$4 Billion White Cap, Construction Supply Group Merger Highlights Changing Construction Supply Chain

BW Supply Chain Briefing

News of the proposed $4 billion merger of HD Supply’s White Cap Group with Construction Supply Group points to more changes in the construction supply business. Mergers and acquisitions in the construction supply business are not new. In April of last year, L & W Supply purchased Delta Gypsum, after itself having been acquired by ABC Supply in 2016. Earlier this year, Ferguson announced an acquisition of Chicago-area based Columbia Pipe & Supply after buying New York Metro-based, S.W. Anderson Supply late last year. Construction Supply Group, itself, a unit of the Sterling Group, has acquired numerous players in the construction supply space in recent years.

So, while mergers and acquisitions have continued apace among building product manufacturers and distributors in recent years, there are a number of trends in technology that may be influencing this activity or may influence it in the years to come. Some of those trends impacting the building supply business include:

1.  Continued Gains in eCommerce in Building Supply

Russ Young, then Senior Consultant at construction industry management consulting firm, FMI, contributed a piece last December entitled, Amazon Business Shakes Up Building Product Manufacturers, in which he pointed to the growth of Amazon’s business-to-business sales and the implications that may have on manufacturers and suppliers. In the spring of 2019, Construction Supply Group, purchased Best Materials, a construction materials eCommerce site.

2.   Increasing Trends in Modular and Offsite Construction

As we noted in our 2019 Modular Construction Update, one benefit of modularization is the ability to standardize supply to a single, central area as opposed to distributing it to various, changing job sites. This standardized purchasing may mean changes to buying practices, disrupting prior supply chains. It was also interesting to note modular builders attempting to get deeper into their supply chains, with the most notable example being Katerra’s 2019 announced line of manufactured products including everything from cross laminated timber products to bath kits to HVAC systems and tinted glass products. Again, harkening back to the days of Sears catalogue homes, Amazon made headlines with an investment in Plant Prefab, a west coast builder of modular homes.

3. Proliferation of Technologies Changing How the Industry Sources Materials and Manages Deliveries

From Ferguson Ventures to Nova External Ventures, Saint Gobain, building products and materials companies are increasingly paying closer attention to emerging technology companies and the way they are selecting materials and building products, buying them, tracking and managing their delivery to job sites, and even tracking them post construction. From last week’s presentation by Bulk Materials Logistics company Truck IT to our recent Projects Conference (2020 Project Delivery Conference:- Material Readiness at the Enterprise Level. Kiewit and Jovix.), we seem weekly to be identifying new emerging technology companies in the products and materials space.

Kiewit and Jovix on Materials Management
John Chesser, Chief Revenue Officer, Atlas RFID, and Brady Richardson, Senior Material Manager, Kiewit Discuss Technology-Enabled Materials Expediting (Click to Watch).

4. Demand for Smarter, more Sustainable, and otherwise Better Materials and Products

Another trend continuously in discussion at BuiltWorlds is the ongoing question for innovation in products and materials. At our buildings conference last March we heard from industry leaders talk about their companies’ initiatives in development of smarter materials, more sustainable materials, lighter and easier to install materials, and more. As the industry develops tools and techniques to better understand the performance and application of materials and as the industry pushes to address labor and skills shortages, pressures to innovate in the materials themselves continues to mount. These forces may reward or punish suppliers able to bring these new products and materials to market.

Building Industry Leaders on Innovation: Laura Dwyer, Global Strategy Leader, Dupont, Terry Rosentiel, Dir. Partnerships & Innovation Pipeline, USG, Matthew Cramer, Dir. Digital Solutions & Tech Integration, Armstrong World Industries (Click to Watch)

5. Quality: One of Several Possible Emerging Trends

Another early yet possibly emerging trend is a heightened focus on quality by building contractors, as technology puts more data in front of builders and insurers about the performance of materials in buildings. In recent Buildings Analyst Calls, we have looked at software that gives builders more information during the planning phase on how materials choices affect the performance parameters of building projects, and this week, we will look at data collection during construction and how that process is beginning to affect the way builders think about quality.

While these trends may be too early in development to have significant impacts on materials companies today, it seems certain that many of these trends will have profound implications for construction suppliers in the years to come.