Housing Zone

The Business Plan: Production

Steve Maltzman, CPA -- 8/10/2004



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One of the components of a company's business plan is the production plan, which describes how the company will produce its homes. Goals and strategies need to be set for all aspects of your production cycle, including estimating, scheduling, customer selections, construction, customer service and warranty. Review what has worked well in each of these areas and identify areas that need strengthening. Challenge all of your systems and paper flow. Establish specific goals in each of the following critical areas:

Plan Design
Estimating
Purchasing
Field Management
Quality Control

Plan Design
This section of the production plan provides an opportunity for you to examine your current portfolio of plans. It would be helpful to develop an analysis of the number of sales of each plan type, as well as profitability by plan type. Ask yourself the following questions when performing your plan review:

How many plans do you maintain?
Is this number too few or too many?
How many years have you been building each product?
What can you do to freshen up stale plans?
Do you have a process to continually value-engineer your products?

Estimating
Within this section of your production plan, you should evaluate your estimating systems and procedures. Ask yourself the following questions to assist in evaluating your estimating processes:

How do you handle estimating within your company?
How long does it typically take for your company to create an estimate?
How can you improve the turnaround time?
How accurate are your estimates compared with actual costs?
How long does it take your company to process non-standard changes to plans?

Purchasing
It is difficult to reap the rewards of good estimating if you do not have an efficient way of managing the purchasing of labor and materials. The following questions should assist you in evaluating your purchasing processes:

Do you have written trade partner/vendor agreements?
How often do you review your job cost reports?
What steps do you use to improve variances between estimates and actual costs?
Do you have a purchase order system in place?
If yes, what can you do to improve your purchase order system in the future?
If no, how do you ensure that vendors and trade partners are only paid for work that is done correctly?
What can you do to improve your change order system?

Field Management
One of the biggest problems I find in home building companies is poor communication between the field, sales and back office. The following questions will help you in analyzing your field processes and improve your communication processes:

What is the process for starting a home?
Do you start a for-sale home differently than a spec-built home?
How do your sales and production staffs communicate to take advantage of even-flow production (or "slotting")?
Do your production supervisors know your specifications and scopes of work?
Who are your best supervisors?
What can you do to train others to be like them?
What systems do you use to make sure the correct materials are delivered to jobsites?
What trade partners may need to be replaced, and what is your plan to replace them?
How can you help your trade partners become more efficient?

Quality Control
To achieve high levels of quality control, you need a systemized production process that holds employees and trade contractors to high standards during the construction process. In turn, this will lead to fewer callbacks and increased customer satisfaction. Ask yourself the following questions in evaluating your quality control systems and procedures:

How would you describe your level of quality?
How would your customers describe your level of quality?
Who oversees your company's production function?
What is your weakest area of control, and what can you do to make it one of your strongest areas of control?
What steps do you use to ensure communication between your customer service, sales and production departments?
What corrective measures do you use for products that don't perform to your standards?

The next column will address the management and customer satisfaction sections of your business plan.

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