New South Construction Supply

High standards yield high results — At New South Construction Supply, only the best is good enough.

Contractor Supply Magazine, February/March 2014: New South Construction Supply

L-R, David Hodgin, Dexter Goodwin, Jim Sobeck and Jimmy Sobeck drive New South Construction Supply with Fortune 500 best practices and
state-of-the-art business intelligence tools.

By Tom Hammel, Contractor Supply Magazine

This story might be called an object lesson in seizing opportunity, specifically, the opportunity that exists today in the distribution industry for companies with vision and relentless drive.

Jim Sobeck, president and CEO of New South Construction Supply has that vision and drive and his company — a “small cap firm” with blue chip operations — reflects it.

Sobeck, a former Owens Corning, Builder Marts of America (BMA) and Enterprise Computer Systems executive, uses a number of Fortune 500 best practices to guide New South. Perhaps the company’s simplest underlying principle is “Do one thing and do it well,” but Sobeck would probably rewrite that to “Do one thing better than anybody else.”

“I’m a big believer in having a laser-like focus on one thing and not trying to be all things to all people,” he says. “We’re a sales and service organization and that is embodied in our company slogan, “‘Know How. Can Do.’”

True to the company of philosophy of doing one thing well, New South’s line card is narrow.

David Hodgin, vice president of purchasing, New South Construction Supply

“The recession changed the market. Manufacturers became so hungry for business that they set up just about every distributor, so now, just about every distributor in the Carolinas and Georgia has the same lines.”

— David Hodgin, vice president of purchasing, New South Construction Supply

“We’re not a typical STAFDA house in that we don’t sell a lot of power tool brands or fasteners,” explains David Hodgin, vice president of purchasing. “Our bread and butter categories are concrete and masonry accessories, waterproofing products and erosion control products. Concrete accessories are our largest volume category, with masonry a close second. We also carry decorative concrete products, L.M. Scofield primarily.”

Hodgin notes that in the past, lines were more distributor-exclusive than they are today, which makes being able to provide superior service all the more critical as a differentiator.
“The recession changed the market,” Hodgin says. “Manufacturers became so hungry for business that they set up just about every distributor so now, just about every distributor in the Carolinas and Georgia has the same lines.”

New South offers blueprint take-offs and rebar fabrication for customers as well, but even with a commodity like rebar, the company strives to set itself apart from its competitors.

“When we fabricate rebar, we tag every piece so customers know where it goes,” Sobeck adds. “We palletize it and place it on the job site with our forklifts exactly where they want it. Above all, we focus on providing the right products at the right time, anytime the contractor needs it.”

Unique Selling Points
“To be successful, a company needs to be able to elucidate its USPs, its Unique Selling Points,” Sobeck says. “When a customer asks, ‘What makes you different from company XYZ that I already buy from?’ the average salesperson says, ‘Oh we have great service.’ The customer just laughs because everybody says that. Well, we put our money where our mouth is.”

First, New South offers an on-time delivery guarantee.

“If we are more than an hour late from when we say we’re going to have it there, we’ll give you a 10 percent credit off that purchase that is good on your next order,” he explains. “Some of our deliveries, like a truckload of fabricated rebar, are $25,000 or $30,000, so we’re talking a $2,500 to $3,000 credit. When I first proposed that, the management team here thought I was nuts.”

But Sobeck believed he was on to something.

“When the customer offers to place an order if you can deliver it first thing the next morning, most outside salespeople say, ‘Sure!’” Sobeck says. “Our salespeople don’t say that anymore because if we have to pay out that credit, it comes out of that branch’s monthly bonus pool.”

Before promising to deliver an order by 7:00 a.m., the New South salesperson will call and verify the expected delivery time with their branch operations manager. If that manager determines the order will be delivered by 8:00 a.m., the customer is called back and informed before the delivery time is locked in.

“A lot of times they will say 8:00 is fine, because they often add a cushion time to anticipate late deliveries,” Sobeck says. “We rarely have to pay out that credit because we no longer over promise and under deliver.”

New South will also deliver 24 hours a day, seven days a week, 365 days a year, including holidays.

“When a customer calls you on Memorial Day and needs five buckets of Cure and Seal and you say, ‘I’m sorry, we’re closed,’ you just showed that customer that your claim of great service is a bunch of BS. That is a moment of truth.”

— Jim Sobeck, president, New South Construction Supply

“We are in business for the convenience of our customers, not our convenience,” Sobeck says. “Eighty percent of our business is with concrete, masonry and waterproofing contractors, who can’t work in the rain. If they see rain is coming on Monday, they’ll work all weekend to get a job done so they can hit their delivery date and avoid any penalties. To do that, they will need deliveries all weekend. Most of our competitors won’t do that.”

Jim recalls one Memorial Day when a contractor called his existing distributor with an emergency order and was told they were closed for the holiday.

“Next, he called our sales guy, who said, ‘I’ll meet you at the branch in 15 minutes.’ That customer only buys from us now.”

Sobeck cements this teaching moment with a reference to Customers For Life, by Carl Sewell.

“Sewell talks about moments of truth,” he explains. “When a customer calls you on Memorial Day and needs five buckets of Cure and Seal and you say, ‘I’m sorry, we’re closed,’ you just showed that customer that your claim of great service is a bunch of BS. That is a moment of truth.”

Sobeck is armed with numerous examples of going above and beyond the norm for customers, including a delivery made by taxi.

“Our guys were mortified. They said they would be laughingstocks. They were half right. That customer called in laughing and said, ‘I’ve been doing this a long time and I have never had a taxi pull up to a job site with four rolls of poly in the backseat!’

Sobeck’s wife, Cindy, has pinch-hit at times with deliveries, too.

“I’ve rented a truck and made deliveries to job sites for a good customer, too,” he adds. “There are three reasons for that — we were fulfilling our service commitment; I was showing our employees that I’m willing to do any job around here; and I wanted to make that contractor a customer for life. I did all three.”

Another New South USP is that every large truck has a truck-mounted forklift. Products are placed on the site exactly where the customer wants them, New South makes more deliveries per day and delivery drivers suffer far fewer strain injuries than in the days of manual unloading. New South has a loaner clause in its full-service agreement with Penske, so if a truck goes down, a loaner is quickly furnished.   

New South Construction Supply at a Glance
Founded: 1981; purchased by
current owners in 2001
Ownership: Privately held
Headquarters: Greenville, SC
Branches: Atlanta, GA.; Charlotte, Greensboro and Raleigh, NC; Columbia, Greenville, Myrtle Beach, Charleston and Hardeeville, SC.
Employees: 43
Sales staff: 13 outside, 12inside sales
Product categories: concrete supplies and accessories; masonry, waterproofing, restoration and repair, and related products
Markets: Commercial/industrial construction, residential, road and bridge, restoration and repair, and export sales
Line card: (advertisers are linked) 3M, ABT, Access Products, ACCO, Advanced Drainage Systems, Aervoe, Albion, Advanced Building Products, Akrotek, American Excelsior, Ardex, BASF, BlueLinx, BoMetals, Bosch, Capital Services, Carlisle Coatings, Cetco, Channellock, CIM, CLC, Clifford Estes, CTS, Dayton Superior , Diamond Products, Dow, Drew Foam, Engineered Plastics, Euclid, Gott, Grabber, Grace, Green Resource, Hanes GEO, Henkel, Henry, Helifix, Hohmann & Barnard, Igloo, Insteel, Inteplast, Intertape/IPG, Irwin, Keson, Klein, Kraft Tool, Krylon, Johnson Level, Lackmond, MM Systems, Makita, Marshalltown, Mapei, MBW, McTech, Meadow-Burke, Miracote, Neogard, Multiquip, Newborn Bros., OCM, Pavestone, Pecora, Pearl Abrasive, PNA Construction Technologies, Powers, PrimeSource, Prosoco, Ramset, Raven Industries, Rectorseal, Reliable Concrete Accessories, Right Pointe, SpecChem, Simpson Strong-Tie, Sonneborn, Sonoco, L.M. Scofield, Stabila, Stego, STI, Surface Shields, Tex-Trude, Tremco, Tremron, Union Tools, United Abrasives, Wacker Neuson, Wire-Bond, Wire Mesh Corp. WR Meadows, Zipwall, Zurn
Memberships: STAFDA (since 2005), ABC, AGC, NAHB, ICRI, NSCA, WCA, NCMCA, ASA
Key Service Providers: Epicor Profit 21, Strategic Pricing Associates, Billtrust, Penske Leasing, Lee Resources

Yet another New South USP is its job site consignment program. New South will stock a job trailer or the customer’s warehouse and replenish the inventory monthly, which saves the contractor time and money.

“The customer gets one invoice a month instead of 40 or 50 and saves the time lost from having to send a runner in for those items. We replenish based on what they have used.”

New South also excels at sourcing.

“Sourcing is part of our DNA,” Sobeck adds. “We will find any product and sell it to anybody if their credit’s good. We don’t care if we stock it — we’ll get it somewhere. We have relationships with some distributors where we will wire-transfer the money before the product ships so they have zero risk. We can buy products at extremely low margins and the distributor picks up two or three percentage points with zero risk. So we will find anything for anybody, anywhere, anytime.”

Team Work, Team Pay
New South’s inside and outside sales forces work to support each other in these efforts because when the company wins, everyone wins. Inside salespeople in each branch get an override on the gross profit generated by the outside sales staff. In good months, New South inside sales associates have seen commission checks of $2,000 to $3,000 or more on top of their salary. Outside salespeople are also somewhat uniquely compensated too; they have no salary caps.

“We pay a lot more money than the average company in this business,” Sobeck states. “We regularly have several salespeople earn over $200,000 a year. But we expect more in return. My father taught me that when you pay peanuts, you get monkeys. We shoot for about 125 percent of what surveys say a job should pay.”

“Superstars tend to do the work of two or three people, so our sales-per-employee is about three times the STAFDA average. This is partially because we don’t sell a lot of tools and small-dollar items but it also relates to the high productivity we get for paying so well.”  

However, if you want to just walk in the door and start earning $200,000 a year, don’t bother. New South puts applicants through a Fortune 500 battery of background checks, intelligence and psychological testing, reference checks and educational verification before making any offers. Lee Resources of Greenwood, S.C. is New South’s psychological testing firm of choice. New South also uses the Wonderlic Intelligence Test and

“Another phrase around here is, ‘Hire slowly and fire quickly,’” Sobeck says. “We are very diligent about using every tool to really know who we are hiring. If we do make a mistake, we encourage our managers to terminate a bad hire immediately.”

High productivity is a standard expectation of every employee, from the warehouse to drivers, the sales force, accounting and management. A comprehensive Policies and Procedures manual helps keep everyone in the company on the same page, operationally and behaviorally.

“When we bought this company there were eight people in the accounting department. Now we have two, and our sales have about tripled.  We’ve done that with automation. We installed Epicor Prophet 21 and our computer conversion went seamlessly. Jimmy, my son, was instrumental in that project.”  

Business Intelligence
“I had studied computer science at Georgia Tech and got my degree in business finance,” Jim’s son, Jimmy, says. “New South was looking at putting in Epicor Prophet 21 and I had some experience with ERP, databases, programming and business so I came in and got involved with that implementation. I’ve been here since 2006 when we went live with the system.”

Today, Jimmy is New South’s vice president of finance and administration, but he still loves computers.

“SPA analyses the vendors and types of products you sell to try to identify your core and non-core products. The idea is that you should be able to get a higher margin for your non-core items.”

— Jimmy Sobeck, vice president of finance and administration, New South Construction Supply

“I really enjoy providing information and giving our people the tools they need to make decisions,” Jimmy adds. “If we think we need to add more people or a new truck to a branch, we may do an analysis of how many transactions they run through the day or how many customer pick-ups versus deliveries they make per day or month versus the other branches. I can go into the database and create custom queries at will and provide information that the system might not have as a canned report. For just about any question that comes up, I can have hard data within 20 minutes.”  

Jimmy also took the lead in New South’s implementation of strategic pricing.  

“We use Strategic Pricing Associates (SPA), which offers an add-on to Epicor’s Prophet 21,” Jimmy explains. “SPA analyses the vendors and types of products you sell to try to identify your core and non-core products. The idea is that you should be able to get a higher margin for your non-core items.”

That product data is put into a matrix that plots a distributor’s customers by market segment, for example, resellers, the government or regular contractors; and by size — small, medium, large or huge. Combined, these three factors create a “cube” of possible pricing combinations.

“They take all that information and build a complex pricing library for you that integrates with Prophet 21. It gives you a custom price for every customer and every item — based on your own historical data.”

“Why give a tiny customer the same price for a particular item that you do to somebody who buys 20 times more? SPA enables you to tighten up these variances and increase your margins. In the products we have added so far to the program, we have seen about a 2.5 percent margin increase year-over-year in our first year with SPA.”

Marketing the Difference
Dexter Goodwin, New South’s director of sales and marketing, is also an Owens Corning veteran.

“For each of our top customers, Jimmy created a dashboard report showing how we performed for them the past year — the items they bought, how often we got the order to them on time and other factors. They were blown away."

— Dexter Goodwin, director of sales and marketing, New South Construction Supply

“Jim uses a lot of Fortune 500 techniques to run a mid-sized company and he has tasked me with carrying some of them forward in the marketplace, albeit on a smaller scale,” Goodwin says. “For example, Owens Corning used to entertain their top customers to show their appreciation for their business. Lots of companies do that but Owens Corning would use those events to both thank customers and to conduct a business review.”

“For each of our top customers, Jimmy created a dashboard report showing how we performed for them the past year — the items they bought, how often we got the order to them on time and other factors. They were blown away. A lot of them had never received that level of personalized attention from a supplier.”

Goodwin also focuses on recruiting. Although the prospect of uncapped earning potential is highly attractive, most candidates wash out in New South’s intensive hiring process.

To expand its talent pool, the company now recruits recent graduates of construction management programs in or near the areas where they will likely work. If the company wants to hire in Atlanta, it looks to Georgia Tech; in Raleigh, it looks at North Carolina State, and so on.

“When we train salespeople ourselves, we don’t have to break bad habits picked up elsewhere,” Goodwin adds. “If we hire someone who has been working for competitor XYZ, they may expect to get in their car at 7:00 a.m. and quit at 3:00 p.m. We expect our salespeople to work 12 hours a day. Jim says all the time, ‘This job is a half-day job, pick any 12 hours you want.’  It’s not just 8:00 to 5:00; it’s what you do in the evening as well.” CS