In this time of market uncertainty, builders are making sure every penny is present and accounted for. And with roughly $12 billion lost per year from supply chain inefficiencies in the residential home building industry, many are seeing that business silo as one of the first places to start looking for accountability.
But restructuring the supply chain is anything but a quick fix, so builders such as Standard Pacific Corp. are finding for more immediate ways to slow the bleeding. With the industry throwing away nearly $1.1 billion each year in uncollected rebates, the Irvine, Calif.–based builder seized the opportunity to make some smart moves to protect its money. Partnering with Home-Sphere, a provider of Web-based supply-chain management services, the builder implemented a rebate tracking system throughout its operations in 31 major markets.
The software program, known as AllTrack, allows the builder to maintain greater control over information related to the use of manufacturers' products. When a unit closes, the program calculates the amount of rebate dollars and then submits an invoice to each manufacturer on a predetermined schedule. Because the system tracks product use information at the most detailed level, both builder and manufacturer can review the information by model, lot, community, manufacturer, or product.
Standard Pacific's regional purchasing program manager Gabe Martinez says the impetus for signing on for the software was that the company realized its rebate revenue stream was weaker than it should be. Inefficiencies at the divisional level were to blame. Each division claimed its own rebates, and some proved to be more meticulous in their tracking methods than others. “There was a large range of numbers [related to rebate collection] coming in from each division,” says Martinez, noting that there was roughly an 80 percent variance companywide.
With the software system in place, much of the administrative load associated with rebate tracking is taken off the divisional staff, leaving them better able to concentrate on operations in the field. “A lot of back-end work is centralized [in the national purchasing department], and there's one person here who does it,” Martinez explains.
Glenn Renner, senior vice president for HomeSphere, says the program fundamentally helps simplify what is often a complicated tracking process. Because each rebate agreement is negotiated, it can be crafted with tiers or other stipulations, which can be unwieldy to manage. “You might have 12 to 13 manufacturer rebate programs, and they [all] could be structured differently,” he explains.
Although Martinez admits that “there's been some growing pains” associated with the software rollout, he says that it's been mostly attributable to “our internal understanding of what's going on.” He says that HomeSphere has provided them with good support, which has made the investment worth it when he considers the alternative of building a similar system in house.
Moreover, Martinez says the software company has worked with them to add functions to the software product to better suit Standard Pacific's needs. “[HomeSphere has] done a good job enhancing it so it can handle more information,” he says.