National agreements may work for appliances or faucets. But for products involving fabricators, multiple distribution hand-offs, and third-party installers, there's still plenty of purchasing power in the hands of local project managers.
“Products that have a large labor component to them are much harder to establish national distribution,” concedes Bill Justus, vice president of supply chain services for David Weekley Homes. Kitchen cabinets are perhaps typical. Builders have been reluctant to strike national purchasing agreements because the finished product is often tethered to networks of fabricators, especially in markets such as southern California. It's one reason why leading cabinet manufacturers don't have much of a presence in such a huge market with home builders.
“Ease of implementation” is why American West Homes prefers to deal with local cabinet suppliers, too, according to that builder's purchasing manager Kelly DeLoach. “In Las Vegas, we have a wonderful group of custom cabinet makers that can work on a production basis for us and will make changes for us,” said DeLoach. “The larger guys will customize for you, but they'll charge for it.”
Installation continues to be a pivotal issue. Recent installation and supply deals that Pulte Homes has struck with Masco Contractor Services could be viewed as Pulte's attempt to peel away some of the supply chain layers of handling labor-intensive products such as insulation and, more recently, fireplaces.
But these agreements are often easier said than done. A year ago, Beazer Homes tried to broker a deal through which faucets made by either Moen or Kohler would have been installed into its new homes by American Plumbing & Mechanical, better known as AMPAM, the industry's largest plumbing contractor. AMPAM's bankruptcy woes put a damper on the negotiations, conceded David Singer, Beazer's national purchasing director. However, Singer noted that Beazer has engaged in installation deals with AMPAM-affiliated companies in Las Vegas and Dallas, and could extend those agreements to other AMPAM companies if those relationships work out to the builder's satisfaction.