KB Home says efforts to trim SKUs lowered building times, costs in Q2

KB Home says efforts to trim SKUs lowered building times, costs in Q2

July 11, 2023

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Dive Brief:

  • KB Home’s efforts to reduce its SKUs by 43% over the past 18 months has helped lower building times and costs, according to an earnings call last month.
  • The home developer opted to retain studio options that were “most frequently selected by our customers and those most readily available in the supply chain,” EVP and co-COO Robert McGibney told analysts.
  • “The construction time improvement was driven by a normalizing supply chain and better trade labor availability, as well as our ongoing initiatives to simplify our product offerings, designed, [collateralized debt obligation] choices and structural options,” he said.

Dive Insight:

KB Home’s construction times sit at roughly seven months, which is still above its typical four to five months depending on the division, McGibney said. However, the home building company is making “solid progress in returning to those levels.”

The number of delivered homes in Q2 increased 6% YoY to 3,666, according to an earnings report. The company ended Q2 with a unit backlog of 7,286, compared to 12,331 the previous year.

KB Home has struggled with supply chain issues in recent years, contributing to construction slowdowns and delays. In Q1, for instance, a shortage of transformers and electrical equipment impacted the later stages of construction.

To tackle extended lead times, KB Home began diversifying its suppliers and trimming SKUs last year. At the time, co-COO Matt Mandino told analysts that converting to Whirlpool’s stainless steel products lowered SKUs to less than 150 appliances from more than 400.

Although overall product availability continues to normalize, McGibney told analysts this quarter that some products remain in short supply with long lead times in several markets. Products include air conditioning and heating equipment, insulation and electrical products like switchgears and transformers.

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