While at their builder's design center, Joe Smith and his wife Jenny decided to order a pair of brushed pewter faucets for their master bathroom for their new home. They saw a sample of these fixtures, and chose them , along with some upgrade-level sinks, a prettier tub, some elegant wood cabinetry and a fancier front door, among other things, and they watched as the design center coordinator punched their choices into the computer.

Little do the Smiths know that following the road on which these two faucets will travel may reveal a twisted path, one in which time may be wasted, costs are added, and paperwork piles up. The customary supply path is one on which the order is received by the builder, is sent to the plumbing sub-contractor, is then forwarded to the distributor and is finally placed with the product manufacturer. Why so many steps? Probably because this is the way business has been done for decades in the homebuilding industry.

Now on a mission to change all that is USBUILD.com, a start-up supply-chain company, is using the Internet to order building materials directly from the manufacturer, arranging for them to be delivered to the building site at the proper time for installation in a new home. Eliminating some of the middlemen, multiple pricing markups and back-order delays oftentimes inherent in the process, USBUILD claims that they will be able to save builders millions of dollars with their new "procurement management system," according to co-founder and chairman Bill Bernardy.

"We're moving products and information at the same time," says Bernardy, "and we're bringing methods to the building industry that are well established in other industries." Bernardy likens the overhaul of this important element of homebuilding to that of the electronics and automobile industries, who have spent the past ten years developing partnerships with people in supply chains. U.S. homebuilders, who are known to be among the slowest to welcome sweeping change, may now be beginning to realize that business in the 21st century will not be done with cumbersome paperwork trails, over the phone, or even by fax. It will be done over the Internet.

Being piloted in Denver by national homebuilder Pulte Homes and large local builder Village Homes, USBUILD will have its first cyber-orders placed this month, with its first deliveries of goods in September. "We're starting out with about nine finish product categories encompassing some 250 different products" says Bernardy. Things like faucets, sinks, toilets, tubs, indoor and outdoor lighting fixtures, and door hardware will be sent directly from the manufacturer to what USBUILD refers to as the fulfillment center, where the materials will be configured into 'work-hauling house packs' and placed on individual palettes. These palettes will contain all the materials needed on a particular day at a particular home site, and be delivered in what Bernardy calls a "just in time" basis, lessening the possibility of both theft and damage. The subcontractor, who will be notified the day before the materials arrive, will be able to show up at the job site ready to install the product, saving him time and increasing productivity as well. "With the labor shortage, we figured that subs show up at the building site and probably about one-third of the time, the materials they need to do their work that day are not there," reckons Bernardy. That's the type of down time that often forces trades people to find other work or lose time.

How will the prospect of eliminating distributors and sub-contractors handling their own orders affect costs? The typical production home can take from two to five months before many of the home's finish products are needed, but Bernardy points out that just about everything that goes into a home can be manufactured within 45 days, including getting the trees from the forest. "Not wasting that time will bring costs down," says Bernardy "Managing and using that lead time is invaluable to the product manufacturers."

Another element of ordering directly from the manufacturer are the markups charged by each entity along the way, says Bernardy. "Builders want to offer more in upgrade selections without significantly higher prices to their buyers. Both distributors and subcontractors pass their markups for premium products on to the builder, who must, in turn, charge them to the buyer. This system can eliminate that part of the equation," he says. And how often do builders showcase their standard features and upgrades within their model homes and then have to inform buyers that they can no longer get them? "Sometimes it's a real struggle for the subcontractors to furnish the builders with the exact materials they want every time," says Bernardy. "Builders care about the look and feel of their homes and hate it when that happens. It's like offering car buyers a Cadillac with a Ford dashboard installed."

Interestingly enough, some of the so-called middle men don't resent being taken out of the loop, says Bernardy. About 50% of the items that are installed in a new home are procured through the smaller sub-contractor, who uses the builder's account. He adds, "The main reason many subcontractors go out of business is because they mismanage their cash flow and credit. This way, they can spend less time on paperwork, build more houses and make more money."

USBUILD.com is not the only company using the Internet for ordering building supplies. Others, such as BUILDNET.com, offer integrated software systems, enabling builders to continue to use the traditional chain of supply, but communicate more effectively with their up-line partners, with accounting programs, estimating and scheduling programs, and the ability to issue purchase orders to local entities with their Web-enabling software. USBUILD.com, according to Bernardy, is the only company to take building a home from the initial purchase of the home and its buyer-chosen amenities to materials delivery to completion using the World Wide Web for most of its components.

One of those components that has already developed systems for bringing costs down and may not become a part of the USBUILD.com offerings any time soon is lumber , says Bernardy. "We call lumberyards pro-dealers," he says. "They actually add value to the process because the lumber-supply chain is already remarkably efficient, maintaining pretty low margins. They can deliver pre-built roof trusses, pre-hung doors and windows, wall panels and pre-cast moldings, and 'intelligently stack' them so that the items needed first are on the top of the stack. They also use lots of specialized equipment to deliver their product, such as cranes and booms. We're not out to replace those folks, but rather partner with them."

Bernardy sums up the USBUILD.com mission as one that is creating 'new value', freeing up dollars that would have gone wasted, and reducing building costs so that the money saved can be redistributed. It is estimated that a full 37% of a new home's sales price is made up of building materials, and yet those products are the part of the price over which builders have the least amount of control. Perhaps companies such as USBUILD.com will indeed revolutionize the process by which homes are built in the new millenium. Most in the industry would agree that it's worth a try.

Published: July 14, 2000

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A veteran of the real estate and homebuilding industries since 1986, Dena Kouremetis first joined Realty Times as a new homes writer in 1998. Since then, she has authored four books, written consumer columns on new homes issues for websites and newspapers all across the country, contributed to builder trade magazines, appeared as a guest expert on several radio shows and even created a ten-chapter podcast for LendingTree.com’s homebuilder website, iNest.com, now available on iTunes, entitled Uncharted Waters; Navigating the Purchase of a New Production Home. Kouremetis recently joined her local Folsom, CA Coldwell Banker office as a broker associate while continuing to write for the real estate industry. For the past three years, she has been training real estate agents for both the resale and new homes industries, putting her experience, research expertise and gift of expression to work to help others entering the business.