Dallas— Supply chain disruptions, port congestion, higher fuel and operational costs and, of course, labor shortages. These are just some of the major challenges directly impacting floor covering distributors today.
To get at the heart of some of these issues, FCNews sat down with members of the NAFCD board of directors during the 2021 NAFCD+NBMDA convention here last week. Participants included: Shane Richmond (Fishman Flooring Solutions), president; Kyle Gorny (Blakely Products), president-elect; Dunn Rasbury (A&M Supply), immediate-past president; Dori Blitzstein (Roesel-Heck Company), director; and A.J. Warne (Abraham Linc), vice president. FCNews managing editor, Reginald Tucker, moderated.
Following are excerpts of the conversation:
Issues surrounding supply chain challenges have dominated discussions among distributors, manufacturers and retailers as a result of the COVID-19 pandemic. From the distributor’s perspective, how have you been dealing with the issue?
Gorny: It’s been very difficult to keep customers happy, very difficult. We’re doing the best we can, but you’re only as good as the supplies that you have.
Richmond: I think one of the interesting things we learned this week during the ITR economics presentation was not only are we suffering from supply chain challenges, but demand is also spiking right at the same time. So, it’s kind of been the perfect storm. If demand weren’t spiking right now, we may not even be having real challenges from the supply chain issues because we’d see a more normalized demand levels. So, I think all of us, most likely at least, certainly have leaned on our supplier partners and expanded our group of supplier partners to find ways to proactively solve problems, which I feel is the best course of action for any of us. We can sit back and complain about what’s happening, or we can try to be creative and find solutions. I would say all of us, most likely, have done that in the last 18 months or so.
Blitzstein: Well, I think the fortunate thing about all the supply issues is that pricing is becoming less of a problem because our customers just need to get product. So if you have product, then you win. As long as you can stay on top of it; whether you are waiting for containers and trying to buy smarter, or whether you are pulling from your manufacturers’ stock. If you can get the stock, you’re not going to have as much of a discussion about price, I’m not going to say you’re not going to have any discussion about price, but price is going to become less of an issue. I think that has helped us all because I know we all are getting beat up on price all the time.
Gorny: In our market, all the large jobs—commercial, multifamily—that were supposed to go during COVID-19 got shut down, so now those are back on the table. Combined with the other jobs that are going now, that’s creating stronger demand.
Blitzstein: All those projects went away in 2020. Now we’re seeing a lot of the specifications that were written even back to 2017 being re-bid at much higher prices. We thought the projects died or went somewhere else, but they are resurfacing now. It’s a little bit crazy.
Gorny: Everything is hitting at one time.
Warne: At Abraham Linc, we have a little bit of a different perspective than everyone else. In 2020, we kind of scaled back so that we had fewer products from more reliable manufacturers and trading partners who are working with us, so we’re doing a better job on their supply chain side. We went with a narrower and deeper approach where we said, ‘Hey, listen, we don’t want to be out of stock.’ Our company’s claim to fame in our market is we’re always in stock. Our customers tell us they don’t have to check stock, they don’t worry about us having stock. And while our inventory levels aren’t as good as they were before the supply challenges, we spent most of 2020 until October of this year having had only one SKU in our predominant lines that we had back-order issues on. A strong supply chain reflects our commitment to our customers, and so we’ve worked really, really hard on that.
Related to the inventory issue, are you finding that availability (or lack thereof) of certain product categories has allowed you the opportunity to revisit other product categories?
Warne: 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 offering to a predominantly domestic hardwood offering because the expense of container freight has made it very challenging to maintain an import program. The domestic supply that exists for SPC or LVT, in general, doesn’t come anywhere close to satisfying any measurable portion of the demand domestically.
Gorny: Also remember that the majority of the film for the SPCs and the LVTs are coming in from overseas, too. So, even if those products are made locally, they have to import the films that go into the product.
Richmond: It’s a similar situation with us. As we’re looking at either new products to bring in or new suppliers to partner with, having domestic inventory is a much bigger piece of the conversation. We find ourselves going back to that traditional model where we’re leaning on suppliers to overstock product in their facilities to support us either between containers or between imported products, or to create completely stateside lines that we can represent so we don’t have the wild fluctuation in freight costs that we’ve seen in the last year.
During the keynote speech by Brian Beaulieu of ITR Economics, he predicted distributors will probably be dealing with the supply chain issues well into 2023. Are you in line with that forecast in terms of what you’re seeing in your own individual markets?
Rasbury: I think that’s pretty much in line with what we’re seeing. However, I do think that costs are probably going to stabilize earlier than expected, because at some point you just reach a saturation point and you can’t get that extra money that you were getting at one time. In fact, we’re already seeing signs of not so much a reduction in cost, but a stabilization in the cost of product and shipping.
Other than supply chain issues, what are some of the other pressing matters floor covering distributors have to deal with on a day-to-day basis?
Blitzstein: The lack of truck drivers is definitely a problem. I mean, they’re scarce, it’s difficult to hold on to them. And even if they have a great resume, it doesn’t mean they’re not going to get in an accident on their first day.
Sounds like that has happened to you?
Blitzstein: Yes. We’re getting less skilled drivers with less experience. At the same time, we’re paying our drivers more money. We’re a smaller distributor, so just to be down one or two drivers has a big impact on us.
In terms of the availability of drivers or lack thereof, are you competing with other industries? Have these drivers left the workforce? What’s at the root cause of the shortage?
Warne: The simple answer to your question is flooring can be a very unattractive freight 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 they come back in the same day. There’s no way to unload carpet cushion except manually. So, if your options are to make $29 an hour making Amazon deliveries or $29 an hour hauling and unloading flooring…which would you prefer?
In distribution, customers expect high service. We want our customers to feel like we’re helping. Our truck drivers don’t just show up and say, ‘The pad’s on the back of the truck, see you later!’ That’s not acceptable. We train them to take it into the customer’s warehouse, put it where it belongs and pick up after themselves. That’s adding value for the customer. At Abraham Linc, we focus on getting ahead of the problem by retaining the drivers who are good.
Richmond: The supply chain challenges we’ve been dealing with have masked just how challenging the personnel issues have become in the last year and a half. While they realistically really don’t have anything to do with one another, it’s really more driven by the overwhelming demand, and that’s causing personnel issues across the board. We’ve talked exhaustively about drivers now and how tricky that is, but even finding professional staff, accounts payable staff, HR staff and salespeople has been very challenging. And from what we heard at convention this week so far, that’s probably not going to get better here as we go forward. So, if the supply side catches up and starts to level off, we’re probably still going to have issues hiring moving forward. Finding people to bring into our business is going to continue to be a challenge for us for the foreseeable future.
Any creative things you’re doing in terms of recruitment? Do you see much poaching going on?
Blitzstein: Some companies poach; we don’t proactively poach. But if people come to us from other distributors, that’s a different story. We take a different approach by focusing on compensation. In order to get good salesmen, we’re having to offer almost triple the base that we used to offer salespeople in the past. The salaries are just skyrocketing, and that’s killing us.
Warne: We’ve been using a different method to attract drivers—we started changing up what radio stations we were playing our ads on. By doing that, we find that we’re getting a whole new crop 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 accessed a whole new potential applicant base. It has taught us some really important things about channel marketing. What type of fish you catch depends a lot on what type of bait you’re putting in the water, so to speak.
Gorny: We found that making some slight adjustments has made a big difference in what kind of applicants we were getting. For example, we have a lot of customers who are installers that 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: For us, it’s not really a creative solution, but what we realized early on is that retention is the most important piece of our personnel puzzle. We are looking at the benefits we offer, employee demands for a better work-life balance and, of course, compensation across the board. We make adjustments as needed based on marketplace conditions.
(For more on this in-depth roundtable discussion as well as additional coverage of the 2021 NAFCD+NBMDA convention, look for the November 22/29 edition of FCNews.)