I'd like to start out this column by making a bold statement: I don't believe anyone has fully realized how to apply valid supply chain management techniques to the installed sales process. I'm not even fully convinced that the national builders have it completely integrated into their processes—but they are trying.
What is supply chain management? One definition says it's a strategy that balances four dimensions—customer service, demand flow, sourcing, and integration. For dealers, this definition can be applied to both traditional product supply and to the installed sales process.
For supply and installed sales, your customers (builders/contractors) provide the customer service feedback that you respond to. As I've said many times, your customer's perception of service becomes your business reality. That statement applies here in spades.
Next we have demand flow, which basically is how much material a customer needs, when does he or she need it, and in what quantities and stages. In the case of installed sales, the material is the installed product you are supplying, such as insulation, siding, or millwork. How many houses are scheduled? Does your builder follow even-flow production or spot-build around the community? Do you have the capacity to meet your customer's needs in a timely manner? Therein lies the essential quality of meeting demand flow criteria in installed sales: Can you live up to the promises made and provide solutions that lower operational costs and reduce cycle time, or are you and your crews part of the production problem?
Following this is sourcing of your products—purchasing and maintaining inventory levels that meet the demand and satisfy the customer service needs of your market. Proper sourcing can provide your customer with real value-added benefits related to cost of product (including installation service).
Finally comes integration—which in the case of installed sales means maintaining an organized division that brings value to your operations instead of bringing it down. In my travels I frequently see installed operations that fall under the “chaos theory” of management. Last-minute wrangling of product to the jobsite; mixing crews to provide a minimum of bodies on site to complete the job; contracts, forms, and invoices haphazardly completed (if completed at all); and at the end of the day everyone falling down absolutely beat from the stress of one more day. Unfortunately, the response I often hear is “We got it all done; it was a chore, but our customer never knew any different.” If you believe this, you're only fooling yourself. Your customer sees more than you may realize.
Each and every day your customer makes a decision whether to continue using your services or to look elsewhere. You may be getting the job done, but are you truly effective, providing quality service and helping your customer complete his or her projects on time and on budget? According to the “2005 NAHB Cost of Doing Business Report,” waiting on material causes 11 percent of the production delays on a typical jobsite. If you are late installing material, not only do you hold up your part of the process, you also hold up the trades that immediately follow you. Production delays cost your builder significant dollars on every job.
Supply chain management isn't just about immediate cost savings on product, it's about long-term, sustainable savings in operational costs that can be applied to the bottom lines of your organization and those that come before you and after you. Are you managing your part of the supply chain effectively—or are you adding to an already problem-prone construction process? If you don't know the answer to this simple question, maybe you should have a long talk with your customers. I'll bet they know the answer.