Despite being nearly 30 years old and hosting annual trade exhibitions and social events, the National Merchant Buying Society has never held a conference. Until last month, that is, when it held a two-day conference in Edinburgh.

It staged the event in response to requests by several leading building material manufacturers who, aware that their route to market continues to change, wanted to reinforce their trading relationships with a greater number of independent merchants.

The conference, ‘Strengthening Independents’, also gave delegates the opportunity to discuss the challenges that face them, particularly with what is very much seen in the sector as the ‘spectre’ of system build looming ever closer and threatening to sideline the merchant middle man.

Fighting talk

Referring to the society’s professional partnership programme, NMBS chairman Chris Bence, managing director of George Bence & Sons in Cheltenham, reminded members that they were strong when working together. ‘We must continue to get stronger, reclaim the agenda for the independent builders merchant… and take the fight back to the national groups,’ he said.

Speakers addressed the issue of reclaiming the agenda in various ways. Mike Hardcastle of the Consultancy Practice, for example, spoke on the subject of e-business within the supply chain. The ultimate goal, he said, was ‘external integration’ between the supplier’s supply chain, the internal supply chain and the customer’s supply chain. Integration had proved difficult because of the multitude of supply systems, processes and methods of communication in the industry.

Mr Hardcastle estimated that around 16 million transactions, at £25 per transaction, take place in the sector each year, adding up to £400m of transactional costs. Effective EDI (Electronic Data Interchange) could reduce transactional costs but, he said, ‘software costs money and if there is so much variation of systems in the industry, this only adds to the cost’.

United front

He pointed to the automotive industry as a sector which had got its e-business supply chain in order and offered the worst case scenario parting shot: ‘Merchants and suppliers must work together. If the supply chain isn’t established and improved, the suppliers will cut out the middle man and go straight to the customer.’

Maggie Molloy, marketing and communications manager for the Construction Best Practice Programme, reminded delegates how the government had created opportunities for independent merchants to establish partnerships within the construction industry.

The reforms brought about as a consequence of the Egan report Rethinking Construction were changing the way NMBS members’ customers were conducting their business, she said, and this presented new networking opportunities.

As an illustration, she cited the case of GSK House, a £220m project for construction company Mace Ltd. The one million m² office development had 1,500 personnel on site, including 85 specialist contractors. SGB, a supplier of access equipment, approached Mace with a proposal to supply all the contractors with access equipment. This provided Mace with, among other things, a common safety standard and sufficient volume of stock, while SGB gained access to a whole raft of specialist contractors operating throughout the UK. Mace was now adopting this ‘best practice’ partnership philosophy in other projects.

The networking theme was continued by conference moderator Roy Sheppard, who reinforced the ‘it’s not what you know but who you know’ message. The former BBC television and radio presenter told delegates they should develop their ‘people portfolios’. ‘Relationship building is something that you just let happen, but you should be more proactive,’ he said. ‘If a national wants to buy you, it’s not your stock they’re after but your customers and contacts.’

Chris Pateman, editor of Builders Merchants Journal, focused on the sometimes difficult relationship between suppliers and independent merchants. He asked of the manufacturers present: ‘Are you my customers or are you my partners in bringing my products to the market?’ The problem, he said, was that many merchants saw manufacturers as stealing their customers by going direct. The manufacturers counter-argument was that if a builders merchant did not stock their products, then going direct to the customer was the only route to market.

System selling

‘Merchants are middlemen,’ said Mr Pateman. ‘We buy product to sell product. We don’t put enough emphasis on adding value which would differentiate us from the big merchants. We must sell systems, not products and we must promote that and move away from commodity selling.’

In a presidential style debate, merchant and manufacturer were able to go head to head on some of the issues already raised at the conference.

Roddy Taylor, sales and marketing director of concrete block maker H+H Celcon, was probably closer to national housebuilders than anyone else at the conference.

Celcon aroused considerable passion within the trade recently when it announced that it was to deal direct with some of Britain’s largest housebuilders. Celcon worked in collaboration with other com-panies to develop the Finnish system built Jämerä houses which were being ordered as complete house-lots. It made sense to Celcon to supply everything rather than simply deliver the specialist elements and leave local merchants to supply the rest.

Changing dynamics

Celcon’s decision was simply a result of what Mr Taylor called ‘the changing dynamics of the supply chain’. The Egan report resulted in a change of attitude in the construction industry, he said, and the large housebuilders were beginning to favour direct buying because they did not see the merchant adding value. Factory-built, assemble on site timber frame and steel frame systems were a big threat to the middle man within the supply chain, he added. ‘System build leaves no room for builders merchants,’ was his stark warning.

His opposite number in the debate, Gary Fowlie, managing director of Index Building Supplies in Peterhead, maintained that his company did place emphasis on adding value. ‘We firmly believe it is our job to sell product, not just to stock it and we have weekly training sessions and talk to architects and specifiers,’ he said. A major problem, he added, was that ‘the national housebuilder still wants to buy direct at a uniform price across the UK – plus get extended credit’.

‘We have to get much closer to the timber frame industry and find ways to supply them,’ was Mr Fowlie’s rallying cry. ‘As an industry we complain too much and don’t do enough about it. You’ve got to look for opportunities.’
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