Feature: Purchasing Power
Martha C. Anderson, McA Business StrategiesPhoto: Jamie Windon
Purchasing sessions at Big Builder conferences tend to have the feel of a junior high dance, with builder purchasing agents on one side of the room and their suppliers on the other.
In the boom years, the gap between the groups seemed large, with a measure of distrust acting to polarize the two. But at Big Builder '08, with the growing realization that each group needs the other to survive, there was a definite desire to dance.
Transparency, translated as building teams up and down the supply chain with enough trust to share true costs of goods and services was the overarching theme of this year's purchasing brain-storming sessions. Once true costs are known, builders and suppliers can work together to take costs out of the process while still providing fair profits to trade partners.
An initiative that could lead to that goal? Holding supplier summits to foster communication between suppliers, trades, and builders, the group determined.
The benefits of building better alliances between builders and their suppliers would have far-reaching effects on profitability. In fact the teams and cost transparency were seen as keys to unlocking a number of initiatives leading to cutting costs and building better houses, not to mention improving the bottom line.
For instance, two opportunities divined during the sessions depend on such cooperation: value engineering homes to make them better and less expensive to build and cutting cycle time.
Tony Callahan, senior vice president of purchasing, planning, and design for Beazer Homes USA, said value engineering is his top priority for driving profits. For him, that means taking apart a home's design and looking to reduce materials without cutting quality and then delivering only those materials needed to the job site and no more.
Jerry Shrair, Boiling PointPhoto: Jamie Windon
It also means simplification, reducing the number of SKUs and floor plans so trades get better and better at building that house and installing those products over time.
Achieving that goal requires working with suppliers to determine what products are most popular, coordinating with the trades to determine what installation and construction issues they run up against with various products and designs, and working together as a team to root out inefficiencies in both the builders' and suppliers' operations.
Reducing cycle time, too, involves teamwork throughout the chain to determine what methods and materials are most easily deliverable and quickly installed.
While the group grooved on the potential of creating better trade partner relations, Martha C. Anderson, principal of consulting company McA Business Strategies, stepped in to bring up a group that everybody seemed to have forgotten: consumers.
She suggested that builders need to work from the bottom up rather than the top down to determine what products should go into their houses. After all, a consumer is more likely to buy a house that fits their needs, but who's asking them what they want?