Success with Semi-Custom

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To paraphrase management consultant Chuck Shinn, "There's no such thing as a semi-custom production builder. There are only production builders, custom builders and builders who aren't making any money." Behind that axiom is the assumption that customizing production plans interferes with productivity and, therefore, profits.

September 01, 2005

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Vital Stats

To paraphrase management consultant Chuck Shinn, "There's no such thing as a semi-custom production builder. There are only production builders, custom builders and builders who aren't making any money."

Behind that axiom is the assumption that customizing production plans interferes with productivity and, therefore, profits. But DiYanni Homes, building 200 homes a year in suburban Columbus, Ohio, for roughly $50 million in revenue, proves an exception to the rule. After working with Shinn's consulting firm for more than a decade, DiYanni's paperless processes and catalog of pre-priced options now shine — and do so particularly brightly on its best-selling and most varied plan, the Muirfield, shown here.

Opportunities

 

In the 1990s, as Columbus-area zoning changes squeezed available lots toward a range with a current low of 55-foot road frontages and five-foot setbacks on the front and sides, the company began "looking for a plan that would be unique and would fit on a narrow lot," says president Henry DiYanni, "and also have some flex in it for larger lots."

The builder then, as today, maintained an inventory of lots for multiple product lines including a mid-market Providence Series with current base prices from $198,000 to $287,000. "We're very comfortable in the middle of the market," says Dan DiYanni, vice president of land development, explaining that broadening the appeal of the line "would give us a better competitive position, by giving us a chance to reach more buyers and the broadest spectrum of buyers."

In their quest for a small, expandable floor plan, company leaders experienced a "eureka" moment during a conference presentation by famed California architect Barry Berkus on the topic. They subsequently contracted with Berkus, whose concepts and consultation led in-house designers to create such a plan.

Challenges Met

The resulting Muirfield plan, set in the middle of the Providence Series, would not only have to target a broad swath of first move-up buyers aged 35 to 50 — with and without children — but overlapping, secondary buyers. These included empty nesters, near-empty nesters and a portion of first-time buyers whose extra savings and/or income put them into price points above the entry-level mainstream.

To meet this broad demand, the Muirfield was designed to include a flexible loft space in the three-bedroom home's second floor, plus adaptability through the use of a three-car garage whose rear, tandem bay can be modified into a study or screened porch at no extra charge. Young families can leave the tandem bay intact to store the kids' toys; aging boomers might use the space to create, for an up-charge, a first-floor master suite, an in-law suite, or a space for "boomerang kids" returning from college. On larger lots, buyers can expand the plan with upgrades including a six-car garage and a wrap-around porch, which "makes the same house look totally different," Henry DiYanni explains.

Such flexibility was also built into the company's business processes via hundreds of pre-configured and pre-priced options stored in a paperless DiYanni sales system. This, in turn, forms the basis for a "Personalize Your Home" marketing program. Buyers can configure their plan with pre-priced options in a single sitting, says Tom Dobberstein, senior sales associate, in which case, "We can tell buyers their price immediately," he says. Off-the-list customization, he adds, isn't as 'custom' as many buyers think," because the database holds a large catalog of repeatable projects.

Material Innovations

"We put a lot of time, money and energy into ensuring a solid home," adds Ray DiYanni, director of trade services, pointing to the use of OSB over less sturdy synthetic sheathing materials and enhancements that allow the builder to offer a lifetime warranty on foundations. These include a superplasticizer for strength, flow and a lower water/cement ratio; vertical and horizontal steel reinforcement; and two layers of protection including a wrap of DeltaMS air-gap waterproofing membrane from Cosella-Dörken Products.

Engineered roof trusses and wood I-joists from Trus Joist provide long, firm spans with a live-load deflection of L/480, higher than required. Atop these, the company glues and screws 3/4-inch subflooring for strong, quiet floors.

Finishing details follow suit with, for instance, 30-ounce carpet as opposed to the common 24-ounce. Throughout the house, white, six-panel Masonite doors and painted wood trim are standard. Walls use a high-pigment paint from Porter Paints chosen for scuff resistance and easy touch-ups, while scratch-resistance similarly led the builder to spec Nevamar surface laminates in the kitchen to complement Aristokraft cabinetry.

Outcomes

 

Since the Muirfield was introduced at a local 1997 parade of mid-market homes and won the event's "People's Choice" award, it has grown to comprise 20 percent of unit sales across DiYanni's total of 30 house plans. The Muirfield has climbed from the standard 2356 square feet to 2800, and prices have climbed from the $220,000s into the $290,000s.

Personalization of pre-priced options and customized plans remain profitable through strong in-house controls, well-managed customer expectations and good partnerships. Subcontractors, for example, must pass a mandatory trade partner certification program, which Phil DiYanni, director of production and warranty, says "instills a higher level of quality because they know our standards, our scopes of work and our processes."

Today, the Muirfield fools even repeat customers who "can't believe it's the same plan," says Henry DiYanni, "It's just one of those plans that goes on forever." He adds that gross margins "follow Chuck Shinn's target guidelines" and are in the double digits. So there is, after all, such a thing as a profitable semi-custom builder.

 

Vital Stats

Builder: DiYanni Homes, Reynoldsburg, Ohio

Design: In house; consulting by Berkus Design Studio, Santa Barbara, Calif.

Market: Suburban Columbus, Ohio

Home type: Single-family

Base Price: $226,500 (and up depending on community)

Square footage: 2356

House size: 45 feet wide × 44 feet deep

No. of elevations offered: 4

First built: 1997

Buyer profile: First-time move up; eclectic secondary targets

Sales results: 20 percent across 30 plans

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