Smart Supply Choices
Builders buy their materials from suppliers that offer benefits to them and the homebuyer.
Some customers express curiosity about the places different suppliers occupy in the building supply chain. With that in mind, we thought it worth explaining why we buy our materials and products where we do.
The basic choice is between the "big box" home centers like Home Depot and Lowe’s and regional or local distributors or supply houses. The latter include lumberyards as well as specialty suppliers of plumbing, electrical, lighting, cabinets and other products.
The big boxes need no introduction, as everyone shops there. These highly profitable global corporations stock an impressive selection of products for customers to look at and choose from. Some small contractors buy materials from them—and tradespeople of all types shop there for tools—but they're mostly geared towards consumers, to whom they offer good service and attractive prices.
So every now and then, a homeowner asks why we don't take advantage of those prices. That's a fair question.
Some comments on the internet (many with anonymous screen names) claim that the big boxes' products are inferior to those sold by pro suppliers. Although we can't prove or disprove that claim, we doubt that any business can dominate its market by selling poor quality products on a consistent basis.
All the same, it's not uncommon to see a faucet at Home Depot or Lowe’s that looks exactly like one sold by a plumbing supplier such as Ferguson's but with a different model number. Combine that with the price pressure the big stores reportedly impose on manufacturers, and some people automatically assume that one of those faucets has cheaper, less durable internal parts.
Again, we're not going to go there because the question is irrelevant to most professional builders. The reason most don't shop at the big-name stores has little to do with products but is based instead on the fact that pro suppliers are structured to serve builders. The builder gets predictable service based on personal relationships with the suppliers' key people.
In fact, professional builders treat suppliers the same way they do subcontractors: as integral members of the project team. A builder who finds a good supplier will usually stick with that supplier and give them a lot of business.
This brings us to the price issue. In return for loyalty, the builder will get the supplier's best pricing. For instance, the builder might pay 15 percent less per board foot for a truckload of lumber from a pro lumberyard than a homeowner off the street who wants a few 2x4’s. The builder also gets advantages like free delivery and an easy return policy. Often, the pro supplier will send a truck to the jobsite to pick up defective items rather than making someone bring them back. Little things like that can add up to a lot of cost and time savings over the course of a project.
Then there's software. Increasingly, pro suppliers and builders use software platforms that talk with one another and allow the builder to place orders online and conduct other business. We predict this type of integration will become standard within a few years.
In other words, the pro supplier is set up not as a retailer but as a business-to-business entity. Its systems and processes are designed to ensure that professional builders get quality products with solid warrantees, at fair prices, on a predictable schedule and with as few hassles as humanly possible.
Pro suppliers understand that their builder customers have schedules and budgets that they need to keep in order to serve their customer, the custom homebuyer. And the best ones work very hard to serve them.
Warm regards,
Tim Alexander
To read our entire July 2019 newsletter, click here.