When Scott Hearty was named vice president of national purchasing operations for Standard Pacific and asked to head up its 1Standard national purchasing initiative in January 2005, it was more than challenging to negotiate national scale deals with suppliers. The first obstacle was that there was no way for him to tell which divisions were using which manufacturers.
That's more of a trick for Standard Pacific than for other builders because, rather than issuing a corporate directive requiring the use of certain products and suppliers, Standard Pacific would rather seek buy-in from every division. Recently, the company asked each division to vote on its supplier preferences. The next step is to use those preferences as a guide that will detail how it will benefit the company to consolidate its suppliers.
"A lot of companies will select products that every division will use, and it's mandated," Hearty says. "That's a very quick way to roll out change. But any time you force someone to use a product or do something outside their comfort zone, there is a certain resistance and possible failure."
While Standard Pacific's efforts to buy nationally aren't complete, Hearty thinks that when they are the changes will be embraced and make for reductions in costs and improvements in efficiency because they will have been vetted by the entire company team, not just corporate. "None of us is as smart as all of us," he says.
So far, 1Standard's efforts to work together as one company seem to be doing the job. Company estimates are that the initiatives have resulted in $66 million in savings across the country–not including an average of $10,100 per house in reductions achieved through better value engineering home plans, exceeding $18 million in the first seven projects.
Standard Pacific's success shows that savings can be made by partnering throughout the company to develop best practices rather than mandating them from the top down.
Hearty, 48, joined Standard Pacific's Orange County division in 1984, working as a customer service representative, assistant construction manager, on-site and off-site purchasing agent, new-home warranty manager, and VP of purchasing before moving up to his current position. Prior to joining Standard Pacific, he worked for other California builders in purchasing and supervisiory capacities.
"Our goal this year is to pull everything together ...and see if we can further consolidate," Hearty says. "I think the divisions now see the benefits of working together, not just talking together. They are more open to it today than ever, and they are becoming more and more comfortable with each other with 1Standard and more comfortable with the process."