If you and I have talked about the building materials industry before, then you’ve likely heard me describe the “path” between where products are manufactured and the buildings in which they’re installed. This “path” represents a value chain and whoever owns the greatest part of it also owns the greatest potential for profit.
So how do you “own it?” Do you want to own it? Do you want to own only certain parts of it?
My answer is that a company should be paid for the precise number of steps along this “path” they own and execute against better than any other viable option. That’s it.
But if you aspire to expand your footprint in the channel you’d also better be willing to exert pressure on those companies up or down the channel from you.
If you’re a two-step distributor, you either need to move up towards manufacturing or introduce services and functions to take you closer to the contractor or builder. And do this with the full knowledge that many dealers will perceive you as a threat to them. But there is also a lot to be said on how distributors can act in harmony with their dealer customers and reallocate what work each performs. Distributors can offer and solve a great deal of burden, costs, and risks dealers have in terms of machining products for them, providing installation assistance as a service to their customers, and a dozen other areas of service and support.
If you’re a dealer and you want to expand and grow, you need to take more control of your supply chain, including buying direct from manufacturers. And that of course will place your distributor relationship in jeopardy.
So you ask, “Why can’t this continue to work like it has for decades where the manufacturer, distributor, and dealer all participate in their piece of the supply chain to the builder?
To those who ask that question…I give you: Katerra
Founded in 2015, today Katerra ranks as one of the top 25 multifamily general contractors in the United States. They’re neither distributor nor dealer, but through buying direct, performing functions typically done at the distributor and dealer location…they’re both.
This is the “Uber” of the building materials and construction industry… impacting both how building materials are sourced and brought together, and ultimately how buildings are built.
Not convinced? Watch this video and count the products and/or services of which you currently own the path.
Five-Year Relevancy Plan
This doesn’t impact everyone in the building materials industry. Rural and smaller regional distributors and dealers serve a strong role. The companies catering to the R&R segment should be confident in their current models. And there are other models that are strong and viable.
But if you play in the single and multi-family production segment…what is your plan to remain relevant? How will you remain the “supplier” of choice when the Katerra’s of the country (and there will be more) come to your market?
Over the next five years, how are you reinventing not only the product lines you sell…but the way they are sourced, inventoried, assembled or produced, shipped, serviced, and ultimately passed through to the end user?
When asked “what industry is Uber disrupting?” most people answer “taxis.”
No, that’s not it. Uber is disrupting automobile ownership itself.
What is Katerra attempting to disrupt?