Builders buy materials from wholesale distributors, contractor supply companies, lumberyards, and direct manufacturers, where they receive large discounts for bulk orders. Some homebuilders are part of membership-based buyer groups where they get priority access to lumber and other building supplies.
A large homebuilder will typically avoid department stores such as Lowes, Home Depot, Rona, Reno-Depot, Canac, and Home Hardware. The reason is – these stores may not be able to supply the vast amounts of materials required at discounted prices. Additionally, these local department stores aren’t considered experts in a specific trade.
It is in the best interest of the builder to purchase building supplies and materials from specialty suppliers. For example, plumbing suppliers would supply the builder with all plumbing-related materials. In the event the builder needs unique products or custom solutions for plumbing, they can reach out to the specialty supplier for support.
When builders don’t pay attention to the procurement of building supplies and materials, it can lead to homes that have a higher cost to build. The rising cost of building materials is one reason why new build homes cost more today.
Primary Source for Building Materials for Homebuilders
|Building Material||Primary Source|
|Lumber material and plywood||Lumberyards|
|Millwork material, trusses, and wood trims||Lumberyards and wholesalers|
|Drywall and gypsum||Wholesale supplier|
|Electrical Supplies||Wholesale suppliers and specialty stores|
|Roofing Materials||Wholesale supplier|
|Plumbing Materials||Wholesale supplier|
|Carpet, flooring, and tiles||Specialty suppliers and wholesalers|
|Appliances||Specialty suppliers and wholesalers|
|Countertops and backsplash||Specialty suppliers|
|Kitchen cabinets||Manufacturers and wholesalers|
|Hardware and tools||Department stores and specialty stores|
|Paint||Specialty stores and manufacturers|
When it comes to decision-makers in the builder’s purchasing department, we find that eight out of ten times – the builder decides where they buy materials from. In some cases, builders may decide to have their trades decide on where to buy material, and at what quality. The subcontractors will usually work with specialty suppliers, so the builder leaves this decision up to the experts.
Most subdivisions will be close enough to local lumber supply companies that are privately owned. These are great places for builders to purchase lumber, as the discounts are significant. The builder can save more than 35% on material costs when shopping through a private lumber company.
In most cases, these specialty lumber companies will only deal with homebuilders, and will not sell to smaller contractors or customers. Homebuilders purchase building material in bulk, for several dozen homes at once. This equates to several thousand dollars in building material that is shipped to the building site – making it lucrative for the lumber yard.
Apart from building materials, a homebuilder will contract out work for a concrete supplier to assist with pouring concrete. These contract suppliers will bring their mixing trucks and pour concrete directly into the site.
When homebuilders are sourcing lumber, oriented strand board, plywood, trusses, and other building materials – they rely on lumberyards. These large lumber suppliers are able to supply several board feet of wood to meet the needs of builders.
Lumberyards have the equipment to move and deliver large amounts of lumber to job sites across the city. With the significant discount available from lumber suppliers, most builders choose to source their millwork, trims, and trusses from them as well.
Each city will have its own lumber store, whether nationally or locally owned. If they are a national brand, there may be better pricing available to the builder.
We’ve seen these suppliers carry other products as well, such as drywall, insulation, and tools. It is the builder’s decision to decide to buy these from the lumber yard.
In the home building industry, a great deal of building material is supplied by wholesale suppliers and distributors. The majority of homebuilders purchase their plumbing, roofing, and electrical materials from wholesale suppliers. Less than one-third of builders also use wholesale suppliers for tiles, carpeting and flooring.
Appliances are also obtained from wholesale distributors by some builders. However, with new offerings from department stores such as Best Buy for Business, builders are contracting out the work, maintenance, and delivery to these third-party suppliers.
With wholesale distributors, builders are able to save a great deal of money on their purchases. Due to the extent of their purchases, these distributors will offer builders with credit terms. This would give the builder an interest-free period before they are required to make a payment. Generally, 30-days of no interest is common in this industry.
When it comes to certain trades, most builders prefer using specialty stores to purchase their building materials. These suppliers offer far more than specialty products, but rather an extensive wealth of knowledge and expertise in the field. These suppliers will often make recommendations and suggestions to builders on which products to use.
Additionally, builders are able to qualify for discount prices on materials for plumbing, electrical, roofing, and other trades. Specialty suppliers will also have the capability to source custom products for home building. The majority of specialty dealers in the home building industry are privately owned.
With our discussion with builders, we’ve learned that most of them have their electricians source the electrical components and materials. As electrical work is governed by the Electrical Safety Authority, builders will often have their licensed electricians handle the product selections. The majority of electrical equipment and material is sourced from specialty electrical supply stores.
Other building materials that are sourced from these retailers include tiles, flooring, carpeting, kitchen cabinets, and backsplash.
Homebuilders will also contract specialty suppliers for certain rental equipment such as hot water tanks, air conditioning, and video camera doorbells.
Across the board, builders enjoy working with direct manufacturers in kitchen cabinets, paint, and flooring. Most direct manufacturers will have the ability to create custom products for their builder clients. These manufacturers may be locally owned or out of a neighboring city or state.
A great advantage for builders when working with direct manufacturers is the ability to see the products in production through to their completion. If issues arise in the production, the builder does not have to go through a distributor or middle-man – they can simply go to the source.
Direct access to the producer of the material will minimize costs and time in production while increasing access to first-hand knowledge. Large home builders who build dozens of homes will often use direct manufacturers to source their materials. General contractors and small-sized builders will typically source less than 25% of their materials from direct manufacturers and factories.
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