The challenges for developers and construction companies
The cost of building materials, labor, construction taxes, and interest rates has increased.
The current sourcing process makes it challenging for developers and construction companies to build budgets and timelines, and it hinders their ability to pencil out new development deals, making it difficult to earn strong returns.
Their project managers have to spend many man-hours shopping for prices and sourcing materials from multiple suppliers, which is a costly and time-consuming process.
Problems for building material supply industry
The current sourcing process begins with supplies ordered from manufacturers by distributors, who then sells the materials in bulk to subcontractors, who then resells the product to general contractors. General contractors will then markup material prices before they’re sold to building owners or developers.
You may know that the local distributors’ profit margin is about 20%; subcontractors’ profit margin is about 30%; and general contractors’ profit margin is about 20%. This is the current material sourcing process for building owners and developers.
Building owners, developers, builders, general contractors and property management companies are always trying to find the way to reduce their cost and increase their profit.
These companies are always searching for more reliable material suppliers and reasonable pricing, but they don’t have experience to source the product lines globally.
Existing building material suppliers (distributors) usually only focus on 1 to 4 product categories, and they are stocking their products in warehouses throughout the local market. While this concept is fine for short-term and on-demand projects, it increases costs on projects that are planned more than three months in advance.