that takes it a step further where truss designers are backed up. Tim information is not only being sent, but could send it over to our L.A. market it’s in a format the computer can read, to get designed, assuming they have which enables us to get an estimate the bandwidth. The builder wouldn’t back to the customer quicker. To me know our L.A. team did the work. The that’s innovative. truss design gets delivered back to BMC is not afraid of that technology. Greensboro on-schedule, and Tim looks To my knowledge, this is something that like a hero because it’s done in a week. hasn’t been done before.

JANUARY 2019 HARDWARE + BUILDING SUPPLY DEALER

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COVER STORY-BMC

Respect the Market By Andy Carlo

Mike Da Dalto, BMC Market Manager for the Pacific Northwest region, oversees the company’s ventures in western Washington and Oregon. A veteran who has been with the company for more than 20 years, including his roots as a millwork product manager at BMC, Da Dalto is responsible for sales, operations and — ultimately — profitability for his region. In the Pacific Northwest about 82% of the company’s business is singlefamily new construction followed by 10% multi-family construction and 8% remodeling sales. While there may be nuances in the products and services preferred in his market, Da Dalto believes that builder customers across the country look to their supplier to bring a similar component to the table: a strong level of trust. “They want honest communication,” he said. “They’re not looking for someone to overpromise something. They want consistency in performance, completed on time. They want to get the product they’ve ordered, when they want it and in the manner they asked for it. It’s pretty basic.”

“We’ve got to be ready to change the way we do business with builders because they are growing and evolving just like we are.”

Delivering and building One of the that trust, however, takes a advantages for BMC lot of work. And while the is its ability to combine headquarters has a blueprint size and speed. In Da for growth (see article page Dalto’s opinion, “BMC 26), there’s an understanding possesses the leverage throughout the company that of a $4 billion company, business happens at the local yet in a lot of ways, it’s level. as nimble as a small “I think BMC is progressive corporation. And if in its approach,” Da Dalto said. you can do both those “It responds to the needs of the things, it’s a pretty market, it respects requirements powerful equation.” of the market and the opinions The company has of leadership in the field. I think had strong sales that’s special. I don’t think every — Mike Da Dalto, BMC Market in value-added Manager for the Pacific organization does that.” components in the Northwest region One of the challenges facing Pacific Northwest, building material dealers of all including READYstripes is consolidation on the builders’ FRAME and other installation services. side of the business. For example, when The company’s eBusiness tools a major regional player is acquired by a are also working well in the region. national builder, it could result in changes Still, BMC is continuing its efforts to to the philosophies or loyalties of that improve all of these programs as it builder customer. According to Da Dalto, seeks out even more new offerings. it’s important for the dealer to understand Toward this end, Da Dalto emphasized the shifting alliances in a consolidating the importance of corporate surveys business and to stay out in front of those sent to management and employees dynamics as much as possible. in the field seeking feedback about operations. “I think the opportunity that exists for us, and all dealers, is anticipating what the needs of the builders are going to be for tomorrow, and a year down the road, and trying to truly to understand how we can help them,” he said. “We’ve got to be ready to change the way we do business with builders because they are growing and evolving just like we are.” Whether its customer consolidation, new technology or a new corporate structure, change is a big part of the industry, and the rate of change is only going to increase. “How you respond and react is the difference,” he said.

JANUARY 2019 HARDWARE + BUILDING SUPPLY DEALER

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Here are a few of the measurable benefits that will be realized with our fully integrated ERP solutions: 1. Only true fully-integrated ‘all-in-one’ ERP system designed speciﬁcally for lumber and building materials distributors, wholesalers, retailers, dealers, and manufacturers. 2. K8 is Oracle-based, recognized for superb stability and unparalleled performance. 3. We are a 40+ year old company with over 900 corporations using our solutions daily. 90% of our customers are in the Lumber, General Building Materials, Industrial Supplies, and Floor Coveing industries. 4. Branch Management, CRM, E-commerce, Wireless Warehouse Management, Rental Management, Dispatch/Delivery, Manufacturing, Business Intelligence (BI), and robust Financials…all built by our in-house development team.

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COVER STORY-BMC

BMC’s Blueprint for Growth The rise of OTIF and the benefits of a healthy balance sheet “Our strategies are boringly consistent,” remarked COO Mike McGaugh. While there may be truth to that sentiment, the recent results produced under BMC’s steadfast leadership have generated some major excitement for the building product distributor and manufacturer. In the third quarter, BMC saw its net income grow $17.4 million to $35.9 million. Gross profit dollars were up 15.2%, as total net sales improved 12.4%. And with the growing population and favorable demographics for household formation, the market conditions are promising for sustained growth.

BMC executives consistently point to four strategic pillars upon which the company has built (and continues to build) its profitable expansion. Here they are: Organic growth of value-added products and segments BMC’s enthusiasm over READY-FRAME, its proprietary pre-cut, high-tech saw and printer combination that delivers readyto-assemble components to the job site is well documented (see article, page 18). But that program marks more than just an offering, it signifies a way of thinking about serving the customer.

JANUARY 2019 HARDWARE + BUILDING SUPPLY DEALER

“Our focus on value-add solutions represents the organization taking a customer need and figuring out how to solve a problem,” said CEO David Flitman. “In the case of READY-FRAME, it helps solve labor challenges and makes the customer more productive.” There are several value-added products and services BMC seeks to grow organically, among them are millwork, windows, doors and components. And the company is rewarding its sales team accordingly. Together with roof trusses, floor trusses, engineered wood and wall panels, BMC’s Structural Components

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category grew 20% to $600 million in sales for the 12 months ended September 30, 2018 and is poised to continue to be a growth driver for the company. Including Millwork and Doors value-added products, BMC’s total offsite manufacturing sales totaled over a billion dollars over the 12-month period leading up the start of Q4 2018. “Offsite manufacturing is here to stay,” continued Flitman. “And in partnership with our suppliers and customers, we are working to understand new ways we can innovate to reduce costs and labor needs. We are working to grow this business and deliver what our customers need to help them navigate the challenges of today, as well as to develop the best building practices for the future.” Deliver operational excellence with the BMC Operating System The BMC Operating System was introduced to the company with the slogan: “Close your lap top, open your mind.” It isn’t a piece of software — it’s a carefully designed, regularly updated playbook that guides employees to efficiency and improvement (see page 14). And the company believes it’s the key to delivering best-in-class service. “If we provide the best service, we will be the provider of choice in our market without having to compete solely on price,” said Flitman. Increasingly, service is associated with the acronym “OTIF” — or “On time, in full.” OTIF is a measure of delivery performance that tracks the success rate of delivering what the customer wants, when they want it. McGaugh describes OTIF as an important differentiator for building product distributors. “The primary value BMC offers is providing products at an affordable price when the customer needs to accelerate their cycle times,” he said. “And that means OTIF.” Another way to describe operational excellence: be easy to do business with — that mantra applies to the builder customer, as well as the supplier. And this concept helps the company

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optimize profitability through pricing and purchasing. Build a high-performing culture Recognizing “Dream Team” performers throughout the company and embracing the principles of servant leadership (see page 14), are part of the cultural story at BMC. But there’s a lot more to it. For instance, the BMC Leadership Academy and trainee program develop future leaders, providing them pathways for career growth. And the continual collection of feedback at both the field and corporate levels amplifies the voice of the employee, so leadership is aware of what is and what isn’t working and can take action accordingly. “Every piece of feedback from associates is a gift,” said Senior VP of Human Resources Mike Farmer. He adds: It’s the role of the management to be “servant and steward” of the company’s associates — wherever they are. “We have to be a field-driven organization because that’s where the decisions need to be made for the customer. Our business needs to happen locally, so as leaders, we want to be out where our associates are, engaging and helping them solve issues.” “It’s the right mentality to have when thinking about how we take care of our associates and how we take care of our customers,” he added.

opposed to simply adding dots to a map. And executives say a strong balance sheet allows BMC to capitalize on opportunities in a fragmented market. “We believe that because of BMC’s culture of innovation, we create value when we aggregate other companies and bring them into the family,” said McGaugh. “We need the financial dry powder to do that. And we’ve got it.”

DREAM TEAM PROFILE

Chris Hollaway DREAM TEAM SELECTION NO. 9 Position: Driver, Houston, Texas Division

Scouting report: A seven-year

veteran with a strong understanding of the company’s core values. Earns respect and appreciation from colleagues and customers. Shows concern for customers and residents who live near the job site.

Notes: “You have one special person working for you.” — BMC Houston customer.

Pursue strategic expansion The way BMC sees the market, the top five building material distributors enjoy a mere 18 percent of the market. There remains a lot of consolidation yet to happen, and BMC intends to play a role. Recent acquisitions include Pennsylvania-based Shone Lumber in early 2018, Texas-based TexPly in 2017 and the Washington, D.C.-area truss manufacturer Code Plus, also in 2017. The company announced it also has several potential deals under review. The desire to grow through acquisition is guided by the idea of building a leadership position in a market, as HARDWARE + BUILDING SUPPLY DEALER JANUARY 2019

SPONSORED BY

PRODUCTS

A View of the Great Outdoors By Andy Carlo The start of the 2019 lawn-and-garden and outdoor-project season is just around the corner. And in a recent HBSDealer poll, 17% of respondents cited “Lawn and Garden” as the product category that represents the best opportunity for growth in 2019, planting the category in third place behind “smart home” and “building materials.” It's also ranks high among homeowners. Keeping up appearances, and keeping up with the neighbors, continues to grow in importance for many — both for curb appeal and outdoor entertainment. HBSDealer has rounded up a collection of some of the the latest products to help get a jump on the 2019 lawn and garden season, including outdoor power equipment, work gloves, fencing and repair materials.

Yard Force LiquidCooled Electric Pressure Washer

Origin Point Brands Multi-Purpose Fence Origin Point Brands, LLC, has introduced its new Multi-Purpose Fence under the No Dig brand. The Multi-Purpose Fence is simple, easy to set up, and versatile in its applications. The unique fence can be used as a small compost enclosure, a pet pen, or a full garden fence that keeps out pesky critters. Originpointsbrands.com

JANUARY 2019 HARDWARE + BUILDING SUPPLY DEALER

Merotec USA, the manufacturer of Yard Force Outdoor Power Equipment, is launching the YF2050LC Liquid-Cooled Electric Pressure Washer. The model is the first ever to be powered by a 14 Amp induction motor that is cooled by water circulating around the motor shroud. It produces 2050 PSI @ 1.2 GPM on a rugged metal frame with a “live” hose reel. Cool water supplied by a garden hose circulates around the motor in a shroud of circulating tubes and finally blasts out of the spray gun. A 25' hose connected directly to the pump makes set-up and clean-up quick and easy. It comes with an ergonomic professional style spray gun with a metal quick-connect tip that accepts all standard ¼" QC nozzles. YardForceUSA.com or merotecusa.com

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visit nationalhardwareshow.com

Stihl Battery-powered Hedge Trimmer Want a battery-powered hedge trimmer with the cutting capabilities of pro-grade equipment? Stihl has you covered. The HAS 94 R and HAS 94 T hedge trimmers are designed for pros looking for lightweight, quality performance to prune and sculpt hedges quickly and efficiently. Featuring commercial-grade, brushless electric motors, the quiet, energy-efficient trimmers deliver ideal speed and run times. Both offer instant start technology and a variable speed throttle trigger with three performance levels for a range of blade speeds. The ergonomic handle is equipped for making cuts in any direction, allowing for efficient and comfortable use. Stihlusa.com

Batman Gear from Midwest Gloves For those looking to receive some outdoor assistance from little ones in the family, coaxing can be accomplished thanks to MidWest Gloves & Gear. MidWest has introduced a new group of products for their exclusive Warner Bros. licensed line of Batman Garden Gloves and Gear for kids. The new MidWest Batman Garden products include gripping and jersey garden gloves, a watering can and hat for sun protection. Midwestglove.com

Quikrete Re-Cap Concrete Resurfacer WORX 40V Trimmer/Edger The WORX 40V trimmer/edger is loaded with features, including two, 20V, 2.0 Ah batteries, variable-speed trigger, push button conversion from trimming to wheeled edging, and exclusive Command Feed line advance system. Several lawn and garden and DIY tools are bundled with two, 20V 2.0 Ah batteries, 60-minute dual port charger and a 3-year warranty service. The product has a gas-like variable speed control, which allows users to maximize run time by varying the trimmerâ&#x20AC;&#x2122;s speed based on the task. Worx.com

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The new Quikrete Re-Cap Concrete Resurfacer is designed to repair and renew old, worn our sidewalks, driveways, patios and other projects. The Resurfacer has a bond to concrete that is 4 times stronger than the concrete itself. Created from a special blend of Portland cement, graded sand, polymer resins and other proprietary additives, one 40-pound bag of Quikrete Re-Cap Concrete Resurfacer will cover approximately 20 square-feet at 1/4 inches thick or approximately 90 square feet as skim coat. Quikrete.com

HARDWARE + BUILDING SUPPLY DEALER JANUARY 2019

MARKET INSIGHTS

J.C. Licht Builds a One-Two Punch Elliot Greenberg mixes paint with hardware in the West Loop By Ken Clark

J.C. Licht, one of the nation’s largest Benjamin Moore dealers, partnered with True Value for this retail show piece in Chicago.

When the neighborhood changes, a growth-oriented dealer must change with it. That maxim has played out in dramatic fashion in Chicago’s West Loop. That’s where a once industrial neighborhood has transformed — some would say overnight — into a livable, walkable neighborhood for young and old urbanites. That’s also where Paint retailer J.C. Licht, one of the nation’s largest Benjamin Moore dealers, has been selling to mostly industrial customers for years. Today, the West Loop location is bolstered by the

addition of a True Value hardware store. Elliot Greenberg, the president of J.C. Licht and former VP of sales and operations at Connecticut-based pro dealer Rings End, shared his thoughts with HBSDealer on how his one-of-akind paint-and-hardware combo store in the West Loop emerged to serve a neighborhood. “I saw an opportunity because there was not a competitive hardware store in the marketplace. New high rises were going up all around the store, and I had a parking lot with 24 spaces. “When two other tenants in the

JANUARY 2019 HARDWARE + BUILDING SUPPLY DEALER

building were leaving, I saw the opportunity for this extra 21,000 sq. ft. We didn’t just leave the paint store and add to it. We broke it all down and built a dream store. It was a big investment. My landlord helped me. True Value helped me. My bank helped me.” The store is showing a $2 million increase in sales in its first year. “We already had a $4 million base paint store, and when you have that, you can go ahead and build a hardware store with a lot less pressure to justify the opening [costs].” The store operates with a commercial

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oriented paint department on one side, and the consumer-focused hardware store on the other. The average paint transaction ticket is $110, while the average hardware store ticket is between $16 and $18. And the synergies are dramatic, he said. “We sell a ton more sundries, and our store traffic is five-to-six times what it used to be. The extra traffic that a hardware store brings us—window treatment sales, wallpaper sales — are sales that we weren’t getting.” Even with the success in the West Loop, Greenberg says two big factors prevent similar expansions at other J.C. Licht locations in Chicagoland. One is the footprint of the existing store base — a 3,000 sq. ft. to 5,000 sq. ft. area generally precludes a bolt-on of an additional consumer-oriented hardware business. Also, Menards, Depot and

Lowe’s are entrenched in the suburbs. “Because this is the West Loop and people don’t drive a lot, people can walk to the store, it’s a big selling feature for the store. It’s a unique market and a unique part of the city.” In building the combination store, Greenberg was informed by his experiences at Ring’s End. “When I came to Ring’s End in 1994,

they were very successful lumberyard chain with five locations. We built the paint business within the lumberyard, and it has grown to way over $40 million in paint business today. It was the idea of building a specialty paint store in a lumberyard where we have paint experts. It’s kind of the opposite here, we have a great paint base and we built a great hardware store within the confines of a great paint store. That’s what we have here.” Another feature of the business — and one of its secrets to success — is its high-wage structure. “I hear that you have to pay people $12 per hour,” he said. “Well, you get what you pay for. So, it’s an expensive model for us, but it’s a difference maker, and that’s what I learned at Ring’s End. We pay for quality help, we give them benefits, they make a great living, and that’s the difference.”

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NEW Horizons

The Big Reveal

Eliminate #MeToo harassment with transparency and tracking.

Sarah Alter

By Sarah Alter Last year was marked by women acting together. In small groups and large, women took on one of the most formidable barriers to gender equality: sexual harassment. Women and their supporters took to the streets, the airwaves and the courts, charging some of the biggest names in corporate America with sweeping workplace harassment claims under the rug. Many of these women’s efforts were aimed at ridding the workplace of mandatory private arbitration of sexual harassment accusations, a practice that prevents women from having their day in court or sharing their accusations publicly, so that other women who may be vulnerable to the same harassment would be warned. Last May, after 14 women who had accused Uber drivers of assault wrote a letter to Uber’s board enjoining them

Companies need to back up their words with decisive action, and tell the world about it. 32

to end mandatory arbitration, Uber eliminated the practice. Lyft quickly followed suit. That same month, workers at McDonald’s stores in eight states filed 10 complaints with the Equal Employment Opportunity Commission, alleging they had been sexually harassed or assaulted on the job and had faced retaliation when they complained. At the time, a McDonald’s spokeswoman said the company didn’t tolerate misconduct. “We are and have been committed to a culture that fosters the respectful treatment of everyone,” Terri Hickey said in a statement. But in September, hundreds of McDonald’s workers who claimed they faced workplace sexual harassment went on strike in 10 cities. Those who led the strike urged the company to hold mandatory training for managers and employees and to create a better way of responding to sexual harassment complaints. McDonald’s responded, noting it has “strong policies, procedures and training in place specifically designed to prevent sexual harassment.” But the company went a step further, saying, “To ensure we are doing all that can be done, we have engaged

JANUARY 2019 HARDWARE + BUILDING SUPPLY DEALER

experts in the areas of prevention and response, including RAINN [Rape Abuse & Incest National Network], to evolve our policies so everyone who works at McDonald’s does so in a secure environment every day.” Two months later, thousands of Google employees staged a walkout after The New York Times revealed the company had given millions in payouts to male executives accused of sexual harassment, while remaining silent about their wrongdoing. Employees who organized the global walkout asked for the end of mandatory arbitration, a report on sexual harassment instances, greater transparency on salaries and other compensation, an employee representative on the board and a chief diversity officer with direct access to the board. A week later, Google changed its policy mandating private arbitration for sexual harassment cases. Facebook followed and changed its arbitration policy the next day. From 1991 to 2017, the share of U.S. private sector, non-union employees who were subject to forced arbitration rose from 2 percent to 56 percent, according to a report by the Economic Policy Institute. While

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arbitration has its place, especially for women who prefer to maintain confidentiality, organizations must be more forthcoming in their handling of sexual harassment and discrimination claims — and their efforts to put an end to both. The Power of Accountability Talented women steer clear of companies that allow hostile, unhealthy or unsafe work conditions. Touting gender-equality and D&I policies on a company website is not enough. Companies need to back up their words with decisive action, and tell the world about it. A common refrain from victims of sexual harassment — and from women who doubt their company’s gender equality efforts — is the lack of process, commitment and transparency around bias, harassment and discrimination, which often lets perpetrators continue without consequences and creates a hostile workplace. Sexual harassment and genderdiversity training is a must, of course. But here are other actions your company’s leaders should be taking to ensure transparency:

address an accusation straightaway could be credibly accused of disregarding the complaint or attempting to hide it. • Communicate to all staff when harassment has occurred and what has happened to the harasser. • Keep and publish metrics on gender diversity, women’s leadership, pay parity and number of claims of gender bias and harassment. The most successful companies keep and share with their employees metrics on sales,

margins, expenses and profits. Today, measuring, benchmarking and sharing gender-related metrics is just as crucial to your business. Companies can avoid putting themselves in jeopardy — legally and competitively — by treating the elimination of gender bias and harassment as a business priority, with goals set to measurable metrics that are communicated to all stakeholders. Sarah Alter is president and CEO of the Network of Executive Women.

• Publish and share — widely — clearly written policies around bias and harassment and make very explicit the consequences for breaking them. • Encourage employees to speak up if they notice a problem. Professor Rosabeth Moss Kanter of Harvard Business School recommends appointing selected employees as “witnesses” to keep an eye out for misbehavior. • If a complaint is made, respond immediately. A company that does not

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EnsembleIQ, the business intelligence resource and parent company of HBSDealer, serves as the official B2B media partner of the Network of Executive Women, a learning and leadership community of 12,500 members representing 900 companies and 22 regional groups in the United States and Canada. This article marks the first in a series of contributions from N.E.W. on a variety of business topics. Learn more at newonline.org. HARDWARE + BUILDING SUPPLY DEALER JANUARY 2019

Monthly Retail Sales, not adjusted

Residential Construction/Sales 13 months of housing starts and existing-home sales

home centers and pro dealers (NAICS 444) and hardware stores (NAICS 44413)

Total starts

NAICS 444

(in thousands, SAAR) Nov.: 1,256,000 1350

1300

NAICS 44413

(sales in $ billions)

3 34.2

32.8

34.5 31.4

2.46

32.2

31.1

2.28

2 1250

1200

(sales in $ billions)

2.32

2.24

2.2

2.45

1150

AUGUST

SOURCE: COMMERCE DEPARTMENT

2017

SEPTEMBER

OCTOBER

AUGUST 2017

2018

SEPTEMBER

OCTOBER

2018

SOURCE: MONTHLY RETAIL TRADE REPORT FROM THE U.S. CENSUS BUREAU

Single-family starts (in thousands, SAAR) Nov.: 824,000 975

HBSDealer Stock Roundup

950

the percent-change performance of stocks based on Dec. 31 prices

925

900 875

TSCO

850

ANNUAL CHANGE

825 800

LOW

0 N

SOURCE: COMMERCE DEPARTMENT

Existing-home sales (in millions, SAAR) Nov.: 5.32 million 5.8

DJI SHW

-10

-20 -30

SWK WY

-40

BMC

5.6

-50 5.4

BLDR

-60 -25

-20

BECN -15

-10

-5

5.2

MONTHLY CHANGE 5

BECN (BEACON); BLDR (BUILDERS FIRSTSOURCE); BMCH (BMC STOCK HOLDINGS); DE (DEERE & CO.);

HD (HOME DEPOT); LOW (LOWEâ&#x20AC;&#x2122;S); SHW (SHERWIN-WILLIAMS); SWK (STANLEY); TSCO (TRACTOR SUPPLY);

SOURCE: NATIONAL ASSOCIATION OF REALTORS

WY (WEYERHAEUSER); DJIA (DOW JONES INDUSTRIAL AVERAGE)

Consumer Watch Unemployment rate

Consumer confidence

Gas prices

for the entire United States

indexed to a value of 100 in 1985

average price per gallon (regular)

5.0 4.5

100

5.5

$2.50

Current

$2.00 80

6.0

Prior month

120

Prior year

4.0

3.9% 3.5

December

6.5 60

128.1

$2.26

December

Dec. 31

140

JANUARY 2019 HARDWARE + BUILDING SUPPLY DEALER

$1.50

$3.00

SOURCES: LABOR DEPARTMENT, THE CONFERENCE BOARD, AAA

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