It would be hard to overestimate the value of reliable product distribution to builders, or the potential problems their construction activities encounter when the supply chain is weak at some links. To take more control over this process, Hovnanian Enterprises is thinking seriously about opening distribution centers that would mimic the efficiencies seen by its Summit Homes division. Summit, which buys lumber, millwork, HVAC, and plumbing fixtures direct from manufacturers and stores them in a 215,000-square-foot warehouse in Ohio, has caught a good deal of attention in the corporate office. “That's a [business] model which appeals to us,” said Mark Hodges, Hovnanian's senior vice president of corporate operations.
More than two-fifths of builders polled by BIG BUILDER last fall claimed that a distributor served as their local point of contact between themselves and manufacturers. The leverage suppliers wield when negotiating purchasing deals with builders, then, often hinges on the quality and reliability of their points of distribution from the factory to the jobsite. “These relationships are always enhanced when distribution is in place,” said Chuck Stein, vice president and general manager for Owens Corning's Home Experts division.
Take paint, for example. Duron Paint & Wallcovering, the Beltsville, Md.-based manufacturer and retailer, has been presenting itself to builders as capable of national distribution because of its participation in Color Guild, the association of 17 regional paint makers. It's through that guild that Duron has formed distribution alliances with West Coast manufacturers and is able to strike corporate deals, according to Gary Saiter, Duron's director of marketing and e-commerce. This raises the question of whether builders would be better served by negotiating directly with wholesalers that have broad distribution capabilities. Beazer Homes USA continues to explore the possibility of striking a supply deal with two of the industry's largest plumbing wholesalers—Hughes Supply and Ferguson Enterprises—that could include a private labeling component, according to Beazer's national purchasing director David Singer.
Bill Justus, vice president of supply chain services for David Weekley Homes, in Houston, said he sees nothing wrong with home builders negotiating deals with roofing manufacturers such as OC at the same time they bought through roofing wholesalers, such as ABC Supply, with broad distribution. But Justus added that David Weekley tells its distributors their program has to “stand on its own, aside from the manufacturer.”
The answer may not be to set up captive distribution, like Summit Homes has. But the pressure by builders on suppliers to perform will increasingly fall upon the ability of their distributors to deliver.