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REDUCE RISK FROM HIRING OUTSIDE THE LBM INDUSTRY; FOCUS ON CHAOS, VOLATILITY, AND VARIATION

By Tony Misura

REDUCE RISK FROM HIRING OUTSIDE THE LBM INDUSTRY; FOCUS ON CHAOS, VOLATILITY, AND VARIATION
REDUCE RISK FROM HIRING OUTSIDE THE LBM INDUSTRY, FOCUS ON CHAOS, VOLATILITY, AND VARIATION “I accept Chaos, not sure whether it accepts me”- Bob Dylan Summer is here – time to pick up my sons and my fishing boat from the dealership (new water pump and tuning the prop) in Eau Claire, WI, my hometown about an hour from Hudson, WI. This past Saturday, I randomly called Bob, my best friend since childhood, and offer to meet up. Like every best friend he makes the time. We were very young, like 1st-grade in elementary school, when we devised a way to use the 1974 EMS 911 system to our benefit. Several successful missions later, still never caught. Bob is now the owner of a northwestern WI ice business. His business manufactures bags and delivers ice to keep the freezer merchandisers full in every c-store, gas station, bar, and restaurant within a 4-hour radius of Eau Claire. Our in-depth conversations have since moved from childhood pranks to business-related topics. We met at a local cafe for lunch; he carries in his laptop and phone, explaining he is dispatching today for business. During our lunch, his phone messages and emails never stop. A constant flow of customers is reaching out, letting them know they need an ice delivery. Bob looks up over his readers, “I don’t have to explain or apologize… you know the fire drill.” Meaning I know enough about his business and can relate as a business owner. No apologies needed in a 50-year relationship, not many people I can say that about. Ice business facts: •80-degree temperatures create an average weekend sales day; for every degree over 80, sales go up 10%. It was 95 degrees on Saturday, sales were up 150%. (High Chaos) •Customers are not willing, interested, or often able to report on their current ice inventory – until they are OUT. If it’s 95 degrees on Monday – Thursday, it has ZERO impact on sales. To frame the common temperature swings, we had freeze warnings in WI last week. (High Volatility) •Seven trucks full of ice leave in the morning, with no more than a vague idea of their route schedule. As customers call with out-of-stock notices, the dispatcher reroutes the trucks as needed in real-time. Bob: “The cell service is not very good between Bruce and Radisson WI, if I can reach this driver, I can save 40 miles of gas and tire wear.” (High Variation) Ownership strategic facts: •Capital Assets (not including real estate are $1/ $1 to sales revenue. A $5m sales business requires $5m in manufacturing, frozen storage, and refrigerated trucks. •Ice merchandisers/ freezers on customer site: make them as large as possible within their space limitations before customers complain about electricity cost. •The turnover of ice production people is constant. Bob: “No application form is needed for an interview. If you have a beating heart, we will try to sell you on working for us. Once we became more proactive calling people who clicked on our ads and sold them on the opportunity first, it allowed us to hire more people.” •Technology: GPS on trucks is helpful. Bob: “There is a new technology that gets installed on the customer’s freezer merchandisers that gives a constant real-time inventory-level capacity in the freezer. Cost is about $300 per freezer in a set of 10, $3000. I have them ordered but on backorder like everything else in this post-COVID year. Conclusion: It is common for leaders in the LBM dealer space to struggle to embrace or articulate how their business segment is vastly different from other industries. Distribution does not equal Distribution. Milk routes, same-size containers, easily forecasted consumption rate, milk production rates, all relatively consistent by comparison. Pick your industry; it is difficult to find distribution industries that mirror the LBM dealer segment. When looking for talent from outside the building products dealer space, measuring people’s tolerance and experience with high levels of Chaos, Volatility, and Variation is a must. Why do professionals from the building products supply chain on the wholesale and manufacturing side often struggle in the LBM dealer business? They are unable to handle Chaos, Volatility, and Variation. They solve problems with the milk run weekly delivery. Residential construction processes and job site logistics have complexity and constantly shifting dynamics: weather, labor, construction plans, material flow, safety risks. The range of general contractors and subcontractors’ ability to subdue or inflate the construction issues is wide. Overlay interest rates, housing demand, and commodity pricing on top of a complex construction process, and you have the LBM dealer industry. Chaos – is a constant. LBM dealers make their profits by minimizing chaos with their foresighted systems and managing through chaos to minimize the impact on their customers. Volatility – is a constant. Commodity prices, sourcing materials, pricing, bidding cycles, and customer demand. Shifting ground in a typical year. Variation – another constant. Plans, materials, and construction processes are different from project to project and builder to builder. Products with wide-ranging size, mass and weight, and fragility. Delivering into tight and unstable job sites is the norm. Our industry needs more talent and hiring from outside the industry is a must. Minimize risk by looking for talent from industries that have similar environments to the LBM dealer space. Developing interview questions and testing designed to understand an individual’s ability to handle high levels of Chaos, Volatility, and Variation, further reduces hiring risk. Please don’t hesitate to reach out to our team for help and more best practice. Hire Smarter™ - Tony Misura
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