Head of Building Products & Construction, Mark Goldsmith sat down with previous Chief Operating Officer for Plumbase, Chris Maityard. Discussion topics included manufacturers trends and strategies, implementation and benefits of preferred supplier strategies and the evolving role of the building product merchant:
Mark: Building product manufacturers have had to evolve over the past decade, becoming less reliant on the merchant sector to drive revenue growths. What trends are you seeing manufacturers consider? What strategies have you seen work well and would you look to employ in driving the end users (architect, main contractor etc) to buy your products directly?
Chris: The use of specification by manufacturers continues to be at the core of any strategy for the end user and technical specification teams are key to this. In conjunction with this, focus has been on supporting the builders and installers as part of the supply chain with familiarisation of products, by utilising merchant branch based events, manufacturer training sessions and e-learning for both the merchant and the builders and installers.
Increasingly, the importance and strength of the manufacturers' brands with the end user are being realised, and consideration will inevitably be given to creating new online channels directly to the end users customer (“the ultimate customer”) ie B2C. This has been employed by certain manufacturers already to stimulate and create demand in the ultimate customer, meaning that there is a pull through of demand from the ultimate customer for that specific brand. Increasingly, there appears to be a trend to understand both end users and ultimate customers needs through collaborative workshops and direct marketing and create a solution sale for them, rather than simply selling a product.
Mark: The role of the CFO and Finance Director has changed considerably over recent years particularly within the building products sector. Apart from the more traditional balancing of books, what key qualities do you feel a solid CFO now needs to possess?
Chris: With the rapidly changing environment, one of the most important qualities to have is to understand the business and have a passion for it. This is particularly true within merchants but equally, applies to manufacturers as the Omni-channel approach means that there is not simply one revenue stream to account for. The key to this is to understand where the money is made (“cash is king”) and ensure that strong daily cash management controls, together with sales, are reported on a daily basis looking at like for like performance and projected forward.
Coupled with this, an understanding that they support the sales and branch teams is crucial. To this end, the requirement for timely and accurate management reporting is paramount. This means that the focus on stock and the need to have a tight control on where it is and when it will be replenished. Creating a service culture where the trust and respect of the business are earned is key, and educating, helping and explaining what the numbers actually mean at a branch or manufacturing plant level is equally important. Without this, performance cannot be changed.
The final element is to make sure that the processes and teams are in place so that credit management is considered as a part of the sales process. This takes time but again, by investing time with the teams at branches or manufacturing plants; listening to them, the business will grow sales and reduce the likelihood of bad debt.
Mark: As Chief Operating Officer at Plumbase you reduced operating costs by 8%. Where did you focus your team’s efforts in achieving this and where did you start?
Chris: As we’ve just touched on, the importance of having timely and accurate financial information is key to the process. Reviewing initial branch profitability was the first area of focus, along with working as a team to identify what the controllable costs were and whether they were being controlled. An important element of this was looking at the best and worst performers and establishing what best practice was being adopted to deliver the results, and whether this could be replicated.
To achieve this, branch manager workshops were used as they allowed the opportunity to listen, discuss and agree what was required and explain why change was needed. Areas of focus were around team efficiency within the branch and distribution costs, in particular how delivery routes were planned and Inter Branch Transfers (IBTs) were undertaken.
In conjunction with this, equal importance was placed on growing sales and understanding individual branch performance and best practice. Particular areas of focus looked at why single item transactions existed (and the importance of switch and associated selling), understanding average spends per customer and from this what training was required to enhance these skills.
Mark: Much of your work within the COO role revolved around the implementation of a preferred supplier strategy. I would assume you met with a large number of building product manufacturers in completing this task. What key qualities set the good and average apart from the best, and how did they benefit as a result?
Chris: It was important to ensure that there was an alignment of goals as part of the process so that all parties involved were able to benefit. To achieve this, an understanding of the customer’s needs was undertaken and then joint goals which both merchant and manufacturer were focused on, and were based on sales out performance, not purchases in. Inherent in this was timely and accurate information to touch on a point you made earlier. Regular quarterly meetings were key at branch, regional and national levels to ensure that targets were being met or exceeded. If they were not, a review of the root cause and an action plan to address this was created to ensure the shortfall against target would be recovered.
The key qualities that were differentiators started with that of collaboration and partnership. It was important to earn trust and respect by demonstrating actions, and once undertaken, manufacturers who recognised that it was a true partnership were the ones who ultimately benefitted the most from it. Next, commitment to training both merchants, customer and their own teams. Where this commitment was provided, there was a clear differentiator and change in behaviour within the branch network. E-learning was pivotal to this, with manufacturer’s commitment to create and support branch staff for completing specific e-learning modules.
In terms of benefit, the customer was ultimately better supported and able to receive the right solution for their needs. For merchants and manufacturers, there was both an enhanced relationship together with tangible and demonstratable increases in sales out of product.
Mark: How do you see the role of the building product merchant evolving over the coming years and what challenges do they face? What value-add can merchants provide to the manufacturers?
Chris: The role of the building product merchant I believe will remain essentially unchanged. With regard to the pivotal role they play in the value chain; their provision of stock availability, excellent and knowledgeable customer service and their prime location.
The challenges they face are from the home retail multiples in the market, who are different to existing builders merchants in that they offer an Omni-channel approach and extended opening hours. Both players can and will co-exist, but there is a real opportunity to remove the differentiators so that all players in the market can compete based on their stock availability, excellent and knowledgeable customer service and their prime locations.
The value-add merchants provide to manufacturers, in addition to that which they currently provide, would be centred around supporting their strategies and in particular realisation of the value of their brands. In providing solutions as opposed to providing products, end users and ultimate customers have a greater understanding of the value the manufacturer can bring. Developments in manufacturers’ strategies, with mobile apps and installer workshops to further understand what solution the end user and ultimate customer wants, require merchants to be an integral part of this which creates an exciting opportunity for them.
Mark: You have held a broad range of senior positions within a mixture of industries. What has helped you build knowledge and confidence when taking on a new challenge or looking to develop and influence a new team?
Chris: One of the key qualities I believe is to listen and earn people's trust and respect. This is achieved by spending the time to understand at the start (or indeed before you start) how and where the value is created and who influences the decisions. Time spent across the branch network speaking with customers, branch teams, manufacturers and industry bodies is invaluable as they understand the issues and can help to provide the solutions. As part of this process, it is important to understand where the value and cash are created as without value, there will not be a sale and without this, there is no cashflow.
Understanding the role that industry bodies play, in particular, those of the BMF, IoBM, FMB, Gas Safe and the CIPHE are paramount to establish what issues and opportunities exist nationwide. Similarly, the role that Buying Societies play and the importance of the NMBS in providing value to manufacturers and merchants is key.
Product knowledge is also important, and the use of e-learning enables an understanding of why the products are important, and the messages that manufacturers want to convey.