How Lowe’s plans to thwart retail crime at the point of purchase.

Lowe’s plans to thwart retail crime

PROJECT UNLOCK USES INVISIBLE TECHNOLOGIES TO ACTIVATE

PRODUCTS AT POS. By HBSDealer Staff

Seemantini Godbole, executive VP, chief digital and information officer at Lowe’s.

Lowe’s is applying cutting-edge technologies, including a first-for-home-improvement use of blockchain and low-cost RFID — a solution named Project Unlock — to help solve an age-old yet ever-growing problem: Organized retail crime.

“We are inventing the technology that makes at-purchase activation and transparent purchase records possible so we can tackle theft in a way that is virtually invisible to our customers,” said Seemantini Godbole, executive VP, chief digital and information officer at Lowe’s.

Organized retail crime has been on the rise, and a statistic Lowe’s provided from the National Retail Federation shows that, as of 2020, organized retail crime has cost retailers an average of about $700,000 for every $1 billion in sales.

While others are working to tackle this problem, said Lowe’s, the retailer believes there are better ways to curb theft than locking products down.

“Project Unlock combines low-cost RFID chips and IoT sensors to activate power tools at the point of purchase, while also creating a secure, publicly accessible, and anonymized

Retail tech trends for 2023

Techies more approachable— Silicon Valley layoffs and tougher work policies provide a window for traditionally less sexy retail tech teams to attract strong talent on the rebound. Revenge of the CFO— Unlimited free returns? 15-minute delivery? Metaverse? Expect intense scrutiny from finance on the ROI of such investments, with a tougher hurdle due to rising interest rates.

Expect “sure” cost reduction proposals to win over “wishful” growth projects as investors crave cashflow and profitability. QR beyond James Bond— QR-codes make a giant leap forward in retail. These square codes will unlock huge amounts of data for consumers to engage with and fuel new innovation in supply chain analytics.

— From Dave Spear and David King, senior industry consultants for the retail, CPG and hospitality industries at Teradata.

record of legitimate purchases, powered by blockchain,” said the company.

Lowe’s has built a blockchain record that verifies and tracks all legitimate purchases, making it easy for buyers to see if they are buying stolen goods, and for law enforcement to crack down on crime rings, said the firm.

To make this work, a unique tag is created for each physical product by the manufacturer. The tag is preloaded with the item’s serial number.

A customer takes the product to checkout, has it barcode-scanned and pays, and a POS RFID scanner reads the tag and unlocks.

“Only products that are legitimately purchased are activated,” said the company.

The proof of concept starts with power tools, said Lowe’s, but the retailer sees potential to use this invisible blockchain and RFID system for other items in its stores – and across the entire retail ecosystem.

“We see a future in which solutions like Project Unlock can help the entire retail ecosystem create a great environment for our customers,” said Godbole.

At checkout a POS scanner unlocks the item.

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KODIAK BUILDING PARTNERS ROARS INTO 2023

Decentralized and diversified with a special brand of due diligence.

By Ken Clark

The Barnsco team helps round out the diversified Kodiak portfolio with concrete supplies and rebar in Texas and Michigan (shown here.)

It’s not entirely accurate to say that in a little more than 10 years, Kodiak Building Partners came out of nowhere to become a coast-to-coast collection of LBM and construction-related brands — about 40 in all, from American Builders Supply to Zarsky Lumber.

It came out of several places.

In one sense, it launched from CEO Steve Swinney’s Denver basement, where the first actual meeting took place for what would eventually become Kodiak Building Partners.

Or, there was the coffee shop in Denver, where an exploratory meeting with well-connected LBM industry executive and current Kodiak Chairman Paul Hylbert not only gave Swinney the confidence to move ahead with the concept, but — to Swinney’s happy surprise — led to Hylbert’s buy-in as an investor right there at the Starbucks table.

And then there’s the earliest point of origin: Kodiak emerged from the imagination of a handful of entrepreneurial ProBuild Holdings executives who saw an opportunity back in the dark days of the residential and commercial construction downturn. The idea was simple: roll up a collection of businesses in LBM and distribution, and maintain a fiercely local approach that honors the proud, family-business legacies associated with these industries.

Swinney says the commitment to the original concept hasn’t wavered.

“As we’ve grown, people used to say things to us like: ‘You can be really decentralized and all this locally driven stuff, as long as you have two companies or four or five or even six. But you can’t go on like that.’ Well, we have 35 companies

now, and we’re still doing that. Being true to the core of our strategy and our culture of what we want to be — that means a lot to us.”

And the growth continues. Since HBSDealer’s interview with Swinney in late fall, Kodiak has rolled off a string of acquisitions: Sunrise Builders Supply of Mississippi and Tennessee; Albeni Falls Building Supply of Idaho; Goodrich Lumber of Massachusetts; and Diamond Home Improvement of Oregon.

Just as there is no single birthplace, there’s no single key to Kodiak’s success and growth. Three stand out: call them the ‘Three Ds’—Decentralization, Diversification and Due Diligence.

Decentralization

As an illustration of the extent to which Kodiak Building Partners embraces decentralization as a bedrock principal, Swinney recalled a conversation with investor partners (from Court Square Capital Partners) in 2017. The investors wanted to talk about the popular topic of synergies. They wanted to know how Kodiak promoted the idea that a company newly acquired by Kodiak will benefit by being part of the larger group.

Swinney’s response surprised them.

“We said, ‘You know, we don’t really get too many synergies when we close the deal,’” Swinney recalls. “And they were like, ‘What?’”

The logic is simple, Swinney explained. If something works, don’t change it. After an acquisition, the decision-making remains in the hands of the local operators who know their markets better than anyone.

“We partner with great companies,” Swinney said. “Yes, of course, we do work on how to get better. (See ‘Kodiak strives for continuous improvement.’) But we’re not going in trying to change things right away.”

Hylbert sums up Kodiak’s model this way: “The whole thesis that we had was that we wanted to go out and buy good companies and provide a platform

Christensen Lumber of Nebraska gets the job done. Direct Lumber and Door of Colorado adopted a one team “one team, one goal” mindset.

Big ideas at Direct Lumber and Door

Direct Lumber and Door, with 5 locations in metro Denver and Fort Collins, joined Kodiak Building Partners in September of 2018. Since then, the story has been one of steady improvement under DLD’s new ‘One Team, One Goal’ mindset.

According to VP of Operations Clint Carter, an important early decision was to abandon the general-manager model in favor of branch managers. “That was kind of the first step to really getting everything moving with one team, one goal,” Carter said. “Now we have branch managers sitting close to their operations every day. They’re getting the feedback, they’re understanding what’s right and what’s wrong, and they’re in a position to drive change.”

After several rounds of promoting from within (last year alone saw 30 such promotions at DLD), the company created another big idea: “Breakfast Club.” It’s a monthly meeting that featured speakers from inside and outside the company‚ networking and the exchange of ideas. “It’s really just an effort to try to introduce some concepts and help bring along this young management team. That’s the future of this company. So we want them to be vested, we want them to learn.”

Coming next is an Innovation Club. An idea that grew out of Carter’s participation in a Northwestern University’s Kellogg School of Management leadership program organized by LMC.

“What really drove home to me was that innovation is essentially solving the problem for your customer,” Carter said. “So what you have to do is understand the issues facing customers, and then find out how to solve those problems. That’s innovation. And that’s what we’re going to talk about.”

Phillip Steffy and Steve Weaver of Zarsky Lumber Co. earned the Chairman’s Award at the recent Kodiak Leadership Summit. An early photo (2014) of the Kodiak team at Barton’s Supply, with the train that helped seal the deal.

where the people in the company could concentrate on running and growing the business,” Hylbert said. “We provide the financing and the insurance and the benefits and all that stuff. And we’d operate on a very decentralized basis from a customer and supplier standpoint. And that’s exactly what was done.”

Diversification

Kodiak Building Partners, like the rest of the LBM industry, is bracing for a residential construction slowdown in 2023. But there’s no panic. Just the opposite.

With a diversified portfolio that runs across lumber and building materials, construction supply, gypsum, doors/millwork and interiors, Kodiak believes it is built to withstand temporary declines in any one area. And being so built, it

Emphasis on “Partners”

The Kodiak bear on the company logo is an impressive image, symbolizing strength. But the most important word in the company name is the word “Partners,” said CEO Steve Swinney. And Kodiak has picked its partners carefully. Among them: Plante Moran and KPMG in accounting; Davis, Graham & Stubbs on the legal side; Aon and PLM for insurance, and —of particular note in the distribution industry—LMC for its LBM supply chain.

Kodiak’s COO Mark Garboski, who helped build the supply chain team during his tenure at ProBuild, realizes the value of LMC as a partner, recognizing the partnership as a better option than trying to build a logistics network from scratch.

The CEO says the closer Kodiak looked at LMC and the more it relied on its service, the more it liked what it saw. “We were not able to do it better at ProBuild with the scale we had at ProBuild ($5 billion in revenues),” Swinney said. “It’s one of those things where we can say: We have a great partner. We can trust them.

“It doesn’t matter that they’re not employees at Kodiak, they’re incredibly good partners.”

Kodiak moments

In 2011, Kodiak Building Partners entered the acquisition game by acquiring Barton Supply, a steel fabricator in Denver.

“We actually moved into the Barton offices four or five months before we closed the deal,” said Paul Hylbert, Kodiak chairman, emphasizing the trust between the buyers and sellers.

The Barton facility looked like a dystopian landscape, a former Ingersoll Rand manufacturing plant that included a train engine on premises to push heavy loads of rebar. The train played a memorable role in the deal “After a long process, one investor finally said, ‘Well, if it comes with a train, I’m investing,’” Hylbert recalls. “There’s a photo somewhere of the investor partners on the back of the train. One of the first photos of the team.”

That special Kodiak moment (above) is one of many over the 11 years of deal making.

An incomplete list of game-changing moments would include the American Builder Supply deal, which brought Mark Garboski onto the team, He’s now COO. Jeff Smith, a former ProBuild executive, came on as CFO. And brothers Mike and Pat Flood have made big impacts at Kodiak after first making big impacts at New England Building Supply.

“Every key moment that I can think of either has to do with shaping our culture, or it has to do with our people,” said Steve Swinney, CEO.

Another key Kodiak moment came early in the company’s history, when it was working on an early deal with investors who were putting up 75 percent of the funding.

But during the due diligence process, Kodiak felt those outside investors seemed to push beyond what was considered good faith negotiating. Kodiak cut ties with the investors, and their money —even though they could really use it.

“We felt at the time that we were developing a reputation for how we deal with companies and with people,” Swinney said. “Culturally that was a big thing. We realized, OK, this is who we want to be, this is the way we want to do things, and we’re not going to lose that. We’re going to stick to that no matter what.”

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believes it can take a long-term view, mitigating risks and maximizing growth across the company.

Each operation has a plan for what they expect to achieve in 2023, and how they intend to boost performance. Some companies could be down as much as 25 percent, during what is anticipated to be the first year of housing-starts declines since the formation of Kodiak 11 years ago. But others expect to continue growing.

“We’re still in a cyclical space, no matter what,” said Swinney. “But our diversification allows us to be less cyclical and to continue to make investments in the business.”

Aurora, Colo.-based Barton Supply is Kodiak’s case study in the value of its diverse-portfolio. (See Kodiak Moments.) The steel fabricator suffered through a difficult spell in 2018, “gutted” by a combination of trade-dispute steel tariffs and a sudden spike in steel prices.

“If steel were our only business, we would have had to lay off a lot of people,” Swinney said. “But we actually invested more in that business because the rest of the Kodiak world was doing really well. And we could lean into that space at a time when it was down.”

Today, Barton’s EBITDA is five times its 2018 level.

Due Diligence

The year 2022 was Kodiak’s busiest year of acquisitions (eight). But at Kodiak, the question is not ‘how many?’ It’s ‘how?‘ More to the point: ‘How good is the deal? and how do we create value?’

“I’m a finance guy,” said Swinney. “But diligence to me is much more about the operations and the culture than it is about the numbers.”

Mike Flood, executive VP of operations at Kodiak, will often break down field trips or meetings with potential sellers into a simple message. “He’ll either say, ‘no;’ or he’ll say, ‘they’re one of us.’ Which means, yeah, our cultures are going to click.

“Our process makes sure we align together and work well together.” Swinney continued. “To me, those are the two things that are really important and critical about the diligence process, not the numbers stuff.”

Kodiak strives for continuous improvement

VP SCOTT MORRISON BREAKS DOWN METHODS FOR IMPROVING THE BUSINESS PROCESS AT THE PRODEALER. By Andy Carlo

Last November, Kodiak Building Partners brought Scott Morrison on board for the newly created role of vice president of continuous improvement (CI).

Morrison will help develop Kodiak’s nationwide initiatives for eliminating waste and streamlining operations processes.

Into his new role, Morrison brings decades of experience working as a Scott Morrison consultant with some three dozen LBM dealers; and prior to that, some 15 years as an operations manager in the automotive supply industry. He told HBSDealer that regardless of whether it’s known as total quality control, the LEAN management system, or Six Sigma, his mission has been to focus on continuously improving process performance.

Here are three different types of project work that Morrison says can be developed for a culture of improvement within Kodiak in 2023 and beyond. Business Process Improvement – create a process map to identify the current state of any business procedure, such as the sales/design process, production scheduling, or delivery operations. After the map is built, the team brainstorms where/how the process is not performing as well as it should, then the team works on several small experiments (pilot studies) to test changes. Finally, lessons learned from the pilot studies inform the team how to make changes to the business process, resulting in a better-performing “future state.” Layout Optimization – draw a physical layout (lumber yard, warehouse, workshop/mill/plant) at scale in a CAD program and analyze historical sales data to identify which high-volume raw materials and/or products should move within the layout’s study area to a location that results in higher product/operator flow and efficiency. Value-Stream Mapping – similar to layout optimization, but this time instead of looking at the locations of products and operator flow, look at how to minimize the travel/inventory time, also known as non-value-added time, that a manufactured item spends within a production facility. The thought here is that the faster an item is produced (throughput time), the facility becomes more efficient (profitable).

“My most important role, in all projects I will do with Kodiak’s operating companies, will be to help senior management identify people within their organizations who want to learn more about CI,” Morrison told HBSDealer. “As these people are identified, I will take on a teaching/mentoring role to show each of them how to use the full set of CI tools. The goal over time will be to establish a full set of talented individuals who will drive the CI culture within Kodiak.”