Evenflow production may be a no-brainer for mega-builders. But can it work for their smaller competitors? We went to Florida to find out. By Charles Wardell
Evenflow construction, the practice of starting and finishing homes assembly-line-like, on a strict schedule, seems perfect for a mega-builder. But how practical is it for a mid-sized production company? To find out, we dropped in on Inland Homes, a Tampa, Fla.-based company that will build 540 units this year.
While Inland has fully embraced evenflow, company president Jim Clark wonders whether his firm is the best example of a practitioner of the technique. "The big public builders can build a home a week and carry the inventory until it sells," he says. "We can't afford that."
Yet, it soon becomes clear that Clark probably has more to teach the average builder than he thinks. The discipline of implementing the evenflow system has enabled Inland to build more homes in the same amount of time, with the same people--and fewer mistakes.
We find out why the system has worked for Inland during the 40-minute drive to Thousand Oaks, a planned community of $200,000 to $300,000 homes in New Port Richey, Fla. On the way, the 38-year-old Clark returns again and again to the theme of discipline. "Discipline is underrated in business," he says. "I think you can't rate it high enough." Discipline is both a result of the evenflow system and the keystone that supports it. "We talked about evenflow for years, but we couldn't make it work because we kept breaking the discipline," he recalls.
That changed in 1999, when Inland hired Fletcher Groves of SAI Consulting in Ponte Vedra Beach, Fla., to ride herd over the builder. Groves started by having Inland's management take a hard look at its business processes. "He helped us focus," says Clark. One crucial number the inventory revealed was the rate at which the company could most profitably build homes.
To figure it, management looked at closings per month per community for the previous two years, then correlated them with overhead and profitability. They found that construction managers (CMs) who started two homes per month just covered their overhead. When they raised their workload to 3.2 homes per month, overhead fell through the floor, and profitability shot through the roof.
That workload number is what Clark describes as the company's production pipeline. The size of the pipeline--the amount of flow it can handle--drives the evenflow system. "Your pipeline is a certain size. If you try to shove more through it without making it bigger, you will either lengthen it or you will break it," he says.
To illustrate the point, Marty Schond, one of the two CMs at Thousand Oaks, explains that he has 11 houses under construction. He has enough time to visit each house every day, to talk with subcontractors, and to check on the details.
We follow him, starting with the guy who digs the footing and moving through each trade to the carpet layer. Schond says that with everyone working on a consistent schedule, the site almost runs itself. "You schedule guys, you check on them, and it builds itself. It makes the community a lot less stressful."
But if the workload goes up, the system starts to break. "If you have too many homes, you have to cut things short," Schond continues. "If I can't spend enough time in the framing walk, I may miss a structural option that the homeowner wants. The more homes you have under construction, the more likely that is to happen."
To keep that from happening, Inland publishes weekly reports comparing the status of each home and community with the evenflow goals. Schond says that getting used to the paperwork needed for these reports was his biggest challenge during the eight to 10 months it took him to master the evenflow system. But he isn't complaining: Since nobody wants to show up on a report with items pending, the reports focus everyone on improving. The efficiency gains save everyone time and stress.
A happy consistency
Schond has been with Inland about a year. He works from 7 a.m. to about 5 p.m., a change from the sometimes oppressive schedule he has had with other production builders. "I remember working 6:30 in the morning to 9 at night." Things were especially hectic at the end of the year. "This might be the first year I can actually have time to do Christmas shopping," he says during our November visit.
Subs, who are referred to as market partners, also rave about Inland's predictability. "I can actually have a schedule," says Joe Avila, a foreman with JM Framing in Holiday, Fla., who has been working Thousand Oaks for about a year. "If I have to send a guy home for a week because there's no work, he's going to look for another job," says Avila. That thought is echoed by Jeff O'Neal with Fleetwood Homes in Hudson, Fla., the company that sets Inland's slabs. O'Neal ribs Clark about the fact that Inland makes him dig 20-inch-deep footings rather than the normal 16.
Does Inland make it worth his while? "It does," O'Neal says. "They give us enough work to keep us busy all the time."
Using the same subcontractors all the time is another key to keeping the evenflow pipeline free of clogs. Subs like the fact that they get paid weekly. And the long-term commitment lets Inland invest time in making subs more efficient. For instance, Mark Ellerbee, Inland's quality-control manager (and part owner of the company), walks each frame after Schond, before the county inspector arrives, and gets the framers to make any needed corrections.
O'Neal also educates framers on how best to meet quality and code issues. The result: Errors have been slashed. "If I can get all Mark's stuff done before I call for an inspection, we'll be on our way," says Clark.
A structure for success
Even the company's business structure helps support evenflow. Inland used to be a single company with homes under construction in an average of 20 communities. Clark recalls that if one or two communities weren't performing well, they had only a minor impact on the company's overall numbers, so they tended to get ignored. Now, the company is split into three, smaller operating companies. Each has homes under way in just six to 10 communities, so if there's a poor performer there's more incentive to fix it.
Inland Homebuilding Group, of which Clark is president, handles back-office work for all three operating companies. "We're a service center," he says. "We're very scalable." Their job is to free the operating companies to concentrate on starting and closing homes.
Clark says that not all builders will follow Inland's structure, but that they'll still have to organize their companies to support production goals.
The company's embrace of management technology--in particular, the Fast management system--also helps grease the pipe. In fact, Clark credits the efficiencies gained from the use of Fast with pushing starts to an even four a month.
Despite Inland's efficiencies, there's a potential wild card. It's the concern Clark voiced at the beginning of our visit, the fact that the company can't afford to carry a lot of unsold homes. He says the biggest challenge for a builder of Inland's size is making just enough sales to feed the evenflow pipeline.
"We need to have a retailing mentality," says Clark. That means always being ready to change prices or incentives quickly. If homes are selling too quickly, prices may have to be raised. If they're selling too slowly, Inland tries to move them more quickly by dropping prices or pushing options.
As we walk a cul-de-sac bordered by wetlands, Clark points out that the retailing strategy also includes control of how quickly each type of lot sells. "Our standard lots keep the motor running," he says. "These premium lots are where we make our profits." He adds that the ratio of premium lots to standard lots sold in any month should match the ratio of premium to standard lots in the development as a whole. If premium lots are selling too quickly, you need to raise prices to slow them down. Otherwise, all you'll have left will be standard lots, and you may end up having to discount these even more to sell them.
The retailing approach can lead to some uncomfortable moments. "Some recent buyers called the other night after they saw discounts on some homes," says Rae Mims, Thousand Oaks' salesperson. "It wasn't on yours, was it?" she asked them rhetorically. But she adds that when you explain the reasoning behind your business strategy, most people understand.
Sales reps need to help buyers understand the limits imposed by that strategy. "We won't hold up a house for anything," says Clark. If a customer wants to buy a home that's at frame and decides he or she wants an option that will happen in the next 30 days, it's too late. "It's not easy to tell customers they can't add any electrical options even though the frame is up and the electrician hasn't been there yet," says Clark.
If buyers grumble, they can always be reminded of Inland's "Clean, Complete, and On Time Guarantee," which ensures that they will be given a firm closing date at least one month in advance. If there's any delay in closing, Inland pays $50 a day up to $500. "Survey after survey says that's what buyers want," says Clark. Not surprisingly, he sees the guarantee as one more thing to support production discipline. "We're not perfect," he admits. "We've paid about $3,600 year-to-date, so we missed a few. But it's an incentive to do better."
Charles Wardell is a former senior editor of BUILDER.
WEEK 1: The lot is scraped and pinned, and the slab forms assembled. Slab subcontractor Jeff O'Neal forms and pours up to three slabs per day for Inland.
Photo: Tom Salyer
WEEK 2: The forms are back-filled, the slab rough-plumbed, and rebar installed.
WEEKS 3 AND 4: The soil is treated, the slab poured, the block walls built, and the framing package delivered.
WEEK 5: The house is framed, and windows and doors installed. Framer Joe Avila has been at Inland's Thousand Oaks community for a year. He credits the evenflow system's consistency with reducing crew turnover and errors.
Photo: Tom Salyer
WEEKS 6 AND 7: The home's air-conditioning, plumbing, gas, electrical, and low-voltage systems are all roughed in. The roof is shingled, batt insulation is installed, and exterior walls are stuccoed.
WEEKS 8 AND 9: Drywall is hung and finished. Construction manager Marty Schond says that instead of making his job harder, the discipline imposed by evenflow results in a less hectic, saner work schedule.
WEEKS 10 THROUGH 12: The interior is trimmed, and the home painted. The garage door is installed. Cabinets are hung, ceramic tile is laid, and the plumbing fixtures, AC compressor, and furnace are installed. Air-conditioning, electrical, and low-voltage systems are trimmed out. The irrigation system is installed and the yard graded and landscaped. Insulation is blown into flat ceilings.
Photo: Tom Salyer
WEEKS 13 AND 14: Subcontractors complete all punch-list items. Tile is grouted, and vinyl flooring and carpet are laid. Baseboard shoe molding is installed, and doors adjusted. The painter does any needed touch-ups. The range, refrigerator, washer, and dryer are installed. The house gets a final cleaning and is ready for the homeowners to inspect.
An evenflow company starts and completes homes on a predictable schedule, whether one per day or four per month. Before adopting evenflow, Inland Homes' production fluctuated with demand. And how quickly the company could build a home depended on whether it could schedule the subcontractors it needed. Now, Inland builds the same number of homes every month and can schedule subs weeks in advance.
The process depends on a consistent rate of sales--you can't start homes at an even rate unless you sell them at an even rate. To keep sales on track, Inland's COO, vice president of sales and construction, and production planner meet every week to look at the starts scheduled for the month ahead.
If the home that's scheduled to be started the third week of next month hasn't been sold yet, prices have to be reduced or incentives offered to buyers. If there are more buyers than available starts, prices must be raised to slow sales down.
Builders who want to adopt an evenflow system need to understand exactly what their people can accomplish in a day, a week, or a month. That means taking a hard look at their sales, production, and back-office systems.
They have to build their production schedules around those abilities, and they need the discipline to do only as much work as the schedule demands. Doing less means losing revenues; trying to do more means stressing the production system.
Evenflow doesn't affect the way a home is built. After a company adopts evenflow, construction will likely follow the same critical path as before. The difference is the rate of work. Like factory workers installing engines in a steady flow of cars, trade crews move through a development doing the same job to different houses on a consistent basis.
Steady work and a productive jobsite give Inland the pick of local subcontractors. And working with Inland on a regular basis helps everyone to work as a team--and to get things done on time.