Articles Business Intelligence
Fit & Finish – Fall 2015

You’ve all been there. “We are expecting turbulence. Please remain seated and fasten your seatbelts.” This is how many of us in the fenestration business are feeling these days. It’s not to suggest things are bad, mind you. Like a plane flying through turbulence, there’s little chance of a crash. Just an uneasy feeling of “what if.” It’s the inability to confidently walk through the cabin without faltering. Taking a cue from the pilot and economists alike: it’s sometimes safer just to stay seated, seatbelts fastened.

Never before have I seen such turbulence in business. It’s different than the economic downturn a few years back. That wasn’t turbulence as much as the plane in a nosedive. Today, like turbulence, it’s the uncertainty of the market that keeps us stuck to our seats, and who can blame us. Just recently news of recession was made official and floated across every feed. Much like turbulence, it’s being dismissed as a temporary thing, due mostly to the decline in the energy sector and a strong U.S. dollar. There is a federal election looming and along with it, promises and accusations being hurled at every turn. Throw in ever-changing codes and labeling requirements and you have a perfect storm.

Despite this, we “fenestrators” are surviving. In fact, many of us are doing pretty darn good, all things considered. So why all the inner dialogue?

As pilots of our respective businesses, we may have to make changes to our flight path when navigating through turbulent times. This can manifest into significant supply chain shifts, sometimes to a lesser-priced option and sometimes, but rarely, to an up-market approach. It may lead to a shift in manufacturing processes and procedures to increase and improve efficiencies, and sometimes it leads to a shift in the approach to the market and distribution network. This end is usually most noticeable. Change how you go about manufacturing a window or door and there is a good chance it will go unnoticed by the vast majority outside the company. Change the approach to market and distribution, and that gets scrutinized by an entire industry.

Typically, distribution of residential windows has taken either a consumer-direct approach or a dealer/distribution model. For as long as I have been in business, distribution is how it’s been done. At the dealer level, a manufacturer can rely on a relatively consistent workflow. Margins are tight and collection can be, at times, cumbersome. Installation and site logistics are often left to the dealer and effective currency hedging can mean the difference between profit and loss.

The direct-sale approach gives the manufacturer full access to the end users. Sophisticated software development allows an almost seamless transfer of information from the on-site sales staff to the shop floor and back to the site – with a streamlined flow of information. Full access to the end user becomes a value-added asset and the product can often be tailored to the geographic area being serviced. Margins can be generous, but administrative and logistics costs can eat through reserves. Cash flow can be improved with job deposits and collection is often cash-on-completion.

And then there are the anomalies who see success on both sides of the fence. It’s a bit of a balancing act, but distinct market segregation can make for a successful business strategy with each segment providing respective support.

If asked which model works best, I think it’s best decided by the directing management team’s skillsets or the varying levels of responsibilities the owner/operator is willing or able to cope with on a daily basis. Either way, I see much success at every level of this spectrum on a daily basis in the fenestration industry and admire and appreciate the industry leaders in each of these segments.