How many times have you heard the words “supply chain management” (SCM) in the past six months? I can't even count all the conversations I've had recently that ended up delving into some aspect of this subject, from integrated business processes to information technology supporting cross-sector collaboration. A few months ago, all of this hype made me wonder: Is SCM nothing more than the latest industry buzz phrase or is it truly emerging as a full-force, mainstream business management initiative for many builders, pro dealers, and manufacturing companies?
Debating this question spurred us to evaluate current industry research focusing on the building materials supply chain, and then use it to launch a qualitative analysis of how the facts and figures actually are translating into business plans that dealers are banking on to ensure long-term survival and profitability. PROSALES' December 2004 issue bore the first fruits of this labor by presenting a Market Matters report that focused on interviews with industry experts to examine the real-world implications of Residential Supply Chain in Transition, a study released by the Joint Center for Housing Studies at Harvard University in 2004. The article uncovered strategies that parallel findings of the study, including a focus on expanding component manufacturing and installed sales (reflecting the trend toward profiting by offering more “premium services”) and the adoption of inventory models that gravitate toward meeting real-time product demand rather than stock and sell (a movement dubbed “lean retailing” in the study). These findings definitely are not revolutionary industry concepts, but our goal was not to speculate on silver bullets, but rather to show how emerging trends are successfully shaping real-world business models and how they are likely to evolve.
This report went to press shortly before the BIG BUILDER Conference, which was held in early November by BIG BUILDER magazine, a sister publication of PROSALES. As I attended the sessions alongside executives from the nation's largest home builders, it was clear to me that there still are many missing links in the supply chain yet to uncover and hopefully build competitive advantage upon, which gave us the foundation for this month's follow-up cover story on SCM. For example, at a closed roundtable discussion during the conference moderated by Luis Solis, the president of leading SCM consulting group Symbius Corp., it was clear that collaborative information technology is behind the curve and can be one of the biggest stumbling blocks to streamlining the sharing of critical data between trading partners, especially dealers and builders. “A number of builders are playing with different connectivity concepts, such as sharing demand, sharing plans, and communicating messages to suppliers ... but I'm actually surprised that in this industry there aren't more productivity tools being leveraged,” he said.
The executives on the panel (representing builders including Beazer Homes USA, Centex, Technical Olympic USA, D.R. Horton, Standard Pacific, M.D.C. Holdings, and Lennar) were quick to agree, putting forth comments such as: “I think there is a lack of software products ... specifically designed for our industry.” According to another panelist, “There's no synergy all the way through [the home building] process. That's why we're looking for a full online process. We're experimenting at one of our locations ... and we think we will be able to save several hundreds of thousands of dollars just in paper cost. But it doesn't provide all of the functionality that you really need to drive the whole process, so it's frustrating.”
It's obvious there is an IT void out there, but one of the main problems in closing the loop is that there is no “one-size-fits-all” solution that will match all builders' needs. However, that doesn't mean that we should throw in the towel; it means that to succeed dealers must learn to accept and work in a fragmented IT environment. The winners will be those companies that can prioritize the needs of their top customers and focus on using technology to gain a clearer picture of their specific long-range planning and electronic information needs.
–Lisa Clift, Editor