Archive for June, 2018

Pipeline Workshops™: What Builders Say About It

Posted June 30, 2018 By Fletcher Groves

In their own words, comments from builders (and others) 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, CEO, Stylecraft Builders, Inc., College Station, TX)

“I participated in the first-ever Pipeline 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 the Pipeline game™, and 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.  The principles shared relate to homebuilding 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 am looking forward to fantastic results.”  (Mark Refosco, President, Marcus Allen Homes, Arthur Rutenberg Homes franchisee, Jacksonville, FL)

“I would recommend the Pipeline Workshop™ to anyone interested in improving their homebuilding knowledge.  It offered me a fresh perspective, and got me excited to go back to work to share what I had learned.”  (John Marcy, Purchasing Agent, CalAtlantic Homes)

“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.”  (Adam Roller, Project Manager, The Fechtel Company, Tampa, FL)

“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 margin.  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, President, 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 attending 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, Vice President of Land, Blake-Wilder Strategies, Orlando, 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 September 26-27, 2018.  The cost is $895.00 per person;  for team pricing, inquire here (flgroves@saiconsulting.com).

Delivered by SAI Consulting and Continuum Advisory Group

Sponsored by BUILDER, BuilderMT, and Specitup.

For more details:  www.buildervelocity.com

Pipeline Workshops™: Right for You?

Posted June 24, 2018 By Fletcher Groves

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

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

Achieving that requirement is what creates sustainable competitive separation;  sustainable competitive separation is what determines survival.

Pipeline workshops™ are a two-day immersion into production physics – 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®.  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.

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.  And, those outcomes are diagnosed after each game, so that the connection between operating decisions and business outcomes is embedded, the principles and disciplines ingrained.

What do you get from a Pipeline workshop™?  

  A visual image of a homebuilding production system – its purpose, its size, its cost, its length, its capacity;

•  An elegant understanding of how operating decisions drive business outcomes, and how the measures of operating performance connect to the measures of business outcomes; 

•  A set of mental models – a way of thinking about size, growth, capacity, even-flow, 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 managing the unique attributes and parameters of homebuilding production; 

  A set of velocity accelerators – Pipeline™ tactics, techniques, and practices dealing with trade partnering, job scheduling, process improvement, building information modeling, and open-book management and performance compensation – that result in shorter schedules, reduced cycle times, higher quality with less waste, and higher throughput achieved with a planned, finite, and controlled level of 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 interactions with – a production system at some level of a homebuilding enterprise.  Pipeline workshops™ 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 and Marketing
  • Design, Estimating, and Purchasing Managers
  • 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 September 26-27, 2018.  The cost is $895.00 per person;  the cost during early registration, extended through June 29, 2018, is $750.00;  for team pricing, ask flgroves@saiconsulting.com 

Sponsored by BUILDER, BuilderMT, and Specitup.

For more details:  www.buildervelocity.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).

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 associate Asset Turnover (financial term) with Inventory Turn (operating term).

The point is to thrive in this business, not just survive in it.  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 my company make on every house?  (2) How many houses can my company build with a planned, finite, and controlled amount of inventory and production capacity?

As a builder, consider this scenario:  You have a competitor that has exactly the same work-in-process, overhead, working capital requirements, borrowing capacity, and risk profile.

If you generate a Gross Margin of 24% and turn your inventory twice a year, you will be outperformed by this competitor that generates a Gross Margin of only 18%, but turns its inventory four times a year;  you will be outperformed in terms of Revenue, outperformed in terms of closings;  you will be out-performed –better than two-to-one – in terms of Net Income and Return on Assets.

You will struggle to compete;  in fact, you will struggle to survive.

It is the picture of a slow, marginally-productive homebuilding company versus a fast, highly-productive homebuilding company;  your competitor generates 85% higher Revenue and 40% more Gross Income than you do, and does it 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 – the one with the 18% Gross Margin and a 4x turn – produces almost the same ROA as you do 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, remember this:  in this scenario, your competitor is exactly the same size as you, when the real measure of size is the amount of work-in-process you each have to carry.

It’s not a choice forced between either higher margin or higher velocity;  it’s the challenge – and the opportunity – of doing both, of maintaining higher margins at higher velocity.

Yet, despite the obvious advantages, the demands of achieving higher velocity – the demands of generating higher productivity – are so daunting, require so much rigor, so much discipline, so much resolve, that most builders won’t attempt it.

And, therein lies competitive separation.

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 September 26-27, 2018.  The cost is $895.00 per person;  the cost during early registration, open through June 29, 2018, is $750.00;  for team pricing, ask: (flgroves@saiconsulting.com).

Sponsored by BUILDER, BuilderMT, and Specitup.

For more details:  www.buildervelocity.com

 

Pipeline Workshops™: Finding TrueNorth

Posted June 9, 2018 By Fletcher Groves

Scott Sedam is President of TrueNorth Development, Inc., and is the industry’s foremost Lean Production practitioner.  A well-known, well-respected Lean Building purist, Scott is a Bill Pulte protégé, who’s roots go back to Edwards Deming and TQM.

He is a friend, and longtime fellow consultant.

In 2013, after the first edition of The Pipeline: A Picture of Homebuilding Production© was published, and as I was planning the first Pipeline workshop™, I suggested that Scott attend as SAI’s guest, so that he could see pipeline-thinking for himself.

I wanted his opinion of the workshop, but I also wanted him to share with those first-time-ever attendees his thoughts on applying Lean Thinking beyond the margin side of economic return, towards what we were now terming the velocity side of Return on Assets.

Scott graciously came to the first workshop in March 2014, functioned like any attending builder in the discussions and in the Pipeline games™, and was a panelist (with me) on blending improvement methodologies towards a solution that works best for homebuilding.

Afterwards, this is what Scott wrote in a discussion on the BUILDER group on LinkedIn:

“If you are ready to challenge your brain, get out of your well-sealed ‘Builder Box’ and make a huge leap forward in understanding schedule and its impact, come to this workshop and bring a few of your better thinkers.

“The roots of [this] workshop are in Goldratt’s Theory of Constraints, which is at first-blush exceedingly simple, but you can spend years studying the intricacies.  Fletcher puts it all in builder language and forces you to go deep into the impact of our most common builder practices.

“If all builders learned and followed the principles in [a Pipeline workshop™], our industry would take a huge leap forward.  The winners would not be the builders alone, but also homeowners and especially our suppliers and trade contractors.  Fletcher does not know I am writing this, but I strongly recommend his Pipeline Workshop™ to everyone who has the will to change for the better.”

Come. Participate.  Learn.

 

The next Pipeline workshop™ is September 26-27, 2018, at the Ponte Vedra Inn and Club, in Ponte Vedra Beach, Florida.  The cost is $895.00 per person;  the cost during early registration (through June 29, 2018) is $750.00;  for team pricing, ask (flgroves@saiconsulting.com).

Sponsored by BUILDER, BuilderMT, and Specitup.

For more details:  www.buildervelocity.com

The Pipeline: A Picture of Homebuilding Production, Second Edition© is available on the publisher website (virtualbookworm.com), as well as through the major book sellers (amazon.com, barnesandnoble.com, and booksamillion.com).

Pipeline Workshops™: Come. Participate. Learn.

Posted June 2, 2018 By Fletcher Groves

In the weeks leading up to a Pipeline workshop™, we explain to builders what they are about to encounter.  We describe the tools that they will have to learn to use, the facts of the business case they will confront, the knowledge they will take away from it, what they should expect to see.

We explain the challenging, disruptive, competitive nature of the learning – the degree of interaction, the level of intensity – they will experience.

At a Pipeline workshop™, it is learn-by-doing, applying production principles and disciplines to production simulation, and measuring the resulting operating performance and economic return.  We communicate our expectation that builders come prepared to learn that way, that there is no place to hide.  Nevertheless, many attendees tell us afterward they should have studied more, they should have prepared harder, in advance of the workshop.

Clark Ellis and I make no apologies for the extraordinarily demanding nature of a Pipeline workshop™.  It is intended to not just inform your thinking, but also to reform – and to re-form – that thinking.  It is designed to challenge your thinking, to change the way you think.  It is intended to test your understanding of how production systems work and how daily operating decisions drive business outcomes.

We constantly remind builders: there is a big difference – a big difference – between being in the home building business, and being in the business of building homes.

So – you have to come to a Pipeline workshop™ prepared for what is going to be thrown at you.

For example, exploiting the RB Builders: Lessons from the Pipeline© business case, which is revised and used at every Pipeline workshop™, requires the use of financial tools like Breakeven (variable costing, Cost-Volume-Profit Analysis), the DuPont identity (ROA), and the Cost of Variation.  It requires an understanding of production physics, like Little’s Law* (duration, cycle time) and the Law of Variability Buffering.  It requires the application of known improvement methodologies, like the Theory of Constraints, Lean Production, and Six Sigma.

You can read the book.  The Pipeline: A Picture of Homebuilding Production, Second Edition© is carried in stock on amazon.com;  it is also available directly from the publisher’s bookstore (virtualbookworm.com).

But – if you want it all handed to you, don’t bother to attend.  If all you want is binder material you can underline and highlight, and put on your bookshelf, don’t come.  If you aren’t willing to own what you take away from it, a Pipeline workshop™ is not for you.  If you believe improving the margin side of Return on Assets is the only game in town, a Pipeline workshop™ is about a different game.

But, if you are determined to create sustainable competitive separation, by thriving on the velocity side of Return on Assets®, by excelling at a discipline other builders find too difficult, too rigorous, too daunting, then a Pipeline workshop™ is precisely the right place for you to be.

 

Come.  Participate.  Learn.

The next Pipeline workshop™ will be held September 26-27, 2018, at the Ponte Vedra Inn and Club, in Ponte Vedra Beach, Florida.  The cost is $895.00;  the cost during early registration, open through June 29, 2018 is $750.00;  for team pricing, ask (flgroves@saiconsulting.com).

Sponsored by BUILDER, BuilderMT, and Specitup.

For more details:  www.buildervelocity.com

*We will entice you a bit with Little’s Law.  Consider this scenario:  C/T=120 days;  WIP=80;  Closings=240.  Little’s Law says:  CT = (WIP ÷ C) x 360;  WIP = (CT x C) ÷ 360;  C = (WIP ÷ CT) x 360.  Therefore:  CT = (80 ÷ 240) x 360 = 120 days;  WIP = (120 x 240) ÷ 360 = 80 units;  C = (80 ÷ 120) x 360 = 240 closings.