Archive for July, 2016

Pipeline Workshops™: Velocity Accelerators®

Posted July 31, 2016 By Fletcher Groves

If you had to choose a single word to associate with a Pipeline Workshop™, it would be velocity – speed in a purposeful direction.  In every workshop, we select specific areas of production management for a deeper dive – more discussion, pointed exercises from the RB Builders: Lessons for the Pipeline© business case study, etc.

We call these areas Velocity Accelerators®.

Velocity

They tend to be important areas which do not receive sufficient industry attention;  Velocity Accelerators® are often the first meaningful exposure to those areas that builders attending a Pipeline workshop™ have ever experienced, which makes those sessions something of a boot-camp.

There are three Velocity Accelerators® we are using at the next Pipeline Workshop™ (October 26-27, 2016, in Ponte Vedra Beach, Florida):

 

Epic Partnering™.  Builders attending Pipeline workshops™ consistently emphasize the need for stronger trade-partnering, better coordination, more cohesiveness, a more unified approach to managing the trade side of production.

They acknowledge the obvious:  they do not have the internal resources necessary to perform “the set of all specific actions” required to bring houses through the start-to-completion process, and they are completely dependent and reliant on skilled construction resources that are in short supply;  they understand that they can no longer dictate the terms.

Developing the business relationships that unify a builder’s value stream is a program of milestones and features, and it is a transformative process;  a program and a process.  Epic Partnering™ has profound implications on the margin side and the velocity side of economic return.

 

Business Process Improvement.  The most basic, most fundamental proposition in the business of building homes is this:  the reason a builder exists is to make money;  the way a builder makes money is by delivering value to its homebuyers and other stakeholders;  that value can only be delivered through the work that the building enterprise performs;  that work has to be performed in some manner of workflow, most commonly performed in processes.

Make money . . . by delivering value . . . through the work a builder performs . . . in processes.

BPI is the front-end of a process of continuous improvement, one that fundamentally changes the perspective of workflow, and becomes the driving component of the operating model that forms a builder’s strategic value discipline.

 

Critical Chain Project Management.  Now more than sixty years old, the scheduling algorithm known as the Critical Path Method (CPM) was never intended to function in the environment of homebuilding production, which is project portfolio management with embedded and supporting processes;  CPM was never designed to function in environments in which velocity is important, where faster cycle time and higher inventory turns are critical drivers of business outcomes;  and, CPM is oblivious to the effect variation has on the scheduling of a production system.

Critical Chain Project Management (CCPM) is the leading edge – the future – of project scheduling for homebuilding;  it promises significant improvements in managing homebuilding production – faster cycle times, faster inventory turns;  enabling homebuilders to generate more Revenue, more Gross Income, with a planned, finite, and controlled amount of work-in-process and production capacity.

 

Come.  Participate.  Learn.

The next Pipeline workshop™ is at the Ponte Vedra Inn and Club, Ponte Vedra Beach, Florida, on October 26-27, 2016.  Cost is $850.00.

Sponsored by BUILDER and Constellation HomeBuilder Systems.

Details:  www.buildervelocity.com

 

Pipeline Workshops™: Right for you?

Posted July 24, 2016 By Fletcher Groves

Homebuilding production is a system, and it has to be managed as such;  in order to be managed, it must first be understood.  Unfortunately, that type of ordered, process-centric, capacity-focused thinking is not the homebuilding industry’s natural inclination;  it clashes with the deal-driven, product-centric, margin-focused mentality that pervades the industry.

IMG_2417

That understanding is now crucial, because in the challenging environment that confronts the industry that has survived the worst economic and housing recession in three-quarters of a century, it is no longer a choice between higher margin or higher velocity;  it is the requirement to achieve higher margins at higher velocities.

Meeting that requirement is what creates sustainable competitive separation;  for some, meeting that requirement will be what determines survival.

Pipeline workshops™ are a two-day immersion into production physics – a deep-dive into the principles and disciplines that enable homebuilders to thrive on the velocity side of Return on Assets, to thrive on the velocity side of economic return.

The understanding and expertise delivered in a Pipeline workshop™ pulls from The Pipeline: A Picture of Homebuilding Production, Second Edition©, but it also relies on the extraordinary depth of industry knowledge and experience that resides with SAI Consulting and Continuum Advisory Group.

Pipeline workshops™ transfer in-depth knowledge and create an intuitive, instinctive understanding of production principles and disciplines, focused exclusively on homebuilding operations.  They are not a lecture;  the material is comprehensive, the learning is intense, and the format is interactive and competitive;  they are size-limited, with attendance capped at 40 attendees.

The comprehensiveness, intensity, interaction, and competitiveness found in a Pipeline workshop™ flows from two unique elements:  (1) RB Builders: Lessons from the Pipeline© is a state-of-the-art business case;  (2) the Pipeline game™ is a progressive series of production scenarios that simulate homebuilding production in the real business world, in an environment of variation and uncertainty, where operating decisions produce economic outcomes.

The results of every game – sometimes good, but oft-times bad, occasionally meeting expectations, but oft-times not – are diagnosed, so that the connection between operating decisions and business outcomes is embedded, the principles and disciplines ingrained.

What you acquire at a Pipeline workshop™:

  • a visual image of a homebuilding production system – its purpose, size, cost, and capacity.
  • an elegant understanding of how operating decisions drive business outcomes, and how the measures of operating performance connect to the business outcome measures of profitability and economic return.
  • a set of mental models – a way of thinking about size, growth, capacity, cost of variation, and other critical areas – that define a homebuilding production system, provide a systemic approach to solving production problems and managing finite production capacity, and deliver a blended approach to process and project portfolio management that addresses the unique attributes and parameters of homebuilding production.
  • a set of velocity accelerators – Pipeline™ tactics, techniques, and practices dealing with trade partnering, job scheduling, and business process improvement – that produce shorter schedules, reduce build/cycle times, increase production throughput, and control construction work-in-process.

Is a Pipeline workshop™ right for you? 

Pipeline workshops™ are not about job titles, operational scope, or company size.  They are intended for anyone charged with the critical responsibility of managing – or managing the interaction with – homebuilding production as a system, at some level of a homebuilding enterprise.  They are for those who must understand and manage homebuilding production, and drive results, including:

  • C-Level Executives – Presidents, CEOs, CFOs
  • Division and Regional Managers
  • Vice Presidents of Operations and Construction
  • Vice Presidents of Sales
  • Production Managers
  • Construction Managers

Pipeline workshops™ are also an excellent experience for the equivalent positions with building trade partners – for the manufacturers, distributors, suppliers, and subcontractors who must interact with builders in the value stream.

Come.  Participate.  Learn.

 

The next Pipeline workshop™ will be held at the Ponte Vedra Inn and Club, Ponte Vedra Beach, Florida, on October 26-27, 2016.  Cost is $850.00.

Sponsored by BUILDER.

For more details:  www.buildervelocity.com

 

Pipeline Workshops™: More of What Builders Say About It

Posted July 19, 2016 By Fletcher Groves

In their own words:  comments from more builders who have attended a Pipeline workshop™:

“The Pipeline Workshop™ and associated business case study was an excellent way to help me shift my production paradigms, from growing capacity to maximizing my current capacity.”  (Chris Harrison, SVP – Construction, Robson Communities, Sun Lakes, AZ)

“The concept of production building being in a “Pipeline”, along with the simple and straight-forward concepts discussed in this seminar made this one of the most eye-opening experiences I have ever had when it comes to learning about production building.  I would definitely recommend this seminar to any building company looking to gain a competitive advantage and to learn ways to get more with less.  The hands-on learning approach and interaction with other builders from around the country was invaluable.”   (Patrick Bukszar, Director of Construction Services, Essex Homes, Lexington, SC)

“The exercises and processes opened my eyes to immediate steps I had to take to become a better builder.”  (Lusant Ordonez, CEO, Zenodro Homes, Altamonte Springs, FL)

“[In many] classes, you get a lot of great ideas, but never act on them.  The impact [of] this class resonated in many ways, and has spurred us to take two immediate actions:  (1) hiring the design center manager that we did not think we could afford;  and (2) beginning the implementation to Critical Chain Project Management.  It was very clear;  we have been penny-wise and pound-foolish in not hiring a strong manager for our design center, and the impact of Critical Chain will be huge on the way we conduct business.”  (Karl Haslinger, CEO, Essex Homes, Lexington, SC)

“The Pipeline workshop™ was an eye opening experience.  Not being an owner of the company, sometimes you don’t realize the impact day-to-day business decisions have on the true desired bottom line results of the company.  Playing the Pipeline game™ gave me that ‘ah-ha’ moment, seeing first-hand how those decisions can influence your bottom line.  I took away invaluable insight on what it takes to operate a profitable homebuilding company.”   (Daniel Hopkins, Director of Purchasing/Estimating, Jeff Benton Homes, Huntsville, AL)

“If [teammates] can utilize this information correctly and make good business decisions, owners are free to consult and finance rather than handhold.  I also thought that the interactive games really showed how everyday decisions can make-or-break your production pipeline.  If a start or a closing is delayed, the whole rhythm of the pipeline is off;  you can’t correct that disruption, since it is a function of time.  A [lost] start can never be made up.”  (Sara Flint, Controller, Homebuilder Solutions, LLC, Tampa, FL)

“I highly recommend the Pipeline Workshop™.  The concepts learned have directly affected my building process in a positive way.  Implementation [of these principles] will guarantee a ‘more-for-less’ mentality in any home building operation.”  (Sebastian Alvarez, Member, Alvarez Construction, Baton Rouge, LA)

“The Pipeline Workshop™ really opened my eyes to how a company’s operating performance truly impacts business outcome.  These are things that I already knew, but the workshop caused me to start thinking about it in a different way.  For example, some companies’ motto, including ours, is to put out as many starts as we can, then sort it out in the field. After attending the workshop, I realized how counterproductive this way of thinking is;  releasing more starts than our ‘pipeline’ can support is actually going to cause us to perform worse.”  (Darek Burns, Purchasing and Estimating Manager, Essex Homes, Charlotte, NC)

“[Pipeline workshop™] is a concept that we, as a team, were aware of before coming to the seminar.  That said, being aware of it and being able to understand and implement are two very different things.  After going through the case study and the [simulations], our team went home better prepared to implement it in our company.  We feel that it will be a long-term building block for us going forward.”  (Justin Morrison, Vice President, Cimarron Homes, Durham, NC)

“The Pipeline workshop™ really took a different focus and approach than I was used to.  I enjoyed the group workshop forum that was very interactive.  It’s information that will long term and continually be thought about and digested in my day-to-day work.  It presented an interesting balance concerning the importance of cycle time in regards to the financial and operation spectrum.  It was challenging and thought-provoking.  The group games really brought the concepts to life.  I appreciated the “Accelerators” discussion that touched on some of the best practices and implementation.  The workshop challenged me to be a better leader in regards to velocity and its importance, as my Team and I will be looking for the best ways to apply the concepts to our business model.”  (Jeremy Tesimale, Production/Construction Manager, Essex Homes, Lexington, SC)

“The Pipeline workshop™ quickly and clearly helped me realize our company’s mismanagement of the amount of work-in-process and job starts.  I believe our new thinking on those principles, along with the techniques we learned, will reduce our cycle times substantially.”  (Bob Anderson, Construction Manager, Stylecraft Homes, College Station, TX)

“It is going to help our business refocus on what all of us already know, but lose focus of, in the haste to make money and sell as many homes as possible.  What we have learned will benefit [our] business and margins, if we become disciplined, [and] stick to the principles of the pipeline.”  (Sean Ward, Field Manager, Eagle Construction of Virginia, Richmond, VA)

“[The Pipeline Workshop™] allowed me to step outside of my department and see the industry on a wider scale.  The Pipeline Game™ was a great visual tool that emphasized the importance that velocity plays in home building.  It has allowed me to begin thinking creatively about the ways I can improve my department to ultimately improve our companies velocity overall.”  (Alexa Drees, Design Consultant, Drees Homes, Jacksonville, FL)

“The Pipeline workshop™ was a great chance for my team to learn some excellent fundamentals for a better business in a very straightforward manner.  The instructors were superb, and the overall atmosphere was one of education, fun, and comradery.”  (David Savicki, Purchasing Manager, Cimarron Homes, Durham, NC)

 

Come.  Participate.  Learn.

The next Pipeline workshop™ will be held at the Ponte Vedra Inn and Club, Ponte Vedra Beach, Florida, on October 26-27, 2016.  Cost is $850.00.  Early registration, open through July 31, 2016, is $725.00.

Sponsored by BUILDER.

For more details:  www.builderevelocity.com

 

Pipeline Workshops™: What Builders Say About It

Posted July 17, 2016 By Fletcher Groves

In their own words:  comments from builders who have attended a Pipeline workshop™:

“The [Pipeline game™ production] simulations were a brilliant way to demonstrate and drive home the significance of cycle time improvements and improving trade partner efficiencies on ROA and Net Income.”  (Keith Porterfield, COO, Goodall Homes, Gallatin, TN)

“Pipeline workshops™, through hands-on simulations and classroom instruction, provide excellent learning experiences to see WIP turns at different velocities, and the effects on Return on Assets.  The principles and disciplines, if applied in the field by you as a builder, will increase your ROA.”  (Scott Jagoe, President, Jagoe Homes, Owensboro, KY)

“All of our construction guys came back from the conference with a lot of new info.”  (Doug French, Vice President, Stylecraft Builders, Inc., College Station, TX)

“I participated in the first-ever [BuilderVelocity™] workshop, spending two days exploring the ins-and-outs of production, inventory, and scheduling.  It was quite intense, challenging, and not for the intellectually lazy.  We played repeated rounds of a building simulation game, and the students saw clearly that scheduling requires careful thought and planning.”  (Scott Sedam, President, TrueNorth Development, South Lyon, MI, excerpted from the April, 2014 issue of Professional Builder, “Taming the Chaos”)

“[the] Pipeline workshop™ was by far the most engaging workshop I have attended to date.  The principles shared relate to home building companies of all shapes and sizes.  The two day program kept me engaged the entire time with a mix of lecture, open discussions and simulations of practical application.  I have already applied some of what I learned to my business and I’m looking forward to fantastic results.”  (Mark Refosco, President, Marcus Allen Homes, Arthur Rutenberg Homes franchisee, Jacksonville, FL)

“The Pipeline Workshop™ is an extremely effective insight to production, for homebuilders of all sizes.  Whether your company builds 5, 50, 500 or 5000 units annually, you will leave this event with a deeper understanding of your company’s production capacity, and where you need to focus your attention, to perform at an optimal level.”  (Adam Roller, President/COO, IH First Coast, LLC, St. Augustine, FL;  an Inland Homes® Builder)

“The simulations at [the] Pipeline workshop™ [were] a very innovative way to demonstrate the critical nature and relationship between cycle time, inventory turn, margin, and return on assets.  Both days were filled with learning, engagement, and inquiry that proved to be invaluable.”  (Vishaal Gupta, President, Park Square Homes, Orlando, FL)

“Think the same way, and you stay in the same place as everyone else;  challenge yourself with the new theories and strategies, and [you] become more effective in your company[y’s] achievement with your team.  You get to take these theories and teachings and immediately apply them in a simulation of the real world to test your skills against others, and that’s what this business is all about:  finding the right mix of everything to be the best.”  (Justin Parry, President, Parry Custom Homes, Irwin, PA)

“ROA is not discussed much in the building industry;  the focus has always been on margins per house.  Through the Pipeline workshop™, you will learn that your company ROA is just as important to know as margins per house.”  (Mark Ivey, Owner, Ivey Residential, LLC, Evans, GA)

“I think the concept of ROA or inventory turn can be THE differentiator between success and failure in a production type environment.  It requires thought one level past the “P&L”, but will allow the manager that can recognize [its] impact and implement it, a major competitive advantage.”  (Wade Jurney, Wade Jurney Homes, Greensboro, NC)

“The Pipeline workshop™ provides full insight into the application of universal principles of production.  It provides clear and convincing proof that improving velocity will yield not only faster profits but greater profits.  I look forward to attend it again with some of my key staff.”  (Carlos Alvarez, President, Alvarez Construction, Baton Rouge, LA)

“It proved to be a great opportunity to enlighten our entire management team with a ‘higher level understanding’ of how our business works.”  (Craig Morrison, CEO, Cimarron Homes, Durham, NC)

“As an owner of a home building company, intimately understanding the importance of home building production principles, as taught in the Pipeline workshop™ and book, and effectively implementing them in our building processes, will be critically important to becoming a best-of-breed builder in our competitive market.  Running our company using these home building production principles will not only allow us to weather the next downturn intact, but grow in a healthy way.”  (Josh Lysen, Principal, Merit Homes, Kirkland, WA)

“The Pipeline workshop™ conducted by SAI Consulting and Continuum Advisory Group was a straight-forward introduction to what matters most in the homebuilding industry…. Velocity!  Although many of the concepts reviewed are not new to most managers, the manner in which they were highlighted was eye-opening.  The case study, simulations, and discussion with the instructors made it crystal clear as to how to go back to my operation and implement immediate improvements.  The interaction amongst the diverse group of attendees was also invaluable.  How often do we get the opportunity to discuss best practices with others in our field?  The workshop was time and money well spent, and I’m already getting a return on my investment!”  (Mike Cancilla, General Manager, Essex Homes, SE, Lexington, SC)

“Great opportunity for any individual to uncover the potential of the pipeline and maximize their business returns.”  (Brian Small, Land Acquisition Manager, Drees Homes, Jacksonville, FL)

“The Pipeline Workshop™ reminded me that there is no substitute for moving quickly and efficiently in every aspect of our business.  The workshop agenda and material was focused and challenging.”  (Greg Stallard, Division President, Essex Homes, Charlotte, NC)

“I walked away with a new perspective on making returns in residential homebuilding that challenged the models and assumptions I have worked under.”  (Mark Carter, Operations Manager, Drees Homes, Jacksonville, FL)

 

Come.  Participate.  Learn.

The next Pipeline workshop™ will be held at the Ponte Vedra Inn and Club, Ponte Vedra Beach, Florida, on October 26-27, 2016.  Cost is $850.00.  Early registration, open through July 31, 2015, is $725.00.

Sponsored by BUILDER.

For more details:  www.builderevelocity.com

 

Homebuilding is an industry that leverages equity with debt, therefore, some version of Return on Assets is the best measure of a homebuilding enterprise’s economic return.  The most useful version of ROA is the DuPont identity, which expands economic return into two components:

Margin (Return on Sales) and Velocity (Asset Turn).

 

EFA - ROA (capture3)

 

From an operational perspective, the vast majority of assets on a builder’s balance sheet ought to be houses in some stage of construction, particularly when raw land and developed lot inventory is held off-balance sheet;  which means, when we calculate Return on Invested  Assets, we can reasonably substitute Inventory Turn for Asset Turn.

The point is to thrive, not just survive.  To do that, a builder has to do well on both the margin side and the velocity side of ROA.  That understanding fundamentally proposes two questions:  (1) How much can I make on every house?  (2) How many houses can I build with a planned, finite, and controlled amount of inventory and production capacity?

As a builder, consider this:  if you generate a Gross Margin of 24% and turn your inventory twice a year, you will be outperformed – better than two-to-one – by a homebuilding enterprise that generates a Gross Margin of only 18%, but turns its inventory four times a year;  you will be outperformed in terms of Net Income, outperformed in terms of Return on Assets.

You will struggle to compete;  you will struggle to survive.

Your operation is a slow, marginally-productive homebuilding company;  your competitor’s operation is a fast, highly-productive homebuilding company;  your competitor generates 85% more Revenue and 40% more Gross Income than you do, with the same amount of assets.

It is also a picture of the difference between a 180 day cycle time and a 90 day cycle time, and if that contrast is too stark, then consider this:  your competitor with the 18% Gross Margin and a 4x turn produces almost the same ROA as you would with a 24% Gross Margin and a 3x turn;  that’s the picture of your competitor’s 90 day cycle time versus your 120 day cycle time.

In the face of clear differences in economic outcomes, note that your competitors – the two homebuilding companies represented in those scenarios – are exactly the same size as your company, when the real measure of size is the amount of work-in-process you each have to carry;  you and your competitors each have the same resource overhead, the same working capital requirements, the same risk profile.

In an industry with a capacity shortage, like homebuilding, there is not going to be any price elasticity of supply and demand, because there is not going to be any wide-spread, capacity-driven increases in supply.  Besides, homebuilding is essentially a build-to-order process, which tends to regulate short-term supply.  Moreover, the demands of higher productivity are so tough, require so much rigor, so much discipline, so much resolve, that most builders won’t even go there.

It’s not a choice between higher margin or higher velocity;  it’s the challenge – and the opportunity – of producing higher margin and higher velocity.

Pipeline workshops™ are a two-day immersion into the production physics – into the principles and disciplines – that enable homebuilders to thrive on the velocity side of economic return, to thrive on the velocity side of Return on Assets.

Come.  Participate.  Learn.

 

The next Pipeline workshop™ will be held at the Ponte Vedra Inn and Club, Ponte Vedra Beach, Florida, on October 26-27, 2016.  Cost is $850.00.  Early registration, open through July 31, 2016, is $725.00.

Delivered by SAI Consulting and Continuum Advisory Group.  Sponsored by BUILDER.

For more details:  www.builderevelocity.com