Recently I was asked to present to a group of purchasing managers for a Top 20 builder, led by a Corporate VP who truly gets it when it comes to Lean. That is encouraging in itself, because what I see from so many of the Top 20 is either more of the same old “beat the snot out of the suppliers and trades” or misguided strategies under the name of Supply Chain Management and regrettably, even Lean. This VP and the Directors of Purchasing had no stars in their eyes, but were resolved to keep an open mind and find good ideas whatever the source.
There were two consulting-type companies invited to present on what they saw happening in the industry and the implications for the purchasing function in particular: TrueNorth, my firm, and one of the biggest names in general consulting with worldwide revenues in the billions, let’s call them Huge Consulting Group – HCG. Their single client projects generally exceed TrueNorth’s annual revenue. They hire armies of MBA’s from the best schools, are well-pedigreed, poised, drive expensive foreign cars and make big money. HCG has done several significant projects with national builders, (who else can afford them?) but not the one we were in front of that day. In the course of their year-long projects, they had done considerable research and had great data.
If you suspect I am about to disparage these guys, you’d be wrong. They were very sharp, took a low-key approach with the builder and were smart enough to wear open-collared shirts and no jacket. Unlike some of their competitors I have encountered over the years, they did not try to overwhelm the builder team with how big, rich and smart they are, even though it’s true. I actually liked these guys. They presented for about 90 minutes and engaged the builder team in conversation. I followed them and I was disappointed they had to leave for a next meeting, because I wanted them to see what the builder was about to see.
Although Huge Consulting Group used very different methods, which some might call more sophisticated than ours, the experience, conclusions and recommendations on slide after slide in my deck matched theirs. Among other things, both HCG and TrueNorth had determined through experience and convincing evidence that:
• Operating and purchasing labor & material using a Total Cost Model is key – buying on bid-price alone is a fool’s game
• Schedule adherence is a huge driver of success and profitability
• Technology initiatives designed to decrease complexity usually result in exactly the opposite
• Trying to fix bad or inadequate systems by leaping directly to high-tech solutions does not work
• The homebuilding model has changed and we will not see the “profit by land appreciation” model again in this decade. Profits will come primarily from Operating Excellence.
• You will not find the help your need from suppliers & trades to reduce total cost through continual rebidding and turning them over in search of a lower bid price. Find the right people to work with, build the relationships and find the money.
It is always gratifying to hear another expert, in this case a much bigger and richer one, echo your own analysis and conclusions, which leads you to think that they aren’t much smarter than you. HCG and TrueNorth have come at this from very different directions and arrived at the same conclusions. Then it dawned on me that in reality, we have far, far more experience than they do and have produced much greater results. Yet they charge about 10 times what we do. Sigh. Yeah, I am jealous – big time. Big, Rich & Smart – just like me. Well, in this case, 1 out of 3 will have to do.
Scott Sedam, well-known author & presenter and President of TrueNorth Development (www.TrueN.com [2]) a consulting & training firm specializing in Lean Process & Methods, writes the monthly Lean Building article in Professional Builder Magazine. Scott welcomes your direct feedback at scott@truen.com [3] and invites you to join the LeanBuilding Group on www.LinkedIn.com [4]. The conversations continue there on a daily basis.
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