Riding the Wave: Kingsley Lumber endures ownership shifts, COVID-19, market upheaval

by Craig Manning

For the past three years, Mike Tucker has been on a roller coaster ride.

Such is life for the president and CEO of Kingsley Lumber, a building materials supplier and hardware store that has been serving northern Michigan communities since 1937.

When Tucker came aboard as a sales manager, Kingsley Lumber was just entering a brand-new chapter. The company wanted to up its game as a supplier by partnering on bigger projects outside of northern Michigan. At the same time, a group of local investors was thinking about ways to innovate on – and potentially revolutionize – the entire construction industry.

That nexus moment ended up firing Kingsley Lumber right into the eye of an epic and tumultuous storm – one that, even now that the dust has settled, still looks like a key “before and after” moment in the company’s history.

“About April of 2018, there were some discussions at the lumberyard about supplying some larger projects in the metropolitan regions of Grand Rapids, Detroit and Lansing,” Tucker said. “They were talking about some of the pinch points of supplying materials for, say, a large multifamily apartment complex. One of (those pinch points) was that we could sell all the lumber we wanted to these people, but there was no solution to give them more employees. And when talking to these general contractors, their problem wasn’t that they didn’t have enough lumber, or that they didn’t have enough opportunity (to build projects), it was that they didn’t have enough people to build these things.”

Mike Tucker

As far as the team at Kingsley Lumber was concerned, that problem – the lack of skilled trades labor in the construction industry – was one of the big stumbling blocks preventing bigger sales, bigger accounts and bigger prosperity for Kingsley Lumber as a business. There were buyers out there that wanted to build projects and would need lumber to do it – materials that Kingsley Lumber would be more than willing to provide – but the lack of skilled labor was pinching the entire industry.

That “problem” ultimately led to the formation of a business venture called Inphastos – a Traverse City company that, during its brief existence in the late-2010s, aimed for nothing less than changing the way the entire construction industry did business.

“Everything comes from a problem, right?” Tucker said. “You don’t look for a solution for anything until you have a problem. And in this problem, it’s ‘We don’t have enough people.’ So how do we build more homes, more apartments, more anything in the finite amount of time that we have, with the staff that we have? And the answer is componentized homes. So instead of just selling sticks and sheets, we’re going to sell pre-assembled wall panels. And that way, instead of taking a week to build a wall panel and stand them all up, you can arrive at your job site on Monday morning and there’s a pile of pre-assembled walls, and you just pull them up one at a time and stand them up next to each other.”

That idea, of componentized custom homes – with components built and assembled largely through robotic automation – was right at the center of Inphastos. Founded by former tech executive Paul Bandrowski, and backed by a slew of high-profile local investors – from Casey Cowell to Marty Lagina to Northern Michigan Angels – Inphastos was a business marked by massive ambition.

There were even talks, early on, of buying the old 86,000-square-foot Kmart building in Acme and turning it into a “global headquarters,” housing everything from R&D to data centers.

“You’re going to see our developments all over the state of Michigan,” Bandrowski told the Traverse City Business News in August 2018. “You’ll see a lot of product on the market by October.”

Looking back, Tucker says Inphastos grew too fast to sustain itself. In addition to Kingsley Lumber, the Inphastos “conglomerate” ballooned to include property management companies, plumbing services businesses, builders and more.

By combining all those companies under the same roof, the goal was not only to componentize building materials in a new way, but also to assist with building homes out in the field. The concept, Tucker thinks, was right; the pace was wrong.

“The long and the short of it was that Inphastos was a wonderful idea, and is probably still a great idea,” Tucker said. “It was the right solution at the right time, because it solved a lot of the industry’s concerns with labor shortages. When we went out into the market and told people about it, everyone said, ‘Yes, let’s do that.’ So we knew it was a good idea. But there is such a thing as growing too fast, and Inphastos grew so fast – I’m talking from one or two small jobs, to millions and millions of dollars a month. And it was unsustainable, because it grew so fast that it didn’t have the back-office support. It didn’t have the funding, the capital support, all that. There wasn’t enough training for the crews, because we’d hire someone today and we’d have to build something tomorrow. But had the growth curve slowed, I think that it would have been absolutely fine. Because it is still, today, a great concept.”

By early 2020, the ride was over. Inphastos was cycling through CEOs, going through round after round of staff layoffs, and sitting in debt to multiple contractors. The company went out of business shortly thereafter, and the subsidiaries that had been a part of the conglomerate were, in Tucker’s words, “unbound” and rendered as independent entities once more.

For Kingsley Lumber, there was some whiplash in the wake of the Inphastos experience. But there were good things, too: Some of the investors from the Inphastos days, for instance, stayed invested in Kingsley Lumber and are still part owners today; Tucker also says that Kingsley Lumber has “very positive relationships” with many of the other businesses that were subsidiaries to Inphastos.

Still, in large part, the last two years for Kingsley Lumber have been about reverting from the componentized approach of Inphastos to the more traditional workings of a lumberyard.

“We went through some pain,” Tucker noted of the post-Inphastos period. “We had to lay some people off, we had to do some restructuring. But we’ve gotten to a more manageable, sustainable sales level and staffing level now. We’re back in the black and we’re moving forward with consistent, conservative growth and passion.”

The biggest hurdle might not have even been the break from Inphastos, but the timing of it all. Tucker says Kingsley Lumber ultimately divested from Inphastos “by the end of 2019” and was still in the process of recalibrating when COVID-19 hit. “So we’ve kind of had a one-two punch there.”

Even with “some staff reduction, some prudent cost controls, and some solid management techniques,” Tucker admits that the COVID era has been a time of unprecedented (and unpredictable) tumult in the building materials industry.

While he’s confident in saying that Kingsley Lumber is back on “firm footing” now, he also can’t recall a more unpredictable time for the lumber market. The industry hit a massive lumber shortage last year when the supply chain shut down – an issue that’s still affecting availability in summer 2021.

Meanwhile, demand for new homes is at a high, buoyed by a robust real estate market and low interest rates. Couple the high demand and the low supply and you get an obvious outcome: high lumber prices.

“The biggest thing that happened was the rapid increase of pricing of the material,” Tucker said. “On the surface, you might think that’s great for profitability, but it really isn’t. What we really want is predictability. I want to buy something for $1 today, and I want to be predictably able to sell it for $1.25 or $1.30. And when the prices are super volatile, sometimes you win and sometimes you lose, but it’s impossible to forecast.”

Of course, there are positives to a high-price lumber market for a lumberyard. For example, Tucker notes that the higher cost of materials means he’s able to ship more dollars of product out per truckload.

“It still costs me almost the same rate in terms of fuel, and truck upkeep, and those types of things,” he said. “But instead of putting $20,000 on a truck, I can put $40,000 on it because material has doubled. So that has been a net positive for us.”

Still, Tucker is looking forward to the day when things start to settle down. When the supply chain can catch up with demand, allowing lumber prices to relax into a more predictable vein. Only then, he says, will Kingsley Lumber be able to put its last few roller coaster years behind it.

“If I had my way, I would want the lumber market to be as boring as it could possibly be,” he laughed. “Because that’s predictable. That’s something that we can control.”