Data report insights with Jason Cerone of Chicago Lumber Company of Omaha

Zach Wojtowicz:

Welcome back to “The Building Code.” This is Episode 121. Today we have Jason Cerone of the Chicago Lumber Company of Omaha. Charley?

Charley Burtwistle:

Chicago of Omaha, one of the most historic lumber companies in the U.S., which I think we’ll get into it a little bit of a history lesson here in a bit.

Zach Wojtowicz:

We’ll be sure to get the full story.

Charley Burtwistle:

Jason Cerone, who was recently interviewed for the Buildertrend Data Report, which will be linked to the shownotes here. He’s an expert here in Omaha at Chicago Lumber Company.

Zach Wojtowicz:

Yeah. We’re going to get into some things like supply chains, the labor shortage. There’s a lot of really important, big things affecting the building industry. Let’s see what Jason has to note. Jason, welcome to the show. Tell us a little bit about yourself. What’s your background?

Jason Cerone:

First of all, thanks for having me on.

Charley Burtwistle:

Absolutely.

Jason Cerone:

I appreciate that. I was born and raised here in Omaha. My family has been in the construction business since I can remember. They were on the HVAC side. In high school, worked in a cabinet shop, figured out that’s kind of what I wanted to do in the construction field somewhere. And then figured out Southeast Community College is where I wanted to go. So, enrolled there, got a job working in the field framing houses after that. And then shortly after that, I ended up getting married to what I would say is a saint at this point in life. I married superwoman.

Charley Burtwistle:

Nice. So, she’s listening.

Jason Cerone:

She’s blessed me with eight little boys. So, yeah.

Zach Wojtowicz:

Did you say eight?

Jason Cerone:

She’s amazing. Eight, yes.

Zach Wojtowicz:

She is a saint. Good Lord!

Charley Burtwistle:

Yeah, absolutely.

Jason Cerone:

She is, yeah.

Zach Wojtowicz:

Wow!

Jason Cerone:

So, yeah. Thanks to her, but yeah. Without her, we would be lost, and yeah, we wouldn’t survive. So, saint is a good way to put it.

But that first, I guess, winter frame that I realized, I didn’t like the cold, and I wanted to get into the business side of things, so I found a job estimating with Chicago Lumber Company. Then got a big head and decided that I wanted to start my own business building custom homes. Did that, and then 2008 hit and was lucky enough to sell out to my business partner at the time, and that was right before that bubble burst, so I got really, really lucky looking back.

Zach Wojtowicz:

Wow.

Jason Cerone:

I guess, hindsight being 20/20, it was a perfect time to sell.

Charley Burtwistle:

Yeah, planned that perfectly.

Zach Wojtowicz:

That’s a theme …

Jason Cerone:

Yeah.

Zach Wojtowicz:

… We’ve been running into, and like we timed the market perfectly, like we need to be taking …

Charley Burtwistle:

Yeah, absolutely.

Jason Cerone:

… done that this time, too, but nobody saw this one coming. But during that time, I took a position with the local GC as a project manager. I worked for them for about three or four years. Then worked for a developer for about four years. Then the third kid was on their way, or on his way, and this … I wanted to be around, was traveling every week, and contacted Rick Hollinger, the Chicago Lumber Company. Again, just never lost contact with him, and decided that, “Hey, they would make a position if I wanted to come back.” So, they created the commercial lumber sales side of the business here, and that was eight years ago, so …

Charley Burtwistle:

There you go. So, I …

Jason Cerone:

… Here we are.

Charley Burtwistle:

… I feel like we have to stop right here and ask you: Chicago Lumber Company, right? You guys are located in Omaha though. So, that will be on the title of the podcast. I’m sure people are very curious about that kind of naming convention. So, maybe take a step back. Tell us a little bit about the company, obviously, a very historic company. One of the oldest in the U.S.

Tell us a little bit about how that transition has happened, where they started from, and even like where they were when you worked for them in 2008, and before that, and where they’re at now.

Jason Cerone:

So, yeah, it seems more like a history lesson than a company profile, but they started back in Omaha in 1876. A gentleman, a Chicago businessman named MT Green sent his brother-in-law down to Omaha to open up another yard in their chain. So, he sent him down here, and the business was so good down here that him and another partner bought, the Chicago businessman, all the interests from him, in 1894. And then they, I guess, incorporated it at that time into Chicago Lumber Company of Omaha. So, while its roots stem from Chicago, they actually bought it out, and it’s been owned in Omaha here by different businessmen and different things like that since 1894.

In 1910, one of the partners, one of the three main partners, bought the other two out. And at that point, it became a family-owned business until 1952, when the heir to, I guess, him died, his wife died, and he sold out.

And then, the owner at that time was Lawrence Simpson, and he started selling stock to the employees at that point. And then, when he died, he actually left all of his common stock to the stockholders at the time. So, at that point, it became an employee-owned company.

Charley Burtwistle:

I see.

Jason Cerone:

And today, we are a 100% employee-owned.

Charley Burtwistle:

That’s awesome.

Jason Cerone:

So, 2013 is when I started my second round here, and it’s just a great place to work; employee-owned and focuses on the employees. We’ve got 10 different locations. We’ve got a wholesale division, retail division down here, a commercial division. We have a window and door store and multiple different segments in Nebraska. So, Omaha, Lincoln, Norfolk, Kearney, where they focus 100% on new home construction, replacement, remodel, different things like that. So, we’re pretty diverse when it comes to setup of a company. But yeah, great place to work, focuses on the employees, and … Yeah.

Charley Burtwistle:

That was, right away, my first question. You guys are a local employee-owned company in Omaha, Neb. I’m a local as well from Omaha and Millard West roots, so we’re getting really, really detailed here in my …

Zach Wojtowicz:

A small world.

Charley Burtwistle:

… background. But yeah.

Zach Wojtowicz:

It’s just funny hearing this in the last …

Charley Burtwistle:

Wow. That makes two of us.

Zach Wojtowicz:

Yeah. Well, Charley, he’s from O’Neill.

Charley Burtwistle:

Yeah, God’s country.

Zach Wojtowicz:

Yeah, true, true, blue-collar, God’s country area, right?

Charley Burtwistle:

Absolutely.

Zach Wojtowicz:

But do you just do work primarily in Nebraska? Or are you regional? Are you national? Like what’s the length that your supply and materials can go?

Jason Cerone:

We generally do work right around the Nebraska, Iowa, Missouri, Kansas. One of our stores is in Wyoming, so we do a little bit out in Wyoming. But outside of that, we’re just kind of in the little Midwest bubble here.

Zach Wojtowicz:

Got you.

Charley Burtwistle:

And are you primarily working with homebuilders then, I think I heard you mention? Is that kind of your target market? Or is the commercial side kind of been the thing that’s been growing more? Or where does that business …

Jason Cerone:

We’re so diverse that we actually dabble in a little bit of everything. So, a lot of our not Omaha, or what I would call metro-based locations, they’re kind of like your mom-and-pop local lumberyards. So, they’re working with homeowners or working with builders. They’re doing new home construction, stuff like that.

And then, our window and door stores are focused on the homeowner or builder specifics. And then downtown here, we’re more focused on multifamily apartments, assisted living facilities. We’ve got a pre-hung shop down here that pump out a bunch of doors. We’ll do commercial projects when it comes to windows, historic window replacement, renovation, different things like that. We hit a little bit of all of the segments, to be honest with you.

Charley Burtwistle:

It’s really interesting for Zach and me to get to talk to … You know, your customers are also our customers, right? The people buying from the supply chains, and the lumberyards, and things like that. So, I think you offer a really, really unique perspective in kind of everything that’s been happening over the past year, honestly, since COVID started. And just the demand of new houses and the supply chain, and kind of struggling to keep up.

Could you give us just a real high-level overview of all the different changes you’ve seen over the past year? Obviously, we’ve talked to our builders that are, obviously, struggling with the lumber prices and the supply chain, but if we go one level up to you guys, what does that looking like for you, and where do you see it heading after this is all over?

Jason Cerone:

Yeah. I’d say the elephant in the room’s pricing. I mean, it’s just been … It’s been crazy. That’s been the unknown coming into this year is just where and when is it going to stop? I mean, that’s the question on everybody’s mind. So, the supply side, it seems that there’s a hesitancy for the actual dealers or wholesalers to jump in and buy a lot of lumber right now because the price is just outrageous. So, you talk about a truckload of OSB or something like that, that used to cost you $8,000. Now, it’s 30, 40 grand.

Charley Burtwistle:

Oh, my God.

Jason Cerone:

You know?

Charley Burtwistle:

Insane.

Jason Cerone:

When you’re talking about these hometown lumber companies or different things like that, and you talk about guys that you have to make a decision of what product am I going to bring in? Where I used to be able to stock what I needed for these homebuilders or whatnot, and now, it’s costing me 40 grand, where it was 8, like credit lines, banks, this is going to hurt the small guy. So, I think that that’s one thing that people don’t see when they’re looking at this is those local lumberyards, just how do they survive this?

But there’s been so much change when it comes to lead times. Just the amount of material available to the market, with the prices being so high, and people not buying in. And then projects being released the way that they have, there’s just so much demand for material, and people not buying creates an even higher price, just the old supply and demand.

So, I would say that’s the biggest thing, is just the supply-demand side of it right now is the mills are in charge. And while they’re making the material, there are few people that are wanting to buy at the prices that there are, so when there’s a small drop, and they sell a bunch of it, I mean, they just drive the prices right back up, so …

Yeah, just availability, labor shortage. I mean, everything has just been hit. And we had that cold snap back in February. They had pipes bursting down in Texas and places like that, that supplied resins for making OSB. Just anything that seems like it could have happened this year, has been happening. It’s just one thing after another.

Charley Burtwistle:

Yeah, a common theme.

Zach Wojtowicz:

Yeah, for sure. I instantly go to just how long is it going to last? And it sounds like we don’t really know. But from your perspective, is it a bigger … Is it demand that’s pushing it up more? Is it the labor shortage? Can you attribute one more the other? Because then, the instant question as a consumer, to me, is when’s the right time for me to actually start looking for a home then? Because I’ve talked to a lot of my personal friends here in Omaha who are in the market, and building a house is inflated a lot in the last year. And then that means the demand for buying a house has also increased as a result of it. So, as a watchful consumer of making decision of what I want to do, you look at this. It doesn’t seem like that big of an impact directly to me until it’s like I’m ready to go make an investment or do something with what I’ve been saving for over the past two or three years or something.

Jason Cerone:

Yeah. It’s been a big question for everybody, I think. And I don’t think that I have the answer. I mean, it’s one of those things that if I had a couple of million dollars to go back and invest, right? When COVID hit on the lumber futures, we’d be sitting really good right now, you know?

Zach Wojtowicz:

Yeah.

Jason Cerone:

But right now, I think the big thing is just, if I look forward, like the companies that, I guess, manufacturer product to put a lot of the suppliers or wholesalers on allocation, so we can’t buy more product than we bought the previous year, or they allow us a certain amount of footage or board footage to buy in a month, or however much we can get. And with the boom and the sales for new home starts and for multifamily, and all of that assisted living stuff, it seems like they’re just pushing the problem back further and further, if that makes sense.

Zach Wojtowicz:

Yeah.

Jason Cerone:

Or just everything that we can get caught up on, we can’t actually get caught up on because we can’t get the material to get caught up. And then you bring labor side into it. And yeah, there just seems to be no end in sight here right now.

There’s guys that have worked here that six months ago were telling people, “You know what? It’s not the time to build. Prices are going up. It’s crazy.” You look back at it like that was the time to build at the highest price back then because it’s half of what it is now. You think that you know what’s going on. You think that you understand the trends. You think that you’re going to see a price drop somewhere, and it just hasn’t happened yet.

Zach Wojtowicz:

Have you ever seen … I mean, obviously, you talked about you were in the industry back in 2008. How would you kind of relate the first kind of crisis you went through to this new kind of unseen supply shortage that we’re going through right now? Are there any kind of commonalities or things that you kind of learned from going through struggles like that before?

Jason Cerone:

You know, I was pretty lucky because I went from the residential side that the bubble burst and to the general contracting side or the commercial side at that point, which was doing really well. But I have been talking with guys that have been in this business 40 plus years, and they say, I already quoted them. Their big thing is this has never happened.

Zach Wojtowicz:

Wow.

Jason Cerone:

Nothing like this has ever happened. They’ve seen shortages. They’ve seen pricing increases. But the way that this one has transpired, and how long, and the outlook, they’ve just never seen anything like it before, because nobody can say, “Hey, drop the interest rate, and this is going to happen,” or, “Raise the interest rate, and it’s going to solve the problem,” because there’s never been this big of a backlog. It seems like just, oh, the millennial population has pushed back the purchase of that home so far, and now everybody’s trying to jump in at the exact same time. And we were such … just for such a shortage for new homes right now that there’s no way that we can catch up within the next, I would say, year to solve the issue right now. So, it’s going to go on for the remainder of this year into next year.

I know guys that are quoting things that say, “Yeah, if we’re lucky to, we’ll probably see you next spring.” and that’s unheard of. Usually, you can get somebody out there within a couple of months to start your project, or you sign a contract, and they say, “Hey, we’re going to be a six- to nine-month build.” Never do you hear guys saying, “Hey, we hope to have it done for you in a year, maybe a year and a half.” It’s unheard of.

Charley Burtwistle:

Well, that also hurts their business, too, because they’re not able to produce as many homes as quickly as they once were. So …

Jason Cerone:

Yeah.

Charley Burtwistle:

… They’re going to have to feel the effects of even just their own cashflow and business growth. Even though the demand is there, it’s if you can’t get the materials to buy or to build it, you can’t …

Jason Cerone:

Yeah, and of the things that …

Charley Burtwistle:

… You can’t make sales.

Jason Cerone:

… Yeah. That is exactly right. If you have the material to sell right now, you’re doing pretty well. But if you don’t have the material, it’s hard to make money when you don’t have anything to sell.

One of the other things that I think that people don’t see or don’t understand, or even builders to a certain extent, is the raw material it takes to make the I joists that go in the floor system for your house. The mills have a certain percentage of material that they run that’s set aside to make the 2 x 3 or whatever that goes top and bottom of flange. Whereas it used to be that they would say, “Hey, 25% of what we’re going to run is going to go to this,” they have so much demand for other product, and now that they’re dropping that back, it’s creating an even bigger issue to get things like I Joist for the floor systems or stressed-rated lumber for your floor trusses or your roof trusses, the availability.

We’re buying product right now for projects that I have that are going to be starting in October, November, where I’m having to issue purchase orders and buy the material now, in the hopes that it’s going to be here at that point. And that just, to me, is six months.

Charley Burtwistle:

Six months from now, yeah.

Zach Wojtowicz:

That’s really interesting. So, when you issue that purchase order that far in advance, I mean, you’re doing that to lock in the pricing, I am assuming because right now, it’s just so volatile. It’s like get ahead of it, A, because of supply but also, you don’t know what the price is going to be, so you’re better off capturing it now? Or will you have to actually honor it, whatever the market value says it is, come November?

Jason Cerone:

Well, it depends on whether or not I’ve committed to a contract where I’m getting a certain load at a certain price the day that it ships, or whether I’ve purchased the product now, with the understanding that it’s going to ship on this date. And that’s generally what I’m doing, is I’m buying product now on a manufactured LVL or something like that. I’m buying product today that I’m hoping I’m going to see in four months at the current time. And we’re having to say, “Hey, I’m paying today’s price to get it then, not knowing what the price is going to be then.” And then there are guys that are saying, “Hey, you can buy it. You can issue me a purchase order, but it’s priced at the time of shipment.”

Zach Wojtowicz:

Got you.

Jason Cerone:

So …

Zach Wojtowicz:

Interesting.

Jason Cerone:

… I mean, you’re seeing guys that are just, “Pay at the time of shipment. We may have to ship you something else that’s a higher grade, and we’re going to ship it without letting you know, and you’re going to pay the difference.”

It’s amazing what people are doing now. And even the guys that have dropped a ton of money on buying lumber, there are guys that have had their orders canceled.

Zach Wojtowicz:

Oh.

Jason Cerone:

Say that you put up a bunch of money down, and say, “Hey, I have this many houses for sale. I need to buy this much lumber.” And then the mill comes back, or your broker comes back, and say, “Hey, our order just got canceled.” There’s nothing you can do, other than hand somebody their money back. You can’t get them product anymore. And then, then what happens? Just like we keep saying, it just keeps on pushing this problem further and further back.

Charley Burtwistle:

Yeah, so I would assume you guys have very good relationships with your guys as builders here in Omaha. How are you working with them? And the kind of advice that you’re giving out there, currently trying to navigate the same sort of difficulties and situations that you guys are?

Jason Cerone:

A lot of what we’re doing right now is just working with people on lead times. We can’t solve the lead time from the manufacturer, but we work with them as best we can to get … “Hey, the first orders that come in, we’re going to make sure that we get produced as soon as they get here to get them out to the customer in time.”

But the best thing that a builder can do at the current time is work with their supplier on scheduling. If there’s hiccups along the line or anything like that, as soon as you can let your supplier know … Gone are the days of, “Hey, we just sold a house, and we’ll have the foundation in, in a couple of weeks here. Can you put the lumber package together, and have it out there in two, three weeks?” It’s not realistic right now.

When we’re building wall panels or trusses… Right now, I sign a contract today, and I’m lucky if I’m going to see it beginning of October to middle-October. So, scheduling is just … It’s a major thing right now, and the builders aren’t able to schedule. I mean, just the ability to provide product at the end of the day when they say they’re going to, this can be very difficult.

Zach Wojtowicz:

Yeah, it’s really interesting. And where technology kind of fits in, how do we evaluate the builders that are kind of stuck in their old ways versus evolving, adapting new technology? I know you worked with us here at Buildertrend in the data report that we’ll be releasing. And that was something they kind of lucked into, is the how technology fits into making you a better business but also helping you deal with some of these situations. What’s your perspective with builders who are using technology versus the ones that aren’t?

Jason Cerone:

I mean, the builders who are using technology are going to be the ones that are going to be able to anticipate what’s going to happen with their schedule. They’re going to be able to anticipate when they’re going to be able to deliver product to the end user.

The guys that aren’t using technology right now, I mean, they’re going to be the ones that are going to get hurt on the backside trying to turn something over to an owner that they think that they’re going to have, when they’re not utilizing technology, and saying, “Hey, if I’ve got to bump this from 4 weeks to 14 weeks, how does that affect every other contractor that I have involved?” There’s a flow of construction that has to happen, and in order for any of that to happen, he’s got to be on top of his schedule.

And if you don’t have technology helping you out with that at this point, it’s … I’d say it’s near impossible if you’re a production builder, or if you’ve got multiple homes going on at one time, or you’re a GC that’s got multiple projects going on right now, it’s almost impossible to do it without scheduling software anymore.

Even if we look at our pre-hung shop, the way that we’re running right now, we’re booked out solid through, I’d say probably, oh, end of September, mid-October. And there’s no downtime. There’s no adding projects in there. There’s no nothing. So, if somebody comes to us on something that we bid last month, they have to get it awarded to, I guess, us in this case in order to see it in October or November.

So, without the ability to see what that does to their schedule, they maybe jump and saying, “Hey, I think that I’ve got this taken care of,” and then all of a sudden, no. And the next guy, the price is 20, 30% higher, or they’re two, three months further out than we are. So just without the scheduling thing, guys are … They’re just in the dark.

Charley Burtwistle:

Everything that you were just mentioning there about being able to push things back and understanding how that changes the rest of your schedule, obviously being able to link schedule items and build a trend is a huge thing there. It alerts everybody when those changes are happening, any purchase orders or anything that are tied to those scheduled also get pushed back as well too. So, maybe we can drop a schedule overview in the show notes here for anybody that’s curious about how Buildertrend can maybe solve some of those issues. And actually just got a brand new redesign, I think. I got an email the other day from Buildertrend saying …

Zach Wojtowicz:

That’s correct. He is correct.

Charley Burtwistle:

… Yeah. So, it’s scheduling all your scheduling needs, obviously, over at Buildertrend, we understand how important that is, and interactively working to help to try to solve some of those issues.

Zach Wojtowicz:

Jason, how has your business changed with technology over the last few years? Are you guys implementing it? Are you going through a procedure that a lot of builders are going through, a few growing pains? Or what’s your evolution been like?

Jason Cerone:

There are people that are on the leading edge, the bleeding edge, and then there are people that are on the dying edge. And we tend to use things until they die. And we’re actually in the process right now. We’ve got a computer committee that’s meeting, trying to upgrade our system to be able to incorporate a lot more of the things that we’re talking about, just because we’re starting to see some of the pains of what old technology isn’t capable of. And then, just the growth that we’ve seen, we’re needing the updates in order to be able to do a lot of the things that we’re talking about. Just tracking different things from whether it’s shipment, production, where our trucks are going, where they’re at, timing of deliveries, all that type of stuff. We know that there’s newer stuff out there that can definitely help us out with that. So, I don’t know if that answers your question.

Zach Wojtowicz:

No, yeah.

Jason Cerone:

But …

Zach Wojtowicz:

I’m really interested in the supply market and their technological adaptation. We’re seeing it with the builders. But, as an amateur who has only made a career talking to builders about building houses and whatnot, whenever I start talking to people who are in the actual material supply and the manufacturing, it’s kind of intimidating because there’s so many variables. I’ve seen the inventory sheets. I’ve seen suppliers. And it’s just like where do you start? Where do you begin? So, it’s really interesting to get your perspective because I can totally see if something’s successful, tampering with that can be almost dangerous because you might overlook something, or you might end up changing something that you didn’t mean to. So, I’d like to get some perspective …

Jason Cerone:

That’s some of our downfalls, I think, over the years, too. It’s just like, “Hey, it’s worked really well for us.” But reality is we’ve outgrown it, and there are better things out there. Even though it works well, there are better things out there now. We just need to change, and we need to get with the time some, and just the reality is that, yeah, we could use some of that software upgrading too, so …

Charley Burtwistle:

Well, I love the title computer committee. That sounds like a committee I would …

Zach Wojtowicz:

Very official.

Charley Burtwistle:

… Yeah. I would love to be on.

Zach Wojtowicz:

The computer committee.

Charley Burtwistle:

So, hopefully, they get you guys pointed in the right direction.

Jason Cerone:

I didn’t come up with it, so …

Zach Wojtowicz:

Well, Jason, I think we’re just about out of time. And this was a great conversation. Thank you for joining us. And, hopefully, it gave some insights for our listeners about the things that are happening. And we didn’t have any answers, but we certainly got some insights. So, thank you.

Charley Burtwistle:

Yeah. Super beneficial, Jason. We appreciate your time.

Jason Cerone:

Well, I appreciate it. Thanks for having me on, guys.

Charley Burtwistle:

Yeah, this is great. Have a good day.

Zach Wojtowicz:

Thanks for listening to “The Building Code.” Remember subscribe, rate and review.

Charley Burtwistle:

And please join us on The Building Code Crew on Facebook. Thank you, guys, for listening.