Competition in the construction-supplies sector is turning into a delivery race. 

Ferguson, one of the largest plumbing and heating materials distributors in the U.S., is adding three warehouses in major cities across North America over the next two years to step up its rapid-delivery capabilities in an increasingly competitive sector serving professional contractors. 

Chief Executive Kevin Murphy said contractors have gotten used to fast shipping in their personal lives and now expect speedy fulfillment for materials, from toilets and water heaters to piping, that they need on job sites. “Their expectation is framed by, ‘I want to have my sunglasses delivered same-day,’” Murphy said.

Ferguson and its rivals are vying for a bigger share of a construction market that has been buffeted by volatile demand in recent years. 

Overall U.S. construction spending has grown over the past three years, driven by a wave of companies building manufacturing plants and data centers. But residential construction has slowed as higher interest rates have pushed potential buyers out of the market, and office construction has turned sharply downward as a result of the faltering return to the office by American workers. 

That is putting a premium on serving contractors alongside the big firms that manage larger projects and are trying to keep their costs down through tighter controls on materials inventories. 

Ferguson, which is based in the U.K. with operations solely focused on North America, has restructured its supply chain to accommodate the shift, opening smaller, highly automated warehouses closer to population centers to fill orders for pickup and delivery on a tight turnaround. The company plans to open three more of what it calls market distribution centers by the end of 2025, adding to an existing network of four of the facilities as well as 10 larger, regional distribution centers. 

Murphy said the company plans to eventually place market distribution centers in all major U.S. cities.

Evelyn Xiao-Yue Gong, an assistant professor of operations management at Carnegie Mellon University, said industrial customers have grown accustomed to fast shipping from retailers such as Amazon.com and Walmart. Shoppers now expect “more of the things they need in their life all around to be delivered in a fast timespan,” regardless of whether the product is for personal or professional use, Gong said.

Ferguson’s smaller distribution centers, which range from 350,000 to 750,000 square feet, fill a gap in the company’s supply chain between its 1,750 bricks-and-mortar stores and its sprawling regional warehouses that can exceed 1 million square feet. The market distribution centers carry more inventory than stores and include areas with lockers where customers can pick up their orders at any time of day or night.

“Many of our customers are going to a customer site or a job site predawn and so the ability to come pick up materials that they need on their way to the job is hugely important,” Murphy said.

The smaller warehouses have helped Ferguson cut fulfillment costs by allowing its suppliers to deliver full truckloads at a time and to smooth out production cycles, Murphy said. 

A booming market for home-improvement materials during the pandemic has faded as consumers have pared back do-it-yourself projects and shifted spending toward services such as travel. Now, more building-materials companies are competing for business from construction and remodeling professionals, which they view as a strong growth market.

Home Depot is buying roofing distributor SRS Distribution in a deal valued at $18 billion that is aimed at bringing the home-improvement retailer more business from big contractors and construction firms. The Atlanta-based company is adding four distribution centers this year to its network of 14 warehouses targeting professionals, with dedicated sites handling bulky construction materials such as lumber, insulation and roofing shingles.

Serial dealmaker Brad Jacobs, executive chairman of less-than-truckload carrier XPO, in December started a tech-focused company called QXO that plans to acquire businesses distributing construction materials.