The development of that type of intimate trust and harmony between a builder and supplier is exactly what Centex Homes is looking for as it mines for single-source arrangements in other markets. “A lot of companies ‘know this is what it takes,’ but very few execute at the level Texas Building Supply and Seigle’s do,” says Dodge. “It really does take an exceptional level of communication, and both of these companies communicate continuously at every level of the local organization—from field managers to purchasing managers to division presidents.”
Growing Together Centex Homes is now leveraging this flow of information as it negotiates other single-source deals around the country. Learning from TBS, for example, the builder has been able to evaluate the critical aspects of drywall supply. “Phil knows the business,” attests Hooker. “He’s been working with some unique ideas to make drywall distribution more efficient for [several years].… The intelligence that we get from that process is unbelievable—we know what it is coming out of the plant, we know what the freight rate is, and we can compare it to other drywall suppliers [in other markets to see] if they really know what [those costs] are.”
Similarly, in Chicago, Centex Homes’ purchasers consult with Seigle’s to determine competitive data not just on cabinets, but on LBM commodities as well. Lumber experts at Seigle’s, in particular, have helped Centex Homes to evaluate lumber volatility and determine when locking in price could be disadvantageous. “Their lumber guys talk to us quite often, helping our decision makers as we look at whether it is time to go short or time to go long,” says Wallor. “Being able to pick up the phone and say, ‘I’m looking at this material or product—what do you guys think?’ gives us definite market intelligence.”
According to Dodge, this type of cooperative approach is what single-source supply is really all about. “As we continue to develop our internal systems in construction, estimating, purchasing, scheduling, etc., they are all aimed at streamlining our business processes, both internally and externally in the supply chain,” he explains. “The assumption is these systems ultimately will be integrated with our suppliers’ systems. If you are going to continuously put business partners in a position where they are not sure if they will have a significant portion of your business, why would they commit the time, effort, and money it takes to integrate the systems and processes? On the other hand, once we commit our business to a supplier, we expect them to take our business practices to a new level.”
Both Seigle’s and TBS are prepared and anticipating to do just that. In July 2003, TBS opened a second location west of Dallas in North Richland Hills, Texas, to better serve local Centex Homes subdivisions, as well as some other big builders that the supplier is beginning to sell to. According to Hooker, Centex Homes is ready for TBS to grow into additional markets as well, although both parties are proceeding slowly at this point.
“I don’t want to go to a place just for the sake of going, and opening up and then not being able to service them,” says TBS’ Kohut. “They are much better off with someone that is taking care of them [in a market] until it makes sense for both Centex [Homes] and TBS to go there. Partnership or not, you can’t operate on your ego—you have to operate on good business practices.”
While TBS waits to develop that scale to handle Centex Homes’ operations beyond Dallas, Seigle’s stands ready to incorporate even more products into their supply partnership with the big builder through the dealer’s four lumberyards, three showrooms, three manufacturing facilities, five distribution centers, and a contractor product selection center. In particular, the dealer’s acquisition of framer Michael Nicholas Carpentry in September 2003 has spawned a new construction services division that Seigle hopes can bring even more of the house package into the Centex Homes/Seigle’s deal.
“With Michael Nicholas, we can come to them with a rough frame package that can include carpentry, all components, loose lumber, and windows,” Seigle says. “[If Centex Homes] doubled their size in Chicago, we would grow right with them.… We look forward to it; it’s an opportunity.”
Seigle even predicts that within five years the dealer’s partnership with Centex Homes will streamline to the point where it becomes paperless as logistics, delivery, and point-of-sale systems and processes match up. And that’s exactly where Hooker would like to see all of Centex Homes’ current and future supply partners heading.
“We want to focus on the relationships that communicate and share enough information where we are confident that we have aligned with companies that want to help us achieve our goals,” Hooker says. “In turn, the suppliers must also flourish in their business by us holding up our end of the bargain. Let’s both make some money.”
