Inner Workings of the Millwork Industry
Over the Ever-Changing Millwork Supply Chain
by Allen Dyer
Where does the traditional millwork distributor fit in today’s millwork supply chain? Few forums openly address this issue, but the nagging question remains and is bantered about in more private discussions among industry participants. The question is not new.
We’re approaching two decades since the growth rampage of when the home centers began re-writing the building-products retail supply chain rulebook. Not long after that growth began, today’s major consolidators on the pro side of the industry were making their first acquisitions and beginning their own supply chain shakeup. The time-honored model of manufacturer-to-distributor-to-dealer-to-installer-or-consumer does indeed remain under duress. As a matter of fact, in some regions that model has withered mightily.
Defining the Millwork Distributor
Nowhere is this debate more emotional and heated than among the members of the National Sash and Door Jobbers Association (NSDJA), the industry trade association, where it has now entered the confusing state of trying to define: "Just exactly what is a millwork distributor?"
Most accept that the functions of millwork distribution remain very similar to those of 20 years ago-they are just being performed or controlled at various points in the supply chain. Yet the neat, clean segmentation of supply chain participants as manufacturer, distributor or dealer is largely a thing of the past. One major door manufacturer now operates its own door unit assembly plants, which, in the past, was clearly a function of the distributor.
Other major window and door manufacturers have driven their own consolidations by simply acquiring the distributors of their products, electing for more direct control of their distribution channels. On the other end of the supply chain, two major home centers operate their own door unit assembly plants in lieu of sourcing assembled units from either door manufacturers or distributors. And, some dealers and one-step distributors are encroaching upon their traditional builder customers’ turf by installing the products they distribute. There seems to be no end to the variations of supply chain models used to get today’s millwork products to market.
The malaise of some traditional millwork distributors is clear, and the focus of debate among two-step and one-step distributors alike is usually about dealers or retailers buying “direct” from their suppliers. That defensive tone increasingly seems to be counterproductive, diverting attention from the real issue of what each should do to make sure they remain part of the most efficient channel.
Ironically, and less publicly, the pro chains and home centers are beginning to wrestle with the very real questions of whether they must perform the distribution functions of assembly and logistics management in order to remain competitive with other supply chain models that are usually enabled by distributors. In very recent years, their answer seems to rely less frequently on the blind assumption that efficiency is an automatic result of “buying direct.”
The Right Answer
Confused yet? Maybe we’re asking the wrong questions. The truth of the matter is that no single supply chain model offers the right answer in every case. Depending upon many factors, one model may be most efficient in one market or product category while a different model may work more efficiently in another market. So, why don’t we examine those factors instead of continuing to fret over which single supply chain model is most effective?
Geography and Demographics
Geography and demographics are one area of supply chain impact. There are undeniable efficiencies of “critical mass” usually achieved by larger volumes and/or fewer SKUs. In regions that enjoy a fast-growing population base, new construction tends to dominate the millwork landscape, concentrating larger volumes of lower cost products in fewer variations.
Areas that have older housing stock, slower population growth or fewer developable properties tend to emphasize the value of product upgrades offered in more variations. The achievement of scale efficiencies may require different channel models depending upon these demographics in order to leverage their respective volumes, in turn favoring different methods of
Another point of supply chain delineation lies within the products themselves. The generic term "millwork" is applied to some pretty diverse product categories. For example, stair parts clearly fall into the millwork group, but have inherently different supply chain characteristics than do windows or doors. Stair systems still favor job-site assembly, while windows or door units usually reach their final destination fully assembled. Mouldings, a third major millwork category, usually reaches the installation point as a finished product, but may require such an array of species and shapes that a more specialized supply chain is needed in some markets and not in others.
The Product Source
A more recent factor impacting millwork supply-chain design is the source of the products. Increasingly, the millwork industry is faced with managing supply chains that have dramatically different points of origination than in the past. Not long ago, the adjective “wood” was almost assumed as a precedent to the noun “millwork.”
Now, vinyl windows, fiberglass doors and composite exterior trim have eclipsed the wood standard. And, with the politically- and economically-driven shift away from the Western United States’ woods as the basic raw material for our industry, even those millwork products still made of wood many times originate from trees grown in another hemisphere. Here, too, supply chain structures that made sense in the past are racked by dynamics that indicate need for an open mind to supply-chain structure.
The debate around the millwork distribution channel seems to defy the simple answers found in other segments of the building-products industry. It is clear that neither the shallow thought process of "buy direct" embraced in the past by the consolidators, nor the biased view of rigid functional assignments held by some distributors are the end-all answers.
Attempts to apply across-the-board answers to the millwork supply chain limits our potential for delivering the best value to the most important supply chain partner of all-the end user of our products. An open mind that focuses on the perspective of our ultimate customer is the most reliable guide for answering the ongoing questions of the millwork distribution channel.
Allen Dyer is president of ECMD Inc. of North Wilkesboro, N.C. ECMD Inc. is a building products manufacturing and distribution company with production operations that include EastCoast Moulding, Crown Heritage Stairs and A&H Windows.
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