(excerpted from The Pipeline; The Pipeline: A Picture of Homebuilding Production is available on the publisher website (virtualbookworm.com), and the author website (thepipelinebook.com), as well as amazon.com and barnesandnoble.com)
“Without adding one iota of production capacity – from either a resource standpoint or a financial standpoint – productivity would almost double”, she said. “In today’s real estate market, we don’t know what that means for Gross Income or Net Income, because we don’t know what kind of margins it would take to acquire all of the sales necessary to fully utilize the additional capacity that would be the result of that much increase in productivity.
“What we do know is that – as long as the Gross Income Margins are positive – all of the Gross Income above breakeven would drop straight to RB Builders’ bottom-line.”
“This is not the smart short-term play”, said the CFO. “Given the current market conditions, we clearly have a situation with excess capacity that we won’t be able to reconcile; we should be bleeding-off excess capacity and overhead cost, not trying to find ways to become more productive and create even more unusable capacity.
“However, I do agree with the point you made earlier. Long-term, the gains in productivity that result from fixing the scheduling problems inherent in traditional project management have the potential to far outstrip the gains that might result from anything else we can do to improve operating performance.
“I’m worried about now.”
“We know that”, said the CEO. “This is about securing the long-term future of the company. We are working on other rapid-results projects with much faster paybacks.
“This is about creating sustainable competitive separation into the future.”
“I’m not buying it”, said one superintendent. “180 day cycle time is a fact. 120 day job schedule is also a fact. But, I don’t see how the 23 days that comes from reducing the duration of tasks from ‘highly certain’ to ‘toss-up’ could possibly reduce overall duration by 83 days.”
“Let me explain it to you, once again”, said the intrepid, results-based consultant. “It’s due to a combination of things. The padded duration that we hide in each task is unmanageable. The tendencies of human behavior conspire to use it all up. In a system, delays multiply and cascade, due to all of the interdependency.
“The traditional CPM-based method only accounts for task dependency, and has no way of dealing with resource conflict, other than to put float in the schedule; CPM says, ‘make sure you do A before B, but if you have A doing three things at once, we can’t help you’. If the templates had float tasks inserted, the float would represent more time, which the tendencies of human behavior still conspire to use up.
“The problems with systems are much more than the sum of the problems of the individual parts.
“The mere fact that everyone in this room acknowledges that RB Builders should be able to build a home in 90 days, its schedules stipulate 120 days, but it takes the company 180 days should tell you this is true. If the float was actually in the schedule as separate tasks, the schedule would go to somewhere between 120 and 180 days, say 150 days, and I guarantee you the actual cycle time would increase to 220 days, because nothing has changed.”
“It’s supposedly not my forte’”, said the VP of Sales. “But – if these numbers are right – someone needs to explain why everyone on the production side knowingly tolerated cycle times that were twice as long as they should be.”