By Charles Wardell. Remember BuildNet's vision of the electronic business utopia? The dot-com promised to seamlessly integrate sales, marketing, accounting, project management, and procurement. It reportedly spent $20 million building the procurement system alone, which was to be a translator in a Warehouse of Babel. It would map the back offices of member builders and suppliers to a central hub, then translate SKU numbers, product descriptions, and the like into the languages of each member's system. It was enormously complex.
BuildNet derailed, but it was on the right track. Other companies continue pursuing a lingua franca for exchanging business data, and for good reason. "This is where the benefit is obtained," says Carla Collinge, Beazer Homes' vice president of operations. "Being able to share information in a common language within our industry will facilitate sharing information with our various trade partners. This includes product specifications, MSDS sheets, and installation instructions."
Rather than peg the home building's digitization to a specific time frame, most prefer to say it will happen "eventually." Think of the process as the finish line of the Boston Marathon: The first runner may cross the finish around 2 p.m., but the rest of the crowd continues trickling in until late into the evening. "Our company would like to see relationships become more electronic," says John Ulen, CIO of K. Hovnanian in Red Bank, N.J. "But we realize that it will take a long time."
Ulen has a valuable perspective. He joined Hovnanian last year, after several years in manufacturing, which has had more luck digitizing its business. That's not a criticism. "Manufacturers' supplier base doesn't come from the same roots as does builders," he points out. A company that just makes circuit boards for Dell will have reason to harmonize its back office; an electrician who works for a dozen builders won't. Add to this the range of technology among builders' trade partners -- from the big, sophisticated supplier to the bricklayer working out of a pickup truck -- and it's clear why it's so hard to create a system that works for everyone.
In fact, Ulen predicts that Web portals, which don't care about users' computer systems, will remain the choice for communicating with subs and vendors for the foreseeable future. Portals aren't perfect, but they're a vast improvement over phones and faxes.
Manufacturers have also embraced portals. DeWalt Service Net (www.dewaltservicenet.com), includes exploded graphics and lets users order parts online. GE's Customer Net (www.GECustomerNet.com), which lets builders schedule appliance deliveries, has gained 20,000 users. GE's Selection Center (www.selectioncenter.com) and Whirlpool's Virtual Showroom (www.virtualshowroom.com) extend builders' Web sites. "Pulte's buyers bring up what looks like their site, but it's really ours," says Kevin Ruppelt, manager of sales and marketing digitization for GE Appliances, in Louisville, Ky.
As for architects, there seems little urgency to automate. AutoCAD is a de facto standard for plans, but try to interest builders. "Most don't want electronic plans," says Tom Kruger, director of information technology with Bloodgood Sharp and Buster, an architectural firm in Des Moines, Iowa. And the online project collaboration software used in big commercial jobs remains an oddity in the residential market.
But while electronic communications with trade partners inches ahead, there's an urgent push for e-commerce standards -- particularly online home listings and building materials.
Builder Homesite Inc. (BHI) and HomeBuilder.com are creating a data standard for real estate listings. It will be based on Extensible Markup Language, or XML, an open format for structuring data. The standard will let builders integrate their data to BHI's listing engine (NewhomeSource.com) with minimal effort. Once a builder sends the data, BHI can re-direct it to MLS sites, Realtors, or any other partner. Says BHI CEO Tim Costello: "If you're not working on the ability to send and receive XML data, you're going to have problems."
XML also promises to rule the supply chain. In fact, despite the chain's legendary fragmentation, many companies understand that they can save money by standardizing their transactions. The most ambitious effort to do so began more than a year ago through a combined effort by Pro Dealer Exchange (PDX), a consortium of the largest lumber dealers, and the Partnership for Advancing Technology in Housing (PATH). The PDX/PATH Standards Group includes representatives from across the industry, including home builders, distributors, manufacturers, and software vendors.
The group's first project has been to develop standardized formats for electronic documents -- invoices, requests for quotes, and so on. It required them to settle on standard XML "tags," and "schema." An XML tag tells a computer what each field on a document refers to (p.o. number, company, addresses, phone number, phase number, etc.). Schemas determine which tags each type of document should include but let businesses use their own document formats. A draft of the first document formats could be available by the time you read this. Some of the industry's largest companies -- manufacturers, dealers, and builders -- are committed to using them. "By this time next year you will see a lot of interchange of data in XML," predicts Tom Leete, vice president of E Commerce with Builders FirstSource, a Dallas-based building materials distributor that is spearheading the effort. "Over the long term legacy systems will yield to systems that are native XML."
Builders are more cautious. David Finch, director of supply chain for Centex Homes, values the company's PDX/Path involvement but says that Centex may not use the group's XML schemas as a standard, though it will make sure its back office can communicate with companies that do. The reason: Builders have to transact business with a variety of suppliers other than lumberyards, and there's no guarantee that this will emerge as the industry standard.
Documents are easy compared to product listings for the simple reason that there are so many products, and they change so often. For instance ebuild (which is owned by Hanley Wood, LLC, publisher of BIG BUILDER) is creating an online catalog to let builders make useful comparisons between different manufacturers' products. But the catalogers have to reconcile mountains of detail.
Their first task is to create taxonomies -- lists of key attributes that describe products in each product category. Take faucets, for instance. The catalog listing should include type (kitchen, lavatory, tub-shower, etc.), configuration (widespread, center-set, etc.), style, number of handles, material, finish, weight, and other variables. But different manufacturers use different terms for many of these attributes. And not all describe their products with the same level of detail. "Every business creates a list of attributes that's right for its own purposes," says Michael Chotiner, ebuild's director of content. Because of this, ebuild is creating standard generic descriptions, then translating the manufacturers' product information to fit these. That makes the job of building a master catalog of all the product information that a builder might need, then keeping it updated, a monster task. "It's like building the pyramids," says Chotiner. They're taking it one attribute at a time, often working from paper catalogs and keying information into the ebuild database.
Another problem is manufacturers' fear that standardized product descriptions will weaken their years of brand building. Leete concedes the point, but adds: "Someone will classify these things. Do you want to be part of making those classifications or do you want someone from outside the industry to do it?" Even manufacturers who are willing to get on board cite the difficulty of doing so. "I don't mind sharing information with ebuild, but in six months the information changes," says Newbold Warden, director of marketing for Toto USA in Atlanta.
The PDX/PATH group is also developing product taxonomies -- also based on XML -- and despite the difficulties is making enviable progress. "The pro lumber business has been under the margin hammer for years. That might make us more sensitive to taking cost out of the channel," says Leete. The group has released draft standards for structural lumber, plywood, and OSB, is about to do so for gypsum and related products, and is getting ready to tackle millwork. Meanwhile, Leete continues trying to organize other industry groups. And unlike BuildNet and other dot-coms, which planned to charge for every transaction, the standards will be available at no charge. "We're trying to drive cost out of the system, rather than to layer new costs in," says Leete.
Centex's Finch sees taxonomies as crucial. "We are an industry of conversations rather than numbers," he notes. OEM suppliers may place orders by part number, but builders order by physical description (tubs and faucets). This causes problems when you start doing business electronically. "I may say 2 by 4, but when translated to a written format this could be 2X4, 2by4, or a variety of other descriptors." He says Centex has not fully committed to PDX's descriptions as a guideline for taxonomies used in both internal and external communication.
"Implementation of these standards will require some significant work, without a doubt," says Beazer's Collinge. "The key for builders is the purchase orders, given that some are moving toward automated schedule systems and auto-vouchers." But builders who expect an immediate payoff from these efforts may be disappointed; rather, the benefits will likely accrue over time. "I don't think they mean a heck of a lot to builders' day-to-day operations right now," says Larry Zarker, a liaison to the group from the NAHB's Research Center. "Long term, I think they mean the process of getting products ordered and delivered and paid for becomes more efficient."
--Charles Wardell is a senior editor of Builder.
Published in BIG BUILDER Magazine, July 2002