This week, Standard Pacific Homes' 25 divisions in eight states are scheduled to vote online for their preferences of suppliers in several product categories. This is an intermediary step towards StanPac establishing uniform regional assortments for its purchasing agents.
Using an online collaborative tool called ThinkTank, Standard Pacific will conduct an online poll of its divisions' preferred vendor choices for HVAC, paint, engineered flooring, appliances, door hardware, fireplaces, lighting, and windows. This vote represents the latest development in a supply-chain management program, called 1Standard, that Standard Pacific initiated on Jan. 1, 2005, whose goal is to leverage its buying power with suppliers and reduce its costs through strategic sourcing and better training of its purchasing teams.
Until recently, the divisions pretty much called their own shots when it came to purchasing products. "We never went as fast towards exclusive deals [with manufacturers] as some other builders," says Scott Hearty, vice president of national purchasing operations, for the Irvine, Calif.-based builder. Now, "I'm working hard to get us to act more like a single company."
The voting will be "open" for two days this week, after which the company plans to present the results to its divisional purchasing leaders at its Executive Purchasing Conference in San Antonio on Oct. 17 and 18. Hearty explains that the company intends to narrow its supplier list to one preferred manufacturer per category for each of its four regions. The districts then would be allowed to buy from any of the preferred vendors, regardless of what regions they are located in.
A week after the conference, the 1Standard team plans to analyze the ramifications of these votes on its vendor relations and discuss the implementation of its purchasing decisions with Standard Pacific's COO, Scott Stowell, and its regional presidents Bruce Dickson (Southeast), Kathy Wade (Southwest), Todd Palmaer (Southern California), and Doug Krah (Northern California). A more thorough discussion of that implementation plan is slated for the company's division presidents' meeting in mid-November. "We are ready to devote a larger share of our business to suppliers that our divisional purchasing leaders select," says Hearty. He concedes, however, that certain products - such as windows - don't always lend themselves as easily to regional purchasing because of their distribution and pricing. "My goal is to drive down the upfront costs, not go with a supplier just for the back-end rebate," he says.
As it works on coordinating its purchasing, Standard Pacific is also looking for cost savings in its construction processes. The builder has been working with Unify International, the jobsite management consultant, to conduct divisional value-engineering workshops, or VEWs, where it has invited its contractors in to see where waste can be eliminated. These workshops, says Hearty, include walking the sites, bringing in rough and finish trades separately, and then taking a vote on the last day of training about how the trade partners should proceed. That vote might be to meet again or to redesign a floor plan, says Hearty.
"What we're doing is teaching the divisions how to value engineer the houses they build," says Hearty, and it appears to be working: During a recent meeting with investors and analysts, Standard Pacific's CEO Steve Scarborough stated that his company is saving $10,000 per home in divisions where the VEWs have bee conducted and as high as $16,000 per home in the Phoenix market.
What Standard Pacific is doing can be seen in a larger context of big builders trying to rein in their construction costs, either through value engineering or by renegotiating prices with manufacturers and contractors. For example, Beazer Homes is going to what its CEO Ian McCarthy, calls "SKU rationalization," which has included reducing the carpeting choices it offers customers by 88 percent, and by installing less expensive, but look-alike, lighting fixtures that save the builder anywhere from 56 percent to 70 percent. Through September, half of TOUSA's divisions had gone through what Jeff Vogt, its chief supply management officer, calls "design charrettes" or value-engineering exercises with their trade partners, which he says are helping the builder spot potential cost savings quicker and, in some cases, redesign its house plans for greater construction efficiency.
Learn more about markets featured in this article: Los Angeles, CA.