Pulte Homes' Purchasing Pro

At the center of Pulte Home's supply chain sits people not products, and this is entirely by the design of Reggie McCoy, the GIANT builder's chief logistics officer/national vice president supply chain and purchasing. While efficiently buying and moving product is the "a, b, c's of the job," McCoy's focus is on delighting customers with the products that matter most to them.

Here, McCoy explains how his learning in other industries shapes future purchasing at Pulte.

Purchasing Philosophy
"Product purchasing in home building has been largely one dimensional - buy things to fill the holes in the house. There is very little focus in purchasing departments on understanding what products would drive customer demand for the home or what would add to the buyer's overall experience. At Pulte, we give the customer an opportunity to upgrade, but we should really be building that into the program to begin with.

"New home customers care about quality, value and perception. Our purchasing organization is built around providing our buyers with the wow experience - exceeding their expectations the minute they come into the home. We already do that in terms of constructed quality and customer service. My purchasing focus should be to do the same thing - to add to the customer experience. When a buyer walks into a house, I want him/her to say, 'This feels like me. I can't get a better deal.' I want them to feel the value, feel the quality.

"I want to institute this customer-centered purchasing philosophy across the company - at every price point and for each of our customer segments. All of our products must represent true quality and true value, and purchasing has to help in that regard. Our opportunity to do that comes in understanding what the customer wants, understanding what we currently buy and then standardizing our processes to get the best buy on the best products in the home. We can buy things all day long at the right price, but if they aren't the things that drive value, then we're missing the mark. We must enhance the customer experience by putting the right things in the home."

Creating Customer Value
"Understanding what products make a difference to buyers is what we're always working to answer. To do this, our purchasing organization partners with our marketing segmentation team to draw on their knowledge. We're exploring the value of brand versus the value of the product. For example, consumers know their brand-name appliances, faucets and toilets. Right now we buy 30 different types of toilets throughout our divisions. What if, through customer research, I learn we only need two types of toilets? I can leverage that buy across tens of thousands of units and then the price I pay per toilet goes down. I've increased the value to our customers and I've delighted them.

"It's all about the customer's brand experience. Our job is to recognize the brands in the home that drive the customer's perception of quality. Then we go get those items and do our homework in terms of how we secure the commodities in the home. Look at lighting. There are a lot of good companies, but lights still are not a branded product. No home buyer talks about the maker of a light fixture, just the appearance of it. The job of purchasing in a category like this is to drive the quality and get the best buy. To do this, we're going to look at more globalized purchasing streams for lighting, investigating resources around the world. There are lots of other commodities in the house. I want to drive standardization in these areas to reduce our SKU base so we're more efficient.

"The other way to create value for the customer is to put real discipline to the ABCs of purchasing and procurement. This means looking at our standardization process and our SKU depth. We need measures and metrics for everything. The goal now is to focus the purchasing organization in four major components:

1) Purchasing: We are looking at a coordinated activity versus a fragmented approach while still allowing each division autonomy.

2) Contract management: We must re-look at all our contracts to allow the organization to run at the velocity we're growing. Our contracts have been designed to buy things, not to leverage partnerships. It's time to look at the strategic partners we have done business with for many years and help them understand our growth so they're able to support it. 'Partnership' is a bit of a cliché; what I really expect is a marriage. We want the companies we align with to know we care about their success and we want the same commitment from them.

3) Business development: We must manage our labor base. How do we take a contractor that builds 10 homes for us and get him ready to build 200? This is a vital part of the purchasing function. If I purchase materials and get them at the right price, my trade contractor just lost a bunch of the margin he needs to grow his business. It becomes our job to teach him we can make him more money on the labor proposition alone. We just hired another senior leader to help secure our production capability throughout all our markets.

4) Logistics/distribution network: If we manage purchasing, contracts and our trade partners correctly, we have to be able to move all of it to where it is needed when it is needed. Whether we create our own high-velocity network or consider a third-party integrator to do it, distribution is the next piece.

"With all basics in place, we'll be able to sprint real soon."