The Lean Building Forum - with Scott Sedam, March 2010
|About the host
Scott Sedam hosts the Lean Building Forum where each month he interviews those who are implementing the principles of Lean operations in home building. Sedam is president of TrueNorth Development in Northville, Mich. He can be reached via email at email@example.com.
For the complete transcript and audio of the Lean Building Forum interviews, visit www.HousingZone.com/Lean
|This month's guests
Scott Sedam interviews Mike Funk, Sr., and Jennifer Heitmann from David Weekley Homes to find out how the company saved $10 million by implementing Lean building principles. Funk is quality coach and Heitmann is Lean building analyst with the Houston-based builder. Funk has been with the company for 21 years. In that time, he built homes for five years, worked on the sales and operating systems in IT for five years and has been a quality coach since 1999. Heitmann joined David Weekley Homes in 2007 as a purchasing analyst. Previously, she worked for Houston-based Taylor Woodrow Homes in a variety of capacities, including estimator, custom design representative, options coordinator and purchasing manager.
This is the complete transcript of an interview for the Lean Building Forum in the February 2010 issue of Professional Builder magazine. Check out the condensed version of this interview and the complete audio transcript (8 MB MP3 file). We welcome your comments and feedback at firstname.lastname@example.org or email@example.com.
Hello and welcome to the LeanBuilding Forum on HousingZone.com Radio. I am your host Scott Sedam. You may know me as a building industry author and conference speaker but most of my time is spent as president of TrueNorth Development where our primary focus is helping builders, suppliers and trade contractors implement Lean thinking, process and methods. As such we meet a wide variety of interesting and dedicated people who are pioneering the adoption of Lean principles in home building. Through the Lean Building Forum each month we bring you their stories and their advice with the goal of helping all of us lead the industry forward to a new era of profitability and customer delight. There are many definitions of Lean but the simplest for our purposes is this: Lean is the relentless pursuit, identification and removal of waste in all forms of product and process. Getting rid of the waste applies to every department and every level. Lean requires tools and techniques but mostly it requires the guts to confront our wasteful practices and long held beliefs and then the discipline to make the changes stick.
The LeanBuilding Forum will feature those who are leading the way. And today we have with us from David Weekley Homes an old, old friend of mine and a new friend. We have Mike Funk who is Senior Quality Coach David Weekley Texas, covers Texas and Colorado, a huge amount of the company. He’s based in Houston and Mike and I go back a lot of years. Found each other somewhere along the way and found kind of like minds and he has been leading the way at David Weekley for several years now in implementing Lean methodology. And they have there the only person of this title I know of in the entire country. Jennifer Heitmann is actually called the Lean Building Analyst and her full time job with David Weekley Houston is to help focus on the Lean initiatives, make sure the results come through and she’ll tell you more about that. So with that introduction we’ll get started and what I want to do to start out with, if you each would in turn just tell us a little bit about your background, where you’ve been in building and how you got into the position you are today.
Mike Funk: Well first of all thanks very much Scott for having both of us on today. I started, and I would be Mike Funk, started with David Weekley Homes 21 years ago. Prior to that I had been with a Texas company building entry level homes, and I was with them for about 10 years. I came to David Weekley Homes and started building homes in the field in Dallas Texas. Took a little bit of a different turn in life with Weekley Homes and went into the IT department for 5 years and then came back to Houston Texas and became a quality coach back in ’99. Since then I have acquired other jobs along the way. I get to do a lot of special projects and most recently was made in charge of the area that Scott had mentioned Texas and Colorado. All of our construction operations and training in those areas is my area of responsibility. But the one thing I wanted to emphasize is it was interesting my building career started with those basic homes that had a lot of Lean practices built in and as we evolved and as my company has evolved over the years we’ve kind of gotten away from those. It was kind of refreshing to me when I first met Scott to talk about some of these things that for me were kind of old school, but of course Scott brought fresh ideas and things that were a little new school that we could learn and be even better than what we were back then when I started in this business. Jennifer.
Jennifer Heitmann: Thank-you. Hi Scott, thanks for having us. I started my career in home building about 11 years ago. First 8 years I was with another national builder here in Houston, based here in Houston. With them I primarily worked in the office, in purchasing, everything from designs to estimating, options, controlling costs, things like that. And I joined David Weekley almost exactly 3 years ago with the main focus was Lean. It was an idea that they had discovered and wanted to explore and I was brought on to kind of help lead that or guide that and to take it where it is today.
SS: Mike let’s, and thanks both of you for that introduction, for the audience I think everyone knows the name David Weekley Homes but just give us a real quick picture of where the company is today and the types of products that you are building.
MF: David Weekley Homes is privately owned. We’re a pretty large company, we’re either the first or second, but I haven’t checked the latest numbers. In 2009 we closed approximately 2300 homes. We are projecting about the same this year, fairly flat. We’re in 14 markets across the United States and in general I think when you talk to people about David Weekley Homes most people will talk about our design although we have been moving towards an energy efficiency as part of brand recognition with us. We build homes anywhere from oh let’s say around $150,000 and around 1700-1800 square feet, maybe a little bit larger on up to homes slightly and over a million dollars, maybe a million and a half up to about 6000 square feet. Plus we also do a little multi-family. We started that in the past couple of years. But generally speaking, one of the things that is interesting about our company is if we adopt an idea, we try and do it for all price ranges and anything that we do so a lot of our practices whether you buy that $150,000 home or that $1.2 million home the practices and procedures and products and all that stuff will be pretty much the same on the basic core things that we do. So, that’s us.
SS: Tell us Mike, where did the inspiration to start a really definitive focus on implementing Lean methods, where did it come from, where did it start, how long? You said earlier that well some of it was old school to you, but then how did it happen that you really started to focus on this to the point that it would become a key part of your job and you would then go as far as actually hiring someone called a Lean Building Analyst? So, how’d you get started?
MF: Well as I said, a lot of well my let’s talk about me for instance. I started in a market where we built starter homes so they had to be very effective in the way that we did everything with them whether it was building the product, marketing the product, selling the product. It all had to be very, very efficient.
That’s funny is, most of the management in our company, and it is a Lean management style here at David Weekly Homes, but most of the management grew up in the 80’s in companies that were very similar to what I grew up with. In 2006, Scott sent a letter and some information to the owner of our company David Weekley and David was intrigued because Scott said that if you’re more efficient I can save you a lot of money, you’ll be a better company and a lot of things that we’ve all come to know and believe. And he sent that e-mail, that Scott sent to our owner, it was distributed through our upper level management. One of our most progressive senior level managers is in Houston Texas, his name is Rick Moore. He grew up, to make a long story short, in that same 1980’s period where things were real efficient. At that time things were just booming in Houston. I mean we were just selling homes right and left. In fact I really shouldn’t say selling homes, we were taking orders. And he was very concerned that we had run amok a little bit about efficiencies and doing things the right way. It was so easy just to hire another person, to get another company, rather than doing it necessarily the right way that he knew. So we talked to Scott and decided to run a test run with this here in Houston Texas. It was extremely, extremely successful. Very good concepts, very good buy in. We are very serious when we say numbers to you like I’m going to say here in a little bit, that they are actual dollars that we can pretty much quantify this and we saved I think 3.2 million dollars in our first year after that very initial meeting with Scott. That in itself was kind of a shocker to the rest of the company. One of our senior vice-presidents Mike Humphrey decided that was a good thing so he kind of sent the information around and encouraged all of our other cities to take a second or third serious look at this program. And from that many, many of our different cities decided to go ahead and go down the Lean path, because it’s a proven way of doing business and we’ve been supporters ever since.
SS: Well, I hadn’t asked Mike to give us a plug and I appreciate that but what’s real important about David Weekley Houston is that we helped them get started on some of the stuff, they certainly had a culture in place that was ready for it. But what’s so impressive about what they’ve done around the country, and I think it’s no question Mike’s provided an awful lot of leadership, is that they’ve taken it, taken off from there and are fantastic implementers. There’s are all sorts of builders in history who have tried to do things, a lot of people call them Lean even when they aren’t, but they don’t get the implementation done. So tell us about how is it that you, particularly David Weekley Houston, have been so good at implementing? Actually ok you identified the savings but then you go out and got them, booked them documented it. What has it taken to get that done?
JH: Well I think that having someone specifically, like myself who that is her main focus, is a key point in getting things accomplished. Like you said, finding ideas initially can be fairly easy, there’s a lot of low hanging fruit that can easily be picked, but it’s taking the steps to setting up a process or setting up a program and taking it from beginning to end and making sure that all steps are involved and that the people in the field or the trades or whomever needs to be involved with it is. When I came on board I was very fortunate because we had a LeanBlitz™ within the first 3 or 4 days that I was here. So it was a good platform to start from and from there we formed a LeanTeam™ as we call it. We meet, the first year we met every month now we meet quarterly. Every aspect of the company from construction to purchasing, design, warranty, everyone is involved, knows their role. And I think having that one person to spearhead and to make sure that the steps are done, and that you are completing a task from beginning to end, is a big key to the success of it.
SS: Now I want to point out that David Weekley Houston is the biggest operation. How many units are you doing there these days?
MF: We’re doing somewhere between 800-900.
SS: What I want to ask you is and I ran into this issue exactly as Jennifer described, back many, many, many years ago when I was in a quality and a productivity role back with Pulte Homes in the 90’s, late 80’s and 90’s and we had some of our divisions were large enough to be able to figure out and to have a dedicated person. Some of them that were doing maybe over 100-200 units. Although I could have probably come up with a cost justification we couldn’t get them to do a dedicated person. So, I presume Mike that many of your operations don’t have a dedicated person like Jennifer. And I want to go back and talk more about the things that she does. But what do you say to a company that’s doing 150 or 200 units and they feel like they can’t afford a full time dedicated person.
MF: Well I tend to disagree a little bit on that. And as I think this through and we’re having this conversation I’m kind of asking myself why we don’t have more people like Jennifer in those positions. Because here’s what happens. If you set up Lean programs in some of these cities and you don’t have somebody dedicated to the concept of true Lean. What you have is maybe a purchasing manager or somebody in charge of a purchasing department that’s running the Lean end and from a remote standpoint what they’re doing is they’re reporting how much they’ve saved and what they’ve done. Jennifer and I had this conversation just a short time ago and it’s interesting because some of the numbers that they report, I’m just going to tell you some of the good and the bad and this would be some of the things I would question a little bit.
MF: They’re reporting things that are savings but not directly related to Lean. So Lean is being more efficient and actually eliminating waste as opposed to just cutting costs.
MF: And so what happens with a Lean person in place is that you actually take that cost cutting to a new level and I firmly believe that it would be extremely easy for that person to justify their position moving in to areas and cost and waste reduction that normally a purchasing manager wouldn’t look at. They are sitting there looking at contracts and the value of a contract per se but they’re not looking at efficiencies and how companies are inefficient in certain areas. They are not asking for input specifically many times on how to get more efficient, even if it’s internally with us as a company or whatever. So I guess my point is, is we’ve got to make sure that we stay true to Lean and with Jennifer I know that we’re specifically getting better and saving money as opposed to just saving money. And that’s the crux of this is that we all can find ways to save money but how good are we, how efficient are we, and are we moving down that path?
SS: What we see so much is that people will, they’ll save on initial cost but if they really start to understand total cost sometimes they aren’t saving at all. And that’s always been a challenge for me, you know a purchasing department, well they got another nickel a square price reduction. Of course then you just went to a roofer that your warranty claims are going to go up significantly and make that nickel a square look like the worst deal you ever got. Is that something that you have specifically worked on, getting people to understand the total cost perspective?
MF: We’ve worked pretty hard on that but let me tell you a backend problem that we’ve had. One that’s been pretty apparent is people don’t understand some of the human costs here too. Here’s what that means. We know that having a lot of employees is a fairly expensive proposition when the market is in a downward or a flat style. So you want to be as efficient with your personnel and your people as you can. I mean that’s just a fact, we’ve seen a lot of different things that different companies are doing. What I have noticed is this trend. And this trend is to OK we’re not going to be as big, we’re going to be a little smaller. You know we can offer people a better price and all of this stuff because we don’t have the employees we did before. But they got rid of the wrong employees. So what we’ve done from a standpoint, locally here at least, is part of the evaluation process on helping a company get better and more efficient. Whether it’s a partnership and how we do business and all that is what was their business philosophy in keeping the people that they still have. Has our service gone down? I didn’t think it should and fortunately we’ve made some interesting calls here within Weekley Homes that they were hard decisions but we kept the best people, even if the initial cost was higher. Maybe it’s more experienced people that we might have higher salaries or this or that. Ultimately as a company that’s the right thing to do. So we didn’t try and squeeze that extra nickel from the human end of it out of there. We kept the right people. In our suppliers and contractors that we deal with, we take a look and try and work with them in that same human capital form too. Because we want them to be efficient but the right way. Not just offer us a contract that they can’t deliver on because they actually don’t have the personnel to execute it anymore.
SS: Yes, those are really good observations and I wish it was true that more builders understood that the way that you do. Jennifer I wanted to ask you, you know Lean Building Analyst. Again, as I said earlier, you are probably the only person in America with that title at least that I’ve run into. So I think the audience would be interested and want a day in and day out basis what things are you working on? Tell us about a project or two that you’re working on right now. What are the kinds of things that you are doing to help implement?
JH: Okay, like I mentioned, we here in Houston have quarterly Lean meetings. We just had our first one for the year just a few days ago and it consists of about 9 people and we get together and for example in this meeting we focused on our top variances for 2009. We looked at the top 5 variances and just round table discussion. From a superintendent builder to a warranty personnel even somebody in the office what different ideas they have on how we can improve on things. Some specific examples: we had a huge project last year on landscape. Like most companies we had landscape was set-up as a budget. You kind of just as soon as the landscaper and everybody knows what the developer wants and you pay them a certain amount of money and that’s what you get. Well, taking a Lean initiative we wanted to look at exactly what we were paying for and we wanted to know exactly when we were paying for a 5 gallon shrub what did that look like? What kind of plant was that? What really is required by the developer? What do we need to portray the look that we want for David Weekley Homes? So, I mean it took several months. It was a very intense project. We met with nurseries, we met with landscapers we looked at every community, every shrub down to the trees, the sod, talent, everything for each home. In the end we saved close to $900,000 on that project.
JH: That was a huge project
SS: That was it for the overall project for the division, $900,000?
JH: Yes, for that year for Houston based on just getting a more accurate count on what was required for each community and then eliminating a lot of variances. Because we actually knew what we needed and weren’t just relying on some obscure budget. So along the same line…
SS: I have to ask you if I’m the customer and I’m looking at David Weekley Homes now this year compared to last year am I going to see any visible difference. Am I going to notice it?
JH: It’s a better product. Because we were able to identify what was required and then there in turn what we wanted and what we wanted to give to our buyers the landscaping has just improved significantly.
MF: Let me jump in just a second on this too. For instance Scott, what we did is if we needed a tree which is fairly common for our landscape packages here, we negotiated with 2 companies in the city instead of 12 to get economies of scale. So that we actually for the same amount of money could upgrade what we actually delivered to our contractors.
MF: So as part of that, in addition to identifying it and eliminating some of the strange things that were going on in the product and the pricing and all of those things, we standardized it out and it actually was easier for our contractors. They were highly involved in this process. And it adds more flair and different things that we can offer our homebuyers.
SS: And see what you’ve done here is something that 90% of builders out there say is impossible. If you went to a builder and said you know you could have your houses look better, offer a better product with more flair as you say, and make your suppliers and trades happier, make it easier on your own people in terms of administratively and save $900,000. That’s to most builders they’re “That’s impossible. Okay here’s how we’re going to save $900,000. We’re going to take everything from the 5 gallon to the 2 gallon, we’re going to take the 12 foot trees and use the 6 foot trees and we’re only going to sod the front yard, etc. etc.” So what you guys have done is crack the code enough to say that you are not the term we use is dumbing down the houses in order to save money. And that’s been the strategy of most of the builders during this downturn. They’re saving money by dumbing down the houses.
JH: I think that having that dedicated person, I know that a purchasing manager or somebody else who has another role could probably not have dedicated that time to that type of a project or if they had it would have taken maybe a year to get through it. So in that sense I think having that person who that is their main focus does allow you to tackle those projects that seem impossible and hopefully get some good results from it.
SS: I’m just taking a wild guess here Jennifer, that $900,000 would probably cover your salary and benefits oh maybe at least, at least maybe 2 years?
JH: (Laughter) Oh maybe just a little.
MF: Barely, barely (laughter) but OK.
SS: And that’s a wonderful example. Do you have a small one that maybe is a smaller dollar value, but was one of these little genius things that people come up with, it seems like there’s always some great stories there.
JH: We had one the very first year where the electrician basically just mentioned that I think one of our oven breaker switches, to change the amp on it. I mean it didn’t save a huge amount but it was about $50,000 so it was just a simple suggestion. Just something that by having that LeanBlitz™ and putting the question out there to our trades, letting them know that we were going to take them seriously and that we did do it at a corporate level and that upper management was there. That simple suggestion easily saved us $50,000 just because. We had several great ideas that came from that first year that were just more of a hey, why don’t you do this instead of this, it’s not going to cost you anymore and it’s a better product and it might save some money.
MF: You know it’s interesting Scott, you bring it up and Jennifer had a sheet with some of this stuff here and the one that was most surprising to me just from an old guy been building around and all that other stuff, was we use a lot of brick here in Texas and don’t drop the brick on dirt. I didn’t even think about it but put the brick actually on whether it’s a driveway or some of your flatwork that’s around there. But put it on there. I didn’t think about the waste factor that our brick masons had with dirty brick. They throw it away. And the brick masons …
SS: You know we’ve actually run into this 6 or 8 times the last couple of years. That exact issue, it’s common all over.
MF: And I was stunned because it’s one those where the light bulb goes off and you’re going well that makes sense, but I’d just never thought of that at all. And so that was one of those practices, that it’s a small practice and I don’t know that we ever really truly quantified how much we saved but we sure know we did save on that. So it was a very good idea that came from the brick mason on that one.
SS: What is it about this process, as I’ve seen it evolve in builders, builders who really get serious in to Lean, what is it that seems to empower the suppliers and trades to a higher and different level than what builders traditionally see?
JH: Well, I think that with us initially because we had, we asked them to come in and the invitation came from our division president. It came from upper management and it was presented that we’re here to support this process and this program and this isn’t just something we’re going to do for a day and see what comes of it. This is a change in our culture and the way we are going to do things. We had an initial meeting at our corporate office and we had all of upper management there and I think the trades saw that. That this was something we were going to take seriously and we truly wanted to know what they thought. And I think that by empowering them with that and letting them know that their input was going to be valued and looked at, I think really got us such great ideas.
MF: Think about, we talked about this a little bit prior to this call, think about it from a large, we’re a pretty large builder here in Houston Texas and we build in a lot of subdivisions probably 30 – 40 subdivisions in any given year here in Houston Texas. And you’re a contractor and you’re a good one.
And you’re building in 2 communities for us, fairly typical, that kind of a thing. And you see some practices that you think that are really good that could really help out both you and the people that you work for which would be David Weekley Homes. Well, you have to run that process through the superintendent who may or may not be busy, may or may not pay attention just like anybody else out in the field. And so those good ideas go by the wayside until you get an invitation to talk about things that could impact the whole city. And you’re just a framer, a guy who frames homes for a living sitting in a community over here. And all of a sudden you’re asked “hey I really want to hear your ideas”. It really went over tremendously well because it was the first time they truly had a forum to talk about any of these things. And so the scale became completely different than what they’d expected and that’s why, one of the reasons it was a tremendous success.
SS: Well, you know when we were talking about doing this call, a couple of things you mentioned to me Mike, and it dovetails with things that we’re seeing, is that over the last few years there’s been so much emphasis and focus on product that a lot of what we call low hanging fruit has been picked up and people have gone on after that. You and I were talking about 2 areas where it’s tougher to get to, hard to get people to focus on, it’s kind of next level stuff but there’s a whole lot of money there, one being in design and the other being in going after process savings instead of product. So let’s talk about those Mike and Jennifer and how you can, your experience and how you’re approaching it, any success you’ve had. Let’s talk about design first. How do you get design which is often kind of a sacrosanct, you know a sacred cow kind of a thing, how do you people really open up and looking at the designs so that we can get our designs lean in the first place?
MF: I think it’s extremely hard in our company not because the people that actually, we have in-house designers, in-house architects designing our homes, we’ve won a lot of awards and rightfully so, they’re very proud of what they do and I hate to say this because it’s not really the case but sometimes I think it’s more they think we’re calling their baby ugly and that’s not the case at all. So how we’re approaching this or going forward here in 2010 is we’re going to take some of our designs, our more popular designs and we’re going to do something just as simple as saying – OK if we increase the length of this home 16 inches, fifteen inches and everything’s on 2 or 4 foot increments gee, how much can we save. So before we even talk to the design or our architects and all that we want to take a look at – okay and it’s a legitimate question on their part – is it worth the redesign effort? Because we can’t just tell them “Hey you need to redesign this stuff to make it more efficient”. Well, they’ve got a point there so let’s give them some numbers. So that’s how we’re going to approach it and whether that number is $300, $500, $1200 I don’t know. But some of these small incremental changes on design, and we’ll do it in increments, I think will have big impact on the profit potential of the home. And honestly I don’t think its going to impact the design nearly as much as people would think. In fact, I’d be surprised if it really impacted the design hardly at all. So I think what we’ve got to do is show them the money and then I think they’ll become believers. But I think that’s our job, we’ve got to do that first. So that’s one of the big goals we have on design.
SS: We had a guy come in to a session we were running in Canada before Christmas and it was on the 90 day follow-up and we had given him plans and asked him to review the plans and he came in. He looked at the LeanTeam for this builder, had the 12 people there, and said “Do know how many builders in this city” a big city in Canada “how many builders in this city do 40 inch wide stairways?” And everybody looked at each other and he said “do you know that only you guys do 40 inch wide stairways?” And everyone looked at each other, it’s like no one knew. “Oh we do?” “Yeah you do” “Why do you do that?” No one knew - it’s just what they’d always done. He said “Well I did a little looking into this, I looked at the stairway company” in that market they always build the stairs by a separate company and bring them in. “We looked at stairs, we looked at framing” and this guy on his own went out and talked to these people. “We went to see the carpet guy he says we’ve got a minimum average of $375 a house extra for that cost, he says now understand you have to just about double that at retail. So if that was an option you’d have to charge a homeowner $750 to have an option to increase their stairs from 36 to 40. would any home?” and this was the trade talking, “would any homeowner pay that much?” And they all looked at each other and shake their heads no. He said “Well why don’t we get rid of that?” It’s not doing anything. And everybody said “well let’s do it”. So right there almost $400, it will be $400 by the time they get all their ?? , $400 a house. These guys are smaller, they will build 200 homes. That’s $80,000 and they didn’t even know they were spending the money. And so there’s a design, well let’s get this up front in the design and just change it. Now we’re going to do 36 inch stairways. And that was a real eye opener for the people. Have there been points in time where something happened? You can think back on your 3 years experience now, that have been kind of like light bulbs have gone on for people that you can relate to our audience here?
MF: Well, I certainly related to what you just said because its amazing to me whether it’s the phrase well David wants it that way, the David would be David Weekley our owner, or whether it would be - I’m sorry I’m still laughing about this one - it was from the very beginning, we sat in our original Lean meeting and there was a product that came up, we have a lot of 2 story homes and the sub-floor area, there were some alternative products that were available. And the guy who represents the supplier for that particular product is very tenured, he’s a partner and friend of our company and all that and he fidgeted in his seat and said “Well I’ve got a great product but you guys won’t want to do it”. Everybody looked at him and said “Well why won’t we do it?” “Well because Mike Funk said he doesn’t want this product, he wants plywood.” Of course I’m sitting up there and I’m cocking my head going “Mike Funk said that? What are you talking about?” And sure enough there had been some misconceptions or a comment that I had made many years ago about a preference at the time. But we saved $312,000 the first year off of something that somebody thought I said. And so it’s kind of like the stairs or it’s kind of like this, its weeding through what is really important to your company and what isn’t. And that’s where we are. Very few things are sacrosanct, to use a big word, anymore or anything with us. That’s the biggest eye opener is what people really think they can’t even bring up. And you’ve got to open that up to it’s an open game. Bring everything up. That way you just get better. You can address it.
SS: I remember one that was three years ago this month and the plumber said “You guys are the only people in town that use a double layer of Hardie backer and why do you do that?” Remember, a couple of your guys actually got on the phone and found one of your field superintendents who’d been around for like 25 years and called him and said “How long have we been doing that?” And he was like “I don’t know. We were doing it when I got here.” And nobody knew. We came up with various theories of why that might have been.
JH: We ended up saving $280,000 by getting rid of that one thing that one layer.
SS: How much was that one?
JH: We saved $280,000 by getting rid of that one layer
SS: $280,000 and that was just slightly more paid than you guys paid us.
MF & JH: (laughter) Yeah, right.
SS: Yeah a huge factor
MF: That’s what I remember for sure Scott
SS: The thing about that that was so great was and then we were all speculating. We said well it could have been there had been someone thinking it was leaking and they did it on a house and started doing it on all of them. It could have been someone thought it was better protection from mold. As I recall the best guess we came up with was that design had decided to go from maybe a ½ inch bull nose to a ¾ inch bull nose because that was hot, they thought that was cool. Well in order to make that work you’ve got to put another layer of Hardie backer or no one looked at really the cost because it was design center or whatever that was all excited about this and then it just became part of their tradition. And we find examples like that sometimes they’re just little $8000 or $10,000 things. We find them everywhere.
MF: You know we did figure out the answer to that Scott. We now know how that all came about. (Laughter) We learned it years later. One of our division presidents decided that he wanted a heavier look and it was interesting that decision by one man in one area affected the whole company. Everywhere we went there was double, you know, double Hardie all over the place. And it was one person expressing an opinion that had never really been thought out. What’s interesting is we did save that money and we did go back to one and the ultimate person that really counts our homebuyers have said nothing, nothing what so ever. And we still build our showers the same way, you know, waterproof the whole bit and so it was just one of those opinions that a person espoused that just got out of hand. There’s so many of those sitting around in our practices and our procedures.
SS: You know it might have been too painful to ever do this but did anyone ever come with an estimation of over a 10 or 15 year period how much total dollars were spent on this double layer Hardie backer in the company?
MF: Scott I told you this a while back. I’m kind of thin on top and I have no desire what so ever to lose what little bit I got left up there. (laughter) So I’m not going down that road.
SS: It’s just remarkable and we appreciate the fact that David Weekley has always been willing to discuss things and be open because you guys realize the same things occur everywhere. Let me ask you, to bring you to a question that has not come up yet in LeanBlitz™, I mean in the Lean Building Forum, leads me to what’s a really important question. As companies work on Lean, very often people in especially in construction and purchasing , VP’s, directors of construction and purchasing, even sometimes the field guys feel threatened by - well wait if we’re going to start working on this process they are going to start finding things like Hardie backer where we didn’t need it or we’ve got these rooms that are 12’ 1” wide and its costing us an extra $400 a house in carpet because they weren’t 12’ wide they were 12’ 1”. People are going to start seeing that. We’re overbuilding the framing in these houses. And it’s going to make me look bad. Have you encountered any of that? And if so how have you dealt it, how have you helped these people along?
JH: I haven’t directly encountered anything like that but I definitely can understand where you’re coming from. I think that you know initially there was probably that feeling across the board but when it was shown that we were looking at this as a way to celebrate and to improve our processes and the way we do things and that this was going to be a positive change I think people embraced it and they realized when we have our monthly division meetings and they announce how much money we’ve saved and everybody knows that they all have small part of that and that it’s a company culture and a company effort I think that it alleviates that fear of oh no, I’ve been doing this wrong and I’m going to get in trouble. Let’s acknowledge that we did base a decision on someone’s opinion and we’re going to move on from that and we’re going to save the money now and we’re going to celebrate that and improve ourselves and only get better. I think that’s helped.
SS: I’m glad you mentioned the C word which is the culture word. In our last interview with Jagoe Homes in Kentucky, they talk about the culture a lot and they’ve really worked hard to build it. What are things that you’ve done at David Weekley that really try to build that, we’ll call it a culture of Lean, in the company so that it’s an ongoing thing. It’s not an event, it’s not something you bring in someone from a thousand miles away. It’s something that you’re doing all the time. How do you build that culture?
MF: Like anything else, if you have really good support at a top level management the kind that doesn’t just give lip service to it, that sends out an e-mail now and then, that actually believes it. I think that’s a great starting point. We have as we’ve talked about, we have regular meetings here. I think the more you actually talk about it and demand results, and demand is probably a strong word, encourage results and reward those people that are doing a great job with it, those areas are, I think it sells itself Scott. I think the profitability and the efficiencies and all of that itself are fine. What you can’t do is you can’t just throw it out there and say OK I’ve saved $500,000. Thank you very much. We’ll take a look at it next year. You have to set up some kind of structure within your company and this is where I really truly like the fact that Jennifer is doing this, dedicated to doing this because I think if you haven’t already heard the subtle message that particular position can pay for itself, make itself very, very valuable within your organization. But the bottom line on this is you have to keep it out in the forefront because it’s a much better way of controlling costs and procedures and all of that than just get out the old knife and chop it off. So keep it current. Have dates, times where you go ahead and revisit where you’re at and have somebody, you’ve got to have a driver at some point. Fortunately for us as a company we have a senior vice president that drives this and then individually at other market levels we have people within those markets that drive it but it’s got to be out there. It can’t be a one shot then yeah, yeah we’ll follow it and all of that other stuff. You’ve got to believe, but on the other hand its one of those processes that actually shows the results to you and you can actually see how much money you’ve saved. We just keep it on the forefront with us. We have people, specific people that are in this process in each of our cities. We have somebody at the top. We have regular meetings and then we talk about our results and how well we’ve done and what are problems and what our successes are.
SS: So what’s your biggest frustration?
JH: Currently, I don’t know if it’s really a frustration. I guess probably just another challenge is that because we’ve been doing this for 3 years and all of that nice easy picked low hanging fruit is gone, you do have to get a little bit more creative but I think it gets you better results because you have to focus more on the details of the details and the processes. You explore areas that 3 years ago you never would have thought you would have touched but now its an opportunity and its another way to possibly save money or at least just to become more efficient and a better working company.
SS: An example of that that I, things are starting to come back to my mind now from 3 years ago. Mike I remember the president of your lumber company. As a matter of fact I have used that story in presentations I have done. Do you remember when he walked in and he took the marker right out of my hand. He didn’t ask permission. He took it out of my hand and wrote this number on the flip chart and said “What’s that number” and made everybody gasp. And the issue was the number of gallons of diesel fuel that he estimated he was wasting a year on what should be unnecessary trips to building sites.
SS: And those are process issues. And he kind of threw down the gauntlet to you guys, gave you a challenge, said let’s work on this, let’s reduce this. There’s huge money for everybody in here. Incredible waste. Did you work on that one and have you had success in this difficult process area of reducing these wasted or otherwise unnecessary or what should be unnecessary trips to the building sites?
MF: Yes, we have many efficiencies that we still could improve on. We build fairly quasi-custom homes I guess would be the best thing. What we’ve done there is we’ve worked with them on when we’ll do deliveries, which actually saves them gas as opposed to what our original procedure was but that doesn’t mean that we’re any more efficient. What we did is from a purchasing standpoint we tried to tackle why they were making those runs. Was it something that was a purchasing issue? Was it a building issue? All of those things. Now, I don’t have any great results to tell you because it’s not something we quantified a tremendous amount. We do know that with some of our vendors the extra trips and the reasons to come back out for problems this and that is down somewhere in the 35% -40% range. So when talking with them they’re not making as many runs out. I tell you what it’s just been a combination of things because we were very inefficient in that and they had a very valid point. So from a purchasing standpoint we tried to include some things that we hadn’t on our packages that go out and from a trade standpoint we hold them a little bit more accountable depending on what it is. So yeah, I mean its one of those things that’s real hard to quantify Scott but that’s a big issue and you’re right. They were spending a lot on gas going out there running extras out to us all the time.
SS: And we hear about these trips from every trade from all around North America, drywallers and painters and plumbers. It’s endemic to the industry, it’s everywhere you go. It’s very wasteful and often we find we have trouble getting builders to make a decision to focus on that. You know if I can focus on how do we do a shower stall more efficiently or how do we do our TJI’s more efficiently or how do we do our trusses more efficiently. That’s something you can hold in your hand and you can see. It’s easier. But to really look at why is a painter averaging 5 to 6 trips for finish paint and what should be 3 at the most. Why are they averaging, where’s the extra 2 or 3 trips coming from? And even if you get it documented then the issue becomes can we really avoid them. Can we keep the carpet guys from dinging up the baseboards? Can we really keep the electricians when they put the fixtures up from hitting the paint? Can we keep the appliance guys off of it? We’ve seen companies that have really made great strides there but generally speaking it’s difficult to get people in the building companies to say “We’re going to go after process waste too as well as the product waste”. Do you have any examples from your work Jennifer where you’ve made some progress on something you’d classify as more of a process waste?
JH: Well we had something that we, it’s called a panel charge list, it was kind of a basic catch-all for items that we had not quantified or put into our takeoffs.
SS: And what do you call that category?
JH: Panel charges
JH: I guess as a process we just went ahead and took those items and added them to our actual takeoffs and purchase orders. So in that sense we were better able to identify what we were spending and to get some control on that. That’s probably a good example.
MF: Panel charges are stuff like tape, spray paints, bolts – we call them J-bolts to anchor down the foundations.
SS: Sure, sure.
MF: A variety of just those things that come in bulk quantity that you need on your homes but in reality they may not come packaged in the way that you want. And if you want to talk about something that was bloated like a whale you’re talking about what we had on that list and what you could walk out into the construction offices of our builders and see that they had 3 years supply of stuff there. So that was one of those processes and procedures that we changed. We decided to go ahead and implement all that stuff but for the most part we cut it down by about 95%.
MF: And we negotiated some deals with our suppliers that were favorable to us delivering this to a jobsite. And so we’ve actually made tremendous strides there in costs and how we look at some things.
SS: Did you get any savings numbers on those? I’m just curious what kind of numbers you’re talking about.
MF: We’ve done this fairly recently but if I had to estimate, I’d probably say, we know our charges per home I expect them to go down $100 - $120 a home. They had that much excess on the homes and that’s just the small stuff, caution tape, those kinds of things, reduction that was being charged to homes.
SS: I ran into one recently that the framer pointed out that he had always got this box of nails. I don’t remember what size they were but a big 20 lb box or whatever it was, found out it was a $28 box of nails and he never uses them. I’ll never forget the look on the VP of construction’s face and he said” Well what do you do with them?” He said “We leave them there and someone picks them up we presume, we just leave them in the garage”. “Oh okay how long has this been going on since you haven’t been using those nails?” “Oh, since you changed all those plans, it’s been 10-12 years now.” And the whole room was just dead quiet and then everybody broke out laughing and just shaking their heads. Well, those things are out there. $28 a house doesn’t sound like a lot until you multiply it by 10-12 years production, it’s huge. If a company was to decide okay, we’re listening to David Weekley. Boy it sounds like they’ve saved a lot, they’ve done a lot, they’ve got the culture going, things are happening here. And they want to get started and they called them and said Mike, Jennifer tell me 2 or 3 things that you have to do, maybe 2 or 3 things that absolutely you shouldn’t do. What would you tell them? You know builders like lists. What list would you give them? Do this, don’t do that.
JH: First I would say that you would want to have the support of your upper management. You want to have that buy-in from the top down. To be able to ingrain into the company and to the people that this something you are going to do and something you are going to work on. I think you definitely need to have a game plan like Mike was saying earlier that this isn’t just a one time shot. You’re not going to just try to save some money and then move on to other things. You need to dedicate whether its set meetings or schedules or a person or multiple people on this project. But you need to view it as something that maybe even it’s a new culture, it’s a new step a new procedure that we’re going to do. And this is the outline of how often we’re going to meet and when we’re going to meet and what we’re going to discuss. I think that’s key to keeping it going because otherwise it could just fall to the wayside after an initial meeting or discussion about it.
MF: A couple of things I wouldn’t do. I would not limit this to just a select group. I would be all-inclusive to the broad band of people that you do business with that are involved in the process of building the home etc. Do not require “think inside of the box”. In other words what I mean by that is you know what – no preconceived ideas. Let people come in with whatever they want to do. And then you can sort through it from that standpoint. The other is, don’t worry about money. Money shouldn’t be the issue at this point. You want ideas and the money will take care of itself. So get a broad range of people. Don’t limit yourself to “well I only want to talk about this or that”. Everything is open for discussion. Don’t worry about the money. Like I said, it’ll all take care of itself once you hash it all out.
SS: You know that brings up an issue that came up this week on a conference call with a builder. We were talking about examples of savings a builder had. He said “Will that money go to the trade or to the builder?” And I very gently said but I really wanted to jump up and down and scream “Once you really start to understand Lean, it does not matter to you whether that savings is going to go to the trade or whether it’s going to you directly next Monday.” Let’s talk about that. Does what I said, would you support my position on that and if so yes or no tell me why.
MF: No, I’d… It’s an interesting statement. I can see where some people would have a problem with it. But from a philosophical standpoint and where I stand knowing what I know about Lean I’d say no, I don’t care if the contractor, if we improve the efficiencies of the contractor and they make more money okay that’s fine. Because I know at some point they’re going to pass those savings on to me one way or another. Whether its increased efficiency, better people, somewhere I’m going to benefit through this process. So, you know what, I’m not all that worried about it. Because if you’re building the partnership, you know part of this is partnerships, because you’re asking people here for their ideas and you want a long term relationship. And really think about this, why would you want get rid of a contractor or supplier or vendor who suddenly got efficient, who actually was doing a great job. You know those kinds of things right there. You know that retraining takes more resources and money that you could ever manage. So yes Scott, I’d go with that concept right there. That doesn’t bother me at all because I know that that’s going to come back to me and make me a better company.
SS: I gambled on that a little bit and thought you would because of what you said when you said don’t worry about the money. You want the ideas. The money will take care of itself. What we’ve always found is that while you work on this process so many of these ideas come up with so much money that does go to the builder, that if during this process the supplier-trade can say “Oh I see some of this stuff is coming back to, is going to be for me at least initially for now anyway”. They get much more creative. They get much more open than saying “Oh I’m going to find something and as soon as I find anything the builder, when I say “well I think I might be able to find you a hundred dollars a house here ” and then a month later say “where’s that hundred dollars a house? I want that reduction now.” Because you get plenty of that Monday morning stuff. You get a ton of it and stuff that’s 3-6 months. And if we can help these suppliers and trades become more successful and more efficient, because so many of them are just living on the edge these days. That what we’ve seen is that it absolutely comes back to you and quicker than you think it will. So Jennifer, do you have any observations about that and also working with the trades and how this process has affected them?
JH: I think it’s been a positive effect. Like Mike mentioned that if we can collaborate and find ways just to make them more efficient in the end they are going to, you’re going to get paid back whether it’s through better lead times or more accurate delivery times or just when it comes down to better pricing or better product. Any kind of suggestions they are going to look out for you because you’ve looked out for them. So I think it’s kind of it’s a positive thing and we want to have as they say you want to have that true partnership with your trades and know that it’s a working relationship and I think its been positive.
SS: Well in getting close to wrapping up here, are any other experiences that you have that you can think about off the top of your head, experience or anecdote that you feel might be revealing to builders who are trying to go down this route or thinking about starting. The kind of story that maybe they can take back to the boss, something to talk about. Anything come to mind here?
MF: Oh boy
JH: I’ll just real quick, the biggest thing that I think has been enlightening is that people are just afraid to ask questions, or ask the question. I know Mike has talked about it a lot today and it’s just don’t be afraid to question something even though it’s been going on for 5 years, 10 years, 20 years. Ask the question, put it out there. It could be just the simple fact that no one’s ever had the nerve to ask or to question it. So ask those questions, think outside the box and you’ll be surprised at the amount of success you can get very quickly.
MF: I don’t have anything really witty or insightful other than it’s interesting to me because I asked Jennifer to roll up how much in Houston Texas over the last couple of years, 3 years that we’ve saved. And she’s confident in the 10 million dollar number that she had. Now I know that Scott, a lot of smaller builders are going to hear this and go yeah, yeah that’s a big company and boy they must be incredibly inefficient and all of those things but it’s a legit number and my question to the various people that are listening to that is if we found that much and we needed help with Lean, why haven’t you found it? You have good people in your organization and this and that. It’s probably because you haven’t focused or found the focus in different ways to save your money. And I highly recommend that you do because we didn’t think that we were that bad of a company. We didn’t think we were that inefficient. We didn’t think that we had 10 million dollars sitting around, just laying there over the last 3 years and we did. And so I highly suggest that people take a look at Lean building. Because philosophically and from a practical and bottom line standpoint it’s a process that very much so pays for itself. So that would be it.
SS: Well that’s good to hear. Of course it’s a mantra that we preach and a lot of people find, or they think that that’s just too good to be true. But you’ve given us quite a few examples here of how this can really change an organization. Change your focus and bring people together too. There’s no doubt that what you’ve done in this regard has saved a lot of jobs, has kept a lot of people working and we can all feel good about that. So this has been very interesting. You know what we have here is 2 people in Jennifer and Mike that have been on the street and in the trenches implementing here for 3 years now and it sounds like there’s no end in sight to what they think can be gained. Let me just ask them to wrap up here what are your plans going forward? Anything in particular that you are going to be working on, on the horizon coming up in the next 6 months to a year, that’s any new area or anything different than what you’ve been doing?
JH: I think we touched on it briefly. We are going to be looking more at the warranty end of things, really kind of focusing on that. It hasn’t been a main focus so far as far as, I mean we look at it as far as total package, what your total cost is but as far as actual warranty side and the processes we’re going to look at that. As well as design try to you know see if there’s ways to make the plans a little bit more incrementally efficient. Things like that. And then just different things with our mechanical companies that also relate to design so it’s going to be mainly more I would say design and warranty focus in the next few months.
SS: Mike, I’ll let you wrap it up.
MF: From a company standpoint I think Jennifer is right where we’re at. I think we’re going to make design somewhat of a focus for us as a company because that constitutes low, medium and high hanging fruit for us I think and from a design standpoint we’ll start from the low. But it’s amazing to me how far away we’ve gotten from efficiencies there and so I’m looking forward for you to send me some of that information you said that you had on design. Because that has been as you know one of my number one issues for a long, long time. We talked about that back 4 years ago. So with that said I think we’re ready and willing to tackle that tough stuff. Now we’re at that stage where we’ve got the culture going, we’ve got the people in place that we need and now it’s time to kind of roll up the sleeves and tackle the stuff that we always knew was there and see what we can do with it. So with that said, that’s where we’re going.
SS: We appreciate your candor Mike. You mentioned earlier that as you say you’re a little short on top but because you don’t have any hair there’s no way it can get any worse so you might as well just lay it out there, right?
MF: You know thanks a lot Scott. That’s what I appreciate, your candor.
SS: He’s got that Kojak look. It works for Mike. So Mike and Jennifer we really appreciate your time. You’ve done a great job, a lot of interesting information here and you’ll be seeing yourselves in the March edition of Professional Builder. So thanks again.
MF: Thank you very much
JH: I appreciate it, thanks.
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Comments on: "The Lean Building Forum - with Scott Sedam, March 2010"
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