PROSALES sister publication BUILDER talks with housing industry consultant Tony Callahan on how to improve operations to take advantage of the recovering U.S. housing market.
What’s the No. 1 misconception builders have about purchasing and supply chain issues?
The biggest misconception is that “price” and “cost” are the same thing. Price is only part of the cost of doing business with a supplier or trade. Poor quality, missed deadlines, rework, warranty expense, and negative impact to employee morale and customer satisfaction are all additional costs.
In addition, many builders buy into the myth that they can always get a better deal purchasing locally than by aggregating spending at a higher level. The truth is that fragmenting your spending almost always results in higher costs. Unless your installer has more volume than you on a national basis, you are leaving money on the table by allowing him to control your material specification. Manufacturers are interested in builders that are willing to make an exclusive commitment. Long-term pricing, rebates, and volume incentives aside, manufacturers are a great resource in concurrent engineering new floor plans or value engineering existing ones.