Measuring up: high efficiencies, firm cost control, and a commitment to accurate framing packages make Davidson Industries the de facto truss and panel supplier to the Indianapolis big builder market

Measuring up: high efficiencies, firm cost control, and a commitment to accurate framing packages make Davidson Industries the de facto truss and panel supplier to the Indianapolis big builder market – Profile Davidson Industries

Chris Wood

In the early 1950s, entrepreneur and pro dealer Ted Davidson brought into a risky new way to add sales revenue to his Southport, Ind., lumberyard. Called panelization, the technique promise a juicier margin for sticks compared to the typical commodity prices garnered by most other dealers around Indianapolis. For the payoff, all Davidson has to do was prefabricate the studs into interior wall panels and truck them out to builders. “Ted started us in component manufacturing with the old Lorico system, which was a 4-foot modular panel,” explains Alan Vander Meer, executive vice president and general manager of what is now Davidson Industries. “You built three panels–a blank panel, a panel with a window opening, and a panel with a door opening. Combinations of those three panels made a house.”

Davidson couldn’t have picked a better time for his gamble on manufactured building components.

Like almost every post-war metropolis, Indianapolis was becoming acquainted with the arrival of the suburb. The soldiers were back, the baby boom was on, and rushing to meet the resulting housing demand was another relatively new guy on the block: the production builder.

Nowhere were these phenomena more apparent than in Indianapolis. “This market has always been prone to production builders,” says Vander Meer. “National Homes, a pioneer in packaged housing, was located in Lafayette, Ind., back in the ’50s. Their homes were entirely fabricated, and it was a great business with the housing demand as soldiers returned home.”

Throughout the next two decades, Davidson grew steadily along with the Indianapolis market. Successive generations of Davidson family ownership have keyed that steady growth, including current third generation owners Larry Davidson, who heads up the company’s commodity purchasing division, and his sister Debbie Hillenburg. “Allowing Davidson to retain earnings to build a stronger business has been one of the greatest, ongoing assets that the Davidson family provides to the company” Vander Meer says. The company added roof trusses and pre-hung exterior doors to its manufactured product mix in the early ’60s, and the ’70s saw another burst of production building in the market, this time in multifamily housing. “Multifamily was 85 to 90 percent of our business in the ’70s,” says Vander Meer, who assumed managerial control of the company more than 20 years ago as the second non-Davidson to guide the company. “Our fabrication background brought us much success there, and we continued in that vein until 1986 when the tax law changed and multifamily came to a screeching halt,” With the 1986 Tax Reform Act, Congress began to restrict the availability of tax-exempt bonds for financing multifamily projects.

At the time, Davidson found itself as the lone truss and panel provider in the market. Switching business back to 80 percent single-family construction took less than a year–and it turns out Davidson was just in time. Overall annual starts in the Indianapolis market have exploded from 6,000 units to 15,000 units in the past decade, and everyone wants in on the component action. “Fifteen years ago, we were the only one doing panels and trusses in this market,” says Davidson director of sales and marketing Phil Barth. “Now every major lumberyard has either opened up or bought an operation and is doing components full swing.”

From either its sprawling 30-acre manufacturing center and headquarters in Franklin, Ind., or the 10-acre distribution center north of Indianapolis in Fishers, Davidson is positioned to compete against the upstarts. You want output? Davidson’s 50,000-square-foot truss plant and 30,000-square-foot panel plant roll out approximately 5,000 full units each year. Complemented by window assembly and door hanging shops in Fisher, Vander Meer says the impressive component volume keeps Ted Davidson’s legacy secure despite the competition. “There are some quality plants out there” Vander Meer admits. “We just happen to have a 50-year jump on them in manufacturing experience.”

Vital Info

Topping Davidson’s experienced resume is an intimate understanding of costs and a propensity for measuring efficiencies and productivity–and then improving them–that borders on the unreal. “We do measuring all the way down the line” says Vander Meer. “How long does it take us to cut material? What is our capacity to assemble common trusses? What is the dollar value of errors made, and what are the dollar values of different percentages of productivity? All of it is measurable, and we are continuously identifying those [measurable values], addressing them on a quarterly basis, and attempting to improve them from year to year.”

Appropriately enough, the building component manufacturer has everything broken down into “Davidson Units,” quantified values for each of the company’s manufactured products that are used to determine output, efficiencies, job size, and even incentive compensation for Davidson employees. “One Davidson Unit truss is a 28-foot common tress made of nine pieces of lumber,” explains Vander Meer. “We know exactly how long it takes to build in man minutes. Our capability on two 8 1/2-hour shifts [per day] is 12,000 Units a week. If you have a 44-foot truss with a vaulted ceiling, that might be 1.8 Davidson Units. We have formulas devised to calculate that. In the panel plant, we’ve determined that 1 lineal foot of non-load-bearing interior partition equals one Unit. Our capacity there is 120,000 Units a week.”

All Davidson Units accounted for, approximately 110 houses a week are coming out of the component facilities, and each one of the complete packages is timed and measured as well. Courtesy of Mitek software in the truss plant and Intelligent Building Systems software in the panel plant, the company has real-time updates on all projects from the time a builder’s schedule is downloaded until the check clears the bank. “A salesman can get on the computer at any time and see that a particular framing package is being cut today, or is being assembled today, or has already been packaged and delivered,” says Barth. From order entry to jobsite delivery, the average framing package channels through Davidson in 11 days.

“Information is vitally important in a manufacturing setting, because the customer wants to know: What is the status? Where is it?” says Vander Meer of the zealous data collection at Davidson. Still, when all of the measuring and double checks are said and done, Vander Meer lives by a simple motto: “If it is engineered right, we’ll build it right, and if we build it right, the customer will be happy and our business will continue to flourish.”

Top Gear

Indy production builders have no problem with Vander Meer’s engineering mantra, especially as Davidson continues to deliver the near-perfect housing package. “We’ll do 650 to 700 [homes] this year, and we’ll get the majority of our [panels and trusses], exterior doors, and interior trim from Davidson,” says Cliff White, division president for Indianapolis-based Trinity Homes, a subsidiary of Beazer Homes.

Davidson’s framing packages, in particular, have hit a sweet note with big builders in the market because of quality product and service execution. “Their engineers are incredible, and they do a great job of getting truss packages out of their plant,” says Steve Spencer, president of Indianapolis-based M/I Homes of Indiana. “Time is a vital cost issue for us, and we have never had to wait for a package from Davidson.”

White agrees, and while the builder feels nothing in the industry is ever 100 percent, he says Trinity never faces an open foundation waiting for wood. “Davidson is so automated and efficient that our package is usually waiting for us at their yard two or three days before we need it [at the jobsite],” White says. In addition to on-time virtually all-the-time delivery, Davidson gets high marks from Trinity for the labor-saving accuracy of the delivered product. “Our framing subcontractors love the Davidson package,” says White. “We use two different framing suppliers, and Davidson’s packages are always complete and easy to assemble. It could be a minor difference, but it’s [one that the labor prefers].”

According to Vander Meer, that accuracy is the product of cutting-edge component manufacturing technology wielded by experienced hands. “Especially with the automation we have in the plant, the chances of manufacturing, accuracy from our engineering team are second to none,” Vander Meer says. Automation, however, doesn’t come cheap. In the panel plant, Davidson invested $400,000 in Virtec laser layout machines. For the truss facility, OMNI component saws (Davidson has two) dock in between $180,000 and $200,000.

The prices keep Davidson prudent. “We’re not one to be the first ones to buy into technology,” says Barth. “We always end up sending our manufacturing manager to a plant where equipment has already been installed to evaluate it. After technology has been in the market for a period of time and has proven itself, then we will jump into it.”

And jump into it they do. The efficiency that today’s component technology can provide can often be priceless, and Davidson is quick to apply the tools to the job. For example, a recent TCT saw purchase has drastically impacted the time-consuming 1- and 2-foot cuts for hip ends and more complex components. “We had four men on radial arm saws cutting, and they had a hard time keeping up. It was the bottleneck in our plant for quite a period of time,” explains Vander Meer. “Now we have one, sometimes two operators on the TCT saw completing the same cuts in one-sixth the time.”

Manufacturing speed aside, the savings in manpower is what really validates the investment in equipment technology. “Doing more with less is really the key to success today in the manufacturing business,” Barth says. “But every time we find a labor savings, we keep our people and move them to other key areas in the company.” Indeed, since Vander Meer assumed full-time management of the business in 1980, he maintains that the only reliable success resource is the company employee base. “All of this equipment and manufacturing technology just sits here until somebody puts it in motion,” Vander Meer says. “Begin with people, and profits will come. If you couple competitive compensation and benefits with respect for your employees and their families, they will work their butts off for you.”

Vander Meer and Barth judge Davidson’s overall compensation to be high for the industry, and they also keep tabs on nearby auto plants and other manufacturing facilities to make sure they’re offering a competitive paycheck. Every manufacturing employee in the company is on an incentive plan that is based on Davidson Units produced per man hour, earning workers additional pay ranging from $1.50 per hour in the high-volume truss plant to $3.50 an hour in the more labor-intensive door-hanging shop. The bonus paycheck is activated after productivity goals are reached and covers an entire month, less a week’s worth of bonus hours for every unexcused absence. “Since the incentive is based on productivity, the larger the checks get, the happier we are” says Barth. “It is a great motivational tool and also affords us a stable work force.”

Big Plans

Davidson will need that stability as Indianapolis continues to show impressive market growth. The company’s manufacturing capabilities have funneled building components right into that growth–panel and truss output alone is supplying approximately one-third of the area’s annual framing market. But big, national builders want more than just supply. Each production titan has its own economies of scale ranging across orders, invoices, deliveries, installations, and payments, to name a few.

The company serves builders wanting different delivery protocols under different payment terms with totally diverse invoicing systems, and the challenge is to maintain an adaptable culture. That flexibility has led the company into installed sales over the past several years to where Davidson now has more than 14 subcontracted framing crews to put at the customer’s disposal. “If it fits any type of normal routine, Davidson looks to change its own systems to live with the builder idiosyncrasies of doing business,” says Vander Meer.

“I’m not their largest account, but they often make me feel like I am with the level of attention they provide,” attests Spencer. “We started out doing 10 homes 15 years ago and this year we will do 400. Davidson has been with us the whole time supplying panel and truss packages, and windows and doors, and doing business with them has always felt like a partnership.” With partnership all the rage in the big builder supply chain, Davidson hopes to gain even more of the Indianapolis market by leading with its service flexibility and continuing to manufacture high quality–and higher margin–components.

The promised efficiencies and faster cycle times are exactly what Indy big builders have on the brain as they shoot for even higher growth goals. “They are top-notch communicators, [from pricing to delivery to execution],” says Spencer. “Our goal is to build 500 units a year, and I know I don’t have to look for another supplier to meet that goal” If Spencer needs any reassurance, he can call Trinity Homes for a reference. “Two years ago we were at 400 units, and Davidson has had no problem with our growth curve to 700,” says White. “We think they have the capacity to handle any volume we operate at.”

Indeed, the tremendous manufacturing foresight that Ted Davidson had more than half a century ago is still paying off today as it continues to lead Davidson Industries to the next steps in fabrication. Right now Vander Meer sees a trend toward more complex components like sloping walls and fabricated dormers, proving that production building is becoming less cookie-cutter and more complicated. “If it can be done efficiently in our plant, takes labor out of the [job] on site, and yet provides builders with design flexibility, that’s what we want to do,” says Vander Meer. That and continue to be viewed as one of the best building component suppliers in Indy, by any builder’s measure.

Vital Statistics

Company: Davidson Industries

Year founded: 1929

Headquarters: Franklin, Ind.

Number of locations: 2

Number of employees: 350

2002 gross sales: $64 million

Pro sales percentage: 100 percent

COPYRIGHT 2003 Hanley-Wood, Inc.

COPYRIGHT 2003 Gale Group