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  • Effects of Tariffs: How Moore Lumber & Hardware Increases Efficiencies to Power Through Economic Uncertainty

Effects of Tariffs: How Moore Lumber & Hardware Increases Efficiencies to Power Through Economic Uncertainty

February 06, 2020


The U.S. shift in foreign economic policy can have enormous implications for businesses that trade with foreign markets. Beginning in January 2018, the U.S. abruptly changed course by adopting a unilateralist strategy of going it alone on trade policy after decades of participating in multilateral trade agreements with other countries. The shift in policy creates uncertainties for businesses, as well as competitive and operational challenges. 

In recent years, the prices of metals like steel are on a roller coaster-like trajectory, as China and the U.S. exchange tariffs on goods. Now, other commodities—even those not directly in the line of fire—are experiencing the same fate. “The U.S.-China trade war is sparking so much fear over demand that even those parts of the commodity world that aren't in the direct firing line are getting burned,” reported Bloomberg in August.

While economic policy can make it difficult to do business as usual, one building materials company is doing just that.

Third-generation, family owned Moore Lumber & Hardware has seen a lot of uncertainty and turmoil since its founding in Bailey, Colorado in 1947. Bill Moore, who now runs his father's business along with his son, Erin, is optimistic—despite the challenges facing the business. A trade war isn’t only affecting the cost of raw materials, but it also requires regular changes and updates to inventory pricing and labeling. And that comes with additional labor expenses.

"I don't think that most consumers understand the extraordinary amount of work that it takes at the retail level when tariffs are implemented," says Moore. He reveals that the effects of tariffs and trade negotiations impact the pricing of around 20,000 individual items out of roughly 35,000. In an average year, prices of only 5,000 items need to be changed. "It's taking us four times as much labor to change that, and I think that's one of the effects that most people don't understand," he explains.

Powering Through the Effects of Tariffs

While these challenges can prove too difficult for many small businesses to manage, Moore Lumber & Hardware gradually learned to adapt, and even thrive, in uncertain economic times. Sometimes, it includes adjusting a longstanding strategy. Other times, it requires reinventing the wheel entirely. And on other occasions, it just means carefully picking your battles.

For example, when 20,000 items suddenly need to be repriced, Moore doesn't always make the adjustments. He says they evaluate which items are worth relabeling and which cost more in labor to relabel. "In some cases, we're actually not making the price change," he says.

One way that Moore Lumber adapts is by significantly cutting down on the amount of labor it uses when stocking items that arrive at its stores. Traditionally, when new items arrive, a staff member takes them off the truck and puts them on the ground while unloading the rest of the truck. Then, the employee spends additional time moving items from the ground to where they're supposed to be stocked. "That means that we're handling it twice," says Moore. "So, we're looking at that—to cut down the amount of times we touch something."

Effective Vendor Relations

Since international trade relations are well beyond Moore's control, he says the company instead focuses on what it can control like vendor relations.

"Vendor relations in our business are absolutely critical," he says. "Whether it's paying people on time or making sure we receive things correctly, vendors are a critical part of the total picture."

Vendors are going through the same economic challenges, and Moore says it gives them the unique opportunity to improve these vital relationships by making it easier to do business.

"One of the things we've started doing is requiring written confirmations from our vendors on all purchase orders," he says. "This allows us to compare the purchase order against what the vendor says they're going to ship and get corrections made."

This step significantly reduces instances of incorrect orders, which would otherwise also add to the vendor's costs. "We notify our vendors immediately of problems," he explains. "That increases the probability that they're going to ship correctly."

E-commerce and the Amazon Effect

While issues related to labor and pricing are nothing new for the 72-year-old company, they manage a range of challenges Bill Moore's father could never have anticipated when he opened the family business in the 1940s. That's because even a quintessentially tactile and low-tech industry like building materials isn't immune to the impacts of technology—including the rise of e-commerce and online competitors. "Amazon and e-commerce have really started to affect not only how we look at things, but also the visibility of things for customers because customers are coming in with a lot more information than they had before," says Moore.

To solve a high-tech problem, Moore Lumber & Hardware uses a range of high-tech solutions. For example, by allowing the company's hardware supplier, ACE Hardware, to have full visibility into their inventory, the family business can offer online services like delivery and in-store pickup for online orders.

"Technology allows us to compete with Amazon and other e-commerce retailers," says Moore. "We now have a lot of items that are ordered online."

Technology and Data Insight

Other high-tech solutions help the company increase efficiency and combat challenges posed by regular price changes due to ongoing trade disputes—like increased labor costs. New digital technology performs traditionally labor-intensive tasks like confirming and correcting costs and inventory quantities, analyzing and matching invoices to purchase orders, and automatically moving them into payables—all without any human intervention.

"That means about 70–80% of the invoices we get in never have to be checked," says Moore. "It saved us the cost of at least half a person here last year."

Document scanning technologies can also match items with purchase orders and provide visibility into inventory and payments across the entire organization. Automated systems are designed to ensure data is available in real time. "We can see the purchase order. We can see the bill of lading. We can see the invoice, and so it's got everything we need," explains Moore.

Previously, Moore says the company had a less reliable solution—all the graphs that tracked the status of deliveries were written on paper and stashed in dispatch offices. "Every time somebody wanted to know the status of a delivery, they made a call to dispatch," explains Moore. "It took an immense amount of time for both salespeople and for dispatchers just to answer those types of questions."

Automating processes not only provides instant data about the status of deliveries, but it also offers a form of insurance. There are tangible records to show what, when and where something was delivered. Now a rich pool of data and the visibility it offers also allows Moore Lumber & Hardware to optimize a range of processes—including scheduling, delivery routes, and even how trucks are loaded to maximize delivery efficiency. "We're minimizing the number of miles we're putting on, and at the same time we're also minimizing the fuel usage and labor that goes into that," explains Moore.

In the coming years, Moore hopes to further enhance the business with better data-related insight, but he knows he's already on the right track. One primary success metric used by ACE Hardware is its ACE Pinnacle Status, the highest status awarded to the hardware giant's independent retailers.

"That's [earned] by meeting a whole bunch of different initiatives," says Moore, including in-stock percentage, customer satisfaction, and employee satisfaction. “All the different elements that go into running a good organization.”

Moore Lumber & Hardware is a Pinnacle Status business and they’ve received the designation every year since ACE introduced it seven years ago. The company has largely been able to thrive in uncertain times, according to Moore, as a result of its willingness to adapt and use new, digital solutions. Today, Bill Moore is proud to have a strong, thriving family business to one day pass on to his children—as his father and grandfather did before him.

After years of adapting to economic and political conditions, the company is ready and willing to embrace transformation to remain profitable in uncertain times.