What does it take to build a Lean culture with your suppliers and trades, and how does it impact their business and yours?
I’m often asked to contrast Lean process with traditional value engineering. One of the key differences is that although Lean employs the tools of value engineering, it moves a step beyond through much greater emphasis and involvement of suppliers and trade contractors. Without this key ingredient, a builder’s ability to identify and eliminate waste in product, process, and plans is limited at best, and in some situations, impossible. The impact is twofold. First and most obvious, those working closest to the product know more about it than anyone else. So to optimize our building envelope, for example, we’d better have our framers, the lumber company, and suppliers of engineered wood products involved. A caution is in order, though — sometimes myopia sets in for those working too closely on the task and the addition of a third party from outside the immediate scope of work can bring a perspective and ask the tough questions to get to the heart of issues.
The second critical impact of supplier/trade participation is in building Lean culture. Many builders forget that 90 percent of those who build our homes do not work for us directly, and the implications are profound. Anyone who has toiled in more traditional industries understands the negative impact of workforce turnover on quality, productivity, and profit. Home building’s near-universal dependence on outside, subcontracted labor hides this reality from less astute managers, as turnover is “the trade’s problem,” not the builder’s. If you’ve never taken the time and considerable effort required to foster solid, long-term relationships with suppliers and trades that know your company and its products intimately, you cannot appreciate this. Those who have done the work, however, know the positive impact from early, ongoing, and structured supplier/trade input from design through build and on through warranty cannot be overstated.
Gaining these benefits through Lean process requires the builder to establish a culture that continually solicits supplier and trade feedback, fostering a spirit of continual improvement of product and process. Yet “facing the brutal facts” reveals an incredible amount of fear, especially after five years of housing recession. Last year was officially declared the worst year for housing since the Great Depression, and 2011 looks to be no better and potentially worse. That poses a daunting challenge for home builders. With both suppliers and trade contractors clawing for every piece of business, fear is rampant. When people are afraid of losing their jobs and livelihood, how do you encourage their most honest feedback? Will they tell you about the construction scheduling issues that cause them extra trips? Will they protest when a new product someone in purchasing got a deal on will actually result in warranty failure down the road? Will they tell you the new software that you are led to believe works great is actually costing a fortune in field time due to workarounds? In short, will they tell you the baby is ugly — or maybe just that you’re feeding the baby the wrong thing, dressing it poorly or not keeping it safe?
What does it take to build a Lean culture with your suppliers and trades, and how does it impact their business and yours? To find out, we asked some builders on their own Lean journeys to suggest a few suppliers and trade contractors that “truly get it,” that understand what it takes to create the environment where Lean flourishes. What we received back was both what suppliers and trades expect from builders and what they expect from themselves, couched in good advice for all of us.
Scott J. Appel, co-founder, Touch of Color Flooring, Harrisburg, Pa.
“Lean is the new normal in the post-recessionary economic times. If you are not Lean, you better get Lean fast because your competitors will, leaving you scratching your head wondering where your customers have gone. Lean is the way of the future, and if you are not going forward, you are going backward. To get the most out of Lean, builders must understand the process as a way to increase profit for both the supplier and the trade. Trades can tell when a builder is sincere and when they are just looking for another way to beat up subcontractors one more time.”
Gary Humphreys, operations manager, Hardy Plumbing Co., Augusta, Ga.
“Lean requires an understanding that every bit of material and every minute of the day represents a profit or a loss — it’s your choice. The biggest thing I had to learn to do differently is listening to others — my people, the builder, and other trades. The hardest thing for builders is to become truly concerned about their trade partners’ bottom line. The largest savings I have found is in the cost of return trips. I knew it wasn’t good, but when I put the pencil to it, I woke up. The biggest obstacle you will face in adopting Lean is being stuck in the habits or traditions that you developed over the years. My advice for any builder, supplier, or trade contractor is to not think that you’re so big, so profitable, so smart that you cannot benefit from the Lean journey.”
Scott Reed, owner, Reed Concrete, Lancaster, Pa.
“Should you begin a serious journey into Lean process and methods, be prepared for more than you expect, in both self-awareness and savings. After completing several days of intense Lean focus meetings, my team of field staff, office personnel, and management were mentally exhausted. We wrapped up at an offsite location on Friday afternoon about 1:00. I was so pleased with the results I told the team to take the rest of the day off — they earned it — then I went back to the shop. About 3:00, I looked out the window and saw several guys from my field crews working on ideas to rearrange and reflow the yard they devised during our Lean sessions. They just couldn’t get these ideas out of their heads and didn’t want to wait till Monday. Friday afternoon? On their own time? I’d call that ‘Lean fever.’”
Will King, owner, operations manager, Southern Builders of Louisiana, New Orleans
“Operating Lean means completing our work on schedule, with zero call backs. This cuts cost on every house that is framed, from crew time to supervision time to managing waste. Teaching our superintendents was the first order of business. It began with thought process, and teaching the old dogs new tricks was actually easier than I expected. You have to be consistent with your methods and help them see the value. Putting guidelines and standards in place has made it clearer for them to manage their projects more efficiently. My advice to the builder is to spend time on the job site to see how the house is really being put together so that all material and kinks are worked out the first time. Lean has enabled us to maximize our profit even in tough times and has become a lifestyle in our company. Our motto is ‘Desire to change, Willingness to learn, Make no excuses, Take action.’”
Eric J. Crawford, consumer department manager, HB McClure Co., Harrisburg, Pa.
“Lean has helped me think more like a consumer than a provider of a service. What is important and necessary to me does not always benefit the end consumer. We learned that, at times, we go way above and beyond the standard when in reality it can be done another way without hindering quality. Lean has helped us look outside the box from installation practices to product. We have developed improvements that helped not only the builder, but also carried into other aspects of our business, enabling us to become more competitive within our market. For the builder, paying on time should be a given, but the biggest impact of all is job scheduling. With the tight margins we face today, the unexpected ‘dry run’ can literally make or break a job.”
Bill Hutchens, branch manager, Archer Exteriors, Nashville, Tenn.
“In today’s tough market, to be Lean is to be working. It is not necessary to make all of your own mistakes in Lean implementation. Many companies have done the pioneering, so use them as a resource. Consider the cost to learn Lean as an investment in your company. Understand that you are asking your people to unlearn habits that they have spent years developing, so it will be a process. But if you see it through you will find your company stronger and better positioned, with new ideas about how to view business. Never forget that, in the end, our final customer is an individual — some young mother whose dream of owning a family home is about to come true, or a retired couple buying their last home. Being Lean means giving people the best value possible. When we take the time to remember that, we realize that operating Lean as a company is truly what we owe our customers.”
This is just a sample of the responses we received, but for many builders it begs a big question: Why aren’t you getting this kind of commitment from your suppliers and trade contractors? Dr. W. Edwards Deming said it first back in the 1950s and repeated it continually over the next 40 years — the biggest obstacle for management is fear. Fear is insidious because, in the short run, it can be a highly effective motivator, bringing intense focus and enabling heroics, inspiring people to do the near-impossible. One has only to consider the actions of the Allies in WWII, fighting battles on multiple fronts on opposite sides of the globe, or the recent tsunami tragedy in Japan, which presented hourly live accounts of brave and selfless acts. Fear drives us to action, but in the not-very-long run, it is paralyzing. Fear propels people to the safest position they can find, keeping heads, ideas, and voices low lest they be pounded down in the time-honored tradition of management whack-a-mole. In such an environment, improvement stops.
The suppliers and trades that have spoken here have clearly risen above their fear, but they are not unique. You have them too, waiting to help your business as they help their own, if you are able to allay their fears and open up to their most sincere and honest feedback and ideas for improvement. You’ll get a lot of good, you’ll find your fair share of bad, but when you are fully willing to hear the ugly, take it to heart and take steps to eliminate it, you’re on the right track.
Scott Sedam, former home-building executive, well-known writer, and frequent speaker, is president and founder of TrueNorth Development. He and his seven TrueNorth colleagues focus on the adoption of Lean Operating principles into the home-building industry, serving more than 200 builder and supplier clients in the U.S., Canada, and Australia. Sedam welcomes your feedback at email@example.com.