On April 14, 2020, CBUSA’s CEO, Bill Smithers, invited Wendy Minichiello, Director of North American Sales at Weyerhaeuser, to discuss how their company was navigating the ever-changing landscape of the COVID-19 crisis.
Similar to the interview with David Kohler, CBUSA learned that Weyerhaeuser was using the unprecidented time to pivot and provide more support and communications to their customers. Watch our highlights video or read the below transcript to see what peices of information and ideas you can begin applying to your residential homebuilding business today.
I’m happy to have you joining us on the CBUSA Leadership Series today. We have the privilege of having Wendy Minichiello with us from Weyerhaeuser. Wendy’s role at Weyerhaeuser is a senior leadership role, Director of Sales for North America in the EWP category.
We’re going to jump in and talk about a couple of different product categories or areas of discussion. Wendy said she’d be happy to share her thoughts with us because she’s got a lot of experience in a lot of different categories.
In a lot of respects, what you make and we buy, and that transaction process is a leading indicator for many of us in terms of what we think is going to be happening with the rest of the construction cycle from a demand and usage standpoint.
Can you share some thoughts on what Weyerhaeuser is seeing in terms of demand and what changes you all think may be occurring over the near term?
Definitely, our order intake is reduced from what we would expect for this time of year, as well as what we had seen in January and February. We actually had a very strong March. I would say really the order intake over the last three weeks is down depending on our mills set, 25 plus percent and even more just last week.
Because of that almost immediate slowdown on the builder side, we’re seeing things like, “Oh, my days of sales are starting to push, they are starting to reduce out as far as my amount of inventory.” So I’m trying to reduce inventory.
I think that we’re seeing, kind of the double whammy of both demand, as well as desires for the supply chain to reduce the inventory their cap carrying so that they can leverage it into cash.
Are there areas that you see that seem to be kind of holding on a little bit more than others and you think are likely to be well positioned for a quicker turnaround?
And are there other areas that you think may lag a little bit?
There are some parts and some specific markets where we’re seeing some good growth or I would say continued kind of ongoing volume coming through.
Texas really stands out as an area because they didn’t execute a full government shutdown statewide, but they did protect construction statewide, which was very interesting as far as the development. We’re seeing our dealers are reporting volumes that are flat to up right now in that market. It’s probably one of the bright spots.
Interestingly enough, we just got word that the Province of Quebec, which, for us in North America is not a huge driver of volume, but they had shut down for construction and just announced yesterday that they’re reopening for construction. They were actually encouraged by some of the announcements that we see where possibly construction had been prohibited initially. Then it has gone and picked back up as essential.
That seems to help with the supply chain overall. Kind of just staying relevant and moving inventory and keeping folks working.
I’ve heard a lot of talk about product shortages and allocation – that kind of thing. I’m sure that’s been on y’alls radar screen in terms of your planning and that kind of thing.
How are you all looking at that? And what are you trying to do to mitigate that?
Let me first start by saying, I hope we get back to just the levels that we were right at and quickly. I don’t know given what happens with the economy, if we get there that quickly. Weyerhaeuser has really implemented three strategies around thinking of the upside and what potentially might happen.
The three things that we’re working on are: One, for our own distribution centers and we have independent distributors as well, we’ll be working with them as well. We want to make sure that we’re focused on whole dollars and volumes of inventory, not that weeks of sales worth of inventory metric. That’s something that we’ve pulled the trigger on very recently in light of what’s happening right in front of our eyes over the last three weeks.
Most folks, because this is relatively invisible, are not aware of what I would call our second strategy, which is that we also build what we call “Strategic Inventory” over the winter months, when the seasonal requirement is less. We actually park it, whether it’s in our distribution center or reload or wherever it might be. We have that inventory, which we built over the winter. Typically we start to draw on that over the summer months when cycles tend to push out lead times. We tend to pull on it in the summer months, but we also have that ready to go. We’re hoping that we’ll be able to leverage that as the market picks back up.
Lastly, each of our mills also has the capacity to carry anywhere from two to ten weeks worth of their own production in their yards or in the space that we have. That’s one of the areas where I would say today we’ve been relatively light in some of those yards and that will be part of our strategy. Just to make sure that they’re full and ready to go relative to what demand might require.
From the whole transportation sector, do you all see that as being, a sector of the economy that’s going to be very strained for the perceivable future and could cause some additional headwinds for you all getting product to where it needs to be?
I would say most of the contracts that we see relative to transportation, a lot of businesses already committed. For instance, my mills, my distribution centers have already committed on a B to B basis with carriers and the rail lines relative to volumes that we expect for them to service us with on a regular basis. Now, obviously we have the situation today, where some of that is dropping off, I would say, the the opportunity for a trucker to have a regular B to B commitment where it’s possibly a line that they do every day or every week, we think brings a lot of benefit and consistency to that end of the business.
Now you put your builder hat back on. As I mentioned in the intro, you were a VP of Strategic Sourcing for Lennar. I know you still have a lot of customers that are on the “big builder” side. What are you seeing from them in terms of the top 25 builders and how their overall response, and do you see ones, that you think are really knocking it out of the park and doing things that you think, “Wow, that’s really smart, the way that they’re handling things.”
Many of them are in the process or have reported Q1 earnings that are amazing. At the same time, we’re seeing companies also withdraw guidance for the second quarter because they just don’t know what’s going to happen. Internally, where you’re hearing that builders, depending on the market, their volume is down by as much as 50%, as far as sales. We had one public builder report a couple of markets with negative net sales last week for the discrete week. That means that they had more cancellations than they did sales in the week. That’s concerning, honestly. Like a lot of companies, we’re seeing builders draw down on their lines of credit. They’re looking to preserve cash on the land acquisition side. We’re seeing some of those deals fall apart or get delayed which, I think, creates some interesting opportunities down the road relative to land that will be available at a lower price point. I also see them adjusting on their sales and marketing sides as well.
For our group of independent builders that are on the call, and we’ll have people that are anywhere from 10 very high end homes a year, to 200- 250 homes a year – maybe in the luxury production space or a more semi-custom. What words of wisdom do you have for them based on what you’re seeing are best demonstrated practices from some of the nationals in terms of what you would say, “Here’s what I would recommend y’all do to keep your team focused and keep them functioning at a high level.”?
I think, there’s a couple things that I would recommend. One is to communicate. I think in some ways we feel, as an industry, we’re over communicating a little bit, but making the time to communicate not only with your associates, your prospective buyers, but also back through the vendor channel. The hope, your support network will understand what they can expect, how you’re thinking about their business. We certainly from the production builder level, we’re seeing production builders not be shy about asking for things, whether that’s, support to help them keep going. They’re, in many cases, they’re mandating that their trade partners lower prices. I think that some of that is interesting, but I think the name of the game for all of us is how do we get through this downturn?
I can’t thank you enough for being willing to jump in here. I it, very, very uplifting. We call this our leadership series, and clearly you all have great leadership at Weyerhaeuser based on many of the things that I’ve heard.
Any closing thoughts or words of wisdom or something to help put the wind in the sales for our network?
All I can say is, one, “Thank You” for the partnership with CBUSA. Relative to this time, if I could give us all a fast forward six months, I would – but, we are going to get through it. And we look forward to getting through it all together.