Dive Brief:

• KB Home is diversifying suppliers and trimming SKUs as the homebuilder confronts extended lead times and other supply constraints for garage doors and other components, said co-COO Rob McGibney on a Q4 earnings call.
• "We’ve taken some action to minimize the disruptions from that through finding alternate suppliers and manufacturers," McGibney said. "We’ve worked to minimize the door styles that we offer to match what’s more readily available in the supply chain."
• The company converted its featured indoor appliances to Whirlpool’s stainless steel products, cutting SKUs to fewer than 150 appliances from more than 400, said co-COO Matt Mandino.

Dive Insight:

KB Home is one of many builders unable to get adequate materials and components for its projects — and the issues aren't limited to garage doors. Kentucky-based homebuilder Drees Hills reported problems procuring windows, appliances, flooring and shower stalls over the past year. Dallas-based GMS ordered more wallboard and steel to navigate high demand and longer lead times.

Materials prices jumped nearly 20% last year, with labor constraints and many of the other pressures on the industry expected to continue. But clients are moving more quickly to commit to projects, according to Canada-based PCL Construction president and COO Deron Brown, who told sister publication Construction Dive he has a robust outlook for 2022. He’s not alone: Contractors are optimistic going into the year, according to an Associated General Contractors of America member survey.

KB Home has locked its costs and prices for a backlog consisting of more than 10,500 homes with a value of $5 billion, "representing the bulk of our revenues expected for 2022," CEO Jeff Mezger said on the earnings call.

The company is seeing no weakening in homebuyer demand, Mezger said on the call.

"The markets remain very strong," he said. "We have a long waiting list. We’re continuing to balance price and pace, like we have been for the last year, and I think we’re going to see a very strong spring selling season. It’s very good out there right now on the demand side."

Still, materials shortages continue to present challenges for homebuilders. KB Homes is balancing SKU cuts with its customers' desire for customization, Mandino said.

Its philosophy is to retain as many personalized choices as possible without sacrificing its build times, Mezger said.

"We're dropping SKUs right now to help ease the supply chain," Mezger said. "If you're offering three or four of an item, take it down to one or two, and you reduce choice a little for the customer, but you improve your ability to get the product and compress build time."

Materials shortages continue to present a moving target, with homebuilders continuously encountering new issues, McGibney said. The foam used for stucco lath, a waterproof base layer, "wasn’t really an item on our radar" as an issue early on in 2021, he said.

"But now, the supply of that has become scarce," he said. "So while one issue kind of gets traded for another, we’ll claw back time in one area and lose some in another."