Five Questions With: Kelly Fox

THE REINVENTION OF HUMAN CAPITAL in the LUMBER & BUILDING MATERIALS INDUSTRY

A Q & A Series Conceived and Hosted by Matt Meyers of Yesler

Featuring Kelly Fox, Vice President of General Lumber at Kodiak Building Partners

Tell me about your job?

I am the Senior Vice President of General Lumber at Kodiak Building Partners. What that entails I have no idea. Chief Janitor some days and other days it’s heavy on the strategy. You name it, it fits all the roles. I try to just be engaged with my employees. I feel that my primary job is to work with leaders of our organization to help them be better and to help our frontline employees be better. And so, whatever that means, that’s what I do.

How do you see technology infiltrating your business and the industry?

Technology is changing our business every single day. It used to be that everything was done on a handshake and that’s still the case. I think those mill relationships still exist. The problem is we have to be a lot smarter about how we’re purchasing, how we’re pricing.

Let’s talk about the Amazon’s of the world. Amazon cleans our clock on the margins. In the sense that the things where we used to be able to get halfway decent margins, Amazon now beats us to that punch.

If we talk lock sets or doors for example, everyone cuts the hole where the handle goes. That used to be our margin, that used to be the profit driver or the add on sale. Amazon now has a warehouse full of every color door lock and combination imaginable that can ship immediately to a job site for less money than I can buy it in some cases. And so they’re picking apart the margin in our industry for the high margin value add items and leaving us with the scraps of the commodity. I think we have to fight back as an industry, and as a company, and start looking at ways to control our margin. We own the hardest part of the job, which is the last mile to the customer for building materials.

Amazon could figure that out if they really wanted to. It doesn’t have to be Amazon. It could be any big company with technology. But I feel like as an industry, as Kodiak, as Frontier Building Supply and Builders Alliance, our ability to fight back is to figure out how to own that last mile or to continue the ownership of the last mile and really prevent them from coming into this space at the rate that they’ve taken over everything else. And you look at what they did to grocery delivery and Whole Foods, what they’ve done to pharmacy, or any of those things.

Is Amazon a competitive player in the lumber buildings material space?

Yes. I can look on their website and I can see what they do. You can search “building materials” on Amazon and see what they have to offer. And the fact is they’re offering more and more all the time. It’s only a matter of time before they figure out who to partner with, or take over that space and then come to dealers and say, “Do you want the sale or not? And, oh, by the way, you’re only going to really make a thin margin now”. ‍

How do you compete against the likes of an Amazon?

I think we compete by being a lot smarter about what we do. We just make the barriers to entry harder and I think as we adopt more technology in the industry. We have the ability to create those barriers.‍

What are the kinds of technologies that you need to adopt to build that wall?

‍I look around the industry and everybody using BisTrack, or other point of sale technologies. I think in a lot of those cases, the point of sale has a lot of the tools that can help, but it’s so widely underutilized. I think if we use our point-of-sale tools, the things available in BisTrack, we should be able to gain the intelligence, the data, the analytics, and the understanding of what’s going on in the market. Relative pressures, you name it, is we find those things and allow ourselves to buy better, price smarter. All of a sudden now it’s less lucrative for an Amazon to get into the space. Right now, when we can’t figure out pricing from one day to the next, or the commodities move at such rates that we just get lost in the shuffle, that technology that allows us to really analyze that data, understand all those data points is going to allow us to create the place where we win at job site and win with the customer.‍

So it’s really about using technology for data analysis and evaluation?

We’re good at collecting mountains and mountains of data, but really bad at analyzing that data, putting that data together.‍

Does technology and the human relationship piece  create a barrier to Amazon getting into your business? Because Amazon does not have any of the human connective tissue.‍

That’s right. 100%.

We own the mill relationships. We can’t give those away. Now if we can use the technology to pick apart the margin opportunity that would exist for Amazon and keep our relationships intact, there’s not a place for entry for them that’s easy.

The fact is we have a retirement problem in our industry too, where all of the guys that I learned from are now 65 or 70 and pushing retirement. I am a digital native.  I grew up with technology, and that’s the way I communicate. That’s the way I work. Now, getting the mills on par with that, it also makes us a more attractive employer to that next generation of people that currently do not even think about lumber as a career or lumber as an opportunity. And so if we embrace that technology, embrace what we do with relationships, with mills, with home builders, with their customers, all of it together, we now create a pretty neat pipeline. I think it’s a very viable future to have those relationships intact and bring it all around.

All of us have things that we don’t like to do. Technology now can do a lot of those things and keeps the human relationship intact. It allows us to focus more time on the human relationship, whether that be with the mill, the supplier, or in the case of Frontier Building Supply and Builders Alliance, out here in the Northwest, the home builders or custom builders. For example, we want to have more relationships with the next generation of carpenters. We want to understand how technology changes their life, changes the build cycle, whatever it might be. I think all told, we adopt that technology and bring that technology in, and it allows us to get rid of the things we don’t like to do. The things that can be automated. It allows us to focus on relationships. And now we’re a pretty compelling business with a pretty compelling future. Absolutely right.

Is the technology angle more about the efficiency of business process automation, or is it that and virtual reality and drones?‍

For me, it’s not so much about the whizz-bang and the really flashy stuff. We need the business process improvement. We need to take those next steps. ‍

Are you seeing more young people get interested in the industry?‍

Not yet. No. It’s a crazy thing. I know more people that make six figure incomes in the building material space than I do in anything else. But granted, I’m a building materials guy, I’ve been in this for 20 years. And so with that, it would make sense that I’d know more people there, but realistically, it’s a place to make a very good living that goes widely under the radar. Most of the people I know making that kind of income don’t have fancy college educations or master’s degrees.  They work hard, they build great relationships, have great friendships with their builder community and they do very, very well. I think the opportunities exist. People just don’t know it.‍

What does the industry have to do to make it more known and attractive? ‍

We have to focus less on the way that we used to do things.  If we can simplify process, simplify the way we purchase, either through technology or other means, all of a sudden now, you’re starting to break down some of the barriers. I think some of the ways we do things puts barriers up.‍

Are the two big hurdles in the industry people and sophisticated technology enabled companies like Amazon?‍

Yes.  And it doesn’t have to be Amazon. Home Depot has spent a lot of money in their online presence. For  us, it is the online competitor, whatever that online competitor is going to be. And Amazon is a big one for sure. And on the other side are the people.  We are in the middle and we don’t understand how to connect the two because as an industry, we’ve been so successful doing it this way for so long, that we really don’t entertain the idea of technology or using technology as a competitive advantage or using technology to simplify our businesses in a lot of ways. We’re just afraid of what it looks like, because it’s unknown.‍

Do you believe you can compete and win?‍

Absolutely. What I can transfer to my daughters or transfer to that next generation, are the relationships. The technology’s not going to transfer the relationship or know what mill to call when you need a very specific type of 2 x 4 or 2 x 6. Those relationships have to pass down and that’s the one thing that I can do, they can bring the technology piece.