Jumping the supply chain helped this company keep up with demand

Global Lumber Resources cut out the middle man by setting up locally

 
A container terminal at work
(Jorg Greuel/Getty)

While the housing industry in North America and much of Europe tanked in the wake of the global credit crisis of 2008, Mississauga-based Global Lumber Resources was making the most of a construction boom in emerging markets. As founder Zalfiqar Ahmad says, his company underwent robust growth between 2008 and 2011. By 2012, Global Lumber was bringing in $19 million, all from customers in the Middle East and China.

Business was almost too good. The company literally couldn’t keep up with demand as construction firms waited impatiently for building supplies to arrive. Ahmad needed to find another way to deliver the goods, which is when and why he decided to jump the supply chain by building his own network of warehouses and building-supply outlets in the region.

Global Lumber traces its roots to a spark of entrepreneurial insight that occurred when Ahmad, an accountant, was working for Ernst & Young. He had done a stint in Dubai, where he had advised construction companies and other firms in the building industry.

When Ahmad returned to Canada in 2006, he decided to launch a company that sold lumber and wood-based building supplies, such as doors and flooring, to construction companies working overtime building highrises in rapidly growing cities in the Middle East and China. With the Canadian forestry industry in the midst of an almost decade-long cycle of plunging prices, consolidations and layoffs, Ahmad was able to buy cheap supplies as well as hire out-of-work insiders previously employed in the forest products industry.

Within a couple of years, Global Lumber (131st on the PROFIT 500) had added more products, such as veneers and door cores. The firm began to focus its efforts on the door industry, supplying components to manufacturers that sell thousands of units to condo developers. Some of the lumber, says Ahmad, came from Canada, but the company was flexible, sourcing wood from Europe or Russia according to customer preferences.

That’s when Global Lumber encountered a big logistical problem. Developers in the Middle East and China went into overdrive to complete construction. At the same time, suppliers like Global Lumber were constrained by a frustrating bottleneck: the 45-day wait to get wood products out of processing facilities and onto boats crossing the ocean.

What’s more, says Ahmad, his customers were operating in what he calls “low trust” environments: whereas a door manufacturer or developer in North America might stick with an order despite delays, Middle Eastern firms have a tendency to change suppliers abruptly.

As Ahmad considered how to expedite shipping, he decided to take a calculated risk and set up warehouses in the Middle East. That allowed him to be closer to his customers as well as compensate for shipping delays by keeping the warehouses well stocked. By jumping the supply chain, Ahmad would be able to sharply reduce lead times on his customers’ orders.

Ahmad also began looking at the situation from a door manufacturer’s perspective: a company building a hotel or a condo with 300 units might need several thousand doors. Typically, a construction company would place an order from a distributor or a large building-supply retailer like Home Depot. But in relying on those kinds of suppliers, the builder may not get exactly the product it wanted.

Ahmad figured that he could “disrupt the supply chain” by approaching builders directly and offer to supply exactly what they needed—which a large-scale supplier could rarely do—for 10% to 20% less per unit than the wholesalers/retailers were charging. Moreover, Global Lumber could get the goods to the builders faster.

Recently, Global Lumber has moved further up the supply chain, manufacturing wood-related products for interiors used in shopping malls and office buildings. And as the company has evolved, it has become more aggressive about protecting its edge—locking in shipping costs and closely monitoring inventory.

“I had no clients asking me to [set up warehouses in the Middle East] when I started,” Ahmad says. But he does now.

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