Breaking Down Traditional Supply Chains
Interview with Jim Hourigan, Chief Operating Officer at BuildDirect
Q) We’re fascinated with BuildDirect. So, let’s start with a description of BuildDirect as a company – can you describe the company, its mandate, vision and market?
A) What we’re trying to achieve here with BuildDirect is develop a platform for heavyweight goods – over 150 pounds. Right now, if you look at a lot of e-commerce companies they are working with UPS and Federal Express. That’s a great way to work because they get their planes and their warehouses – those companies can deliver.
What is difficult to deliver, however, is heavy stuff. That’s where we think there is an opportunity for us to develop a new supply chain, a new platform that we can deliver that either directly to the home or to the project site.
We’re going to stay fairly asset-light, we are going to be the enabler of the network. We will be able to plug in and leverage the different types of things that we’ll need to supply these heavyweight goods. So, you’re going to need a truck with a lift gate on the back to deliver heavy stuff. There may be needs for flat beds. We also do roofing, so we’re going to have to have trucks with cranes.
Q) The foundation of your company, in many ways, is built upon a robust, well-oiled supply chain. Can you describe how that supply chain was designed and built?
A) Originally it was Rob Banks (co-founder; executive officer) and Jeff Booth (co-founder; CEO) that pulled it together. Essentially, what they did at the time was build a website to deliver from manufacturers to a customer. Back when they started, because they didn’t have warehouses, they were doing it at a container level. When the credit crunch came and the housing recession in the U.S. came they had to figure out a different way.
That’s when they came up with the warehouses. Of course, you had to have enough warehouses with enough heavy stuff – if you had one warehouse in California but you have demand in Massachusetts the cost is going to be very, very high.
So, the other thing that we’ve done is analytics. We’ve been able to use those analytics in supply chain to determine where we put our warehouses, what inventory needs to be stocked there. We’re actually out in the front of where demand is going to be. So, we can actually help a supplier manage their production. That’s where it gets really exciting.
Q) How does that differ from a “traditional” supply chain?
A) It is a huge, fundamental difference. I like to use Wal Mart as an example. If I was out of stock with Wal Mart, they’d say ‘Hey, you’re 10% out of stock.’ And I would make sure we got up to 95% or 98%. But, it was tough to really quantify what you were missing. What we’ve been able to do with our analytics is we can actually tell a supplier how much they are missing in sales before it actually happens.
And with our warehouse structure, we bring everything in. Everything in our warehouse is on consignment. One of our best suppliers has more than a $1 million in product in warehouse. They do that because they trust that we will be their sales and marketing in North America. And we tell them how many containers to ship and where to ship it and we give them all the analytics. For a smaller company, they would never get those analytics on their own, for instance.
Q) Lastly, I wanted to touch on the idea of Supply Chain 2.0. Can you elaborate on what that is?
A) We’re not exactly sure, but we’ve got some ideas. We see the supply chain has been more of a push. When we’re trying to do – along with others – is develop the right way of both push and pull. We don’t have all of the answers yet, but one of things we’ve just kicked off is a supply chain advisory board.
The level of people we have on that board is equal to, or perhaps even greater, than the people we have on our corporate board. We’ve got the ex-CEO of Descartes, the ex-CEO of Red Prairie, a professor of supply chain at Stanford graduate school – they are all at the heart of this. And they are going to help us get to Supply Chain 2.0.
What we think the overarching vision is: we want to build an “end trust.” The “end trust” is customers trust us, suppliers trust us and we will give credentials to the suppliers – so they all get a rating and it is very transparent. Essentially, we become the toll booth and we’re making money on the transactions because we are making it possible for these guys to connect. It’s very dynamic.