This is a longer version of an article that appeared in the May/June 2021 issue of Pro Builder.
When smaller-volume home builder clients ask for assistance in adopting more production-based systems and processes, I always ask them to show me a list of construction starts and completions by month for the past 12 months.
Taking geographic location and the resultant weather impact into consideration, I’m looking for an even monthly distribution in the number of starts and closings plus spec-home construction completions. If the consistency is plus or minus two or three homes for a builder doing 40 to 120 units of annual production, that’s great!
If it’s outside that range, I start with an explanation of the importance of and opportunity afforded by adherence to an even-flow job processing system, which is: If the goal is to build 50 homes per year, the ideal would be to start and finish one home per week. (We typically measure goals weekly for even flow at or over 40 homes per year, and monthly when doing fewer than 40 units of production.)
Where Do You Start When Setting Up an Even-Flow System?
The foundation of an even-flow system is what’s called the “slot” schedule. We concentrate on the primary slot milestone, which is the construction start date. All activity starts are based on a presold, ratified contract date or a spec home “start of activity” approved date, and there are a number of mini milestones that make up the full slot schedule.
These milestones can be divided into three main sections: preconstruction, during construction, and the completion phase. We like to set these up in weekly blocks of activities; typically, six to 10 weekly blocks of preconstruction activities; 12 to 24 weeks of construction activity (depending upon your average time of construction); and two weeks of completion (or post-construction, pre-close) activity.
Sample Preconstruction Slot Schedule
This is the preconstruction slot schedule the production home builders I worked for and many clients have followed for years. Each weekly schedule is seven calendar days long. There normally is a list of activities taking place in each weekly slot, and we label the week based on the most critical of those activities.
Week 1: Draw the job plans to the contract using the base home and all items selected in the initial ratified contract. We call this the Preliminary Drawing.
Week 2: Selections Phase 1
Week 3: Selections Phase 2 and lot inspection
Week 4: Pre-construction meeting with customers or spec coordinator
Week 5: Redraw the home based upon activity in weeks’ 2 to 4 redlines. We call this the Prem Drawing and typically use this to submit for permit.
Week 6: Estimating. This produces the job-specific budget, including base plan, foundation adjustments, and selections chosen and will include any and all contract addenda. We do not call them change orders until the purchase orders (POs) are out the door to the trades and suppliers. The final activity in this section is to prep, but not release, the POs.
Week 7: EPO (estimated purchase order) report review, where the construction department evaluates and approves the job start package and accepts the home from the preconstruction departments (CAD, Estimating, and Purchasing).
Week 8: Release plans and POs to trades and suppliers. This occurs after any edits to final plans and POs during the EPO review meeting.
Week 9: Construction start (whatever activity is consistently used as the start date. For me, as a builder in Ohio, it was basement excavation, or “Dig Date”).
All told, we have nine weeks to get the house ready to build efficiently and with the most accurate job start package. A 50-unit-per-year builder will ideally want one house in each weekly phase and have each home move up into the next weekly phase at the conclusion of each week. If we’re building 100 homes per year, our goal would be two per week, etc. Seventy-five homes per year would result in a goal of three homes every two weeks, or one home one week and two the next, and so on.
This preconstruction phase example is echoed in format during the construction phase (12 to 24 weeks) and the completion phase (2 weeks) of the slot schedule. We want an even number of homes in each weekly phase, all moving in lockstep.
The Benefits of an Even-Flow System
This process, once accepted by your team and working well, will:
• Improve communication to the customer about when their home will start and complete/close.
• Create a sense of “Get it before it’s gone!” urgency with customers by dangling the next open slot in your process to “start” their new home.
• Give you the ability to keep a steady flow of work to your trades.
• Decrease the time of construction.
• Increase both customer and employee satisfaction.
• Drive consistency of all metrics in key performance indicators.
• Improve quality metrics.
• Ultimately raise profitability.
A client that adopted our even-flow and slot scheduling process made the most obvious improvement, generating more revenue closing 146 units the first full year on even flow than they’d made in the previous 21 years (including several years closing between 200 and 350 homes). And that’s in raw dollars, not just in margin percentages.
Secrets of Even Flow for Home Builders
There are “secrets” to the system, some more obvious than others. The first is backlog. To make it work, you need a presold and/or spec-approved backlog to constantly fill your preconstruction weekly schedule. In our example, a 100-homes-per-year builder would need 18 homes or more (two per week, multiplied by the nine weeks of the preconstruction phase) in preconstruction backlog at all times.
That builder also would include an under-construction backlog of two homes for every weekly slot of construction, or 40 homes for a 100-homes-per-year builder with 20 weekly construction slots.
Other secrets include:
• Sticking to the schedule: Getting ahead is almost as bad as getting behind. Even if an activity can be rushed, it’s still better to work the schedule and keep to the weekly system of progress.
• Being transparent: Builders can tell their sales teams they can sell as many homes as possible, but they also have to be honest with customers about what their build schedule is going to be.
• Making presold adjustments: The slot schedule can be adjusted during preconstruction slots to “slide” a presold home in front of a speculatively built home where desired.
• Monitoring schedules: The weekly slot schedule inherent in the even-flow process is the best way for company senior and department managers to monitor schedules. Save the more granular-level schedule tracking for field supervisors and individuals in the preconstruction team who have to check off all of the boxes on the checklist.
This simple yet comprehensive system can change a disorganized entity into an efficient company faster than any other implementation. And, it creates a synergy within your firm-—including your trades and suppliers—unlike anything else.
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