Scaling Vendor Operations: Five Lessons Learned

In 2022 we were three years into growing Redfin Home Services, LLC, the internal general contractor business to complement Redfin’s brokerage. We were expanding into new markets and preparing to double our job volume in the peak summer months. A key element in getting ready for that scale increase was finding, engaging, and retaining the best vendor and subcontractor partners to fulfill $100M of renovation services across our 30 markets. We paired field managers, who ran renovation operations in their markets, with our central vendor compliance team to help source and vet potential vendors.

Here are the top five lessons learned from ramping up the scale of our vendor operations:

1. Clarify roles and responsibilities

Large organizations can unlock efficiency by building a workflow that matches knowledgeable, hands-on field folks with dependable central administrative resources, but they can only achieve those efficiencies at scale if the central teams can deliver the same administrative support in Dallas as they do in Denver; if the field teams have the same understanding of their own responsibilities in LA and ATL. 

To help central teams deliver their services consistently, they need enough infrastructure to guide them through their functions, and before an org invests in changing software, it needs enough buy-in from field and central leaders about what they’ll be responsible for and what they think they need to be successful in doing it.

At Redfin we felt that we didn’t have “enough” vendors in some markets in 2021. Before we mobilized to make a bunch of cold calls to local plumbers and electricians, we had to step back and map out the sourcing and engagement process. We need to clarify who decides when we have “enough” vendors, and how they know.

We broke the analytics, sourcing, onboarding and engagement workflow down to 20 steps in a RACI matrix to clarify who would be Responsible for each task, who Approves the work, who is Consulted about the work, and who gets Informed when it’s done. The crucial decision was “who owns the relationship with the vendor once onboarded?” We felt that the team selecting between vendor A and vendor B for the next purchase order, and holding the vendor accountable for their quality and timeliness on the last job owned the relationship. That field manager needed to control the decision to “hire” that vendor in the first place, the responsibility to coach and train them about delivery standards, and the decision to “fire” them if they didn’t measure up.

From there we built a playbook for our central team, and Tableau dashboards to surface our “inventory” of vendors by market by trade. We spent time in December and January planning the work, then worked the plan, setting weekly call targets through May to close the gaps, and established a feedback loop between our field teams and central support resources. We grew our vendor database by 400 net vendors, and deepened our partnership with the vendors we already knew so they could scale their operations with us as our summer volume ramped up. 

As the dust settled in September, there were things we wanted to improve in our vendor partnership process, but we had “enough” vendors to hit eight straight weeks of 90+ renovation deliveries, peaking at 135 deliveries in late July, which blew past our biggest week from the prior year by 80%.

2. Make the work visible with shared infrastructure, even if it’s basic

The make-work-visible concept comes from lean manufacturing, and it applies whether you need to show off which tools from assembly line step 17 haven’t been returned to their color-coded spots, or whether you’re designing a workflow that hands tasks between field and central teams.

The key metrics in a workflow need to be unapologetically visible to partner teams. No one is going to be perfect at all functions at all times, and surfacing the metrics gives everyone an objective way to gauge performance and ensure that teams can own up where they have made a mistake or underperformed.

When we asked our central vendor compliance team to act like recruiters in sourcing and vetting potential vendors for field manager “hiring” interviews, we spun up a Smartsheet database to track the sourcing funnel. It was a minimal viable tracking system, and we couldn’t have operated without it; it enabled us to show on-demand reporting to field managers on the number of new outbound calls per market and per trade, the number of vendor interviews lined up, and the number of newly onboarded vendors. We set recurring meetings between each field manager and their central vendor recruiter so they could step through the funnel progress, recap lessons learned for the past week’s vendor interviews, and surface any exceptions in engaging newly-onboarded vendors. 

At our scale, the Smartsheet felt like a duct tape solution. It helped us learn what we needed to track and how, but we found it labor-intensive to log all activity in the system, and it didn’t integrate with the job management system we’d built for our field teams. For the next year’s scale, we prioritized adding a formal CRM system to track all the gaps in our vendor inventory, and all the recruiting efforts to find, win and keep the best trade partners.

3. Ride the wave–don’t bring on vendors unless you can engage them quickly once they are onboarded

Coming into 2022, we’d hear feedback from our field teams that “we don’t have enough vendors in trade X,” only to look in our database and see that we had several onboarded vendors in that category that had never been used. 

In interviewing those vendors, they would often report “I added you to my Acord certificate, and then nobody ever called me!” Something was missing in the communication loop.

To help promote alignment between our central sourcing team and our field operations teams, we built a dashboard showing vendors by the number of purchase orders they’d been assigned, and added an easy filter to look into vendors that had not yet been engaged on a project. 

At the regular sourcing meeting between our vendor coordinators and field managers, we added a standing agenda item to review onboarded-but-not-used vendors, and set the expectation that new vendors needed to be engaged within 30 days of being onboarded. 

Each week we looked at job forecasts and tried to balance any staff recruiting needs, which typically required 60 days lead time, and vendor recruiting needs, which could be filled faster as long as we had bandwidth to source them.

Surfacing the exceptions in vendor assignment helped reduce waste in the sourcing process. We planned to formalize a round-robin approach, awarding new projects to ensure we were balancing engagement across the vendor pool, and triggering an initial job for new vendors by default.

4. Incentives Matter–sometimes more than you might expect

We linked field manager bonuses to three performance metrics in 2022, including working speed–how many dollars of renovation work are performed per business day by trade partners and internal technicians. We had mixed feelings about this metric, as the easiest way to drive up performance is to overpay for things, and $15,000 of roofing can be installed without slowing down the performance of internal services. But by centralizing the expected costs of several hundred standard services, and surfacing exception reporting on our most frequently-ordered services, we felt we could manage cost controls and perhaps see a slight bump in delivery speed. We got a tsunami.

Coming into the peak season in 2022, a few of our higher-performing markets were delivering projects at more than $900/day, which they achieved by maintaining good communication about job starts with vendors, and looking to compress schedules by having different trades overlap. We had asked all of our field teams to go fast, but when their compensation was directly on the line, most of our managers found new motivation to compress job schedules further and hit job duration targets more dependably. Some markets still struggled, but our performance across the board took a big step up. In 2019 our first set of OKRs aimed for a working speed of $600/day, which felt like a stretch goal back then; by 2022 Q3, we were averaging nearly $1,800/day, with ¾ of our markets above the $900/day threshold.

5. Write your forecasts in pencil, not ink, and budget for flexibility

We worked with our partners to identify the number of expected renovation job starts by market by month, then built our team infrastructure, including our vendor base and our internal staffing, to be ready to start that volume of work on that schedule. We could commit to targets for starting that volume of work timely, working at a brisk $/day rate, and delivering at our duration budget the vast majority of the time. 

We tried to organize around our partner’s job start projections in 2021, but a pair of new markets had a “success catastrophe” and signed us up for vastly more projects than we were prepared for. While most markets had solid performance that summer, we spent most of 2021 working through the backlog in a handful of faster-than-projected markets.

For 2022 we worked to clarify with our partners that we could absorb a little more than the forecast volume, but if projects greatly exceeded the projections on short notice, we could get into the same trouble.

We also started building an operational excellence team for our field organization. Their focus was on ensuring best practices market by market in the shoulder seasons, but they could act as firefighters if individual markets started pushing past their capacity.

A combination of staffing departures and surges in volume did result in hitting our capacity limits in four of our 30 markets. While most markets were running smoothly in the peak months of 2022, we flooded these four markets with support, setting up a daily burn-down call for each market to step through every project’s next steps and likely delivery date to see when we would free up resources to start the next project. We flexed a few field team members across markets, and having an extra project manager often made all the difference. Field resources are inherently inflexible and tracked to the local market’s cost center, but paying more for 3-4 flexible resources had a huge boost in keeping our overall staffing lean, and recovering operations when job volume pushed beyond local capacity.

Your project forecasts are going to be wrong, you just won’t know in which direction and where until after you’ve committed most of your fixed-budget resources. Keeping a few flexible resources in reserve can help immensely when you’re in year three of rapidly scaling a new business.

Postscript

Thanks for reading my thoughts on vendor operations at scale. I have a longer white paper on our year over year tactics in preparing for 2021 and 2022–please reach out if you’d like a copy.