Lead times take center stage for construction supply chain management. Given abnormally long lead times and higher instances of "no stock" situations in 2021 within the building materials industry among others, the way and accuracy with which you communicate order fulfillment lead times to your channel partners and end customers must become top priority.
The reason for this shift in mindset is primarily this: without reliable lead time information, construction progress is impeded or more costly.
Inaccurate Lead Times Create Construction Delays (and worse) for Customers
Inaccurate lead times create construction project management nightmares for your end consumers like builders, contractors, and specialty installers who then experience material related project delays (MRPDs). These MRPDs force them to rearrange the job-site schedule, reschedule subcontractors, and in extreme cases, bear the bad new to their client that they will have to wait even longer to move in or otherwise utilize the space that is currently under construction.
Lack of visibility into lead times creates headaches for your other channel partners, like dealers and distributors as well. They rely on consistent order fulfillment and consistent demand fulfillment figures. The worst possible outcome for your channel sellers is to have ready and willing buyers at their doors or websites and to be out of stock due to lack of order fulfillment to their warehoused and dealer centers.
Further, not giving any of your channel customers accurate information break their trust in your brand and makes it easier for partners to become loyal to another brand who better supports their business objectives and availability needs.
Poor Lead Time Communication Is monetarily Costly
The financial domino effect in the building materials industry can become highly volatile to everyone involved, but especially the homeowner or commercial property owner at the end of the line who may have other financial moves in play or a limited window to work within to begin with.
It decreases the project profit margins for the contractors who may have to pay for extended equipment rental; or pay for more workers to be on site expecting to have all necessary materials to install but are then delivered only a partial order or no order in their delivery window at all. According to a COAA study and 2020 LevelSet study, between 63-66% of construction project time is spent waiting for materials. And that was before major supply chain disruptions further complicated construction supply chain management. These increased labor costs an other fees associated with project delays eat into the marginal 2-8% average profit margin for a construction project. Theirs is an efficiency game, meaning time is always of the essence.
Inaccurate lead times also impacts your dealers' and distributors' abilities to operate well and squeeze out their slim 3-5% profit margins. After all, when theirs is a volume game and their shelves are empty, they have to either fill the shelves with competitor offerings that are available or make tough business decisions, such as layoffs or taking on debt.
How to Improve Supply Chain Visibility
So, how do we fix this significant problem? I propose that manufacturers modernize their lead time communication systems with a straightforward, initial solution: set up a PRM with lead time tracking capabilities to be manually accessible by channel partners and end customers. With this method, you'd be taking fractured channel communication of partial or outdated order status and instead providing a single source of truth for internal teams, channel partners, and customers to operate with.
How it would work:
In a matter of just a few weeks, you can have a solution up and running.
Step 1: Setup a "minimum viable" partner relationship management tool (PRM). There are many benefits of utilizing a customer portal or full PRM for channel management, but to solve this time sensitive problem quickly, you can implement just lead time communication features first and then iteratively build out the rest of your PRM over time. You'll need to assign a responsible internal team member to manage the implementation and oversee the accurate distribution of lead time information.
Step 2: Communicate the changes to supply chain visibility before, during, and after the launch of your PRM. You can do this through you partner newsletter and via direct communication from internal sales reps and channel account managers. This will assure your partners that you understand the challenges they are facing; that you are taking actionable steps to quickly resolve what you can; and of course to share when the lead time and order status features are available.
Determining your communication methods and frequency for this PRM feature launch can be your testing ground for developing and communicating the iterative PRM feature launches that follow as well.
Step 3: Managing the feature launch, onboarding partners and customers, and ironing out the kinks.
Step 4: The initial launch should not be the last time you consider this channel communication feature. Foster open lines of communication with your partners to understand if this implementation solved for their need for self service lead time communication. If you get negative feedback still, uncover what's missing and improve your tactic or platform.
Step 5: Setting up automated notifications via email, text, or otherwise is something to consider incorporating in the initial launch or in an improvement iteration.
How long it would take:
We understand the necessity of getting a solution up and running quickly without sacrificing quality. That's why we help building products manufacturers implement this "minimum viable PRM" to communicate lead status in 4 to 6 weeks on average.
How much it would cost:
Initial costs for the "minimum viable PRM" is oftentimes less than $10,000. There are a couple of factors in the initial and ongoing costs and a couple of variables to account for, however. Those include:
- Which PRM you choose. Here are some of the best PRM options for manufacturers. Plan for this to be around $1,500 per month, give or take.
- The cost of initial lead time feature configuration if you implement everything in house, hire an implementation partner, or choose some combination of the two. Consider this as the portion of employee's salaries devoted to initial PRM configuration + any implementation partner fees. When you partner with ManoByte, a typical initial PRM configuration costs, on average, roughly $6,000 for the partner fees portal of the equation.
- The cost of ongoing additional PRM features development, configuration, and rollout. When you partner with ManoByte, we typically develop a roadmap that implements PRM features in stages and develops additional content over time. This roadmap also accounts for successfully training any existing or new partners and staff to use the PRM features effectively. A typical monthly retainer of this sort typically starts at $4,500 per month.
In 4 to 6 weeks and starting at $10,000 initially you would have a solution to your lead time communication issues across the channel.