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Partners in Lumber Brokerage Take Client-Based Approach to Business
Precut International: Partners in Canadian lumber brokerage take a client-based approach to business as they serve the pallet and crating industry in the Northeast
By Jack Petree
Date Posted: 3/1/2001
Quebec City, QUEBEC ó Larry De Lottinville and Claude Giguere take a client-based approach to serving customers of their lumber brokerage. Their approach provides an unusual amount of flexibility and value to the pallet and crating businesses they serve and has led to the growth of their company, Precut International.
Precut International supplies precut stock to the pallet, box, crate, and wirebound industry throughout the Northeastern U.S. and Eastern Canada. The Quebec-based Canadian company will celebrate its 10th year of operation in September. Larry and Claude have seen their start-up enterprise grow to a lumber brokerage that moves more than 50 million board feet of lumber annually.
Many lumber brokers will contact customers to let them know what is readily available from the mills that the brokers do business with. At Precut International, Larry and Claude take the reverse approach.
"We determine exactly what the customer needs, then we have the lumber produced by the mill to their specifications and in the quantities wanted," Larry explained. "Our customers are not getting whatís left over after a mill has produced the other products it really wants to focus on. They are getting a quality product manufactured for them to their specifications.
"We believe that is a very important distinction in a day when the pallet and box manufacturers we deal with are working with just-in-time schedules and customers who expect the best the pallet plant can provide to be the standard for every pallet delivered," he added.
Both men had experience in the pallet and crating industry and sawmills prior to starting Precut International ó experience that has proved valuable in both serving pallet and crating businesses and dealing with sawmills.
Claude graduated from college with a degree in forestry and worked five years with a large Quebec pallet manufacturer and then five years with a lumber brokerage firm that owned a scragg mill. Larry graduated from university with a double major in management science and administration. He worked for a box manufacturer three years, a planing mill for five years, and then in a hardwood mill for two years.
"Between the two of us weíd touched enough production in terms of mills by the early 1990s to feel we had the experience and knowledge to go out and do something special for the customer on our own," said Larry. They came up with a business plan that they believed would give their customers greater value and took it to the marketplace ó with successful results.
Their service is designed to allow a customer a great deal of flexibility in ordering precut stock. Pallet manufacturers that are making specialty pallets tailored to the needs of individual customers do not always want to buy in large lots nor do they want to pay premium prices for smaller orders of lumber, Larry noted.
Precut Internationalís clients frequently need a mixture of cut stock. "Based on what theyíre producing for their customers, they really need a variety of materials," said Larry. "They might want a half a bundle of this, two bundles of that, and another bundle of a third product. They might want to mix grades and species, and they will want some notched stringers and some unnotched, as well as a selection of lengths, widths, and thicknesses. We give them the opportunity to order based on their needs rather than on what happens to be available from the mills at any particular time."
Larry and Claude are able to provide this kind of flexibility to pallet companies and other customers by using a two-pronged strategy. First, Precut International maintains a sorting and reload yard in Milby, Quebec. Second, Precut International takes client orders to mills instead of contacting the mills and buying what over-run they have to offer.
"We couldnít operate the way we do without it," Larry said of the reload yard. It contains a "hodgepodge mix of production from mills all around Quebec." The yard may have .5 million to .75 million board feet of material. From the reload yard inventory, Precut International mixes and matches lumber for clients with standing orders or special needs for smaller quantities of lumber. About 50% of the material the company sells moves through the yard at some time on its way to a customer.
Larry and Claude have close working relationships with a large number of reputable mills throughout Quebec that are capable of providing the products their customers require. However, they still deal with their suppliers at armís length; they have no contractual agreements that obligate them to certain mills. "We donít have the kinds of contracts with the mills some firms seek out," said Larry, "and Iím not afraid of saying that. Iím proud of saying that."
Brokers who contract with mills for their production could develop too close a relationship with a particular mill and push its lumber on a customer, Larry noted. "We work for the customer," he said. "We discover exactly what the customer needs, then go to the mill that can best produce that particular product and have it manufactured for our customer." Precut International will take the customer order to a mill that has proven itself capable of delivering a quality product on time to the clientís specifications, he added.
If necessary, Precut International can use several different mills to fill an order. Filling the order with several mills avoids some potential pitfalls of dealing with one supplier. For example, an order for a variety of cut stock components may force a pallet or crating company customer to make some unwanted compromises with a single supplier because of the millís limited inventory or production capacity or other factors. "Itís really a matter of who youíre working for," Larry continued. "We work for the pallet manufacturer."
Larry and Claude expect continued growth in the future for Precut International ó both because of the services they provide to their clients and because precut lumber is becoming more and more the standard in the pallet and container industry. With labor shortages, Larry noted, sometimes pallet manufacturers must choose between having enough workers to assemble pallets
or having enough to make pallet components. It is more profitable to the pallet manufacturer to have limited employees building pallets, which can be accomplished through buying precut material.
Environmental regulations also are playing an increasingly important part in the decision to rely on precut material, according to Larry. "Many pallet plants are in the cities, so air and water quality are important considerations," he said. "If youíre using precut lumber you avoid many of the problems and the associated environmental expenses that go with a lumber remanufacturing operation."
Because of the way Precut International does business, Larry and Claude contend that they do more work for customers ó and provide more service and value ó than a traditional lumber brokerage. "Thereís a lot more involved than when youíre just selling a commodity," noted Larry. "Weíve developed a network of mills who can produce the lumber our customers need. When we work with a client and have an order, we have to decide which mill can best produce the product, then order it, assure itís been scheduled for production and arrange for its transport to the client. Weíre doing a lot of work many brokers donít care to do, but it benefits the customer substantially." These additional services are what make Precut International competitive in the marketplace.