WEYERHAEUSER : SERVING THE HOME BUILDING NDUSTRY
Overview
With its annual sales of over $20 billion and 55,000 employees in 18 countries around the world, Weyerhaeuser has grown into one of the largest integrated forest products companies in the world. Its principal operations involve growing and harvesting trees and manufacturing, distributing, and selling forest products. Weyerhaeuser is currently the world's largest producer of softwood lumber and pulp. Weyerhaeuser's wood products businesses produce and sell softwood lumber, plywood, and veneer; oriented strand board and composite panels; hardwood lumber; and engineered lumber products. These products are sold primarily through the company's sales organizations and building materials distribution business, though Weyerhaeuser targets large builders in particular with its National Builder Program. As partners with a leader in the worldwide
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forest products industry, members are offered the convenience of a single reliable source for quality building supplies. Moreover, the program offers customized features and value-added services designed to meet each builder's unique needs, such as
¦ Access to Weyerhaeuser's in-depth product expertise and technical support.
¦ Input on product development to engineer greater value.
¦ Ongoing communication updates to enhance sales and profitability.
¦ Relationships at the executive level with key decision makers.
¦ Shared opportunities in e-commerce, environmental stewardship, joint marketing, and safety training
Factors Affecting the Industry
In the wood products industry, changes in the political landscape in the past several years have affected environmental and land-use policies that regulate logging. In the late 1990s, logging on federal lands was cut back when the nesting areas of the spotted owl were made off-limits to loggers.
Further restrictions were imposed due to additional concerns about other species. As a result, within the span of 10 years, the timber harvest on federal lands dropped by 75 percent. Environmental concerns also fostered the growth of environmental certification and labeling for wood products as a means to ensure that the wood was harvested in an environmentally responsible way that sustains the forest ecosystem. These environmental concerns also led to the creative use of waste materials, like using wood byproducts as fuel to provide mills with electricity. Other scrap materials have been marketed to consumers as dyed mulch and shrink-wrapped bundles of firewood.
In addition to these environmental influences, some key technological advances have favorably affected the manufacturing of wood products for building. For example, the use of new technology and automation have greatly improved productivity, and computerized controls and laser scanners have maximized the amount of lumber obtained from a log, thus increasing output while consuming less wood.
The Building Construction Market:-
Housing is a major part of the U.S. economy, representing roughly 15 percent of the gross national product.32 The largest volume items purchased by home builders are typically lumber and plywood, which represent roughly one-third of the total cost of the materials used to build a home.33 The home construction industry also is highly cyclical, though repair and remodeling efforts are somewhat less so than new construction. The vibrancy of the industry varies along with several key factors, such as the overall health of the U.S. economy; demand levels for new home construction, improvements, and repairs; and the volume of home sales.
During the first several years of the twenty-first century, the industry experienced strong growth after a pronounced lull; residential construction permits and starts reached record highs, largely fueled by low interest rates. Despite the threat of increasing interest rates, continued growth in the single residence home building construction market is anticipated in the next several years. Although the industry is dominated by small firms, the largest builders represent a significant portion of new home sales. According to the most current government data, the top 1 percent of builders account for 40 percent of all new residential housing starts, and 1 percent of builders account for 34 percent of all new multifamily housing starts.
Industry concentration is likely to increase in the future through the increasing number of mergers and acquisitions. For large wood products manufacturers like Weyerhaeuser, meeting the high expectations of large builders effectively is a business cornerstone. Because lumber represents a substantial portion of the total costs for builders, builders are careful to develop strong relationships with those manufacturers that can provide them with a good value for their money.
Although the most important factor is obtaining competitively priced materials, builders also value product availability, speedy delivery, reliable products, and the ability to install quickly and efficiently.
Questions
1. Describe how you would expect large home building companies to purchase wood products from companies like Weyerhaeuser. Use the steps in the B2B buying process discussed in the chapter to facilitate your discussion.
2. Builders often consider wood products to be commodities, so companies like Weyerhaeuser work hard to provide additional value to gain a competitive advantage in the marketplace. Describe some ways that Weyerhaeuser provides greater value to its customers than its competitors can. (It might help to review its Web site at www. weyerhaeuser.com.)
3. Identify the environmental factors discussed in the case that have influenced the industry during the past decade or so. What additional environmental factors might be important to the lumber industry, and how would they affect its B2B operations?