Archive for August, 2016

Pipeline Workshops™: Disruptive Learning

Posted August 28, 2016 By Fletcher Groves

“The concept of production building being 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.”  (Patrick Bukszar, Dir. Construction Services, Essex Homes, Lexington, SC)

EFA - Disruptive Learning

“The Pipeline workshop™ was an eye opening experience.  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)

“It was quite intense, challenging, and not for the intellectually lazy”. (Scott Sedam, President, TrueNorth Development, South Lyon, MI)

In relentlessly improving the Pipeline workshop™, our intent – simply and plainly – is to open the eyes of attendees ever-wider, and make the learning as disruptive as possible to conventional, long-accepted ways of thinking.

Specifically:

 Pipeline games™ are a production simulator and a business game; they are what make Pipeline workshops™ so intense, so interactive, so competitive, and so worthwhile.  Already the best sim in the business, we have made the Pipeline game™ even better over the years, by shortening its duration and making the operating statement look exactly like a homebuilding operation.

 RB Builders: Lessons from the Pipeline© is the business case that we use; it presents a set of problems dealing with a very realistic homebuilding operation that attendees are required to solve;  it is a test that challenges their knowledge and understanding of production principles.

The use of Pipeline games™ and the business case means that a Pipeline workshop™ – already known for its unique, engaging format – is now even edgier in that regard, because that is where almost all of the learning occurs.

Pipeline workshops™:  creating a visual image of homebuilding production;  making the connection between operating decisions and business outcomes;  building a new way of thinking systemically – building a paradigm shift – towards solving core problems, managing limited capacity, dealing with variation, managing homebuilding production as the type of workflow that it truly is;  emphasizing the actions that accelerate velocity.

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.

Clark Ellis and Brandon Hart of Continuum Advisory Group continue in their presentation and facilitation roles, adding heft and extending the legacy of FMI Corporation in the residential construction vertical space.

Sponsored by BUILDER and Constellation HomeBuilder Systems.

For more details:  www.buildervelocity.com

 

Velocity Accelerators®: Business Process Improvement

Posted August 21, 2016 By Fletcher Groves

An overwhelming portion of SAI Consulting’s work, in and out of homebuilding, has been about enabling clients to structure themselves around their core-critical business processes;  Business Process Improvement is the area of our practice for which we are most recognized;  a supporting statement can be made for Continuum Advisory Group, the consulting firm that joins SAI in the facilitation of Pipeline workshops™ and Pipeline seminars™.

BPI - Process (capture)

There is a good reason for our firms’ collective focus on improving (and managing) business processes, and it is simply this:

It is the most basic, most fundamental proposition in all of business:  the reason an enterprise exists is to make money;  the way an enterprise makes money is by delivering value to its customers and other stakeholders;  that value can only be delivered through the work that the enterprise performs;  that work has to be performed in some manner of workflow;  the most common form of that workflow is work performed in processes.

Make money . . . by delivering value . . . through the work you perform . . . in processes.

From a business standpoint, processes are critically, centrally important;  they exist – they matter – whether homebuilders are intentional about them or not.

How important is Business Process Improvement to a homebuilding company?  Important enough that we removed one of the highly-regarded Pipeline games™ from future Pipeline workshops™, so that we could elevate improvement of workflow to the level of Velocity Accelerator®, a category in which it now joins Critical Chain Project Management and Epic Partnering™.

We always make the point that Pipeline workshops™ are about thriving on the velocity side of Return on Assets®;  truth-be-told, better process workflow pays off on both sides of economic return;  it drives higher margins as well as higher velocity;  it drives a higher Return on Sales just as much as it drives higher Asset Turn.

The most visible element of BPI (and BPM) is the mapping of process workflows;  process mapping involves far more than documenting the current workflow;  it includes redesigning workflows in ways that improve them, which invariably reveals other issues – root causes, core problems.

Which makes understanding and improving workflow the means to a more important end.

BPI is the tip of the spear, the front-end of a continuous improvement methodology in which the activities and elements of workflow that add no value are eliminated, and the remaining value-adding activities and elements are refined to make the workflow more clear, more consistent, more connected, more succinct, more fit for its purpose.

The analogy from our Pipeline workshops™ is that we want a shorter, straighter pipe.

Because it is so foundational, it is impossible to overstate the importance of understanding and improving the way work is performed, before starting down the long road on other improvement initiatives, before the process of continuous improvement moves anywhere else.

In addition to being the means to a more important end, and the front-end of a process of continuous improvement, BPI ushers in a new perspective.  It shifts the organizational view away from the structure of work performed in functions. towards the flow of work performed in processes;  BPI shifts the perspective from vertical to horizontal;  it rotates a homebuilding enterprise 90 degrees from vertical, lays the enterprise on its side, and aligns its workflow with the value it seeks to create.

Processes are also one of the elements of the operating model that forms any strategic value discipline that serves to deliver exceptional levels of the specific and distinctive value demanded by a narrowly-defined segment of homebuyers.

 

Business Process Improvement is one of the three Velocity Accelerators® (along with Critical Chain Project Management and Epic Partnering™) highlighted at the next Pipeline workshop™, October 26-27, 2016, at the Ponte Vedra Inn and Club, in Ponte Vedra Beach, Florida.  Cost is $850.00.

Sponsored by BUILDER and Constellation HomeBuilder Systems.

Details:  www.buildervelocity.com

 

At a Pipeline workshop™, one of the most important takeaways, drawn by almost every building company executive in attendance, is that a notoriously fragmented value stream has to be unified, if they are ever going to be able to manage production as a system.

Partnering 1 (capture)

In their landmark 1996 book, Lean Thinking, Jim Womack and Dan Jones defined a value stream as “the set of all the specific actions required to bring a specific product through the three critical management tasks of any business.”  They went on to describe a set of processes, which they termed tasks:  a problem-solving task, an information management task, and a physical transformation task.

By definition, a value stream does not belong to an industry;  it is enterprise-specific;  each value stream belongs to its enterprise;  every homebuilding company has its own value stream.

Nevertheless, it would be a challenge to cite another industry, in which the sequence of tasks in the most common versions of that industry’s core-critical process (start-to-completion, i.e., the physical transformation task) is entirely performed by so many separate entities, as is commonly seen and accepted in the homebuilding industry.

Look at the value stream of almost any homebuilding enterprise, and you will find a combination of independent, separately-owned, non-proprietary, non-exclusive, unaffiliated businesses, each having their own goals.

In her final comments to the team at RB Builders (The Pipeline: A Picture of Homebuilding Production©), the intrepid, results-based consultant reviews the components of RB Builders’ production management system, the RB-IPS, and has this to say about the final component:

“It is a production management system that specifies the means by which RB Builders fosters epic relationships of mutual interest with its building partners and supply partners.  The RB-IPS provides both the process and the program for progressively transforming subcontractors and suppliers into true partners, into trusted allies, joined by shared, mutual interests.”

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.

Is vertical integration the answer?  We have been suggesting, for almost 20 years, that builders at least consider that possibility.  That suggestion is usually dismissed as a radical, undoable notion.

Which is usually where opportunity lies.

Whether or not vertical integration has a future strategic role to play in the homebuilding industry remains to be seen.  It is an area that has been covered in the Lessons from the Pipeline© business case at previous Pipeline workshops™, and it is a new section in the second edition of The Pipeline: A Picture of Homebuilding Production©, which was released for publication in the Spring 2016.

The outcome of the vertical integration question doesn’t change the underlying imperative.  Success in unifying the effort of even the existing value stream has profound ramifications, on both the margin and velocity components of Return on Assets;  and success in unifying the value stream has profound implications for creating competitive separation.

With or without vertical integration, addressing the issue will require Epic Partnering™.

Come.  Participate.  Learn.

 

Epic Partnering™ – the attributes of the relationships being fostered, the program, the process – is one of the three Velocity Accelerators® (along with Business Process Improvement and Critical Chain Project Management) highlighted at the next Pipeline workshop™, October 26-27, 2016, at the Ponte Vedra Inn and Club, in Ponte Vedra Beach, Florida.  Cost is $850.00.

Sponsored by BUILDER and Constellation HomeBuilder Systems.

Details:  www.buildervelocity.com

 

Velocity Accelerators®: Critical Chain Project Management

Posted August 7, 2016 By Fletcher Groves

One of the areas we single-out for deeper discussion in a Pipeline workshop™ – what we call Velocity Accelerators® – deals with the imperative of replacing the current method used to schedule jobs;  actually, the current method used to schedule a portfolio of jobs.

Chain

The nature of the workflow in homebuilding production is project portfolio management.  Yes, there is workflow performed in processes, but those processes are generally embedded, enabling, and supporting;  process workflow is different than project workflow.  The process of building a home – what we call the Start-to-Completion process – is actually the management of multiple projects that share resources.  It is the structuring and the management of a portfolio of job schedules, with interdependencies and interactions of tasks and resources.

The current method of project scheduling is known as the Critical Path Method (CPM), which evolved from the Program Evaluation and Review Technique (PERT) in the 1950s;  it has been in existence for more than sixty years;  it is the method used in every homebuilding ERP suite.

PERT and CPM were designed for programs with large, complex structures (Polaris weapons system, Manhattan Project), but the Critical Path Method has become the de facto standard for scheduling all types of projects:  construction, aerospace/defense, software development, product development, research.

The problem with CPM is that it was not designed for managing a portfolio of projects, and it was not designed to function in environments where velocity is important, where faster cycle time and higher inventory turns are critical drivers of business outcomes.

Where it must contend with variation and uncertainty, CPM offers only a buffer of additional time – individual task durations lengthened to protect the completion date of each task, but not necessarily the completion date of the project.

For the most part, builders are oblivious to the effects of variation on their production system.  The cost of variation is always the same:  it is the Gross Income lost from all of the closings that never occurred, from houses that were never built with the capacity they paid to have;  for a profitable builder, it is Gross Income that would have become Net Income, and ultimately, Net Profit.

Moreover, CPM considers task dependency (the predecessor-successor relationships of tasks) in its work breakdown structure, but it does not resolve resource contention;  it does not consider situations in which tasks of different projects/jobs depend on the availability of resources that do not have sufficient capacity to meet the demand being placed upon them.

These two factors – dealing with variation and resolving resource conflict – should be anathema to builders.

CPM was not designed to contend with the production environment homebuilding presents.  It is not the problem (the problem is variation and resource conflict), but CPM is benign to the solution.  ProChain Solutions’ Rob Newbold (Project Management in the Fast Lane) told me that he would go further, saying:  “CPM supports values that perpetuate the problems of homebuilders.”

Which brings us to Critical Chain Project Management.

Developed in 1997, Critical Chain addresses task dependency and resource contention, and it replaces padded durations intended to protect task completion dates with buffers that protect the completion date of the project/job;  CCPM is much more aware of system constraints.  Most importantly, Critical Chain reduces the duration of projects – the cycle time of houses under construction.

Consider this exercise from one of the RB Builders: Lessons from the Pipeline© business case studies used in a recent Pipeline workshop™:

RB Builders’ newly-acquired division has a construction schedule of 120 calendar days, but its actual cycle time is 180 calendar days.  There is wide agreement that it should be able to build its homes in far-less than 120 days, because the schedule reflects “highly certain” task durations.  Switching from CPM to CCPM would reduce the schedule from 120 days to 96 days, cutting the schedule by 20% with no diminution of confidence;  it would reduce the actual 180 day cycle time by almost 50%.

Critical Chain Project Management does more than just reduce the length of construction schedules.  It also specifies a set of rules preventing behaviors that consume (and waste) the safety built into task durations.  It installs a release mechanism that pulls starts into the system and keeps work-in-process at the levels required to produce faster cycle times.

It implements simple, visual tools to manage production.

Builders can put a number of these practices into place without changing the scheduling algorithms from Critical Path to Critical Chain.  But, it will not be a complete solution until management technology catches up.

Come.  Participate.  Learn.

 

Critical Chain Project Management is one of three Velocity Accelerators® (Business Process Improvement and Epic Partnering™ are the others) that will be presented during the next Pipeline workshop™, held October 26-27, 2016, at the Ponte Vedra Inn and Club, in Ponte Vedra Beach, Florida.

Sponsored by BUILDER and Constellation HomeBuilder Systems.

Cost is $850.00.

Details:  www.buildervelocity.com