Apollo’s $1.2b Bet On Qxo Tests Data Limits In Building Materials

Apollo Global Management affiliates announced yesterday a $1.2 billion investment in QXO. QXO CEO Brad Jacobs–after building an array of successful distribution companies in logistics and equipment rental–entered the construction industry by acquiring Beacon Roofing Supply in April 2025. 

He’s 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’s data to optimize.

I’ve spent 12 of my 40+ years in construction helping homebuilders reduce construction costs through process optimization and by implementing supply chain solutions that cut costs, not margins. We’ve implemented the exact data flows QXO will need.

Here’s what the team at QXO doesn’t know what it doesn’t know.

The 3-month data gap

In typical homebuilding operations, the decision point for building materials is separate from the order point. The parties responsible for information at these two critical junctures in the build cycle don’t collaborate to share demand signals vital to materials supply optimization. We typically know which kitchen faucet will be installed in a house three months in advance, yet plumbers wait until 48 hours before they need it to submit the order. This forces distributors to over-inventory SKUs and quantities—just in case someone orders them.

I applaud Brad Jacobs’ intention to use technology to drive efficiency in our industry. However, distributors and dealers aren’t inefficient because they don’t know what to do. They’re inefficient because the data needed to optimize operations isn’t available. This isn’t a distributor competency problem—it’s a structural information problem.

Distributors can’t forecast demand they can’t see. No amount of AI in the world can predict which products will be needed at each house at the right time.

Why logistics playbooks don’t transfer

Jacobs succeeded in logistics and equipment rental because those industries have inherent demand signals. Shippers know what they’re moving 3-7 days in advance. Contractors know to reserve equipment in advance to ensure they have what they need to support production.

Homebuilding should have a significant advantage over other construction and typical manufacturing due to its longer construction cycle times (it takes six months to build a house, five hours to build a car) and predictable repetition. There’s plenty of time for manufacturers and distributors of kitchen faucets to optimize if they have timely customer data. Instead, QXO is building a Formula 1 race car for a dirt road. The infrastructure can’t support the technology.

Homebuilders know what they need—they just refuse to share it

We’ve been waiting a long time for trade contractors, who have the SKU data suppliers desperately need, to improve communication of SKU and date-needed information. Homebuilders who predominantly contract with subcontractors through turnkey, lump-sum contracts typically lack SKU data—especially not in the format the supply chain needs.

A purchasing manager may have the kitchen faucet model number in a specification document and know that lot 47 needs a Kohler K-596-VS faucet in week 23 of the construction schedule, but that information doesn’t translate well to the upstream supply chain. This intelligence dies at the builder level—trade contractors order products tactically, and distributors respond reactively.

Why the current model persists

Some homebuilders view product specifications as flexible, leaving product selection to the homebuyer. When customization is completed before construction begins, the supply chain has time to respond. Builders who allow staged customization during construction undermine the objective 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 struggle to align with homebuilder construction schedules, opting to do nothing until just before installation. They often solicit bids from several distributors to secure the lowest price, even though they must make a decision within days.

This frustrates distributors, who want advance notice to optimize inventory and operations. But distributors don’t have much choice—they don’t consider the homebuilder their customer; the trade contractor pays their invoices. In this situation, no one has an economic incentive to be the first to change.

It works—but only when builders commit to data discipline

We’ve helped small, medium, and large builders implement direct-to-distributor data flows across a wide range of building materials. Results can include up to a 30% reduction in finished-goods prices, and some builders tell us they’ve exceeded that. The cost reduction comes from better procurement timing, reduced last-minute order fulfillment, and the near elimination of backorders and returns.

To enable this, a builder must commit to managing SKU-level details in construction contracts and entering them into their ERP. Most builders use electronic scheduling that allows SKUs to be merged with their associated installation dates. These three pieces of information—SKU, quantity, date needed—are essential to achieving the level of efficiency QXO claims to deliver. It also requires builders to be disciplined in requiring homebuyers to finalize all specification selections before construction begins. The last step is to build integration between a homebuilder’s ERP and the distributors’ and manufacturers’ back-office systems. That’s the easy part.

Builders get better pricing because data-driven demand planning optimizes inventory, increasing inventory turns and buying power. Distributors can procure materials from manufacturers with confidence that the products will sell quickly. During periods of constrained material supplies, such as 2021-2022, homebuilders can collaborate with distributors to secure inventory allocated exclusively to them. This eliminates backorders. It also allows builders to substantially reduce construction cycle time, lowering carrying costs. 

This strategy also increases the production capacity of on-site construction managers. Having the right materials in the right place at the right time reduces the chaos of ‘the way we’ve always done it’.

Building materials distributors and dealers receive accurate demand forecasts that update 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 when a subcontractor orders it 48 hours before it’s needed on the job site.

Improved demand predictability also helps distributors strengthen relationships with manufacturers. Engaging in this kind of data-driven operation could give them a competitive advantage by helping builders seek supply chain sophistication that turns data into cost savings.

The Pilot Problem

Builders of all sizes, small, medium, and large, have achieved computer-to-computer communication with various distributors and manufacturers. We don’t hear about it, though, because it’s their competitive advantage and they’d rather guard it carefully.

The smaller builders lack the scale to attract the attention of other builders who might replicate their strategy.

How do we get the entire industry to improve?

This is the question QXO should have at the top of its whiteboard. QXO is spending 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 high-volume builders to validate the concept. Today, builders don’t know how much money is being 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 needs to pay for software interfaces that convert homebuilder data into metrics and terminology distributors can understand.

I recommend that QXO fund these interfaces until momentum builds, value is realized, and mutual benefit is established.

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 critical to supply chain data integration. Next, ensure the back-office ERP can manage SKUs easily. Some programming changes may be required.

Builders can procure materials directly or have trade contractors trigger and manage the last-mile deliveries. This decision is best made on a case-by-case basis. If you decide to procure 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 isn’t new.

Builders can establish a new set of key performance indicators (KPIs) to track and measure supplier performance and drive excellence: on-time delivery, fill rate, order accuracy, damages, and backorders. Begin a collaborative, continuous improvement process to identify efficiencies that reduce costs. I assumed our trade contractors were doing these things all along, only to find out they weren’t. 

The $800 billion building materials distribution industry is poised for transformation—but not through M&A and A.I. alone.

Whoever cracks the data architecture problem will capture disproportionate value. The technology exists. The economic incentive exists. What’s missing is the operational courage to change the way the industry operates.

We’ve implemented these systems at homebuilding companies we previously worked for and with builders in a consulting capacity. We know they work. We know the objections, the workarounds, and the results. The future of building materials distribution won’t be won by whoever buys the most companies. It will be won by whoever solves the data problem first.