Dealers and distributors agree that one of their thorniest supply chain challenges continues to be when builders demand seamless electronic interchange without taking full account of the mechanics or the costs related to its execution. “Eighty percent of the time, this isn’t a technology issue; it’s a processing issue,” says Keith Rozolis, vice president of strategic marketing and planning for ABC Supply, the Beloit, Wis.–based distributor with 275 locations nationwide. For nearly three years, ABC has been building an infrastructure that can accommodate the multiple ways that builders and contractors purchase and pay for merchandise.
Rozolis is convinced that the industry could realize “vast savings” from billing and invoicing if trading partners spent as much time developing common rules that address how exceptions and mistakes should be handled electronically as they do trying to squeeze out the lowest price on the front end of a transaction.
Fred Marino, CEO of Brooklyn, N.Y.–based The Strober Organization, says that in a perfect world, his company’s 90 yards would have “full electronic interface” with builders at three crucial touch points: placing the order, delivering the order, and invoicing. In the real world, he lamented that too many builders are homed in “exclusively on invoicing, and we’re not seeing a lot of demand for higher levels of technological sophistication from production builders.”
In some respects, larger builders often seem hell-bent on getting the lowest price, and their suppliers’ overhead be damned. “Builders are so focused on price, and their supply chain dynamic has been ‘I need it today,’ so everyone else is scrambling,” says Bill Schnitzer, director of business development for the Atlanta-based building products distributor BlueLinx, with 63 facilities nationwide. He and other sources note, as well, that any supply chain initiative gets more complicated by the inclination of many large builders to allow their divisions significant operational latitude. “At some point, someone is going to have to manage the information flow,” said Schnitzer. “We’re trying to help dealers do that. But we can’t do it for the industry by ourselves.”
Finding Common Ground Few industry officials dispute that supply chain technology is likely to advance and become more pervasive in step with the speed with which the builder and dealer sectors consolidate. But some aspects of distribution have resisted computer-aided structures. For example, Marino states that 25 percent of Strober’s sales to builders are special orders, which he conceded “are much harder to track electronically.” Several dealers also pointed to the stalling of pioneering efforts like BuildNet and Pro Dealer Exchange—that rode boldly into the high-tech frontier, only to be shot down by insufficient financial or user support—as proof that trading partners in this industry may have only a limited appetite for technology-driven innovation.
“Some companies overcomplicate what is actually a simple distribution process,” says O’Meara of Builders FirstSource, whose yards and plants are currently set up to execute 24-hour runs for lumber and three-day runs for mill-work. He states that, under certain circumstances, Nextel’s popular communication devices are as effective as expensive ERP systems for conveying timely information about the progress on a jobsite. “Ultimately a human is going to have to say that it rained on Monday and the foundation wasn’t poured so we don’t need that shipment of lumber on Wednesday.”
And to hear some dealers tell it, the scheduling information that builders post on their Internet sites—which Seigle derided as “nothing more than glorified bulletin boards”—can be pretty unreliable. To be fair, builders are subject to many factors, such as a volatile labor force and tightening constraints on land development, that can limit their ability to project how much product they need, or when. “With the entitlement process being what it is today, builders are like wildcatters out there,” says Max Guetz, president of Lanoga Corp.’s Home Lumber division in Colorado. This current state of supply chain management among builders and pro dealers “characterizes all industries at this stage of their evolution,” says Luis Solis, a former executive with builder Richmond American Homes and now president of Boulder, Colo.–based Symbius Corp., which offers business solutions and training programs. He observes that pro dealers still don’t have anywhere near the outlook into their customers’ product needs as The Home Depot or Lowe’s do on the retail side. That’s partly because builders have been so focused on how many homes they can deliver that they’ve either lost sight of or aren’t paying enough attention to the unit costs of materials. But as more builders seek ways to lower their construction costs, Solis is convinced that there could be a “huge opportunity” for dealers to integrate themselves into their customers’ supply-chain apparatus by helping them understand what their construction consumes, and at what price.
There have been encouraging signs that pro dealers and builders can stand on common ground. In Colorado, Home Lumber wrote new programs to interpret information coming from one local builder, Village Homes, which operates on the FAST Builder Management System. By doing so, the dealer can import Village’s purchase orders that bundle the materials being purchased in packs the way Home delivers them to the job-site, says Guetz. Village’s field staff is equipped with handheld electronic devices, so Home can receive up-to-date scheduling information. And through a program called eBooks, Village can continuously update most other documents it transmits to this pro dealer.
While this kind of builder-dealer nexus should become more typical in years to come, most dealers don’t think their industry would ever coalesce around any single supply chain process. “We certainly aren’t looking for that one silver bullet, but we’re going to peck away, piece by piece,” says Huttig’s Lupo, whose company recently converted one of its dealer-customers to an automated collection system that reduces that dealer’s processing time from 30 hours to three hours. Other dealers also are cautiously optimistic about reaching a happy supply chain processing medium with their customers.
Strober, for instance, recently initiated a turnkey framing program and will invest in scheduling software this year to facilitate what Marino anticipates will be exponentially greater demand from builders for installation services. But, like most dealers who view technology with both an optimistic and cautious eye, he’s not yet ready to assert with certainty how quickly any changes in the way his company does business with builders and contractors will have an impact. “My sense is that we will continue to improve the supply chain and take costs out of the channel, but at a slow pace,” he believes. —John Caulfield is a contributing editor for PROSALES.
