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Do it Best President Outlines How Co-Op Will Execute on Growth Objectives

Do it Best President and CEO Dan Starr delivered his annual President’s Address to Members during the Shareholders’ Meeting in Indianapolis.

During his annual Shareholders Address to Members, which took place September 29 in Indianapolis, Do it Best President and CEO Dan Starr said the co-op is very proud of its accomplishments over the past year in the midst of a pandemic, but is focused on continuing to facilitate continued growth for member-owners.

Starr outlined how the co-op plans to build on its service around the three roles of those in attendance: as a customer, as a member-owner and as a shareholder.

He reported that last year’s record results were followed by even stronger results this

year. “Our co-op finished the year with gross sales of nearly $5.2 billion—an increase of 45 percent. Warehouse sales were up 20 percent. Directs were up 27 percent and lumber was up an astounding 121 percent,” he said.

Starr added, “Warehouse sales continued to ride the wave all year long, driving weekly records across the network. We ended the year with nearly $1.5 billion in sales through distribution, with outdoor living, power tools, electrical, farm & ranch, hand tools, and lawn & garden contributing heavily to that 20 percent increase.”

Driven by both increased board footage and record high pricing, lumber delivered an exceptional year, reaching $1.7 billion in total sales. That includes over $1 billion in mill direct purchases for the first time ever. Board footage increased 17.5 percent and reload sales were up 140 percent, Starr pointed out.

He proudly noted Do it Best was distributing a record-shattering rebate of just over $170 million, up $42 million from last year. A record 16 members received rebates in excess of $1 million, with Parker’s Building Supply of Texas and California receiving a rebate of $3.2 million.

Starr also announced that Do it Best delivered a 52 percent return on invested capital to members. “This year, each dollar invested in Do it Best realized a 52 percent annual return. Just two years ago, that number stood at nearly 37 percent. Last year—over 41 percent. And now, it topped 52 percent,” he said.

Despite the pandemic, and all of the extra challenges that came with it, Do it Best will not ease up on the accelerator, according to Starr. “Record demand and record sales volume have tested our warehouse teams like never before. Improving efficiency became even more important with the huge wave of goods moving through the warehouses. It was critically important that our logistics and merchandising teams collaborated even more closely to improve efficiency in receiving, stocking, picking, loading and shipping. None of this has been flashy or glamorous, but all of it combined to drive excellence in our service to you,” he stated.

Do it Best’s deployment plan for a new warehouse management system (WMS), along with reprioritizing the small parcel segment, proved to be timely as the pandemic started impacting the flow of goods.

“The new system immediately reduced the processing time for these orders. We were able to scale up much faster based on demand. The system even picks the exact sized box to minimize shipping expenses. By moving small parcel ahead, we were able to start capturing the gains we expected as well as scale up quickly for the flood of online orders and small parcel demand. We’re also well positioned to drive even greater efficiencies when WMS starts deploying next month,” he pointed out.

Starr added, “On the LBM side, our Best Together initiative kept the pedal to the metal. This was another initiative we launched last fall with the goal of locking in member commitments and then using them collectively to gain greater program strength. While pricing was important, access to a consistent supply of core products took on even greater meaning during the course of the year. We grew contracted business in both dimensional lumber and panels. We also locked in committed purchases in new categories like treated lumber, southern yellow pine and composite decking. In the midst of all that, we seamlessly moved through a transition from the retiring Gary Nackers to the new VP of LBM Russ Kathrein. Under his guidance, our team is driven to help even more LBM members by growing participation levels even higher in this year.”

He admitted that the co-op’s service level fell well short of where it needed to be. “And yes, we can all acknowledge that the pandemic…and the surge in demand…along with ice storms…factory fires…and power grid failures all combined to create massive and unprecedented disruptions that were felt across the entire industry. But that doesn’t change the fact that you need to be in stock,” he said.

Starr added, “There has been tremendous effort extended by our merchandising and LBM teams on a daily basis with our strategies, our outreach and our efforts on your behalf, and it’s the most critical issue for us. I have no doubt our service level would be considerably lower if we were not pursuing solutions with our vendors. But we also know that even with our best effort and intense focus, these challenges have exposed a definite need for continued improvement.

You should also know that these challenges aren’t going away as quickly as any of us would like. The prolonged surge in demand has, in many cases, depleted safety stocks and raw materials, and left little room for a speedy recovery.”

Starr continued, “In all cases, our approach is far from ‘business as usual.’ We’re not accepting this as the new normal. We are aggressively and creatively working with our vendors to manage each situation. We’re aggressively negotiating to get more than our share of products. We’re pursuing new vendors and then building those relationships to source more products. We’re leveraging LBM’s Best Together initiative to consolidate purchases to lock in products. We’re also taking an aggressive position on our order projections, particularly in this long lead-time environment. That means we’ve never had more inventory in place than we do today. We’ve never had more on order. And, in many cases, we’re ordering a full year out. Simply put, we’re taking every action we can to put your product needs as a top priority of our vendors.”

Do it Best continues to prioritize and enhance its approach to data analytics with a clear drive for action across the entire business. This helps Do it Best and its member-owners make more informed decisions and implement solutions that drive efficiency and fuel growth.

Starr said the company’s focus on data has impacted the business in four key areas:

  1. Demand forecasting
  2. Category management
  3. Promotional analysis
  4. Logistics excellence

“Cleaner, more robust data gives us, and you, the confidence to choose the right product mix and promotions at the right time. Enhanced forecasting helps us better navigate supply chain disruptions and ensures our warehouses are in-stock and delivers a fill rate we can all be proud of,” he said.

“We firmly believe that the next 10 years will present a generational succession challenge. That may not seem like an opportunity, but hear me out. As many folks within our industry reach retirement age, a lack of succession will push them to consider selling their businesses. And we project that the number of hopeful sellers will far exceed interested buyers. But rather than view this negatively, we see the tremendous opportunity it holds,” he said.

Do it Best invested $15 million this year to help members grow, according to Starr. “We’re committed to funding growth-oriented programs for all our members through a variety of vehicles: low-interest loans, preference share repurchases, advance rebates, inventory support, store improvements and dating. It’s all summed up in what we call ‘Gear Up for Growth.’

Starr outlined three key drivers for its strategic plan:

  1. Executing on our growth objectives and moving faster than ever before.
  2. Evolving our e-commerce strategy.
  3. Expanding our infrastructure.

“This last year tested our collective resolve like no other. But it didn’t diminish our drive. If anything, it demonstrated just how much potential there is and how effective the co-op model is to drive real growth. And it hasn’t stopped us from making great advances to strengthen this co-op and drive your profitability. As you continue to concentrate your purchases through Do it Best, we’d like to push that 52 percent return even higher,” Starr said.

He concluded, “Our future has never been brighter! Do it Best has the best members, the best vendors, the best plan and the best team to build sustained growth. And we are taking aggressive action and making the right strategic investments to serve you even better and to strengthen our position as the first and best choice for independent home improvement around the world.”

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