We've all seen it happening. During the past few years, larger builders around the country have been consolidating and scooping up their mid-sized competitors as they branch out into new regions or take over more business in their established markets. The sometimes-confusing landscape this phenomenon can create has left many independents scratching their heads trying to decide how to compete, sell, and prosper in the face of this rapidly changing environment.
During my travels, I've had the opportunity to meet with some of the country's largest builders, and I have realized one thing for sure: They are just like us in many ways. They don't have a third eye, they are not all aliens from another planet, and they all share a common goal: to build affordable housing for their chosen market, at a profit, and to continue to build and solidify their business base. Where do you fit in? As a valued member of their supply chain—if you're willing to make the commitment to serve their needs.
Many of these larger builders have very dedicated purchasing managers and buyers who search to find supply chain partners that fit in with their business plans. In most cases, they will outline exactly what they are looking for: specifications, quantities, vendors, etc.
Here's the catch: They also know what they need to pay for these products and services to remain profitable. As big builders have grown in size, they have gleaned a tremendous amount of knowledge about costs and efficiencies, and they are applying that knowledge to their future growth and expansion efforts. This is where you come in. Most of these builders prefer long-term contracts with their supply partners that lock in prices for products and labor for the duration of specific development projects. Now, I realize that “locked-in pricing” scares the devil out of most of us, but I believe there is an upside to this practice. Having a firm commitment for purchases should enable you to plan your buys and better balance out your year. And you can do this without forsaking your mainstay independent contractor/builder customers.
Work closely with your buying group and/or have your in-store buyers closely monitor the market to take advantage of favorable pricing, and be ready to react quickly when product becomes available. Look toward “bundling” services and products for larger builders. In many cases, they look favorably upon installed sales as a way to increase their jobsite efficiency. This gives you an added “in” to becoming a supply chain partner.
If you pay close attention to the methods big builders use, become a little more aggressive and proactive with your sales force, and offer product installation services, you may find yourself with some extremely solid customers with steady growth. Rather than worrying about consolidation, find ways to embrace it and make it work for you.
Mike Butts is director of installation services for United Building Centers. 507.457.8453. E-mail: [email protected].
