FCN exclusive: NAFCD board tackles key issues
Dallas— Supply chain disruptions, port congestion, increased fuel and operational costs, and of course, labor shortages. These are just some of the major challenges that flooring distributors face directly today.
To get to the heart of some of these problems, FCNews sat here with members of the NAFCD Board of Directors last week at the 2021 NAFCD+NBMDA Convention. Attendees included: Shane Richmond (Fishman Flooring Solutions), Chairman; Kyle Gorny (Blakely Products), President-elect; Dunn Rasbury (A&M Supply), former president; Dori Blitzstein (Roesel-Heck Company), director; and AJ Warne (Abraham Linc), vice president. FCNews editor-in-chief, Reginald Tucker, moderated.
Following are excerpts from the conversation:
Due to the COVID-19 pandemic, issues surrounding supply chain challenges dominate discussions among distributors, manufacturers and retailers. How did you approach the issue from a distributor’s perspective?
Gorny: It was very difficult to keep customers happy, very difficult. We’ll do our best, but you’re only as good as the supplies you have.
Richmond: I think one of the interesting things we learned during the ITR economics presentation this week was that not only are we facing challenges in the supply chain, but at the same time, demand is rising. So it’s been kind of a perfect storm. If the demand didn’t increase at this point, we might not even have any real challenges because of the supply chain issues as we would see a more normalized level of demand. So I think we all, at least most likely, have certainly leaned on our supplier partners and expanded our group of supplier partners to find ways to proactively resolve issues, which I think is the best course of action for each of us. We can sit back and complain about what’s happening, or we can try to be creative and find solutions. I’d say we’ve probably all done that in the last 18 months or so.
Blitzstein: Well, I think the good thing about all delivery issues is that pricing becomes less of an issue because our customers just need products. So if you have product, you win. As long as you can stay on top of it; whether you’re waiting for containers and trying to source smarter, or whether you’re pulling from your manufacturer’s stock. If you can get the stock, you won’t have that much discussion about the price, I’m not going to say you won’t have a discussion about the price, but the price will become less of an issue. I think that has helped all of us, because I know we are all constantly being praised.
Gorny: In our market, all the major jobs – commercial, multi-family – that had to disappear during COVID-19 were shut down, so they’re back on the table now. Combined with the other jobs that are now disappearing, this will create stronger demand.
Blitzstein: All those projects will be gone by 2020. Now we see many of the specs written even back to 2017 being re-offered at much higher prices. We thought the projects were dying or going elsewhere, but they’re popping up again now. It’s a little crazy.
Gorny: Everything hits at once.
warn: At Abraham Linc, we have a bit of a different perspective than everyone else. In 2020 we’ve scaled back a bit so we had fewer products from more reliable manufacturers and trading partners working with us, so we’re doing better on their supply chain side. We went with a narrower and deeper approach, saying, “Hey, listen, we don’t want to be in stock.” Our company’s fame in our market is that we are always in stock. Our customers tell us they don’t need to check the stock, they don’t worry that we have stock. And while our inventory levels aren’t as good as they were before the delivery challenges, we spent most of 2020 through October of this year with only one SKU in our predominant lines where we had backorder issues. A strong supply chain reflects our commitment to our customers, which is why we’ve worked very, very hard on it.
With regard to the inventory issue, have you noticed that the availability (or lack thereof) of certain product categories has given you the opportunity to revisit other product categories?
warn: For us, the supply chain issue has changed our product mix within categories. We’ve had a pretty steady transition from a predominantly imported hardwood supply to a predominantly domestic hardwood supply as the cost of container freight makes it very challenging to maintain an import program. The domestic supply that exists for SPC or LVT generally does not come close to meeting a measurable share of domestic demand.
Gorly: Also keep in mind that most of the film for the SPCs and the LVTs also comes from abroad. So even if those products are made locally, they have to import the movies that go into the product.
Richmond: It is a similar situation with us. As we look at new products to bring in or new suppliers to partner with, having domestic inventory is a much bigger part of the conversation. We find ourselves going back to that traditional model where we rely on suppliers to skip products in their facilities to support us, either between containers or between imported products, or to create completely stateside lines that we can represent so that We don’t see the wild swings in freight costs that we’ve seen over the past year.
During the keynote speech by Brian Beaulieu of ITR Economics, he predicted that distributors will likely have to deal with supply chain problems well into 2023. Are you in line with that forecast in terms of what you see in your own individual markets?
Rasbury: I think that’s pretty consistent with what we’re seeing. However, I think the cost will probably stabilize sooner than expected because at some point you just hit a saturation point and you can’t get that extra money you once got. In fact, we are already seeing signs of not so much a reduction in costs, but a stabilization in product and shipping costs.
Aside from supply chain issues, what are some of the other pressing issues that flooring distributors deal with on a daily basis?
Blitzstein: The lack of truck drivers is certainly a problem. I mean, they’re scarce, it’s hard to hold on to them. And even if they have a great resume, it doesn’t mean they won’t have an accident on their first day.
Sounds like that happened to you?
Blitzstein: Yes. We get less skilled drivers with less experience. At the same time, we pay our drivers more money. We are a smaller distributor, so it has a big impact on us if we have one or two drivers down.
Do you compete with other industries when it comes to driver availability or lack thereof? Have these drivers left the staff? What is the cause of the shortage?
warn: The simple answer to your question is that floors can be a very unattractive load for drivers; they have to physically unload these heavy products. Amazon drivers, for example, can pull a transfer truck from one warehouse to another and come back the same day. There is no way to remove the carpet pad except manually. So, if your options are to make $29 an hour with Amazon deliveries or $29 an hour hauling and unloading floors… which would you prefer?
When it comes to distribution, customers expect a high level of service. We want our customers to feel like we’re helping. Our truck drivers don’t just show up and say, ‘The toad is on the back of the truck, see you later!’ That is not acceptable. We train them to take it to the customer’s warehouse, put it where it belongs and pick it up ourselves. That is adding value for the customer. At Abraham Linc we focus on staying ahead of the problem by keeping the good drivers.
Richmond: The supply chain challenges we’ve faced have masked how challenging workforce issues have become over the past year and a half. While they’re actually unrelated, in reality it’s more driven by overwhelming demand, causing staffing issues across the board. We’ve now talked extensively about drivers and how difficult that is, but even finding professional staff, accounts payable staff, HR staff and salespeople was quite a challenge. And from what we’ve heard at the convention so far, that probably won’t get any better here as we go along. So if the supply side catches up and starts to level off, we’re probably still going to have problems hiring. Finding people for our company will remain a challenge for us for the foreseeable future.
Are there any creative things you do when it comes to recruiting? Do you see a lot of poaching?
Blitzstein: Some companies poach; we don’t poach proactively. But when people from other distributors come to us, that’s a different story. We approach it differently by focusing on compensation. To get good sellers, we have to offer almost three times as much base as we used to to sellers. The salaries are skyrocketing, and that’s destroying us.
warn: We used a different method to attract drivers: we started by changing the radio stations we played our ads on. In doing so, we discover that we are getting a whole new batch of candidates. Think about it: if you’re a truck driver, you listen to the same radio station every day, you don’t change, you don’t flip back and forth through the radio stations. So when we changed the radio stations where we placed the ads, we got access to a whole new potential candidate base. It taught us some really important things about channel marketing. What kind of fish you catch depends a lot on the type of bait you put in the water, so to speak.
Gorny: We found that making a few minor adjustments made a big difference in what kind of applicants we got. For example, we have many customers who are installers and follow our Facebook page. A lot of those guys are tired of working on their knees and they see that Blakely Products is hiring and that we’ve been around for 75 years.
Richmond: It’s not really a creative solution for us, but what we realized early on is that retention is the most important piece of our workforce puzzle. We look at the benefits we offer, employee demands for a better work-life balance and, of course, benefits across the board. We make adjustments where necessary based on market conditions.
(For more information on this in-depth roundtable discussion and additional coverage of the 2021 NAFCD+NBMDA Convention, see the November 22/29 issue of FCNews.)