Apollo Global Management affiliates yesterday announced a $1.2 billion investment in QXO. Brad Jacobs, CEO of QXO, entered the construction industry after building a string of successful logistics and equipment rental distribution companies by acquiring Beacon Roofing Supply in April 2025.
He has told shareholders he has a $50 billion revenue target over the next decade and has excited the industry with his focus on artificial intelligence, predictive inventory and advanced B2B e-commerce.
Technology can transform distribution operations, but only if there is data to optimize.
I have spent twelve of my forty-plus years in construction helping homebuilders reduce construction costs through process optimization and implementing supply chain solutions that reduce costs, not margins. We have implemented the exact data flows that QXO needs.
Here’s what the QXO team doesn’t know.
The three-month data gap
In typical residential construction activities, the decision point for building materials is separate from the reorder point. The parties responsible for the information at these two critical points in the construction cycle are not working together to share demand signals that are critical to optimizing material supply. We normally know three months in advance which kitchen faucet will be installed in a home, but plumbers wait up to 48 hours before they need the faucet to place the order. This forces distributors to overstock SKUs and quantities in case someone orders them.
I applaud Brad Jacobs’ intention to use technology to increase efficiency in our industry. However, distributors and dealers are not inefficient because they don’t know what to do. They are inefficient because the data needed to optimize operations is not available. This is not a distributor competency problem; it is a structural information problem.
Distributors can’t predict demand they can’t see. No amount of AI in the world can predict which products will be needed in every home at the right time.
Why logistics scripts are not transferred
Jacobs succeeded in logistics and equipment rental because these industries have inherent demand signals. Shippers know what they are transporting 3-7 days in advance. Contractors know they need to reserve equipment in advance to ensure they have what they need to support production.
House building should have a significant advantage over other construction and typical manufacturing processes because of the longer construction cycle times (it takes six months to build a house, five hours to build a car) and the predictable repetition. There is plenty of time for kitchen faucet manufacturers and distributors to optimize if they have up-to-date customer data. Instead, QXO is building a Formula 1 race car for a dirt track. The infrastructure cannot support the technology.
Homebuilders know what they need, but refuse to share it
We’ve been waiting a long time for trade contractors, who have the SKU data that suppliers desperately need, to improve communication about SKU and date information. Homebuilders who primarily contract with subcontractors through turnkey, lump sum contracts typically lack SKU data, especially in the format the supply chain requires.
A purchasing manager might have the kitchen faucet model number in a specification document and know that lot 47 in week 23 of the construction schedule requires a Kohler K-596-VS faucet, but that information does not translate well to the upstream supply chain. This intelligence dies out at the builder level: trade contractors order products tactically and distributors react reactively.
Why the current model continues to exist
Some homebuilders view product specifications as flexible and leave product choice up to the homebuyer. When customization is completed before construction begins, the supply chain has time to respond. Builders who allow phased customization during construction undermine the goal of sending timely demand signals that reduce material costs. Trade contractors respond by not relying on the final specification until a few days before installation.
Trade contractors also have difficulty adjusting to homebuilders’ construction schedules, choosing to do nothing until just before installation. They often request quotes from several distributors to secure the lowest price, even if they have to make a decision within days.
This frustrates distributors, who want to be informed in advance to optimize inventory and operations. But distributors don’t have much choice: They don’t consider the homebuilder their customer; the commercial contractor pays his invoices. In this situation, no one has an economic incentive to be the first to change.
It works, but only if builders are committed to data discipline
We’ve helped small, medium, and large builders implement direct-to-distributor data flows for a wide range of construction materials. The results can include a reduction in finished product prices of up to 30%, and some builders tell us they have exceeded that. The cost savings are the result of better purchasing timing, less last-minute order processing and the virtual elimination of repeat orders and returns.
To make this possible, a builder must commit to managing the SKU-level details in construction contracts and entering them into their ERP. Most builders use electronic scheduling that allows SKUs to be grouped together with their associated installation dates. These three pieces of information – SKU, quantity, date required – are essential to achieving the level of efficiency that QXO claims to deliver. It also requires builders to be disciplined and require home buyers to select all specifications before construction begins. The final step is to build integration between a homebuilder’s ERP and the back-office systems of distributors and manufacturers. That’s the easy part.
Builders get better prices because data-driven demand planning optimizes inventory, increasing inventory turns and purchasing power. Distributors can purchase materials from manufacturers with the confidence that the products will sell quickly. During periods of limited material supplies, such as 2021-2022, homebuilders can work with distributors to secure inventory allocated exclusively to them. This eliminates repeat orders. It also allows builders to significantly reduce construction cycle time, reducing execution costs.
This strategy also increases the production capacity of construction managers on site. Having the right materials in the right place at the right time reduces the chaos of ‘the way we’ve always done it’.
Construction materials distributors and dealers receive accurate demand forecasts that are updated in real time as construction schedules change. They can reduce just-in-case inventory because they no longer have to worry about running out of product if a subcontractor orders it 48 hours before it is needed on site.
Improved demand predictability also helps distributors strengthen relationships with manufacturers. Engaging in these types of data-driven activities could give them a competitive advantage by helping builders seek supply chain refinements that turn data into cost savings.
The pilot problem
Builders of all sizes, small, medium and large, have established computer-to-computer communications with various distributors and manufacturers. However, we don’t hear about it because it is their competitive advantage and they prefer to guard it carefully.
The smaller builders do not have the scale to attract the attention of other builders who could copy their strategy.
How do we ensure that the entire sector improves?
This is the question QXO should have at the top of its whiteboard. QXO spends billions to acquire distribution capacity, while lacking the operational architecture that makes that capacity (and efficiency) valuable.
What QXO (and the industry) should do next
Stop assuming that technology alone solves the problem.
I recommend a pilot with 2-3 major builders to validate the concept. Today, builders don’t know how much money is left on the table and won’t be economically motivated to make changes until they do. QXO could offer significant discounts to builders who integrate data and collaborate on inventory optimization strategies to reduce product costs. Someone has to pay for software interfaces that convert homebuilder data into statistics and terminology that distributors can understand.
I recommend that QXO fund these interfaces until momentum increases, value is realized, and mutual benefit emerges.
Homebuilders have work to do, especially the larger multi-market builders. The first step is data normalization. When we first tried this at Pulte Homes in 2004, we found 17 different ways to describe a 2″ x 4″ x 8′ piece of framing lumber. Data normalization is crucial for integrating data into the supply chain. Next, ensure that the back office ERP can easily manage SKUs. Some programming changes may be required.
Builders can purchase materials directly or have trade contractors activate and manage last-mile deliveries. This decision is best made on a case-by-case basis. If you decide to purchase the materials, a subcontract change order must specify the use of builder-supplied materials (BSM). Government Supplied Materials (GSM) is a standard contract clause in government construction contracts. This is not new.
Builders can create a new set of Key Performance Indicators (KPIs) to track and measure supplier performance and drive excellence: on-time delivery, fill rate, order accuracy, damage and backorders. Start a collaborative, continuous improvement process to identify efficiencies that reduce costs. I assumed our trade contractors were doing these things all along, but discovered that wasn’t the case.
The $800 billion building materials distribution industry is ready for transformation – but not just through mergers and acquisitions and AI.
Whoever solves the data architecture problem will gain disproportionate value. The technology exists. The economic incentive exists. What is missing is the operational courage to change the way the sector operates.
We have implemented these systems at housing companies we previously worked for and at builders as a consultant. We know they work. We know the objections, the solutions and the results. The future of building materials distribution will not be won by whoever buys the most companies. It is won by whoever solves the data problem first.
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