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Focus on frugality: Grappling with global lumber market volatility

Part of a special series on British Columbia's frugality reality and its implications for business
Nelson Bennett
Nelson Bennett
lumbermill-gettyimages
Photo: Getty Images

BIV reporters examined British Columbia's frugality reality – and how local businesses are navigating skills shortages, inflation, chronic COVID complications and supply chain dysfunction. 

This is one of eight articles that capture acute corporate concerns. Read on to explore different business owners' survival plans and strategies. 

Doman Building Materials Group

A Vancouver-based wood product remanufacturing and distribution company.

Marketplace cost challenges

With 2,200 employees, about 200 in B.C., Doman Building Materials Group struggles to attract and retain workers in a tight labour market – a situation aggravated by inflation and the pressure that puts on companies to raise wages.

“In all regions, we’re short people, whether it’s in the office or the manufacturing plants or distribution centres,” said CEO Amar Doman. “It’s not a matter of just wage inflation, but really just finding people. That’s certainly a challenge for us all over the place.”

More recently, the company has been challenged by extreme volatility in lumber prices, and high fuel prices.

“The biggest one has been pricing volatility in lumber because we distribute a lot,” Doman said. “We distribute a ton of lumber, and it’s just been going up and down like a toilet seat. I’ve been in this my whole life. I’ve never seen volatility like this. That’s been our No. 1 challenge: managing volatility.”

Marketplace frugality solutions

“We pass on our transportation costs,” Doman said. “So our fuel prices are going up, we put it into our fuel charge to the customers.”

But there’s not much the company can do about high natural gas prices, which increase the costs of kiln drying operations.

“Those costs are harder to recover,” Doman said. “We really have to suffer at the margin level and eat some of that on those cost inputs.”

As for dealing with lumber price volatility, the company has modified the way it manages inventory.

“We’re managing with less inventories, just-in-time inventories, turns that are faster, and really trying to be agile with our large inventories that we carry,” Doman said. “We’re trying to run leaner, meaner and really increase our turns and turn over our working capital faster.”

The current pressures, like inflation and rising interest and borrowing rates, have not slowed down the company’s capital investment plans, though Doman said the company is being more careful with acquisitions.

“We’re not pausing on too much here. It’s just business valuations on our acquisitions – we’re being a little more careful, just because we know the last two years are very buoyant in our industry. We think the next two are going to be more normalized. We’re being careful on what we’d pay for a company today.”

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