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Exclusive presentation for. Mike McCrobie Vice President National & Installed Sales Ed Ritenour Director of Cost Forecasting Nick Nickells Pricing Manager.

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Presentation on theme: "Exclusive presentation for. Mike McCrobie Vice President National & Installed Sales Ed Ritenour Director of Cost Forecasting Nick Nickells Pricing Manager."— Presentation transcript:

1 Exclusive presentation for

2 Mike McCrobie Vice President National & Installed Sales Ed Ritenour Director of Cost Forecasting Nick Nickells Pricing Manager :: Manufacturing Dan Crowley Vice President Engineered Wood Products Eric Mora National Account Sales Manager Our team…

3 Agenda Purchasing Philosophy Centralized Purchasing Mill direct or manufactured-direct focus Building partnerships with suppliers Commodities Contract and branded products Builder Influence on mills & manufacturers. Pricing Models Trailing average models Spot market models Market adjust models Composite/Index models Value Engineering The Landrum – Case study Field labor savings Board foot reductions Wall efficiency improvement Lumber grade reduction EWP strategic partnership Efficiency Improvements Hyphen Solutions Build/Supply Pro 84 Lumber Capabilities 84 Components Engineered wood hubs Millwork shops Construction services Coverage

4 Purchasing Philosophy

5 Centralized Purchasing Mill direct or manufactured-direct focus Building partnerships with suppliers Commodities Buy in the “open market” Minimal contracts on dimensional lumber and roughly 30% on OSB Pro-active on buying opportunities Large supplier base on lumber Small supplier base on panel products ( OSB and plywood) Contract and Branded products Small number of suppliers by product category (windows, doors, etc.) Leverage buying power

6 Builder Influence on Mills & Manufacturers Pros Provides apples-to-apples product/price evaluations among dealers Possibly open the door to a new vendor for dealers Provoke discussion on product development/quality/problem solving Cons Can restrict dealers’ ability to correct issues within the supply chain Exclusivity deals can limit ability of dealers to negotiate volume and pricing Can force dealers to stock multiple “like” products for multiple customers

7 Pricing Models There are 4 main types of pricing models: 1.Trailing average models 2.Spot market models 3.Market adjust models 4.Composite/Index models

8 Pricing Models Trailing average models  The most common trailing average model is the 4 week trailing average with the 13 week trailing average model a distant second.  Four week trailing models are the most preferred type that we do  Gives some transparency to builder Pros Model will work continuously overtime with minor adjustments as needed Less time spent negotiating pricing More time to focus on other issues Mutes price fluctuations in the commodity markets Cons May not always be the cheapest pricing Longer trailing average models require dealers to make large inventory commitments for a longer period of time Time consuming to track lumber costs to set the pricing Requires parties to agree to participate in the model for at least 1 full year Does not work well with 30 day pricing

9 Pricing Models Spot market models  Based on current market  No transparency to builder Pros No long term commitment to a dealer Flexibility on pricing commitments 30 day, 60 day, etc. Minimizes the need for dealer to take larger than necessary position in the market No need to track market pricing over time Cons Subject to greater market volatility More time spent negotiating pricing Exposed to commodity market price fluctuations

10 Pricing Models Market adjustment models  Initial pricing based on spot market  Can adjust based on market cost movement between 2 specific weeks or between 2 specific sets of weekly averages to set next pricing period  Adjustments can be made based on a percentage or straight change in dollar value (for simplicity I prefer straight change in dollar value) Pros Limited time spent negotiating pricing after initial pricing is set Works well with 30, 60, 90 day pricing Mutes market fluctuations Cons Time spent tracking the market numbers for pricing adjustments May not always be the cheapest price

11 Pricing Models Composite/Index models  Is not well suited for production builders  Geared toward large projects with known material quantities  Works best with only 1 price adjustment Pros Allows market adjustment based on a compilation of material The movement in the composite determines the price adjustment that is distributed equally among all products Cons Complicated to administer the model Composite takes into account products not even used by the builder Pricing very quickly gets skewed Creates animosity among everyone involved

12 Value Engineering

13 Case Study - The Landrum  Field labor savings  Board foot reductions  Wall efficiency improvement  Lumber grade reduction

14 Case Study - The Landrum 1. Field labor savings Porch trusses Adds 21 B.F. to Elevations A, E, J Adds 72 B.F. to Elevations B, F, G, H, K Hip lay-in gables Adds 427 B.F. to Elevations F, H, N HVAC platform boxed out for easier access No B.F. added Original design

15 Case Study - The Landrum 2. Board foot reductions: Move girder back due to 1’ heels Remove interior wall bearing (if girder is moved back) Standard heel on trusses over 3 car garage since insulation is not a factor Move hip girder (Elevation F, H, N) 2’ off end wall makes girder single ply Get rid of second gable on Elevations J, H. This gets rid of a 2-ply girder to carry brick Savings -Elevation A Saves 143 BF -Elevation B Saves 126 BF -Elevation C Saves 76 BF -Elevation D Saves 76 BF -Elevation E Saves 360 BF -Elevation F Saves 431 BF -Elevation J Saves 631 BF -Elevation K Saves 138 BF -Elevation O Saves 55 BF Elevation A

16 Case Study - The Landrum 2. Board foot reductions: Move girder back due to 1’ heels Remove interior wall bearing (if girder is moved back) Standard heel on trusses over 3 car garage since insulation is not a factor Move hip girder (Elevation F, H, N) 2’ off end wall makes girder single ply Get rid of second gable on Elevations J, H. This gets rid of a 2-ply girder to carry brick Savings -Elevation A Saves 143 BF -Elevation B Saves 126 BF -Elevation C Saves 76 BF -Elevation D Saves 76 BF -Elevation E Saves 360 BF -Elevation F Saves 431 BF -Elevation J Saves 631 BF -Elevation K Saves 138 BF -Elevation O Saves 55 BF Elevation F

17 Case Study - The Landrum 3. Wall efficiency improvement Stud spacing 16” O.C. Exterior 16” O.C. Load bearing Interior 24” O.C. Non load bearing Move hip girder (Elevation F, H, N) 2’ off end wall Reduces master double window as girder won’t sit on it.

18 Case Study - The Landrum 4. Lumber grade reduction Remove limited access storage (Boca 42 Rule) As long as insulation depth is above bottom chord of truss No access to area via scuttle hole or pull-down staircase Elevation N

19 Proudly Offers: Engineered Wood Products Strategic Partnership Beyond the Traditional EWP Bidding Process

20 Proudly Offers: Engineered Wood Products Strategic Partnership By-products of EWP Strategic Partnerships  Lower Cost of Floor Systems  Save Time – Increased Cycle Times  Increase Profits – Economies of Scale  Replicate Efficiencies

21 Proudly Offers: Engineered Wood Products Strategic Partnership Tier 1 – Traditional EWP Products & Services – Many Competitors Only Operate at this Level.  Quality Products  Competitive Prices  Customer Service Standards  Conversion (Exit ) Strategies  Manufacture’s Agreements (Rebate)  Design Per Plan  Usually 2’ Increments

22 Proudly Offers: Engineered Wood Products Strategic Partnership Tier 2 – 84 Lumber Enhanced EWP Services  Process Control (You Control Security ) – Goal of Improved Cycle Times – CPI (Continual Process Improvement)  Distribute – Review – Correct – Approve – Change – Information in Real Time – Processes that are Repeatable and Measureable!  Plans Room – DropBox – Supply Pro – Conference Calls – Spreadsheets - Quartly Review Meetings  Integrate Business Silos  EWP – Components – Estimators – Purchasing – Builders – Poured Walls – H.V.A.C. – Framers – Engineers – Architectural Depts.  Few Competitors Commit to Operate This Level – Offered to Strategic Partners.

23 Proudly Offers: Engineered Wood Products Strategic Partnership Tier Three – 84 Lumber EWP Cost Reduction Services  Manage Waste – Sell by the Inch  P.E.T. to 1/16” – Improved Cycle Times  Ink Jet Printing – Coordinates with layouts & Helps with Inspections  Squaring Diagrams  Customized H.V.A.C Holes Efficiently Processed & Correlated with Layouts  Even Fewer Competitors Choose to Operate at This Level – Offered Only to Strategic Partners

24 Proudly Offers: Engineered Wood Products Strategic Partnership Tier Four – 84 Lumber EWP Integrated Services  H.V.A.C. – Customized Mapping of H.V.A.C. Holes  Framer Orientation & Certification Programs  Builder – Associate Orientations  Builder– Sales Rep. Orientations

25 Proudly Offers: Engineered Wood Products Strategic Partnership Tier Five – Whole House Design  Whole House Design - Process Control  Exact building material list  Implementation – w/ Builders trades  Limited to Strategic Partnerships – Installed Sales or Builders Who Can Control Labor  This Program is Intended to Enhance (Not Replace) the Builders Present Process Control System

26 Proudly Offers: Engineered Wood Products Strategic Partnership 84 Lumber EWP Vertical Integration Savings Example With Permission - An Re-designed Pier Placement Plan Eliminated 6 Piers At $150 Each a Net Savings of $900, Before the First Stick Was Sold

27 Proudly Offers: Engineered Wood Products Strategic Partnership Re-designed First Floor, Eliminated Two Girder Lines and Resulted in a 6% Net Savings ($360) Over a 2 x 10 System 84 Lumber EWP Vertical Integration Savings Example

28 Proudly Offers: Engineered Wood Products Strategic Partnership I Joist Floor System Eliminated Two Steel Beams ($875) and Allowed the Stair Landing to be Cantilevered. Net Savings Over the 2 x 10 System was 23% ($1380). After Working with HVAC Contractor, He Wanted to Add a Surcharge to Continue do 2 x 10 Floor Systems 84 Lumber EWP Vertical Integration Savings Example

29 Proudly Offers: Engineered Wood Products Strategic Partnership $3,000 of LVL & Steel was taken out of 3 rd Floor Walk up & Ceiling Layout, by Asking to Re- direct Roof Point Loads and Allowing the I-Joist to Carry A PLF Roof Load. Net Savings $5,640 I-Joist Carrying Roof 84 Lumber EWP Vertical Integration Savings Example

30 Efficiency Improvements

31 Build Pro, Supply Pro Builder initiated transactions New orders Purchase orders Extra PO’s Measurement PO’s Memo orders Work orders Reschedule requests Change order Adds Deletes Quantity Price changes Order cancellation Order completion Notes Supplier initiated transactions Order acceptance Shipment notification Order completion Notes 84 Lumber is integrating its Ryland transactions through Hyphen Solutions Build/Supply Pro:

32 84 Lumber Capabilities

33 84 Components Plants Pittsburgh, PA Roof Floors Panels Charlotte, NC Roof Floors Panels Nashville, TN Roof Floors Panels EWP Baltimore, MD Roof Floors Panels

34 84’s Engineered Wood Hubs We utilize the Boise EWP family of products including BCI® Joists and the ALLJOIST® system.  Boise Sawtek™ for precision end trimmed product  Large inventory of Versa-lam, Rim boards, and Glulam  Design services from trained designers Birmingham, AL Washington, D.C. Atlanta, GA Baltimore, MD Charlotte, NC Columbus, OH Pittsburgh, PA Charleston, SC Nashville, TN Austin, TX Dallas, TX Houston, TX San Antonio, TX

35 84’s Millwork Shops Bessemer, AL Joppa, MD Concord, NC Pleasantville, NJ Dewitt, NY Rochester, NY Ft. Myers, FL Plant City, FL Sarasota, FL Tavares, FL Jackson, TN Houston, TX San Antonio, TX Manassas, VA Richmond, VA

36 84’s Construction Services Core programs  Framing  Exterior doors  Interior millwork  Exterior millwork  Windows  Shell packages (Sarastota, FL) Secondary programs  Roofing  Siding  Drywall  Kitchens

37 Ryland Markets

38 84 Lumber in Ryland Markets

39 MarketStores Phoenix, AZ1 Denver, CO0 Orlando, FL2 Sarasota, FL1 Tampa, FL1 Chicago, IL2 Baltimore, MD11 DC Metro7 Las Vegas, NV1 Charlotte, NC2 Raleigh, NC1 Charleston, SC1 Fort Mill, SC1 Myrtle Beach, SC1 Rock Hill, SC1 Northern VA1 MarketStores Southern CA1 Middletown, DE2 New Castle, DE1 Newark, DE2 Wilmington, DE1 Atlanta, GA2 Indianapolis, IN3 Minneapolis, MN0 Deptford, NJ1 Marlton, NJ1 Moorestown, NJ1 Philadelphia, PA4 Austin, TX1 Dallas, TX3 Houston, TX3 San Antonio, TX1


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