Though dealers aren’t directly affected by rebates, they must comply with builder product demands that are often based on rebate deals builders have negotiated with vendors.
Installation Valued Callahan of Beazer Homes called price “the cost of admission” for suppliers. But he also cautioned that suppliers shouldn’t be talking about pricing at all if they can’t service an account properly. “Service is the ante in this business.” In a labor-starved housing market, the service that’s often valued highest among many builders is a supplier’s ability to provide installation of its products. More than three-fifths of the builders polled for the BIG BUILDER Study indicated they look for suppliers that offer installation services, and nearly three-quarters choose suppliers based on “ease of installation.”
Types of Homes Built in 2004 Fulton Homes encourages its window manufacturers to install what they sell. “We just went through this with one supplier, Jordan Window, and we’ve found that there’s less breakage, less pilferage, and [the supplier] can resolve problems in the field faster,” says Foshie. Other builders agree that, by having suppliers handle installation, they have fewer headaches with warranty issues. Installation, says Farrell of Ashton Woods, “is always important to us, as long as the supplier has a quality-control program in place.” And it’s probably no coincidence that the purchasing department for Ashton Woods’ division in Phoenix—a market that’s 100 percent turnkey—is the best-run in the company, says Farrell, in terms of managing estimating and takeoffs.
Weesner sees value in having suppliers in the field as “qualified observers” to ensure their products are installed properly. “The problems usually aren’t in the factory.” But the research pointed to a disconnect here, too, as 80 percent of the builders polled said that servicing home buyers after the sale was either “very important” or “somewhat important” whereas only half of the manufacturers surveyed viewed post-sale service that way.
Since one of the biggest problems builders face is callbacks, in the name of customer service they naturally want suppliers—especially those that install—on board in the event that something isn’t right after the buyer takes ownership. The growing pressure on suppliers to take a more active role here is evident from Voetsch’s comment, “I think the biggest change you’re going to see is the post-closing service relationship [among builder, supplier, and buyer] moving forward.” But this could be a balancing act for builders that are possessive of their connections with their customers. “We want buyers to come to us if there are problems, even if it’s 10 years after the house is bought,” says Collier of Highland Homes. Brookfield Homes also strives to be its buyers’ first point of post-sale contact, “especially with all the construction defect problems we’ve had in California,” says Prewitt. “We can mandate that subs fix these.”
Common Systems Lacking As big builders expand into farther-flung markets, the quality and frequency of their communications with suppliers at all levels of the supply chain become critical. But sharing information is difficult for an industry that remains stubbornly unsophisticated in its application of technology. “We can’t execute as we’d like because we’re limited by our systems,” says Weesner of Taylor Woodrow.
Sure, there are plenty of examples of builders extending their technological horizons, but when it comes to systems improvements and upgrades most builders say they must crawl before they can walk or run. Only within the last two years has Rottlund Homes insisted that all of its suppliers—“even one-horse roofers,” says Swanson—be able to receive information on house plans and surveys by e-mail or fax. Highland is in the process of converting all communications to e-mail, which should be completed by April, says Collier. Brookfield transacts 90 percent of its bidding with suppliers electronically, says Prewitt. And Fulton “has everything on our Web site,” says Foshie, including job starts, purchase orders, scheduling, and bidding.
What holds the industry back, though, is that it has yet to find one system that can handle all the supply chain functions that go into building a home and would be acceptable to all parties. Many builders use homegrown systems that aren’t always compatible with their suppliers’. There also seems to be resistance among trading partners toward open-ended information sharing. For instance, 70 percent of the builders polled in the survey want online access to vendors’ data, but only 60 percent of the manufacturers polled separately saw that as a beneficial objective. For dealers, the benefits of builders’ tech acceptance lies in scheduling and inventory—being able to know in real-time if jobs are behind schedule and to plan for customers’ purchasing needs further in advance.
Farrell of Ashton Woods, who has worked for Pulte Homes and Centex, believes the only way this situation will be rectified is through some sort of “global” solution. But the industry is years away from achieving that goal. “The bottom line is that we know where there are inefficiencies in today’s processes,” said Hovnanian’s Voetsch, whose company still doesn’t have a uniform accounting purchase-order platform for its many business units. “I’m not so sure that there is one answer.”
Neither is there one answer as to how big builders choose their suppliers. And until the industry is seamlessly connected, the best that dealers can do is stay as close as they can to their builder-customers, so that they are anticipating, instead of reacting to, their needs. Otherwise, dealers will find themselves as just one of many suppliers bidding for business. —John Caulfield is a contributing editor for PROSALES.
