Supply Side NewsTM  - Lowering the Cost of Homebuilding
  Issue:                                                                                                             February 11, 2010

TopDear  ,

Welcome to this month's Supply Side News, the newsletter focused solely on providing critical information and actions for lowering costs in homebuilding.
 
In the past month lumber costs continued to climb, drywall dropped, and concrete was flat.
 
In this issue, we also explore the beneifts of trade cost unbundling, and introduce an advanced systems solution that will lower costs and improve performance immediately.
 
The solution is called SystemOneTM, an online, fully integrated business system with the support necessary to automate everything from lead tracking through warranty without the need for any computer servers, and IT/systems administration support staffs. To learn more, see Systems Key To Improved Profitability below.
 
California has adopted new sprinkler requirements with other states to follow. To evaluate the impact of this change, check out this month's From The Supply Side. Uponor can help to make this assessment.

Please forward this newsletter to your colleagues who are also interested in managing and lowering costs.

Sincerely,
CPS Signature 
 
 
 
Charles P. Schneider
Chairman & CEO
Builder Sourcing Corporation
 
303.367.2000 x111
info@buildersourcing.com
www.buildersourcing.com

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newsIn the News
Information On Costs & Actions To Lower Them
The downturn highlights the benefits of a new model in builder systems
 
Drywall Dropped 8% In January To An Avg $8.64
A high of $10.43 in the Northwest, low of $5.96 in North Central US

Lumber Costs Rise In January, Up 9.7% & 39.7%
All markets were up, most change in the South & East

Concrete Cost Rose .1% In Jan., 3.1% vs. Prior Year
Cost flat over last month

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SystemsSystems Key To Improved Profitability
The downturn highlights the benefits of a new model in builder systems
Staff reductions have highlighted many of the challenges of existing systems and software. People that manually kept different systems used for functions like sales and construction are gone, and so did their "integration." The ability to get bids from more subcontractors has been limited with the reduction in purchasing staff. An upgrade to a new version of software has to wait to be installed.
 
These are just some of the many problems associated with using software that comes from multiple vendors, and that has to be installed, managed and maintained by a reduced or eliminated staff.
 
Builder Sourcing is introducing a new, online solution for this problem called SystemOneTM - one system, one process, from one software company that is pre-implemented and supported by one company. It is like having your own systems and back-office support department. It is like having one of the most sophisticated, comprehensive and integrated software systems available that spans sales through warranty without the cost or headache to implement, manage or maintain. 
 
Why do this now? SystemOneTM will save money immediately and there is no better time to do a systems conversion while volume is low. And the pricing model is based on volume so it turns a high, fixed cost into a low, variable cost.

Action: Review SystemOneTM and evaluate what a new approach to builder systems can do in terms of lowering costs and improving profits. To discuss this further, contact us.

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drywallBSC Drywall Cost Tracker
Drywall cost dropped in January on average 8.0% 
The price of a sheet of 4' x 12' x 1/2" drywall is now $8.64, down from $9.39 in December. For an average house that uses 122 sheets, that is a current material cost of $1,050, down $92/home.
 
Action: Should receive another cost reduction in drywall this month and, if not, ask for one. Don't accept any increases.

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lumberBSC Lumber Cost Tracker
Lumber prices are considerably higher, industry capacity is lower
Lumber prices rose in January as mills and retailers continue to struggle to find the right balance between supply and demand.

Lumber Cost 013110

Source: Random Lengths, local market pricing, & BSC analysis for a sample house pack of dimensional, OSB & stud lumber for a two-story, 2,030 sq/ft home
 
Producers continued to curtail supply and remain hesitant to increase supply which will apply upward pressure on future pricing.
 
Permits for the South and East rose sharply in the month. This helps explain the faster run-up in prices in these regions vs. others.
 
Lumber futures pricing indicates an expected continued rise to lumber costs. The rebuilding of Haiti is an additional wild card that could spike demand and prices.
 
Action: Consider changing the purchasing model to a cost based one, and longer-term locks/commitments to buy on lumber purchases. BSC has saved builders 8% to 11% on lumber using these techniques.
 
If you would like us to do an analysis of potential lumber cost savings based on your lumber purchase history, contact us.

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concreteBSC Ready-Mix Concrete Cost Tracker
Prices flat in January up only .1%, and 3.1% over a year ago
The price of 3,000 psi Ready-Mix was flat up only another 0.1% in January and 3.1% over a year ago. A slab on grade, 4" pad for an average size 2 1/2 story home and driveway costs $9,310, and is up $10 over last month, and $300 over the prior year.
 
Action: Continue to look for labor discounts from foundation contractors to offset the cost increase of the materials.

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costCost-Saving Tip - Quantity Matters!
Unbundling Trade Costs Saves Money, Even When Turnkey.
The cost to sheet rock a home has fallen. You can feel great about that until it is realized that costs could have been even lower. Why? The builder negotiated a cost per sheet installed and had a much better rate than in years past. Three problems though...
 
First, the number of sheets used in the bids were off by about 12%. Second, the rate per sheet was off by another 10%. How does this happen? The builder relied upon a three bid method for costing. All three contractors had mis-estimated the plan. And, there were another 10 quality contractors in the market who had lower rates than the three used in the bid process.
 
This analysis resulted in more than $925/home in savings.
 
And third, as the price of dry wall goes up and down, it is impossible to know the impact on the cost of a home. This leaves a builder subject to increases when commodity prices rise and to not know what cost reduction to ask for when commodity prices fall.
 
Action: Know quantities of major commodities, talk to distributors about installed costs in the market to find a selection of contractors to bid, monitor commodity cost drops to know when to seek reductions.  
 
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supplyFrom The Supply Side - PEX Piping
Fire safety compliant, less fittings, less noise, less cost
PEX piping can extend a home's water system to meet the requirements for fire safety. Uponor, one of the leading manufacturers of PEX plumbing, has assembled an integrated home and fire safety solution. Uponor can review your plans and recommend the design and layout of a system that your plumber can install.
 
UponorIn addition, the use of PEX piping improves the quality of a home because PEX is quieter than copper and, since it is flexible, it can be routed through a home with less fittings. Less fittings create less opportunities for leaks and takes less time to install.
 
For more information on exploring the cost and performance advantages of PEX piping from the experts at Uponor, contact us.

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about

About Us
Nation's Largest Cost Management Group For Builders

Builder Sourcing is a professional services firm that works with builders to lower costs, including understanding and removing costs from the supply chain, establishing long-term lumber purchase agreements, and creating strategic supplier relationships.
 
Builder Sourcing streamlines and increases value from manufacturers rebate and incentive programs, and lowers general and administrative, and systems costs.
 
For more information, visit www.buildersourcing.com.
 
877.367.2010

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