Lumber Liquidators 2015 Annual Report Download - page 13

Products and Services
Product Selection
We offer an extensive assortment of wood flooring under 19 proprietary brand names, led by our flagship,
Bellawood. We have invested significant resources developing these national brand names, as well as the
Lumber Liquidators name. Our hardwood flooring products are available in various widths and lengths and are
generally differentiated in terms of quality and price based on the species, wood grade, warranty and
durability of finish. Prefinished floors are the dominant choice for residential customers over unfinished wood
planks that have a finish applied after installation. We also offer an assortment of flooring enhancements,
installation and accessories, including moldings, underlays and tools. Our revenue by major product category
is included in Note 1 of our consolidated financial statements in Item 8 of this report.
Direct Sourcing
Sourcing directly from mills and other vendors enables us to offer a broad assortment of high-quality,
proprietary products to our customers at a consistently low cost. We seek to establish strong, long-term
relationships with our vendor partners around the world. In doing so, we look for vendors that have
demonstrated an ability to meet our demanding specifications and the capability to provide sustainable and
growing supplies of high-quality and innovative products.
Supply Chain
Our supply chain is focused on delivering a complete assortment of products to our customers in an
efficient manner. In the first quarter of 2014, we began operating a 500,000 square foot leased distribution
center in Pomona, California as the primary distribution center for our western stores. In 2014, we completed
construction of a million square foot distribution center on 110 acres of land we own in Henrico County,
Virginia to consolidate the distribution facilities located in Hampton Roads, Virginia, increase the efficiency of
our East Coast operations and provide a foundation for future store base expansion. We began the transition of
our operations from those facilities to the new facility in 2014, and the facility was fully operational in 2015.
During 2015, we leased third party consolidation services to break bulk shipments from mills into
quantities and assortments that can be sent directly to our store locations. We terminated these services at the
end of the second quarter of 2015 as we enhanced our utilization of our distribution centers. Additionally, a
number of our vendors maintain certain inventory levels for shipment directly to our stores or our customers.
Our product is generally transported boxed and palletized, and the weight of our product generally is
correlated with our supply chain costs.
Compliance and Quality Control
The Company’s compliance programs are designed to ensure the products we sell are safe, responsibly
sourced, and meet all regulatory and statutory requirements, including without limitation requirements
associated with the Lacey Act and the California Air Resources Board (‘‘CARB’’). We utilize a variety of due
diligence processes and controls, including supplier audits, periodic on site visits, and product testing. The
Company utilizes a risk-based approach to implement and operate the various aspects of its compliance
program. Our compliance program considers, among other things, product risk, the level of vertical integration
at our mills, legality concerns noted by both private and government parties, and the results of on-site audits
performed by, or on behalf of, the Company. Our evaluation of risk is a key component in our allocation of
resources to ensure the Company meets its standards for product compliance and safety. We believe our Lacey
Act Compliance program is one of the most stringent programs in the industry. Compliance and Quality
Control teams located in the United States and in China are supplemented with external resources that provide
independent analyses which are incorporated into our review processes and monitor our sourcing efforts across
all areas from which we source product. Compliance programs are continually under review, updated and
enhanced as appropriate to stay current with statutory and regulatory requirements.
Additionally, we began operating a 1,500 square foot lab within our new East Coast distribution facility
during the first quarter of 2015. The lab features two temperature and humidity controlled conditioning rooms
and two emission chambers correlated to a CARB-approved Third Party Certifier standard. We believe this
equipment mirrors the capabilities of CARB and other state-of-the-art emission testing facilities. We believe
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