Pro dealers seek e-link to builders

Home Channel News, Jan 24, 2000 by Brae Canlen

BMHC, Lanoga, others in B-to-B e-commerce

RESEARCH TRIANGLE PARK, N.C.-- A group of the building industry's largest players has coalesced around a North Carolina software vendor that hopes to become the gold standard for business-to-business e-commerce.

BuildNet, a three-year-old provider of project management software, is developing a network that will link the back offices of residential builders with their dealers, distributors, and manufacturers. Although the system has not yet been tested, BuildNet's list of investor-partners -- a cast that includes Building Material Holding Corp. (BMHC), Lanoga Corp., Cameron Ashley Building Products and Owens Corning -- gives it a running jump on the competition.

Until now, pro dealers have lagged behind consumer-oriented retailers in creating e-commerce Web sites because selling directly to consumers over the Internet is not that important to them. However, the pro side of the industry appears to be putting into place the building blocks for a standardized e-commerce framework to facilitate business-to-business transactions. Just last month, a consortium of computer system and service providers, manufacturers and dealers met in Charlotte, N.C., to discuss establishing data transmission standards and an agreed-upon method of identifying individual products. The group, led by Enterprise Computer Systems, among others, received a boost when the National Association of Home Builders joined the steering committee and pledged its support. Gaining the support of key players in each step of the lumber and building material supply chain is the consortium's current focus.

BuildNet, a privately held company founded in 1996, appears to have reached several important firms in home building, distribution and manufacturing. It laid the groundwork last May by raising $35.7 million from several investors -- including G.E. Appliances -- and by acquiring four competitors that also sold project management software.

Then BuildNet went after the big production builders: Pulte Homes, D.R. Horton and Lennar Corp. signed on as minority investors.

Next in line were the suppliers. Owens-Coming announced an alliance with BuildNet on Dec. 16, 1999. BMHC, Lanoga and Cameron Ashley also joined the crowded platform of retailers, distributors, manufacturers and venture capitalists who invested $104 million in BuildNet's latest round of capital infusion.

"We will be able to link builders to any part of the supply chain they typically use," said John Wagner, director of media relations for BuildNet, in an interview with NHCN.

Wagner stressed that BuildNet has not developed a "click and buy" model for e-commerce; what it offers, instead, is an efficient way for builders and their suppliers to transfer information over the Internet. Participants will be able to place orders, get price quotes, check product availability, schedule deliveries and conduct financial transactions 24 hours a day, without phone calls or faxes.

Computers will do all the talking while humans update the system with real-time information on work-stage completions and on-site deliveries. If the framers are running behind schedule on a certain housing project, the window and door suppliers will automatically hold back their deliveries. The end result, according to Wagner, will be industry-wide cost savings and inventory streamlining -- once the system is up and running.

BuildNet expects to roll out the system to 25 cities by the end of 2000. In the next few weeks, BuildNet plans to start a series of "beta" tests where builders and suppliers will exchange dummy data. BMHC, Cameron Ashley, and Carolina Holdings have agreed to participate; all three firms were already in the process of expanding their electronic data capabilities or developing their own electronic data interchange (EDI) systems.

Carolina Holdings, which hopes to launch its own e-commerce site this year, will test the system in Michigan, said Michael Brooks, director of information systems for the Raleigh, N.C.-based building materials dealer. (Unlike BMHC and Cameron-Ashley, Carolina Holdings did not become a minority investor in BuildNet). San Francisco-based BMHC will electronically connect one of its 53 building-material centers to an existing customer that already uses BuildNet's project management software. BMHC won't divulge the exact location, but Michael Mahre, BMHC's director of finance and planning, told NHCN that the tests will coincide with improvements in BMHC's point-of-sales system. "[BuildNet] needs a robust back office," Mahre explained.

One reason for this requirement could be BuildNet's proposed fees: builders will pay a subscription based on volume while suppliers are charged on a transactional basis. Although nothing has been decided yet, BuildNet may charge the suppliers a percentage of the money they save by using the system. According to the BuildNet spokesman, this figure can be determined, in part, by looking back at the labor costs consumed by the manual handling of information. Cost savings due to inventory efficiency may also figure in.