The Current State: Interview With John Ramsey

John Ramsey, the Chairman of Diamond Hill Plywood, believes the building materials distribution industry will be challenged in 2014 by inventory shortages. “There are going to be some inventory shortages, here and there, for brief periods of time,” he said. “Our strategy will be to try to make sure we have enough inventory coverage during these brief shortages.” Ramsey thinks that plywood and wood sidings will be difficult to come by at first, and that possibly oriented strand board will be in short supply as well.

The industry is not without opportunity in 2014, however. “Housing growth is expected to be bigger than it was in 2013, so we're excited to see that.” Diamond Hill continually works with their manufacturers to get their products specified into large-track housing projects.

Diamond Hill maintains a competitive advantage in the Carolinas with more distribution centers than their competitors. “We have three distribution centers in the Carolinas,” Ramsey said. “And most of our competitors have just one.” The added distribution centers increase Diamond Hill's flexibility, allowing them to more quickly fill their orders. It also has one center each in Virginia and Tennessee.

Diamond Hill embraces the use of modern technology and has just adopted the DMSi Agility Software package, which will streamline inventory checks on other branches and generally increase the efficiency of Diamond Hill's operation. The company is upgrading from an earlier DMSi version, to maintain technical parity with its customers.

Ramsey said that the current state of distributor-manufacturer relations is “very good.” He added, “Manufacturers continually want input from distributors on how best to market and sell their products, and are continually trying to give better sales support to their own sales reps.” Ramsey pointed out that manufacturers reduced the size of their sales departments during the recession, but “we can see they're beginning to add sales people again. So the more people in our territory helps us. We did take on a new product line; we lost one product line and took on a new one that was just like it, just a different brand, and we went from having one sales rep calling on our locations to having seven. That's how more committed to the product line this other company is, and that will be of great benefit to us.”

Ramsey believes getting Diamond Hill's products specified by the contractor is the greatest challenge the company faces in the end-user market. “For instance, we had a large housing project that was coming on the market. One of the owners of the project specified products that matched those offered by Diamond Hill, and he requested his building supply dealer to buy them from us. That's highly unusual.” This exclusivity deal offered Diamond Hill a lock on a large revenue source. To secure other specification orders like this deal, Diamond Hill approaches a project before ground is broken, seeking the supply manager.

In the Carolinas region, “Charleston is a real growth market, because of Boeing coming in there. They created a lot more jobs, so they're needing more housing for those employees, so we're seeing the Charleston market really growing above our other areas.” Myrtle Beach is also experiencing a growth spurt. “For a while, they had two years of homes on the market, and that's been dwindling rapidly, to the extent that they're actually building new homes down there now.” Other markets, such as Greensboro and Raleigh remained resilient through the recession.

One hindrance that Diamond Hill has encountered when seeking specification requests from contractors is manufacturer rebates offered to contractors for using their product. “It's sometimes hard to get our products spec'd in, when they've already got a rebate program directly with the manufacturer, the contractor themselves, bypassing the dealer entirely.” When asked if he thought this was a growing trend, Ramsey replied, “I hope not. It's limited, very limited, but in some areas, they will not switch brands because they have a rebate from the manufacturer.” Ramsey reports this is mainly found in the larger cities.

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