Material Impact

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Taking a cue from the manufacturing world, builders are beginning to view “Made in China” as a formula for curbing costs and bolstering supply.

Exports of Chinese cement to the U.S. increased 75 percent in the first half of 2005 versus the same period in 2004, and industry experts predict strong future import growth in such areas as cabinets, countertops, door hardware, and lighting and plumbing fixtures.

Behind this outlook are builders’ concerns about rising material and labor costs, as well as shortages stemming from aggressive construction schedules and acute supply chain disruptions, such as the 2005 hurricanes.

Michael Hartnett, president of Strategic Associates, an Atlanta-based building products consulting firm, also sees rising imports from China as a natural consequence of builder consolidations and the desire to exert more control over the supply chain. “Large builders are not so much concerned about the brand of products used in their homes,” explains Hartnett. “They are the brand. In the future, the cost economies of dealing directly with contract manufacturers in China may be more valuable to them.”

MEETING DEMAND: Granite tile floors are among the hottest imports from China. Also of interest: cabinets, lighting, and bathroom fixtures. LAYING THE FOUNDATION For the moment, big builders would be rash to send panic signals flashing through their domestic supply chains without first ensuring that international sourcing plans are tried and true. Reggie McCoy, national vice president of supply chain for Pulte, notes that his company has been working on a long-term global strategy to leverage products from international sources, and China is one of many international sources being evaluated.

“China has continued to grow as an economic power, and it consumes considerable resources,” says McCoy. “At the same time, commodities from many international markets have come under severe pressure due to events such as the tsunami in Asia and Hurricane Katrina in the U.S.”

McCoy says he believes the “potential is infinite” for increasing supply from global sources, but he emphasizes the importance of resolving domestic supply and distribution issues first. “You don’t just step into these markets overnight,” says McCoy, who recalls that it took his previous employer, Wal-Mart, five years to lay the groundwork for its supply chain infrastructure on mainland China.

If Pulte does move ahead with its global strategy, McCoy says he sees the company leveraging the experience and contacts of suppliers that have manufacturing experience in the Far East. “We’ve just completed a thorough RFQ process and, increasingly, we are choosing partners with strong global relationships.”

SOURCE SHIFT: The import of Chinese building products is expected to increase as the building boom in China cools and manufacturers look for new markets. Beazer Homes also is starting to look at China, but Tony Callahan, vice president of strategic sourcing, emphasizes that he does not want to disrupt his existing supply channel or “reinvent the wheel.” Rather than have product from China drop-shipped to Beazer’s building sites, which could invite theft and create material handling headaches, he would want distributors to supply the product to subs.

One logical area for Chinese imports is door hardware. “You can get quality product with a PVD finish with a lifetime warranty at very good prices,” says Callahan. Other product areas that he is exploring are HVAC systems and cabinets. Ideally, he would like to see existing suppliers augment their product lines with new products from China—and take responsibility for insuring quality. In any case, stresses Callahan, “we would start small and test the concept thoroughly. We will be very careful about rolling out unproven products.”