What Digital Transformation Actually Means for the LBM Industry | Hardware Connection

It’s no surprise that a crisis accelerates the need for innovation to find solutions for new problems. Just consider the COVID-19 pandemic when the lumber and building material (LBM) industry witnessed an “ecommerce explosion” as online shopping and trends like buy online, pickup in-store (BOPIS) took off—these technologies became essential to maintain daily operations.

Since then, there has been a lasting behavioral shift as customers continue to gravitate toward the digital experience, so it’s no surprise that 88 percent of LBM leaders saw online sales increase over the past year, according to ECI’s 2022 Lumber, Building Material and Hardlines (LBMH) industry survey.

The current market is driving many LBM leaders to leverage digital technologies to meet evolving customer expectations, as well as manage ongoing challenges like vendor fill rates, lead times, price volatility, product inquiries and labor shortages. To implement these digital technology solutions and benefit from the investment, LBM leaders must understand what digital transformation means for them in their individual business and market they serve. For many, and especially those who have only recently begun to use core technology in their business, the transition to digital commerce may seem futuristic, when some would argue the LBM industry is 20 years behind the curve when it comes to this type of innovation.

Digital Transformation: The Integration of Digital Technology Solutions

With nonstop supply chain constraints and recessionary fears, digital technology solutions that support advanced business reporting have become critical for LBM leaders to monitor operations and keep an eye on the broader industry’s health. The good news is that ECI’s LBMH survey report found that many businesses have increased investment in technology infrastructure (55 percent) to address market concerns, specifically to enable them to expand ecommerce offerings (58 percent) and maintain a competitive advantage in the market (54 percent).

Digital transformation isn’t about the technology itself, it’s about how that technology creates an innovative business model that can provide greater predictive analytics and deliver new value. Furthermore, digital technology solutions, such as the ones included below, are driving better decision-making, smarter investments, operational efficiencies and substantial cost savings

End-to-End Software Solutions

To maintain business functions and keep up with demand in the LBM industry, a vertically specific Enterprise Resource Planning (ERP) software solution with integrated point-of-sale (POS) and ecommerce is essential for innovative LBM dealers. With a vertically specific software solution in place, inventory can be better managed, and orders can be processed with greater consistency in pricing—allowing gross margin control, integrations with vendor catalogs and millwork configurators can import without rekeying information.

With an integrated document management system, all POS system activity can be seamlessly tied to business documents from accounts receivable to payables. Having all front-end and back-end functions integrated creates unlimited reporting and analytics. This provides owners and managers insight into both past and current industry business metrics and allows them to compare this data—ultimately enabling smarter business decisions.

Additionally, an ERP solution with integrated ecommerce can support the management of multiple fulfillment processes, like BOPIS, and some solutions allow customers access to view orders, invoices, statements and to easily make payments remotely—essentially helping to further hard-earned customer loyalty.

Ecommerce Solutions

Across every industry, customer expectations of a seamless online experience that can be accessed 24/7 are growing, even in the LBM industry. As a result, a more robust online presence can no longer be an afterthought if retailers want to provide a positive shopping experience that rivals national chains and other competitors. Refusing or being slow to adopt an ecommerce solution may lead to missed opportunity or worse, losing business to competitors that do offer an online presence. As an industry, addressing the expectations of consumers and tradespeople—like contractors, builders and busy build-it-yourselfers—is the cost of doing business.

Simply offering business capabilities online alone will not be enough, however, to attract and nurture customers looking for flexible and seamless experiences. Businesses need to continue to look beyond in-store customer experiences by adopting additional technology solutions that enable customers to shop when and how they please.

Data Solutions

Data is at the center of all technology solutions. In this ever-changing world, it’s critical to have the ability to access and analyze business data to find areas of improvement and have a comprehensive view of an organization’s health. LBM leaders must invest in technology solutions that allow them to learn from their data and uncover critical business insights and trends to make smarter decisions.

For example, digital technology solutions with real-time data dashboards and reports can provide LBM leaders with a clearer picture into key areas of the business such as sales, inventory on-hand, scheduled shipments and special orders, so they can keep a pulse on operations and make more strategic decisions in this economic environment.

Additionally, having an integrated ecommerce solution providing real-time awareness of purchases, self-created quotes, wish lists and even clicks per item, provides useful analytics to predict turns, give insight to sales staff, assist with purchasing and replenishment and more. Using data in a much broader yet refined analytical manner allows LBM dealers to track purchasing behavior and to predict customer demand—furthering price stability and navigating supply chain constraints for on-time deliveries.

Overall, the LBM industry must embrace digital technology solutions and invest wisely, and with the potential for a recession on the horizon, the time to act is now. Digital technologies allow LBM leaders to work smarter and more efficient, even when faced with a multitude of market disruptions. Investing now could be the difference in a business just surviving or experiencing growth when others are declining.

This article was published in the December 2022 issue of Hardware Connection (page 40-42).