Seven ways (plus some extra tips) to cut cycle time in today’s labor-constrained market
In 1999, when our company was exploring ways to reduce cycle time, we decided to find out how quickly we could build a home under ideal circumstances. The result: We completed a 2,200-square-foot home in 4 ½ days—a total of 49 hours of construction time.
The exercise not only gave us clues as to how we might reduce ballooning cycle times under “normal” conditions, but also drew attention to what was truly possible for our field teams and trade partners.
We learned that if you can remove all of the “empty-house time,” maximize crew sizes, plan properly, and execute down to the minute, extraordinary speed and efficiency is possible, even when the circumstances aren’t ideal.
Over the years, I’ve learned a lot about building homes faster; enough to fill a book. But I’ve boiled them down here to seven ways (plus some extra tips) to cut cycle time in today’s labor-constrained market.
1] Start with a realistic, achievable schedule
Many builders are using and distributing schedules that have no basis in reality. They insist that if they publish a four-month schedule (knowing it will actually take six months to build the home), they will magically build faster.
In fact, unrealistic schedules actually lengthen cycle times, as field staff and trades give up trying to meet them, instead relying on phone calls and emails to keep things moving.
Provide a realistic schedule, created in agreement with all parties, and your teams and trades will be able to follow it.
2] Update the status of every home each day
The last act of your field team every day should be to walk the homes and update their status, and do so in a way that trade partners can access that information immediately to plan when and where to dispatch their crews.
Trades will send their best crews to communities where they can rely on accurate status updates, avoid dry runs, and complete their work on schedule. If they can’t rely on your status updates, your community will be last in line when crews are assigned ... and you’ll probably get the least-experienced or proficient of the lot, leading to more delays. Don’t make trades send an expensive foreman to find out!
3] Track empty-house days
While estimates vary, it’s widely agreed that builders lose at least $300 for every day a home under construction sits empty.
I estimate, with confidence, that of the 180 days it usually takes to build a home once it’s permitted, the home sits empty for at least 90. That’s $27,000 off the top!
When you start tracking empty-house days, your field team will focus more closely on making sure progress is made on every home, every day. Each day, have them calculate how much money the company is losing when homes sit empty. For example, 5 empty homes x $300 = $1,500 lost today.
4] Create a Red-Yellow-Green report
Invariably, superintendents focus most of their energy on completing homes that are due to close (especially when they’re behind schedule), while homes in the early stages of construction or built on spec invariably fall behind.
Combat this disparity by creating a weekly “Red-Yellow-Green Report” for all homes under construction. For reference, my system is coded so that RED means a home is 10 to 15 days behind schedule, YELLOW represents a home that’s one to nine days behind, and GREEN is a home that is on schedule.
Review this report weekly with your superintendents, which will force them to focus not just on homes nearing completion, but on all of their homes.
- Extra tip: Require that your supers present a plan to get all homes that are in a Red or Yellow state back on schedule.
5] Even out the release of homes for construction
Often builders release homes for construction according to the rate of sales, since they want to begin building homes as soon as the ink is dry on a new sales contract.
The trouble is that when you have a great new community opening and you sell eight homes in one weekend, the instinctive reaction is to release them all for construction at the same time. But when sales dwindle to just two homes per month, the flow of work for trade partners slows and they send their crews elsewhere.
Builders lose at least $300 for every day a home under construction sits empty.
I recommend doing as much as you can to even out the flow of releases. If you’re building 50 homes per year, start one home a week. Eliminating the “pig through the python” will allow your trades to allocate resources more predictably and reliably, which will greatly reduce the number of empty-house days caused by the uneven flow of available work and will also keep your trades happy and showing up.
6] Prohibit all late changes to homes under construction
I have a client who asked me to help reduce his ridiculously long cycle times. When we looked for root causes, we discovered he was allowing buyers to make numerous changes long after their homes were underway; in fact, the builder was averaging more than 10 late changes per home.
His reason: He was agreeing to multiple late change requests “to ensure satisfaction,” he said, but the delays and errors caused by these changes were actually causing high levels of dissatisfaction among his buyers and were resulting in huge losses due to longer cycle times and late deliveries.
I recommend no changes should be permitted once a home has been started. And data and experience prove this policy does not reduce customer satisfaction.
- Extra tip: I further recommend that no homes be released to construction until all of the customers’ selections are 100% complete. If you give into the urge to start building after only structural selections are made, delays are inevitable when customers conduct decorator selections later in the construction process.
7] Monitor trade crew sizes and 'subs of subs'
Honest trade partners admit they routinely take on more work than they can reasonably manage with their current staff. When trades take this approach, they compensate in two ways: they either send two guys when they need three to meet the schedule (in an effort to keep the superintendent from screaming at them for missing deadlines), or they subcontract work to other companies.
Both scenarios have an extreme effect on cycle time. Smaller crews mean longer time in the homes (and schedule slippage), and ad hoc subs of subs don’t know the homes well enough to build them in a timely or error-free way.
- Extra tip: Use the scope of work in your trade partner contracts to set crew sizes, demand full crews for each home, and require that trade partners notify you in advance if they intend to sub out your work. They won’t want to follow that last one, which means you’re more likely to get their employees, not their subs.
- Another tip: Make sure your homes are 100% ready for each crew and trade, that is, broom-clean, all materials on hand, and free of conflicting trades.
Take these steps and, while you may not be able to build your homes in just 4 ½ days, you will be able to build them faster, better, and more profitably.
Access a PDF of this article in Pro Builder's February 2020 digital edition