Supply Side NewsTM - Lowering the Cost of Homebuilding
ALERT:     Lumber prices decline as demand drops in May, drywall up                June 8, 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.
 
The cost of lumber and plywood dropped this month, down 24.2% over last month but still up 65.8% over a year ago. That translates into a decrease of $2,000 for the month and up $2,500 over a year ago for our average 2,000 square foot home. We are now 6% above the 10 year average for lumber. See the lumber cost tracker below.
 
As we expected, drywall costs have begun to rise given the price increases announced by USG and National Gypsum in February. Costs rose this past month, up 4.6%. See the drywall cost tracker below.
 
We received a lot of questions and interest in last month's piece on "Cloud Computing" and buying and using "Software as a Service." This month we highlight a specific example of how "Cloud Computing" can provide builders of any size an affordable customer service capability similar to the one perennial JD Power winner Pulte Homes utilizes. Check out this month's "Cloud Computing" story below.
 
Have you checked how much money you are paying for office supplies lately? You may be surprised to learn that this can be more than $100 to $200 per house! If you would like to lower these costs, go "Paperless." To learn more, see NO PAPER to the right. You can also take advantage of our program with Office Depot and be eligible for significant savings.
 
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
Drywall Costs +4.6% In May To An Avg $9.48
A high of $10.48 in the Northeast, low of $6.23 in North Central US

Lumber drops -24.2% In May, up +66% vs Yr Ago 
Decrease in demand brought prices down
 
Concrete up +.4% vs. May, up 1.3% vs. Yr Ago
Modest cost increase of .4% over last month
 
"Cloud Computing" Boosts Customer Service
Using systems from the "Cloud" (Internet) improves service & lowers costs
cost"Cloud Computing" Boosts Customer Service 
Homebuilders can implement Pulte's JD Powers winning approach to customer service with "Cloud Computing"
What is the key to receiving high marks from homebuyers in the area of customer satisfaction? According to JD Powers winner, Pulte Homes, it comes down to a focus on setting expectations and then exceeding them.   
 
Pulte Homes has a 7 step process (Pulte Homes' 7-Step Process) that they follow. They are:
  • Pre-Construction Meeting - create understanding of the homebuilding process, set expectations
  • Pre-Drywall Frame Walk - view inner workings of the home, confirm option selections
  • Quality Assurance Inspection - builder's own detailed quality control check
  • Pre-Closing Orientation - demonstration on how to use the features in the home, review service procedures
  • 30-Day Follow-up - Proactive knock on the door to ensure satisfaction
  • 3-Month Follow-up Visit - another proactive effort to ensure satisfaction
  • 11-Month Follow-up Visit - another demonstration of the commitment to customer satisfaction to uncover remaining warranty issues or address questions
If a system could provide a process whereby the best practice steps in customer satisfaction could be outlined and automatically and cost effectively followed, then the results would be award winning customer satisfaction! 
 
Can your current system for customer service do the following:
  • Automatically create to-do lists and checklists for the customer service team to follow the process you have defined?
  • Does the system communicate that process with the homebuyer and does it automatically schedule all events?
  • Can all scheduled and customer requested service events be tracked, reviewed, categorized, and assigned to someone to address?
  • Can unresolved service requests be identified and escalated before they become an issue for the buyer?
  • Can service request resolutions be evaluated to determine underlying quality issues?
  • Can a homebuyer go online and see the status of their issues in real time? A sub-contractor? Your customer service people?
"Cloud Computing," where advanced computer software is provided over the Internet on a low-cost usage basis, can support this process so that builders of any size can have and afford the same capability. Thus, the smallest builder can have the capabilities that would rival the largest builders or companies in the nation.
 
If you would like us to review your current customer service capabilities and help you to provide award winning service, contact us.
 
For an interesting story on customer satisfaction, see "Pulte Leads Pack in J.D. Power's 2009 Customer Satisfaction Ratings"  in Builder Magazine.
 
Action: Explore opportunities to leverage  "Cloud" based systems for customer service and evaluate the impact they can have on your bottom-line.  
 
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drywallBSC Drywall Cost Tracker
Drywall cost on the rise in May, up on average +4.6% 
The price of a sheet of 4' x 12' x 1/2" drywall is now $9.48, up from $9.07 in April. For an average house that uses 122 sheets, that is a current material cost of $1,160, up $51/home or +4.6%.
 
Both USG & National Gypsum had announced 20% price increases to their distributors in February, so continued increases should be expected as dealers work through lower cost inventory.
 
Action: Try to hold the line on price increases, explore price locks.

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lumberBSC Lumber Cost Tracker
Lumber dropped this month by -24.2%, still up +66% vs Yr Ago 
Lumber cost fell this month as demand slumped enough to bring prices down. This tracks with the fall-off of starts in the post housing credit environment that expired in April. 
 
Lumber Cost 0510 
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

Lumber buyers are anticipating an increase in supply from Canada following an announcement that there will be no export taxes, quotas or surge impediment for the month of June. This expectation of increased supply caused many buyers to sit on the sidelines this month and adopt a wait and see approach.
 
Bottom Line: This month's results highlight how small changes in demand, up or down, will create a volatile lumber market. Shortages and wild price swings will be the norm as inventory levels on the supply side are expected to remain low.
 
Historical Perspective: The Random Lengths composite is now 6% above its 10 year average. 
 
Lumber futures are down as economic uncertainty in a post-tax credit market also weighs on traders' minds.
  
Action: Consider changing the purchasing model to a cost based one. Evaluate lumber cost premium being paid.
 
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 rise slightly +.4% from last month, and up only 1.3% over a year ago
The price of 3,000 psi Ready-Mix was up a modest 0.4% this past month, up only 1.3% over a year ago. A slab on grade, 4" pad for an average size 2 1/2 story home and driveway costs $9,300 for 97cy, and is up $40 over last month.
 
Action: Continue to look for labor discounts from foundation contractors as competition remains intense for work.

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about

About Us
Nation's Largest Cost Management & Information Technology 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 & streamlining operations through the use of advanced systems and technology.
 
Builder Sourcing streamlines and increases value from manufacturers' rebate and incentive programs, and lowers general and administrative costs.
 
For more information, visit www.buildersourcing.com.
 
877.367.2010

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