Step 5: Get suppliers and trades involved

The warning in step 4 cannot be overstated. The great majority of cost-cutting efforts since the 2006 crash — including much of what builders try to pass for “Lean” — remain thinly-disguised re-bid tactics that rarely use the knowledge of the suppliers and trades in an honest way. Yes, re-bids, and even unilateral percentage demands, will work in the short run. After all, didn’t the customers re-bid the builders? Of course. But another round of re-bids reveals three flaws.

First, when you force all suppliers and trades through the same percentage knothole you assume they all have the same margins and efficiencies. That’s ludicrous. Second, the collateral damage and hidden costs are both large and rarely acknowledged. For example, what is the cost of no longer getting a trade’s best crews? Or a supplier’s extra care for delivery? Or letting the schedule slip, or not getting service for your customers?

Third, you lose the greatest potential cost reduction of all: the systemic elimination of waste in product and process. Without the full, willing participation of suppliers and trades you’ll find only a fraction of waste in the system. If management truly gets the fact that suppliers and trades hold the key to Lean, not far down the road you’ll look back amazed at what you have accomplished.

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