For Artery Homes in Bethesda, Md., changing its business processes to manage an automated system based on issuing purchase orders (P.O.s) to subs instead of receiving invoices presented more challenges than the actual technology.
Bennett Goldberg, president of Artery Homes, says the company went live with Builder MT's Timberline Production Management system in May of last year. But that was after Artery spent well over a year researching technology and talking through its processes with its department managers. During those meetings, Goldberg says he listened to and worked through the objections of the production and accounting departments. Most of the concerns were about control and facing a process change.
“Production thought it would lose control of bidding if a Builder MT clerk administered all the bids for subcontractors,” says Goldberg, “but that's not how it works today.” He continues, “The production manager still decides on which subs and suppliers to use, and the clerks do all the grunt work, calling up for quotes and entering the purchase orders into the system.”
Goldberg says it took some time for the accountants to get used to the idea of working with purchase orders instead of receiving invoices from the subs.
“Under the new system, the purchase order is the invoice, which means we needed to get the trades to make sure they didn't toss them out,” says Goldberg. “This can be a disaster, if you don't get the subs trained, you will forever do forensic accounting.”
Work In Progress Kathy Kaleo, the woman who managed the initial Timberline Production Management project and has since moved on to another Maryland builder, says people underestimate what a major victory it is for a builder to automate its purchasing operation.
“Our supers used to come in once a week and spend an entire day coding invoices and pushing paper around,” says Kaleo. “The system eliminates a step for the subs and eliminates rekeying for the accounts payable person. She used to spend a whole week just entering invoices.”
Although Goldberg says it's too soon for Artery to quantify the bottom line benefits of the Builder MT system, he did say eliminating all the paper pushing and rekeying saved him from hiring an additional $35,000-a-year accounts payable employee. Goldberg says his main goal is to cut the inefficiencies out of the purchasing process, get his supers spending more time on the jobsite instead of in the office, and have his production staff focus more on negotiating better contracts with the vendors as opposed to spending their time calling up vendors for bids.
“The purchasing process at most builders is archaic and fraught with error,” Goldberg says. “We're building about 100 homes a year now and that's where we'll stay for a while, so automating the business is the way to keep our costs down and add some points to our margins.”
Right now, the sales contract and selections information is still drawn up on paper and the Builder MT clerks enter the information into the system. Once the unit costs are calculated and reviewed in Builder MT and the contract is ratified by Goldberg, the sales data then electronically issues the purchase orders with the initial change orders. Goldberg's goal for this year is for the salespeople to enter all the sales data into Builder 1440, which will then send the information directly into Builder MT.
Goldberg says the contract will still be paper printed and signed before the purchase orders with the options and initial change orders are sent out. But any subsequent change order data will be sent by the salespeople in Builder 1440 to the Builder MT clerk, who will import the change-order data file into Builder MT and issue an updated P.O. to the sub. Once the subs complete the work, the supers sign off on an open purchase orders sheet, and the clerk sends the approved purchase order into Timberline for payment.
“Managing our change orders better is an important shift for us,” says Goldberg. “In the past, the change orders may or may not have been communicated, and the invoices were always done at the end, which could throw off our budgeting.”
The Vision Thing Goldberg's vision is for the entire construction management process to be automated. He'd love it for the sales-people to enter the contract and options information into Builder 1440, send the data on to Builder MT, have the clerks manage the change order information more efficiently, and then have the supers sign the P.O.s on a handheld from the field.
Artery Homes is not there yet, but few small builders are. Automating purchasing was the first step. Deploying Builder 1440 is phase two. Handhelds are still a year or two away.
“I tell my people if we're not thinking about this stuff and don't have a vision for what could be, we'll never get there,” Goldberg says.
To learn more about Artery Homes and Nuilder MT's Timberline production management system, visit our web site at www.builderonline.com, click on “The Magazines” tab and then “Builder Article Links.”
The Bottom Line
Company: Artery Homes, Bethesda, Md.
Goal: Switch to an automated purchasing system.
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