With each passing year, there are fewer categories in which supply chain transparency (including visibility into total cost at different tiers) is not rising – often considerably. But the lumber industry is one in which total cost transparency is blurred through an intermediary-led brokerage model that has evolved little for over half a century. Woodbrowser is hoping to change this. With the support of one of FreeMarkets co-founders, Sam Kinney - probably one of the most authoritative experts on real-world market mechanisms and market design (and, in full disclosure, a friend and mentor) - Woodbrowser is hoping to shake up the economics of the lumber market.
A recent article by NHBR (a local New Hampshire publication) suggests that Woodbrowser is aiming to create greater efficiency in the buying process through a “transparent purchasing platform for lumber and panel products.” In short, “the firm provides truckload-quantity purchasers with direct access to lumber at over 145 mills in North America via phone, email and online, as well as access products from traditional wholesalers and distribution channels.” Woodbrowser is already actively serving the lumber market and is in the process of exploring plywood and other sheet goods (i.e., panels) as well.
Additionally, “The platform also provides such feedback as current market data, the rank of the offer and average offer price, which he said is information that has never been offered to either party in the current marketplace. Purchasers and sellers can also find all of their purchase orders and past quotes all in the same place.” For those with significant experience in the sourcing world, such a model would seem par for the course. But remarkably, the lumber industry lacks intermediaries that foster rather than limit visibility.
To learn more about the market dynamics of lumber and paneling, I decided to drop Sam a note on the topic. His insight was fascinating, and I’ll share some of it here. Sam started by telling me that that the basic history of the market is that sawmills did not want to support the expense of having direct sales forces. What resulted was an independent broker channel whose job was to find demand and buy from mills. These brokers have long followed the old adage of “buy low/sell high.” Their markup remains hidden, and buyers still often don’t even know which mills they’re doing business with until their shipment arrives.
Is this a market ripe for disintermediation? You bet. Enter Woodbrowser. The concept is simple – bring a low, fixed commission model so the buyer and the mill both become aware of the specific intermediary markup to break down the traditional broker obfuscation walls. Woodbrowser is also willing to work in a traditional brokerage model (in an online manner), but seeks to use this approach as a transition phase until buyers are accustomed to requesting quotes directly on the web platform.
Not all relevant category spend is suited for the model (yet). Woodbrowser is working in truckload quantities only, for example. Granted, Woodbrowser faces a battle in proving to the market a new intermediary can change things – and stay in business. The lumber industry had its own B2B marketplace exchange model that went bankrupt during the .com bust over a decade ago (like many marketplaces of the time).
Since then, the industry belief was that things would never change. Woodbrowser hopes to refute that notion bringing both advances in technology, but most important, highly specialized domain knowledge and leadership. As Sam notes, “The Woodbrowser team is great—real lumber guys applying what FreeMarkets learned in so many other markets to the specifics of softwood lumber buying.”
And with truly one of the smartest guys in market mechanism and sourcing/negotiation design lending insight and support, I wouldn’t bet against it.