Pipeline Workshops™: Improvements to the Game™

“Pipeline games™ 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 games™ are a very innovative way to demonstrate the critical nature and relationship between cycle time, inventory turn, margin, and return on assets.”  (Vishaal Gupta, President, Park Square Homes, Orlando, FL)

“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)

Simulating production principles is a huge part of a Pipeline workshop™.  We hear repeatedly that the opportunity to simulate production in a progressive series of scenarios is what enables builders to “see” production so much more clearly.  Because it is both a production simulator and a business game, the Pipeline game™ is what makes Pipeline workshops™ so intense, so interactive, so competitive, so worthwhile.

The Pipeline game™ has always been a tremendous tool for teaching both production and business principles, but we constantly improve it, introducing changes that make it even better.

For example, some time ago, we shortened the game, so that we could run more production scenarios in the same amount of time.  Shortening the duration of the game made each operating decision more consequential, and also made the results more realistic, more intuitive, easier to comprehend.

We also made the game more realistic, by making it depict the outsourced nature of homebuilding production.  In previous versions of the game, the resources that did the work reflected both capacity and the cost of that capacity.  That is an arrangement that reflects a manufacturing operation or project management organization;  a more realistic depiction of a homebuilding production system is to separate capacity from cost.

And, that’s because, in homebuilding, the external resources that determine production capacity are a part of Cost of Sales (which makes them a direct, variable cost);  Cost of Sales is a measure of product cost, not capacity cost;  Operating Expense – the indirect, non-variable cost of internal resources associated with overhead – is what determines capacity cost.

In the original version of the Pipeline game™, using the resources to reflect capacity and cost required us to essentially disregard Revenue and Cost of Sales, and focus on Throughput, which is more closely related to Gross Margin.

In the improved version of the Pipeline game™, we restore Revenue and Cost of Sales to the picture;  in effect, we now account for the margin side of Return on Assets.  The external resources in a Pipeline game™ now define the production system’s capacity, and the cost of those resources is reflected in Cost of Sales, stipulated as a percentage of Revenue;  they are a direct, variable cost associated with the product.  This represents a significant stride in reconciling Revenue, Cost of Sales, Throughput, and Gross Income, making operating decisions easier to connect to financial outcomes.

Operating Expense is now an imposed value, reflecting the budgeted cost of the internal capacity required to manage work-in-process;  that makes Operating Expense an indirect, non-variable cost, as it relates to Revenue – and the completions and closings that produce it.

The outcome is a production simulator and business game that is vastly more reflective of a homebuilding operation, with lessons that are now much easier for builders to understand.

The improved version of the Pipeline game™ was played at three of the last four Housing Leadership Summits (2014-16);  it was explained at the 2014 BuilderMT-Sales Simplicity Client Conference and played at the 2016 Builder Technology Summit;  it has been used in Builder 20 Club meetings;  it has been used at the CertainTeed Gypsum Builder Advisory Council;  it was played at the 2016 Builder Technology Summit;  and, it has been used at every private client Pipeline workshop™ and at all but the first open sponsored Pipeline workshop™.

 

Come.  Participate.  Learn.

The next Pipeline workshop™ will be held October 18-19, 2017, at the Ponte Vedra Inn and Club, in Ponte Vedra Beach, Florida.  Cost is $875.00;  for team pricing, inquire here (flgroves@saiconsulting.com).

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

Details:  www.buildervelocity.com