The Purchasing Dilemma

Adam Hornyak
October 18, 2011 — 1,352 views  

 

As a homebuilding purchasing assistant, manager, and director for a handful of very large builders across the country, I have found that management teams have a tendency to overlook the importance of what I find to be one of the most integral positions within the company.  Obviously, my opinion is a tad biased considering that virtually every position I’ve held in the past 15 years revolved around the purchasing arena, but I have found an underlying problem within the industry that seems to permeate throughout almost every company I deal with.

Four years ago, I started a purchasing software/business consulting company in the hopes of sharing and learning new methodologies of affecting change and adding efficiency.  What I have seen has not altogether been startling, but has reaffirmed my assumptions of how the industry treats the position of what makes up nearly half of every builder’s profit margin.

Too many companies tend to place extreme emphasis on sales, superintendents, and land development.  I agree that these positions should be revered, as without the land being purchased at market value, homes being built with the utmost precision, and in turn, being sold quickly, there is no business any longer.  What about the material and labor?  More importantly, what about human and data management?

I have seen too many instances where the wrong people are placed in positions that they cannot effectively handle within the purchasing realm.  Purchasing employees are one of the few people within a homebuilding office that not only deal with the subcontractors, but virtually every other person within the company including sales, accounting, construction, and management.  They are the go-to when an invoice is late, when a custom option needs priced, and when a vendor fails to perform, yet I have come across too many that has no business assuming the role.

I’ve dealt with many builders over the years in many parts of the country.  My company revolves around fixing purchasing problems, and always involves builders who assume that the position of a purchasing manager is a second-class job, needing only to manage some paperwork whilst the rest of the company builds the bread and butter.  Not true.  Purchasing is a virtual art form as dealing with such a wide array of “customers” requires steady poise and organization that isn’t simply inborn in everyone. 

The companies who are lackadaisical in their purchaser hiring practices end up paying people like me to come in and clean everything up.  Primarily, I focus on instilling industry best practices but always end up finding that the purchasing software is either underutilized and/or mismanaged.  More often than not, the finger of blame can be pointed at the purchaser-in-charge. 

Anybody can negotiate a $40 savings on an HVAC quote, but it seems as though few can actually take that savings from point A, and deliver it to the software equivalent of point B.  In a purchase order driven business, your purchasing leader must not only be skilled at negotiation practices, but must also be proficient in the program that your company uses to run the business.  The $40 savings means nothing if purchase orders are still going out with the wrong prices.

The housing industry is no longer in a place where numbers can be shuffled around to make people look good.  Every penny counts and a solid purchaser, capable of handling the vast swell of daily fire drills is worth their weight in gold.  Take your time when hiring someone that can easily bring your company to their knees if the fit isn’t right.  You get what you pay for, and a slightly higher salary for the right person will inevitably save you millions in the end.

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Adam Hornyak

Center6

My name is Adam Hornyak, and I am a co-founder of Center6 (www.center6.com), a software consulting company focused solely on the homebuilding industry. We cover report writing, software implementations, and general business consulting.