3 WAYS BUILDERS FIRSTSOURCE IS MITIGATING THE IMPACTS OF TODAY'S SUPPLY CHAIN DISRUPTIONS
October 29, 2020
When manufacturers hit pause back in March and April in response to the uncertainty surrounding COVID-19, no one expected the market to rebound as quickly as it did—or experience record-breaking new home sales. Like the economy, though, home builders face countervailing forces.
Extremely low mortgage rates, a lack of resale supply, an expanded buyer pool and strong builder confidence could set builders up for record years. A lack of new home inventory, however, along with high land costs and limited product availability, are making it difficult for builders to keep up with increased demand. Supply issues as well as permitting delays are also lengthening the amount of time from breaking ground to under contract.
Additionally, builders are battling price increases on lumber and other materials, making it incredibly difficult to keep prices low and margins high. Given that 40% of new home sales in August were made by first-time homebuyers, builders’ ability to raise prices during a pandemic cannot continue indefinitely. And, while sales have been much stronger than normal this fall, the holiday season and end of the year are quickly approaching, which typically coincides with a months-long slowdown in home sales.
AN IMPERFECT STORM IN THE HOUSING SUPPLY CHAIN
While demand remains strong, channel inventories are extremely lean. Manufacturers are still trying to catch up from halts in production earlier this year. This has only been compounded by labor shortages, tariffs, and an unexpected surge in home center demand.
As Tim Foster, Builders FirstSource Director of Millwork Purchasing, puts it, “2020 has been kind of an imperfect storm on the supply chain side.” Supply chain disruptions have tightened supply and lengthened lead times, and are now a very serious threat to builders’ ability to keep up with demand.
During this time, we are doing everything we can to mitigate any disruption and competitively meet your product needs. Below are three ways Builders FirstSource is working hard to mitigate the impacts of today’s supply chain disruptions for builders:
1. STAYING CLOSE TO OUR CUSTOMERS
Continuous communication with our builders helps us plan and drive our inventory levels so you have what you need, when you need it. Providing longer lead times—especially over the next 90 days—helps us better understand future demand, which in turn helps us ensure availability with our suppliers.
The reality is that certain products are in tighter supply right now, so we’re also asking our customers to maintain some flexibility during this unprecedented time. Our team is always here to help, and can walk you through similar options with a better supply of inventory so your timeline stays on track.
2. STAYING CLOSE TO OUR SUPPLIERS
At Builders FirstSource, we’re communicating with our suppliers on a daily or weekly basis to mitigate potential customer impacts. Wherever possible, we’re expanding our relationships. We’ve been working very hard to increase our inventories with some success.
Every category in the millwork world has experienced extended lead times in 2020, with variation across product, species and region. “The higher the touch factor in 2020,” explains Foster, “the more the supply chain was disrupted.”
“While we continue to request our suppliers expedite and prioritize BFS needs,” President & CEO Dave Flitman emphasizes, “between hurricanes, COVID-19 and wildfires out West, it's a challenge for sure. But, I'm very grateful for the strong relationships we have with all of our suppliers and their ability to help us service you.”
3. IMPROVING EFFICIENCIES WHEREVER WE CAN
Builders FirstSource has been working hard to increase internal efficiencies and improve standardization across suppliers’ products so our builders have what they need, when they need it. We’re managing our internal metrics very closely, keeping a watchful eye on lead times and service levels.
We’re working with our manufacturing partners to standardize small differences across products and regions, so they can increase efficiencies and get more product with the labor available to manufacturers. As Dave Flitman shares, “We're expecting availability to improve slowly over the coming months. In the meantime, we'll work hard to ensure you have the product that you need.”
In addition, we’re committed to staying on top of market trends and sharing those insights with our customers, which is why we launched our market intelligence webinar series.