A study of the distribution system in the British Columbia building materials industry

In recent years distribution has undergone dramatic changes. Some industries have experienced revolutionary changes, others minor, but in all industries distribution has become an extremely vital area. One of the reasons for the recent prominence of distribution is the increasingly competitive environment experienced by many industries. As competition increases within an industry, manufacturers often find it necessary to improve their efficiency, and distribution is an area with vast potential. The wholesaler is one of the most important institutions in a distribution system. He has also been confronted with more competition than many other institutions. The wholesaler will be the focus of attention in this study of the British Columbia Building Materials Industry. It is the objective of the thesis to study the competitive environment of the independent wholesaler in British Columbia, and to determine whether or not he will continue to perform a function in future years. To accomplish the objective, it is necessary to determine the nature of competition with which the wholesaler is confronted, why it exists, and whether or not it is unique to this industry. It is also necessary to determine distribution trends in other industries and whether there exist patterns that are common to this industry. The analysis of changing patterns of distribution focused on United States industries, with particular attention devoted to the Building Materials Industry. The conclusion was that certain trends pre-dominate distribution patterns, including integration, franchising, direct selling and the formation of buying groups for direct buying. Many of these trends are common to the B.C. building materials industry. There are two main types of competition that all wholesalers, (including the building materials wholesaler) are confronted with. The first is the tendency for manufacturers to sell direct to retailers and final users. The second is the desire of retailers to form buying groups and through bulk purchasing establish direct contacts with manufacturers, thereby circumventing the wholesaler. Aside from these two types of competition there are other pressures the building materials wholesaler faces that appear to be unique to this industry, one of these being an allowable margin of operation that is more historical than relevant to costs of operation. There are two primary reasons why the building materials wholesaler is confronted with this competition. The first reason is the wholesalers failure to give manufacturers and retailers the service they require and desire. The second reason is the feeling of manufacturers and retailers that they can perform the functions of distribution more efficiently than the wholesaler, and in the case of manufacturers, they can also attain more control of the marketing of their products. It has been proven to wholesalers that they are dispensable, and this has brought forth a self assessment of their functions in many industries. Those that realize they must be flexible to the changing environment have attained a new and prominent position in the distribution system, by offering the services their customers desire. Those that have remained static have been phased out. This study concludes that the Building Materials Industry will always have need of the wholesaler. However, to have a successful operation the wholesaler must be flexible to the dynamic environment, and offer the service manufacturers and retailers desire. This must also be accomplished at a reasonable level of cost. It is argued that this can best be attained through implementation of the physical distribution concept, (offering efficiency in operating methods) and a sound merchandising program.Business, Sauder School ofGraduat